CMP Associates Regulation Blog: United States Commercial Banks Assets and Liabilities, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Housing Collapse, World Cyclical Slow Growth and Global Recession Risk: Part V

United States Commercial Banks Assets and Liabilities, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Housing Collapse, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

Executive Summary

I United States Commercial Banks Assets and Liabilities

IIA1 Transmission of Monetary Policy

IIB1 Functions of Banks

IIC United States Commercial Banks Assets and Liabilities

IID Theory and Reality of Economic History, Cyclical Slow Growth Not Secular Stagnation and Monetary Policy Based on Fear of Deflation

IB Collapse of United States Dynamism of Income Growth and Employment Creation

II United States Housing Collapse

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

VB Japan. The GDP of Japan grew at 1.0 percent per year on average from 1991 to 2002, with the GDP implicit deflator falling at 0.8 percent per year on average. The average growth rate of Japan’s GDP was 4 percent per year on average from the middle of the 1970s to 1992 (Ito 2004). Low growth in Japan in the 1990s is commonly labeled as “the lost decade” (see Pelaez and Pelaez, The Global Recession Risk (2007), 81-115). Table VB-GDP provides yearly growth rates of Japan’s GDP from 1995 to 2013. Growth weakened from 2.7 per cent in 1995 and 1996 to contractions of 1.5 percent in 1999 and 0.4 percent in 2001 and growth rates below 2 percent with exception of 2.3 percent in 2003. Japan’s GDP contracted sharply by 3.7 percent in 2006 and 2.0 percent in 2009. As in most advanced economies, growth was robust at 3.4 percent in 2010 but mediocre at 0.3 percent in 2011 and 0.7 percent in 2013. Japan’s GDP grew 2.3 percent in 2013.

Table VB-GDP, Japan, Yearly Percentage Change of GDP ∆%

Calendar Year	∆%
1995	2.7
1996	2.7
1997	0.1
1998	-1.5
1999	0.5
2000	2.0
2001	-0.4
2002	1.1
2003	2.3
2004	1.5
2005	1.9
2006	1.8
2007	1.8
2008	-3.7
2009	-2.0
2010	3.4
2011	0.3
2012	0.7
2013	2.3

Source: Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/index-e.html

http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (https://www.boj.or.jp/en/mopo/outlook/gor1404b.pdf). For fiscal 2013, the forecast is of growth of GDP between 2.2 and 2.3 percent, with the all items CPI less fresh food of 0.8 percent (https://www.boj.or.jp/en/mopo/outlook/gor1404b.pdf). The critical difference is forecast of the CPI excluding fresh food of 3.0 to 3.5 percent in 2014, 1.9 to 2.8 percent in 2015 and 2.0 to 3.0 in 2016. Consumer price inflation in Japan excluding fresh food was 0.3 percent in Mar 2013 and 1.3 percent in 12 months (http://www.stat.go.jp/english/data/cpi/1581.htm). The new monetary policy of the Bank of Japan aims to increase inflation to 2 percent. These forecasts are biannual in Apr and Oct. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:

“The Bank of Japan conducts monetary policy based on the principle that the policy shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy, and is responsible for maintaining financial system stability. The Bank aims to achieve price stability on a sustainable basis, given that there are various factors that affect prices in the short run.

The Bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan's economy make progress. Based on this recognition, the Bank sets the price stability target at 2 percent in terms of the year-on-year rate of change in the consumer price index.

Under the price stability target specified above, the Bank will pursue monetary easing and aim to achieve this target at the earliest possible time. Taking into consideration that it will take considerable time before the effects of monetary policy permeate the economy, the Bank will ascertain whether there is any significant risk to the sustainability of economic growth, including from the accumulation of financial imbalances.”

The Bank of Japan also provided explicit analysis of its view on price stability in a “Background note regarding the Bank’s thinking on price stability” (http://www.boj.or.jp/en/announcements/release_2013/data/rel130123a1.pdf http://www.boj.or.jp/en/announcements/release_2013/rel130123a.htm/). The Bank of Japan also amended “Principal terms and conditions for the Asset Purchase Program” (http://www.boj.or.jp/en/announcements/release_2013/rel130122a.pdf): “Asset purchases and loan provision shall be conducted up to the maximum outstanding amounts by the end of 2013. From January 2014, the Bank shall purchase financial assets and provide loans every month, the amount of which shall be determined pursuant to the relevant rules of the Bank.”

Financial markets in Japan and worldwide were shocked by new bold measures of “quantitative and qualitative monetary easing” by the Bank of Japan (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The objective of policy is to “achieve the price stability target of 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) at the earliest possible time, with a time horizon of about two years” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The main elements of the new policy are as follows:

Monetary Base Control. Most central banks in the world pursue interest rates instead of monetary aggregates, injecting bank reserves to lower interest rates to desired levels. The Bank of Japan (BOJ) has shifted back to monetary aggregates, conducting money market operations with the objective of increasing base money, or monetary liabilities of the government, at the annual rate of 60 to 70 trillion yen. The BOJ estimates base money outstanding at “138 trillion yen at end-2012) and plans to increase it to “200 trillion yen at end-2012 and 270 trillion yen at end 2014” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf).
Maturity Extension of Purchases of Japanese Government Bonds. Purchases of bonds will be extended even up to bonds with maturity of 40 years with the guideline of extending the average maturity of BOJ bond purchases from three to seven years. The BOJ estimates the current average maturity of Japanese government bonds (JGB) at around seven years. The BOJ plans to purchase about 7.5 trillion yen per month (http://www.boj.or.jp/en/announcements/release_2013/rel130404d.pdf). Takashi Nakamichi, Tatsuo Ito and Phred Dvorak, wiring on “Bank of Japan mounts bid for revival,” on Apr 4, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887323646604578401633067110420.html), find that the limit of maturities of three years on purchases of JGBs was designed to avoid views that the BOJ would finance uncontrolled government deficits.
Seigniorage. The BOJ is pursuing coordination with the government that will take measures to establish “sustainable fiscal structure with a view to ensuring the credibility of fiscal management” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf).
Diversification of Asset Purchases. The BOJ will engage in transactions of exchange traded funds (ETF) and real estate investment trusts (REITS) and not solely on purchases of JGBs. Purchases of ETFs will be at an annual rate of increase of one trillion yen and purchases of REITS at 30 billion yen.
Bank Lending Facility and Growth Supporting Funding Facility. At the meeting on Feb 18, the Bank of Japan doubled the scale of these lending facilities to prevent their expiration in the near future (http://www.boj.or.jp/en/announcements/release_2014/k140218a.pdf).

Table VB-BOJF, Bank of Japan, Forecasts of the Majority of Members of the Policy Board, % Year on Year

Fiscal Year Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2013
Apr 2014	+2.2 to +2.3 [+2.2]	+0.8
Jan 2014	+2.5 to +2.9 [+2.7]	+0.7 to +0.9 [+0.7]
Oct 2013	+2.6 to +3.0 [+2.7]	+0.6 to +1.0 [+0.7]
Jul 2013	+2.5 to +3.0 [+2.8]	+0.5 to +0.8 [+0.6]
2014
Apr 2014	+0.8 to +1.3 [+1.1]	+3.0 to +3.5 [+3.3]	+1.0 to +1.5 [+1.3]
Jan 2014	+0.9 to 1.5 [+1.4]	+2.9 to +3.6 [+3.3]	+0.9 to +1.6 [+1.3]
Oct 2013	+0.9 to +1.5 [+1.5]	+2.8 to +3.6 [+3.3]	+0.8 to +1.6 [+1.3]
Jul 2013	+0.8 to +1.5 [+1.3]	+2.7 to +3.6 [+3.3]	+0.7 to +1.6 [+1.3]
2015
Apr 2014	+1.2 to +1.5 [+1.5]	+1.9 to +2.8 [+2.6]	+1.2 to +2.1 [+1.9]
Jan 2014	+1.2 to +1.8 [+1.5]	+1.7 to +2.9 [+2.6]	+1.0 to +2.2 [+1.9]
Oct 2013	+1.3 to +1.8 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
Jul 2013	+1.3 to +1.9 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
2016
Apr 2014	+1.0 to +1.5 [+1.3]	+2.0 to +3.0 [+2.8]	+1.3 to +2.3 [+2.1]

Figures in brackets are the median of forecasts of Policy Board members

Source: Policy Board, Bank of Japan

https://www.boj.or.jp/en/mopo/outlook/gor1404b.pdf

The Markit/JMMA Flash Japan Manufacturing PMI Index™ improved with the Flash Japan Manufacturing PMI™ increasing from 49.4 in Apr to 49.9 in May and the Flash Japan Manufacturing Output Index™ increasing from 46.2 in Apr to 49.2 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/119c7ec318e2469d9afda80921da4f09). New export orders decreased at a faster rate. Chris Williamson, Chief Economist at Markit, finds stabilizing conditions after the stress from the increase originating in the Apr increase in sales tax with weakening demand from overseas (http://www.markiteconomics.com/Survey/PressRelease.mvc/119c7ec318e2469d9afda80921da4f09). Private-sector activity in Japan contracted with the Markit Composite Output PMI Index decreasing from 52.8 in Mar to 46.3 in Apr, indicating contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/50dfe4858cb94ce69e38e3c456a0fa2d). Amy Bronwbill, Economist at Markit and author of the report, finds contraction of private sector activity with the sharpest decline since Sep 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/50dfe4858cb94ce69e38e3c456a0fa2d). The Markit Business Activity Index of Services decreased to 46.4 in Apr from 52.2 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/50dfe4858cb94ce69e38e3c456a0fa2d). Amy Brownbill, Ecoomist at Markit and author of the report, finds concerns with the increase in sales taxes implemented in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/50dfe4858cb94ce69e38e3c456a0fa2d). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 53.9 in Mar to 49.4 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/4786eaed9e824f26b646f9286624726e). New orders and output fell because of demand effects caused by the sales tax increase in Apr. Amy Brownbill, Economist at Markit and author of the report, finds deteriorating manufacturing conditions with manufacturers attributing declines of output and new orders to the increase in the value added tax on consumption (http://www.markiteconomics.com/Survey/PressRelease.mvc/4786eaed9e824f26b646f9286624726e).Table JPY provides the country data table for Japan.

Table JPY, Japan, Economic Indicators

Historical GDP and CPI	1981-2010 Real GDP Growth and CPI Inflation 1981-2010 Blog 8/9/11 Table 26
Corporate Goods Prices	Apr ∆% 2.8 12 months ∆% 4.1 Blog 5/18/14
Consumer Price Index	Mar NSA ∆% 0.3; Mar 12 months NSA ∆% 1.6 Blog 4/27/14
Real GDP Growth	IQ2014 ∆%: 1.5 on IVQ2013; IQ2014 SAAR 5.9; ∆% from quarter a year earlier: 3.0 % Blog 6/16/13 8/18/13 9/15/13 11/17/13 12/15/13 2/23/14 3/16/14 5/18/14
Employment Report	Mar Unemployed 2.46 million Change in unemployed since last year: minus 340 thousand Unemployment rate: 3.6 % Blog 5/4/14
All Industry Indices	Mar month SA ∆% 1.5 12-month NSA ∆% 3.6 Blog 5/25/14
Industrial Production	Mar SA month ∆%: 0.3 12-month NSA ∆% 7.0 Blog 5/4/14
Machine Orders	Total Mar ∆% 4.0 Private ∆%: 17.3 Mar ∆% Excluding Volatile Orders 19.1 Blog 5/25/14
Tertiary Index	Mar month SA ∆% 2.4 Mar 12 months NSA ∆% 3.0 Blog 5/18/14
Wholesale and Retail Sales	Mar 12 months: Total ∆%: 8.6 Wholesale ∆%: 7.6 Retail ∆%: 11.0 Blog 5/4/14
Family Income and Expenditure Survey	Mar 12-month ∆% total nominal consumption 9.3, real 7.2 Blog 5/4/14
Trade Balance	Exports Apr 12 months ∆%: 5.1 Imports Apr 12 months ∆% 3.4 Blog 5/25/14

Links to blog comments in Table JPY:

5/18/14 http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html

5/4/2014 http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html

4/27/14 http://cmpassocregulationblog.blogspot.com/2014/04/financial-fluctuations-united-states.html

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

2/23/14 http://cmpassocregulationblog.blogspot.com/2014/02/squeeze-of-economic-activity-by-carry.html

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

11/17/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-unwinding-monetary-policy.html

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

The indices of all industry activity of Japan, which approximates GDP or economic activity, fell to levels close to the worst point of the recession, showing the brutal impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Table VB-1 with the latest revisions shows the quarterly index, which permits comparison with the movement of real GDP. The first row provides weights of the various components of the index: AG (agriculture) 1.4 percent (not shown), CON (construction) 5.7 percent, IND (industrial production) 18.3 percent, TERT (services) 63.2 percent, and GOVT (government) 11.4 percent. GDP increased 1.5 percent in IQ2014 (Table VB-1 at http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html), industry increased 3.0 percent, the tertiary sector increased 1.7 percent, government decreased 0.6 percent and construction decreased 2.6 percent. The report shows that the all industry index increased 1.6 percent in IQ2014. Industry added 0.53 percentage points to growth of the all industry index and the tertiary index added 1.1 percentage points. Anticipation of purchases to avoid the increase in the sales tax in Apr 2014 explains unusually high activity in the economy of Japan in IQ2014. Japan had already experienced a very weak quarter in IVQ2010, with decline of GDP of 0.5 percent (Table VB-1 at http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html), when it was unexpectedly hit by the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP fell 1.8 percent in IQ2011 and 0.6 percent in IIQ2011. GDP changed 0.0 percent in IQ2011 relative to a year earlier and fell 1.5 percent in IIQ2011 relative to a year earlier (Tables VB-1 and VB-4 at http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html). The all industry activity index fell in all quarters of 2012 with exception of growth of 0.1 percent in IQ2012. Weakness in industry was the driver of decline.

Table VB-1, Japan, Indices of All Industry Activity Percentage Change from Prior Quarter SA ∆%

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
2014
IQ2014	-2.6	3.0	1.7	-0.6	1.6	1.5
Cont to IQ % Change	-0.14	0.53	1.11	-0.07
IVQ2013	2.8	1.8	-0.2	0.4	0.3	0.1
IIIQ2013	4.3	1.8	0.1	-0.2	0.5	0.3
IIQ2013	3.6	1.6	0.3	0.0	0.6	0.9
IQ2013	0.9	0.4	0.5	-0.3	0.4	1.2
2012
IVQ2012	3.0	-1.8	0.3	0.1	-0.1	0.1
IIIQ	1.6	-3.3	0.0	0.0	-0.4	-0.8
IIQ	1.3	-2.1	0.0	0.0	-0.2	-0.6
IQ	2.0	1.6	0.0	0.2	0.1	0.9

AG: indices of agriculture, forestry and fisheries has weight of 1.4% and is not included in official report or in this table; CON: indices of construction industry activity; IND: indices of industrial production; TERT: indices of tertiary industry activity; GOVT: indices of government services, etc.; ALL IND: indices of all industry activity

Source: Japan, Ministry of Economy, Trade and Industry (METI)

http://www.meti.go.jp/english/statistics/index.html

http://www.esri.cao.go.jp/index-e.html

http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

There are more details in Table VB-2. In Mar 2014, the all industry activity index increased 1.5 percent with industry increasing 0.7 percent and services increasing 2.4 percent while construction decreased 1.2 percent and government decreased 0.5 percent. Industry added 0.13 percentage points and services added 1.56 percentage points while construction deducted 0.06 percentage points and government deducted 0.06 percentage points. The all industry activity index is stronger in 2013 with growth of 0.5 percent in Dec 2012, 0.4 percent in Feb 2013, 0.1 percent in Mar 2013, 0.1 percent in Apr 2013 and 0.6 percent in May 2013. After decline of 0.3 percent in Jun 2013, the all industry index rose 0.3 percent in Jul 2013, 0.2 percent in Aug 2013 and 0.3 percent in Sep 2013. The index fell 0.1 percent in Oct 2013 but increased 0.2 percent in Nov 2013. The index changed 0.0 percent in Dec 2013 and increased 1.7 percent in Jan 2014, decreasing 1.1 percent in Feb 2014. Industry is recovering with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.3 percent in Mar 2013, 0.6 percent in Apr 2013 and 2.1 percent in May 2013. After decline of 2.7 percent in Jun 2003, industry grew 2.7 percent in Jul 2013 and declined 0.4 percent in Aug 2013. Industry rebounded with 1.5 percent in Sep 2013 and 0.5 percent in Oct 2013. Industry rose 0.5 percent in Nov 2013 and increased 0.5 percent in Dec 2013. Industry grew 3.9 percent in Jan 2014 and fell 2.3 percent in Feb 2014. The highest risk to Japan is if weakening world growth would affect Japanese exports.

Table VB-2, Japan, Indices of All Industry Activity Percentage Change from Prior Month SA ∆%

	CON	IND	TERT	GOVT	ALL IND
Mar 2014	-1.2	0.7	2.4	-0.5	1.5
Cont to Dec % Change	-0.06	0.13	1.56	-0.06
Feb	-1.3	-2.3	-0.9	0.3	-1.1
Jan	-1.7	3.9	1.5	-0.5	1.7
Dec 2013	-0.2	0.5	-0.1	0.1	0.0
Nov	1.5	0.3	0.3	-0.6	0.2
Oct	1.0	0.5	-0.5	0.8	-0.1
Sep	1.0	1.5	0.1	-0.1	0.3
Aug	0.3	-0.4	0.2	0.1	0.2
Jul	1.1	2.7	-0.1	-0.3	0.3
Jun	2.5	-2.7	-0.3	0.1	-0.3
May	3.0	2.1	0.5	0.2	0.6
Apr	0.8	0.6	-0.1	0.0	0.1
Mar	0.0	0.3	0.1	-0.3	0.1
Feb	0.1	0.9	0.5	-0.1	0.4
Jan	-0.7	-0.8	0.0	0.0	-0.2
Dec 2012	0.9	1.4	0.2	-0.3	0.5
Nov	3.0	-0.9	-0.1	0.3	-0.2
Oct	-0.1	0.3	0.2	0.2	0.2
Sep	1.2	-2.2	0.0	-0.3	-0.4
Aug	0.1	-1.4	0.2	0.1	0.0
Jul	-1.0	-0.5	-0.3	-0.1	-0.3
Jun	1.7	-0.9	0.0	0.1	0.1
May	3.0	-1.8	0.5	0.0	-0.1
Apr	-1.1	-0.4	-0.2	0.0	-0.1
Mar	-0.5	-0.2	-0.3	0.1	-0.2
Feb	0.7	-0.2	0.2	-0.2	0.1
Jan	2.6	0.8	-0.8	0.4	-0.7

Sources: Japan, Ministry of Economy, Trade and Industry (METI)

http://www.meti.go.jp/english/statistics/index.html

Percentage changes from a year earlier in calendar years and relative to the same quarter a year earlier of the all industry activity indices are provided in Table VB-3. The first row shows that services contribute 63.2 percent of the total index and industry contributes 18.3 percent for joint contribution of 81.5 percent. The all industry activity index increased 3.1 percent in IQ2014 relative to a year earlier and GDP increased 3.0 percent relative to a year earlier (Table VB-4 at http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html). Industry increased 8.3 percent relative to a year earlier while the tertiary sector increased 2.0 percent, adding combined 2.75 percentage points to growth of the all industry activity index of 3.1 percent while construction added 0.40 percentage points and government deducted 0.04 percentage points. The fall of industrial production in 2009 was by a catastrophic 21.9 percent. Japan emerged from the crisis with industrial growth of 16.4 percent in 2010. Quarterly data show that industry is the most dynamic sector of the Japanese economy. The all-industry index increased 0.8 percent in 2013 and real GDP increased 1.6 percent. Industry decreased 0.8 percent, deducting 0.13 percentage points, while the tertiary sector increased 0.7 percent, adding 0.46 percentage points. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 201, declining world trade and revaluation of the yen in fear of world financial risks interrupted the recovery of the Japanese economy from the global recession.

Table VB-3, Japan, Indices of All Industry Activity Percentage Change from Earlier Calendar Year and Same Quarter Year Earlier NSA ∆%

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
Calendar Year
2013	10.4	-0.8	0.7	-0.1	0.8	1.6
Cont to 2013 % Change	0.48	-0.13	0.46	-0.01
2012	3.2	0.1	1.4	0.3	1.2	1.4
2011	-2.0	-2.3	0.1	-0.2	-0.5	-0.5
2010	-7.0	16.4	1.3	-0.7	3.1	4.7
2009	-5.6	-21.9	-5.2	0.1	-7.7	-5.5
2008	-7.6	-3.4	-1.0	-1.4	-1.9	-1.0
2014
IQ	8.2	8.3	2.0	-0.3	3.1	3.0
Cont to IQ % Change	0.40	1.41	1.34	-0.04
2013
IVQ	13.4	5.7	0.5	0.0	1.9	2.5
IIIQ	13.0	2.2	1.2	-0.5	1.8	2.4
IIQ	8.8	-3.1	1.3	-0.2	0.6	1.3
IQ2013	5.4	-7.8	-0.1	0.3	-1.2	0.1
2012
IVQ	6.7	-5.9	0.7	-0.1	-0.3	-0.3
IIIQ	3.1	-4.2	0.5	0.4	-0.2	-0.2
IIQ	4.9	5.5	2.1	0.6	2.6	3.2
IQ	-1.1	6.2	2.4	0.3	2.6	3.2

Source: Japan, Ministry of Economy, Trade and Industry (METI)

http://www.meti.go.jp/english/statistics/index.html

http://www.esri.cao.go.jp/index-e.html

http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

Percentage changes of a month relative to the same month a year earlier for the indices of all industry activity of Japan are shown in Table VB-4. The all industry activity index increased 3.6 percent in Mar 2014 relative to Mar 2013. Industry increased 7.3 percent in Mar 2014 relative to a year earlier, adding 1.27 percentage points to growth of the all industry activity index. The tertiary sector increased 3.0 percent, adding 2.04 percentage points. Construction added 0.33 percentage points to the index and government deducted 0.04 percentage points.

Table VB-4, Japan, Indices of All Industry Activity Percentage Change from Same Month Year Earlier NSA ∆%

	CON	IND	TERT	GOVT	ALL IND
Mar 2014	6.8	7.3	3.0	-0.4	3.6
Cont to Nov % Change	0.33	1.27	2.04	-0.04
Feb 2014	8.2	7.0	0.9	-0.2	2.2
Jan	9.9	10.6	2.0	-0.5	3.5
Dec 2013	11.8	7.2	0.8	-0.4	2.2
Nov	14.2	4.8	0.5	-0.2	1.9
Oct	14.4	5.3	0.1	0.6	1.8
Sep	12.8	5.2	1.4	-0.6	2.4
Aug	13.0	-0.7	0.8	0.1	1.0
Jul	13.2	1.9	1.5	-1.0	1.7
Jun	11.2	-4.7	0.6	0.5	0.0
May	8.9	-0.9	1.8	-0.2	1.3
Apr	6.3	-3.2	1.5	-1.1	0.6
Mar	5.4	-6.9	0.7	0.0	-0.6
Feb	4.3	-9.9	-1.5	1.5	-2.4
Jan	6.8	-6.4	0.3	-0.6	-0.7
Dec 2012	8.7	-7.5	-0.1	0.6	-0.9
Nov	7.6	-5.7	1.0	0.3	0.0
Oct	3.5	-4.7	1.3	-1.1	0.1
Sep	2.9	-7.7	0.1	0.7	-1.2
Aug	2.6	-4.4	0.6	0.9	-0.1
Jul	3.8	-0.2	0.8	-0.3	0.6
Jun	6.7	-1.5	0.8	0.9	0.6
May	5.3	6.1	3.1	-0.4	3.3
Apr	2.6	13.6	2.4	1.3	4.1
Mar	3.0	16.2	4.2	0.5	5.8
Feb	-2.5	2.8	2.4	-0.7	1.8
Jan	-3.4	-1.6	0.4	0.4	-0.1

Source: Japan, Ministry of Economy, Trade and Industry (METI)

http://www.meti.go.jp/english/statistics/index.html

Japan’s total machinery orders seasonally adjusted in Table VB-5 increased 4.0 percent seasonally adjusted in Mar 2014. Private sector orders increased 17.3 percent and increased 19.1 percent excluding volatile orders. Orders from overseas increased 3.2 percent and manufacturing orders increased 23.7 percent. Government orders decreased 18.5 percent.

Table VB-5, Japan, Machinery Orders, Month ∆%, SA

2013-2014	Mar 14	Feb 14	Jan 14	Dec 13
Total	4.0	-3.3	8.1	-0.9
Private Sector	17.3	-13.7	17.7	-7.4
Excluding Volatile Orders	19.1	-4.6	8.1	-12.1
Manufacturing	23.7	-4.6	4.9	-7.8
Non-Manufacturing ex Volatile	8.5	-5.1	6.1	-11.5
Government	-18.5	4.4	-7.6	3.0
From Overseas	3.2	2.3	3.7	3.2
Through Agencies	-22.0	-6.5	3.2	2.8

Note: Mfg: manufacturing

Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/index-e.html

Total orders for machinery and total private-sector orders excluding volatile orders for Japan are shown in Chart VB-1 of Japan’s Economic and Social Research Institute at the Cabinet Office. The trend of private-sector orders excluding volatile orders was showing recovery from the drop after Mar 2011 because of the earthquake/tsunami. There was reversal of the trend of increase in total orders with recent decreases and an upward movement in the final data point. Fluctuations still prevent detecting longer-term trends but recovery is still evident from the global recession. There was a major setback by the declines in May 2012 shown in the final segment of Chart VB-1 with partial recovery in Jun 2012, decline again in Jul and Aug 2012 and rebound in total orders in Nov reversed in Dec but decline in orders excluding volatile segments with increase in Nov-Dec 2012. The final segment shows growth in Feb-Mar 2013 interrupted by decline in Apr 2013 followed by increase in May 2013. Orders fell again in Jun 2013, rebounding in Jul-Sep 2013 followed by another fall in Oct 2013. Orders recovered in Nov 2013 but declined in Dec 2013. Orders increased in Jan 2014 and decreased in Feb 2014. Orders increased in Mar 2014.

Chart VB-1, Japan, Machinery Orders

Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/index-e.html

Table VB-6 provides values and percentage changes from a year earlier of Japan’s machinery orders without seasonal adjustment. Total orders of JPY 3,848,026 million in Mar 2014 are divided between JPY 1,381,843 million overseas orders, or 35.9 percent of the total, and domestic orders of JPY 2,363,759 million, or 61.4 percent of the total, with orders through agencies of JPY 102,424 million, or 2.7 percent of the total. Orders through agencies are not in Table VB-6 because of the minor value and appear only in the note to the table. Twelve-month percentages changes in Mar 2014 weakened with decreases of 0.3 percent for total orders and 4.3 percent for domestic orders with increase of 16.1 percent for orders excluding volatile components. Overseas orders rose fell 4.3 percent in 12 months.

Table VB-6, Japan, Machinery Orders, 12 Months ∆% and Million Yen, Original Series

	Total	Overseas	Domestic	Private ex Volatile
Value Mar 2014	3,848,026	1,381,843	2,363,759	1,339,333
% Total	100.0	35.9	61.4	34.8
Value Mar 2013	3,859,764	1,443,467	2,270,684	1,153,476
% Total	100.0	37.4	58.8	37.2
12-month ∆%	-0.3	-4.3	4.1	16.1
Mar 2014	-0.3	-4.3	4.1	16.1
Feb 2014	20.0	31.9	12.4	10.8
Jan 2014	28.8	29.8	29.0	23.6
Dec 2013	15.1	25.0	8.3	6.7
Nov 2013	8.9	1.3	14.4	16.6
Oct 2013	24.6	29.7	21.4	17.8
Sep 2013	30.3	57.4	18.4	11.4
Aug 2013	25.9	41.8	17.1	10.3
Jul 2013	5.3	4.4	6.9	6.5
Jun 2013	2.7	0.1	4.1	4.9
May 2013	18.1	17.1	20.8	16.5
Apr 2013	-4.3	6.7	-9.9	-1.1
Mar 2013	11.5	27.5	3.3	2.4
Feb 2013	-14.8	-21.0	-10.7	-11.3
Jan 2013	-24.8	-36.7	-11.8	-9.7
Dec 2012	-12.5	-24.1	-3.3	-3.4
Nov 2012	-8.6	-9.6	-8.5	0.3
Oct 2012	-6.9	-12.8	-2.6	1.2
Sep 2012	-7.8	-18.4	-1.8	-7.8
Aug 2012	-18.6	-31.1	-10.2	-6.1
Jul 2012	2.6	-1.9	3.2	1.7
Jun 2012	-10.9	-11.3	-12.4	-9.9
May 2012	-6.8	-7.0	-8.6	1.0
Apr 2012	7.5	-9.6	23.0	6.6
Mar 2012	8.1	-10.0	19.0	-1.1
Feb 2012	-9.3	-8.9	-11.2	8.9
Jan 2012	9.8	18.3	0.5	5.7
Dec 2011	0.8	12.6	-8.5	6.3
Nov 2011	11.0	8.0	13.5	12.5
Oct 2011	-6.8	-15.6	-1.0	1.5
Dec 2010	9.4	3.5	14.1	-0.6
Dec 2009	1.8	0.4	3.6	-1.9
Dec 2008	-23.3	-29.4	-17.4	-24.7
Dec 2007	1.3	9.8	-4.3	-6.4
Dec 2006	0.8	0.9	-0.1	0.1

Note: Total machinery orders = overseas + domestic demand + orders through agencies. Orders through agencies in Mar 2014 were JPY 102,424 million or 2.7 percent of the total and JPY 145,613 or 3.8 percent of the total in Mar 2013, and are not shown in the table. The data are the original numbers without any adjustments and differ from the seasonally adjusted data.

Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/index-e.html

The structure of exports and imports of Japan is in Table VB-7. Japan imports all types of raw materials and fuels at rapidly increasing prices caused by the carry trade from zero interest rates to commodities, oscillating under shocks of risk aversion. Mineral fuels account for 31.8 percent of Japan’s imports and decreased 6.0 percent in the 12 months ending in Apr 2014 because of alternating carry trades into commodity futures in accordance with risk aversion together with yen devaluation. Weakness of world demand depresses prices of industrial goods. Manufactured products contribute 12.8 percent of Japan’s exports with change of 0.0 percent in the 12 months ending in Apr 2014. Machinery contributes 17.2 percent of Japan’s exports with increase of 5.3 percent in the 12 months ending in Apr 2014. Electrical machinery contributes 17.2 percent of Japan’s exports with increase of 5.3 percent in the 12 months ending in Apr 2014. Exports of transport equipment with share of 23.3 percent in total exports increased 4.7 percent in the 12 months ending in Apr 2014 but had been increasing sharply largely because of the low level after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. The breakdown of transport equipment in Table VB-7 shows increase of the major categories of motor vehicles of 5.1 percent: cars increased 5.8 percent with increase of 4.5 percent in the minor category of buses and trucks, increase of 1.3 percent for parts of motor vehicles, increase of 5.4 percent for motorcycles and decrease of 0.7 percent for ships. The result of rising commodity prices and stable or declining prices of industrial products is pressure on Japan’s terms of trade with oscillations when risk aversion causes reversal of carry trades from zero interest rates to commodity prices. Data in Table VB-7 are in millions of yen that have been affected by recent depreciation of the yen relative to the USD with invoicing of many products in dollars in world trade.

Table VB-7, Japan, Structure and Growth of Exports and Imports % and ∆% Millions Yens

Apr 2014	Value JPY Millions	% of Total	12 Months ∆%	Contribution Degree %
Exports	6,069,221	100.0	5.1	5.1
Foodstuffs	39,599	0.7	12.2	0.1
Raw Materials	102,123	1.7	-10.2	-0.2
Mineral Fuels	148,746	2.5	13.7	0.3
Chemicals	658,874	10.9	3.8	0.4
Manufactured Goods	779,848	12.8	0.0	0.0
Machinery	1,194,157	19.7	10.8	2.0
Electrical Machinery	1,043,236	17.2	5.3	0.9
Transport Equipment	1,413,349	23.3	4.7	1.1
Motor Vehicles	912,958	15.0	5.1	0.8
Cars	784,348	12.9	5.8	0.7
Buses & Trucks	121,391	2.0	4.5	0.1
Parts of Motor Vehicles	310,017	5.1	1.3	0.1
Motorcycles	24,866	0.4	5.4	0.0
Ships	89,542	1.5	-0.7	0.0
Other	689,289	11.4	4.1	0.5
Imports	6,878,077	100.0	3.4	3.4
Foodstuffs	561,426	8.2	0.6	0.0
Raw Materials	479,980	7.0	15.9	1.0
Mineral Fuels	2,188,018	31.8	-6.0	-2.1
Chemicals	588,093	8.6	9.3	0.8
Manufactured Goods	582,810	8.5	9.4	0.8
Machinery	538,051	7.8	14.8	1.0
Electrical Machinery	856,378	12.5	13.5	1.5
Transport Equipment	202,268	2.9	6.0	0.2
Other	881,055	12.8	1.3	0.2

Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm

Table VB-8 provides Japan’s exports, imports and trade balance in five-year intervals from 1950 to 1975 and then yearly from 1979 to 2013. Exports grew at the average yearly rate of 3.4 percent while imports grew at 3.6 percent per year in the years from 1979 to 2013. Abstracting from the global recession and the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011, exports grew at the average annual rate of 4.8 percent between 1979 and 2007 and imports at 4.0 percent. The global recession had a brutal impact on Japan’s trade. Exports fell 35.5 percent from 2007 to 2009 while imports fell 29.6 percent. Japan had the first trade deficit in 2011 since 1980 and the highest deficits in 2012 and 2013.

Table VB-8, Japan, Exports and Imports Calendar Year 1950-2013 Billion Yen

Years	Exports	Imports	Balance
1950	298	348	-50
1955	723	889	-166
1960	1,459	1,616	-157
1965	3,042	2,940	102
1970	6,954	6,797	157
1975	16,545	17,170	-625
1979	22,531	24,245	-1,714
1980	29,382	31,995	-2,613
1981	33,468	31,464	2,004
1982	34,432	32,656	1,776
1983	34,909	30,014	4,895
1984	40,325	32,321	8,004
1985	41,955	31,084	10,871
1986	35,289	21,550	13,739
1987	33,315	21,736	11,579
1988	33,939	24,006	9,933
1989	37,822	28,978	8,844
1990	41,456	33,855	7,601
1991	42,359	31,900	10,459
1992	43,012	29,527	13,485
1993	40,202	26,826	13,376
1994	40,497	28,104	12,393
1995	41,530	31,548	9,982
1996	44,731	37,993	6,738
1997	50,937	40,956	9,981
1998	50,645	36,653	13,992
1999	47,547	35,268	12,279
2000	51,654	40,938	10,716
2001	48,979	42,415	6,564
2002	52,108	42,227	9,881
2003	54,548	44,362	10,186
2004	61,169	49,216	11,953
2005	65,656	56,949	8,707
2006	75,246	67,344	7,902
2007	83,931	73,135	10,796
2008	81,018	78,955	2,063
2009	54,170	51,499	2,671
2010	67,399	60,764	6,635
2011	65,546	68,111	-2,565
2012	63,748	70,689	-6,941
2013	69,774	81,243	-11,469

Source: Japan, Ministry of Finance

http://www.customs.go.jp/toukei/info/index_e.htm

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table V-9 for Apr 2014. The share of Asia in Japan’s trade is more than one-half for 53.8 percent of exports and 45.2 percent of imports. Within Asia, exports to China are 18.0 percent of total exports and imports from China 22.6 percent of total imports. While exports to China increased 9.8 percent in the 12 months ending in Apr 2014, imports from China increased 7.8 percent. The largest export market for Japan in Apr 2014 is the US with share of 18.5 percent of total exports, which is close to that of China, and share of imports from the US of 8.4 percent in total imports. Japan’s exports to the US grew 1.9 percent in the 12 months ending in Apr 2014 and imports from the US grew 6.9 percent. Western Europe has share of 10.7 percent in Japan’s exports and of 10.3 percent in imports. Rates of growth of exports of Japan in Apr 2014 are 1.9 percent for exports to the US, minus 5.9 percent for exports to Brazil and 17.6 percent for exports to Germany. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity. Growth rates of imports in the 12 months ending in Apr 2014 are positive for all trading partners except for declines from Canada and the Middle East. Imports from Asia increased 7.6 percent in the 12 months ending in Apr 2014 while imports from China increased 7.8 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

Table VB-9, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Apr 2014	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,069,221	5.1	6,878,077	3.4
Asia	3,263,128	3.6	3,109,642	7.6
China	1,095,389	9.8	1,556,390	7.8
USA	1,122,903	1.9	575,427	6.9
Canada	76,087	12.0	92,453	-18.4
Brazil	44,568	-5.9	73,187	5.0
Mexico	98,272	19.7	37,125	9.5
Western Europe	649,304	14.4	710,007	10.1
Germany	169,365	17.6	189,736	7.8
France	54,689	-7.3	96,321	1.0
UK	91,072	10.2	66,436	30.4
Middle East	246,455	25.6	1,249,425	-6.9
Australia	132,306	-10.0	426,071	7.4

Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm

Table VB-8 provides the trade balance of Japan by countries and regions in Apr 2014. The significantly large deficits of JPY 1,002,970 million with the Middle East, JPY 461,001 million with China, JPY 293,765 million with Australia and JPY 60,703 million with Western Europe do not compensate surpluses of JPY 547,476 million with the US, JPY 61,147 million with Mexico and JPY 24,632 million with the UK.

Table VB-10, Japan, Trade Balance, Millions of Yen

Apr 2014	Millions of Yen
Total	-808,856
Asia	153,486
China	-461,001
USA	547,476
Canada	-16,366
Brazil	-28,619
Mexico	61,147
Western Europe	-60,703
Germany	-20,371
France	-41,632
UK	24,632
Middle East	-1,002,970
Australia	-293,765

Source: Japan, Ministry of Finance

http://www.customs.go.jp/toukei/info/index_e.htm

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 IQ2012. The only strong contribution of net trade was 3.8 percent in IIIQ2011. Net trade added 1.7 percentage points to GDP growth in IQ2013 and 0.5 percentage points in IIQ2013 but deducted 2.0 percentage points in IIIQ2013 and deducted 2.2 percentage points in IVQ2013. Net trade deducted 1.1 percentage points from GDP growth in IQ2014. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

Table VB-3, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %

	Net Trade	Exports	Imports
2014
I	-1.1	3.9	-5.0
2013
I	1.7	2.4	-0.7
II	0.5	1.7	-1.2
III	-2.0	-0.4	-1.6
IV	-2.2	0.3	-2.5
2012
I	0.4	1.7	-1.3
II	-1.3	-0.3	-0.9
III	-2.2	-2.4	0.2
IV	-0.5	-1.8	1.3
2011
I	-1.1	-0.4	-0.7
II	-4.3	-4.6	0.3
III	3.8	5.7	-1.9
IV	-3.0	-1.9	-1.1
2010
I	2.1	3.5	-1.4
II	0.1	2.6	-2.6
III	0.5	1.4	-0.9
IV	-0.4	0.1	-0.5
2009
I	-4.5	-16.4	12.0
II	7.4	4.7	2.7
III	2.2	5.3	-3.0
IV	2.7	4.1	-1.4
2008
I	1.1	2.1	-1.0
II	0.5	-1.6	2.1
III	0.1	0.2	-0.1
IV	-11.5	-10.2	-1.2
2007
I	1.1	1.7	-0.5
II	0.7	1.6	-0.8
III	2.1	1.5	0.6
IV	1.4	2.0	-0.7

Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/index-e.html

http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-7 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 104.9 in Jun 2009 to 94.0 in Jan 2012 or minus 10.4 percent and increased to 109.1 in Apr 2014 for a gain of 16.1 percent relative to Jan 2012 and 4.0 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials.

Chart IV-7, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2014

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Chart IV-7A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 100.2 in Apr 2013 or minus 2.8 percent relative to Apr 2012 and gained 0.6 percent to 98.5 in Apr 2014 relative to Jun 2009.

Chart IV-7A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2014

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-8 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan (for the relation of terms of trade and growth see Pelaez (1979, 1976a)). The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 113.1 in Apr 2012 or 21.0 percent and to 127.0 in Apr 2014 or gain of 12.3 percent relative to Apr 2012 and 35.8 percent relative to Jun 2009.

Chart IV-8, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2014

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Chart IV-8A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 112.8 in Apr 2014 or minus 5.6 percent relative to Apr 2012 and gain of 30.9 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency increased 0.6 percent from Jun 2009 to Apr 2014 while the import corporate goods price index increased 30.9 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

Chart IV-8A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2014

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Table IV-8 provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Mar 2014. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Apr 2014, the export index on the contract currency basis decreased 0.7 percent and decreased 5.5 percent on the yen basis. For the entire period from Jan 2008 to Apr 2014, the import price index increased 12.0 percent on the contract currency basis and increased 6.7 percent on the yen basis. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

Table IV-8, Japan, Exports and Imports Corporate Goods Price Index, Contract Currency Basis and Yen Basis

Month	Exports Contract Currency	Exports Yen	Imports Contract Currency	Imports Yen
2008/01	99.2	115.5	100.7	119.0
2008/02	99.8	116.1	102.4	120.6
2008/03	100.5	112.6	104.5	117.4
2008/04	101.6	115.3	110.1	125.2
2008/05	102.4	117.4	113.4	130.4
2008/06	103.5	120.7	119.5	140.3
2008/07	104.7	122.1	122.6	143.9
2008/08	103.7	122.1	123.1	147.0
2008/09	102.7	118.3	117.1	137.1
2008/10	100.2	109.6	109.1	121.5
2008/11	98.6	104.5	97.8	105.8
2008/12	97.9	100.6	89.3	93.0
2009/01	98.0	99.5	85.6	88.4
2009/02	97.5	100.1	85.7	89.7
2009/03	97.3	104.2	85.2	93.0
2009/04	97.6	105.6	84.4	93.0
2009/05	97.5	103.8	84.0	90.8
2009/06	97.9	104.9	86.2	93.5
2009/07	97.5	103.1	89.2	95.0
2009/08	98.3	104.4	89.6	95.8
2009/09	98.3	102.1	91.0	94.7
2009/10	98.0	101.2	91.0	94.0
2009/11	98.4	100.8	92.8	94.8
2009/12	98.3	100.7	95.4	97.5
2010/01	99.4	102.2	97.0	100.0
2010/02	99.7	101.6	97.6	99.8
2010/03	99.7	101.8	97.0	99.2
2010/04	100.5	104.6	99.9	104.6
2010/05	100.7	102.9	101.7	104.9
2010/06	100.1	101.6	100.0	102.3
2010/07	99.4	99.0	99.9	99.8
2010/08	99.1	97.3	99.5	97.5
2010/09	99.4	97.0	100.0	97.2
2010/10	100.1	96.4	100.5	95.8
2010/11	100.7	97.4	102.6	98.2
2010/12	101.2	98.3	104.4	100.6
2011/01	102.1	98.6	107.2	102.6
2011/02	102.9	99.5	109.0	104.3
2011/03	103.5	99.6	111.8	106.3
2011/04	104.1	101.7	115.9	111.9
2011/05	103.9	99.9	118.8	112.4
2011/06	103.8	99.3	117.5	110.5
2011/07	103.6	98.3	118.3	110.2
2011/08	103.6	96.6	118.6	108.1
2011/09	103.7	96.1	117.0	106.2
2011/10	103.0	95.2	116.6	105.6
2011/11	101.9	94.8	115.4	105.4
2011/12	101.5	94.5	116.1	106.2
2012/01	101.8	94.0	115.0	104.2
2012/02	102.4	95.8	115.8	106.4
2012/03	102.9	99.2	118.3	112.9
2012/04	103.1	98.7	119.5	113.1
2012/05	102.3	96.3	118.1	109.8
2012/06	101.4	95.0	115.2	106.7
2012/07	100.6	94.0	112.0	103.5
2012/08	100.9	94.1	112.4	103.6
2012/09	101.0	94.1	114.7	105.2
2012/10	101.1	94.7	113.8	105.2
2012/11	100.9	95.9	113.2	106.5
2012/12	100.7	98.0	113.4	109.5
2013/01	101.0	102.4	113.8	115.4
2013/02	101.5	105.9	114.8	120.2
2013/03	101.3	106.6	115.1	122.0
2013/04	100.2	107.5	114.1	123.8
2013/05	99.6	109.1	112.6	125.3
2013/06	99.2	106.1	112.0	121.2
2013/07	99.1	107.5	111.6	122.8
2013/08	99.0	106.1	111.7	121.2
2013/09	99.0	107.2	112.9	123.9
2013/10	99.2	106.7	113.0	122.8
2013/11	99.1	108.0	113.1	124.9
2013-12	99.1	110.4	113.8	129.0
2014-01	99.2	110.7	114.4	130.1
2014-02	98.9	109.3	113.8	127.7
2014-03	98.6	109.0	113.4	127.4
2014-04	98.5	109.1	112.8	127.0

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/index.htm/

Chart IV-9, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2014

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

The producer price index of the US from 1970 to 2014 in Chart IV-8 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.

Chart IV-10, US, Producer Price Index Finished Goods, Monthly, 1970-2014

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-9. The increase in the tax on value added of consumption caused sharp increases in prices across all segments. Petroleum and coal with weight of 5.7 percent increased 3.3 percent in Apr 2014 and increased 9.5 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, increased 2.6 percent in Apr 2014 and increased 3.4 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income (for analysis of terms of trade and growth see Pelaez (1979, 1976a). There are now inflation effects of the intentional policy of devaluing the yen.

Table IV-9, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Apr 2014	Weight	Month ∆%	12 Month ∆%
Total	1000.0	2.8	4.1
Food, Beverages, Tobacco, Feedstuffs	137.5	2.9	3.1
Petroleum & Coal	57.4	3.3	9.5
Production Machinery	30.8	2.6	3.4
Electronic Components	31.0	2.4	0.2
Electric Power, Gas & Water	52.7	3.6	12.5
Iron & Steel	56.6	3.1	7.3
Chemicals	92.1	1.0	2.5
Transport Equipment	136.4	2.9	2.6

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/index.htm/

https://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1404.pdf

Percentage point contributions to change of the corporate goods price index (CGPI) in Mar 2014 are provided in Table IV-10 divided into domestic, export and import segments. The final block provides change in the corporate goods price without the effects of the increase in the tax on value added of consumption. In the domestic CGPI, increasing 2.8 percent in Apr 2014, the energy shock is evident in the contribution of 0.24 percentage points by petroleum and coal products in new carry trades of exposures in commodity futures. The exports CGPI decreased 0.1 percent on the basis of the contract currency with deduction of 0.02 percentage points by electric and electronic products. The imports CGPI decreased 0.5 percent on the contract currency basis. Petroleum, coal and natural gas products deducted 0.49 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide. The final block D shows that the increase in the domestic corporate goods price index without the effects of the consumption tax is only 0.1 percent.

Table IV-10, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Mar 2014	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change: 2.8%
Food, Beverages, Tobacco & Feedstuffs	0.40
Transportation Equipment	0.36
Petroleum & Coal Products	0.24
Electric Power, Gas & Water	0.24
Iron & Steel	0.17
Other Manufacturing Industry	0.14
B. Export Price Index	Monthly Change: -0.1% contract currency
Other Primary Product & Manufactured Goods	-0.05
General Purpose, Production & Business Oriented Machinery	-0.03
Chemicals & Related Products	-0.03
Electric & Electronic Products	-0.02
Transportation Equipment	0.06
C. Import Price Index	Monthly Change: -0.5% contract currency basis
Petroleum, Coal & Natural Gas	-0.49
Chemicals & Related Products	-0.08
General Purpose, Production & Business Oriented Machinery	-0.03
Foodstuffs & Feedstuffs	0.05
D. Domestic Corporate Goods Price Index Excluding Consumption Tax	Monthly Change: 0.1%
Electric Power, Gas & Water	0.17
Petroleum & Coal Products	0.03
Scrap & Waste	0.02
Agriculture, Forestry & Fishery Products	0.02
Chemicals & Related Products	-0.16

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/index.htm/

https://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1404.pdf

China is experiencing similar inflation behavior as the advanced economies in several prior months in the form of declining commodity prices but differs in decreasing inflation of producer prices relative to a year earlier. As shown in Table IV-11, inflation of the price indexes for industry in Apr 2014 is minus 0.2 percent; 12-month inflation is minus 2.0 percent in Apr; and cumulative inflation in Jan-Apr 2014 relative to Jan-Apr 2013 is minus 2.0 percent. Inflation of segments in Mar 2013 in China is provided in Table IV-9 in column “Month Apr 2014 ∆%.” There were decreases of prices of mining & quarrying of 1.0 percent in Apr and decrease of 6.1 percent in 12 months. Prices of consumer goods changed 0.0 percent in Apr and decreased 0.1 percent in 12 months. Prices of inputs in the purchaser price index decreased 0.4 percent in Apr and declined 2.3 percent in 12 months. Fuel and power decreased 0.6 percent in Apr and declined 2.7 percent in 12 months. An important category of inputs for exports is textile raw materials, decreasing 0.2 percent in Apr and decreasing 0.9 percent in 12 months.

Table IV-11, China, Price Indexes for Industry ∆%

	Month Apr 2014 ∆%	12-Month Apr 2014 ∆%	Jan-Apr 2014/Jan-Apr 2013 ∆%
I Producer Price Indexes	-0.2	-2.0	-2.0
Means of Production	-0.3	-2.6	-2.5
Mining & Quarrying	-1.0	-6.1	-5.5
Raw Materials	-0.5	-3.1	-3.1
Processing	-0.2	-2.1	-2.0
Consumer Goods	0.0	-0.1	-0.2
Food	0.0	0.1	-0.1
Clothing	0.0	0.7	0.8
Daily Use Articles	0.1	-0.1	-0.3
Durable Consumer Goods	0.1	-0.8	-1.0
II Purchaser Price Indexes	-0.4	-2.3	-2.2
Fuel and Power	-0.6	-2.7	-2.5
Ferrous Metals	-0.4	-5.1	-4.3
Nonferrous Metals	-0.5	-6.1	-6.6
Chemical Raw Materials	-0.3	-2.1	-2.2
Wood & Pulp	0.0	-0.6	-0.5
Building Materials	-0.1	0.7	0.6
Other Industrial Raw Materials	-0.3	-1.5	-1.2
Agricultural	-0.5	-0.6	-0.8
Textile Raw Materials	-0.2	-0.9	-0.5

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Jan 2011 to may 2014. The index of current prices paid or costs of inputs increased from 16.13 in Dec 2012 to 19.78 in May 2014 while the index of current prices received or sales prices increased from 1.08 in Dec 2012 to 6.59 in May 2014. The farther the index is from the area of no change at zero, the faster the rate of change. Prices paid or of inputs at 19.78 in May 2014 are expanding at faster pace than prices received or of sales of products at 6.59. The index of future prices paid or expectations of costs of inputs in the next six months fell from 51.61 in Dec 2012 to 31.87 in May 2014 while the index of future prices received or expectation of sales prices in the next six months decreased from 25.81 in Dec 2012 to 14.29 in May 2014. Priced paid or of inputs are expected to increase at a faster pace in the next six months than prices received or prices of sales products. Prices of sales of finished products are less dynamic than prices of costs of inputs during waves of increases. Prices of costs of costs of inputs fall less rapidly than prices of sales of finished products during waves of price decreases. As a result, margins of prices of sales less costs of inputs oscillate with typical deterioration against producers, forcing companies to manage tightly costs and labor inputs. Instability of sales/costs margins discourages investment and hiring.

Table IV-5, US, FRBNY Empire State Manufacturing Survey, Diffusion Indexes, Prices Paid and Prices Received, SA

	Current Prices Paid	Current Prices Received	Six Months Prices Paid	Six Months Prices Received
May 2014	19.78	6.59	31.87	14.29
Apr	22.45	10.20	33.67	14.29
Mar	21.18	2.35	43.53	25.88
Feb	25.00	15.00	40.00	23.75
Jan	36.59	13.41	45.12	23.17
Dec 2013	15.66	3.61	48.19	27.71
Nov	17.11	-3.95	42.11	17.11
Oct	21.69	2.41	45.78	25.30
Sep	21.51	8.60	39.78	24.73
Aug	20.48	3.61	40.96	19.28
Jul	17.39	1.09	28.26	11.96
Jun	20.97	11.29	45.16	17.74
May	20.45	4.55	29.55	14.77
Apr	28.41	5.68	44.32	14.77
Mar	25.81	2.15	50.54	23.66
Feb	26.26	8.08	44.44	13.13
Jan	22.58	10.75	38.71	21.51
Dec 2012	16.13	1.08	51.61	25.81
Nov	14.61	5.62	39.33	15.73
Oct	17.20	4.30	44.09	24.73
Sep	19.15	5.32	40.43	23.40
Aug	16.47	2.35	31.76	14.12
Jul	7.41	3.70	35.80	16.05
Jun	19.59	1.03	34.02	17.53
May	37.35	12.05	57.83	22.89
Apr	45.78	19.28	50.60	22.89
Mar	50.62	13.58	66.67	32.10
Feb	25.88	15.29	62.35	34.12
Jan	26.37	23.08	53.85	30.77
Dec 2011	24.42	3.49	56.98	36.05
Nov	18.29	6.10	36.59	25.61
Oct	22.47	4.49	40.45	17.98
Sep	32.61	8.70	53.26	22.83
Aug	28.26	2.17	42.39	15.22
Jul	43.33	5.56	51.11	30.00
Jun	56.12	11.22	55.10	19.39
May	69.89	27.96	68.82	35.48
Apr	57.69	26.92	56.41	38.46
Mar	53.25	20.78	71.43	36.36
Feb	45.78	16.87	55.42	27.71
Jan 2011	35.79	15.79	60.00	42.11

Source: http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html

Price indexes of the Federal Reserve Bank of Philadelphia Outlook Survey are in Table IV-6. As inflation waves throughout the world (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/04/imf-view-world-inflation-waves-squeeze.html), indexes of both current and expectations of future prices paid and received were quite high until May 2011. Prices paid, or inputs, were more dynamic, reflecting carry trades from zero interest rates to commodity futures. All indexes softened after May 2011 with even decline of prices received in Aug 2011 during the first round of risk aversion. Current and future price indexes have increased again but not back to the intensity in the beginning of 2011 because of risk aversion frustrating carry trades even under zero interest rates. The index of prices paid or prices of inputs increased from 20.6 in Dec 2012 to 23.0 in May 2014. The index of current prices received was minus 7.2 in Apr 2013, indicating decrease of prices received. The index of current prices received decreased from 10.9 in Dec 2012 to 17.0 in May 2014. The farther the index is from the area of no change at zero, the faster the rate of change. The index of current prices paid or costs of inputs at 23.0 in May 2014 indicates faster increase than the index of current prices received or sales prices of production at 17.0. The index of future prices paid decreased to 36.1 in May 2014 from 41.9 in Dec 2012 while the index of future prices received increased from 27.3 in Dec 2012 to 29.5 in May 2014. Expectations are incorporating faster increases in prices of inputs or costs of production, 36.1 in May 2014, than of sales prices of produced goods, 29.5 in May 2014, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages investment and hiring.

Table IV-6, US, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Prices Paid and Prices Received, SA

	Current Prices Paid	Current Prices Received	Future Prices Paid	Future Prices Received
10-Dec	42.6	6.0	56.8	25.7
11-Jan	47.9	12.1	58.7	34.1
11-Feb	61.1	13.2	62.6	30.7
11-Mar	57.6	17	62.1	32.4
11-Apr	50.9	20.8	55.3	33.7
11-May	49.3	20.5	54.6	28.5
11-Jun	38.9	7.7	41.6	6.8
11-Jul	35.6	6.3	48.3	16.7
11-Aug	24.6	-4	45.2	23.4
11-Sep	32	7.1	40.9	22.2
11-Oct	24.3	2.8	42.9	27.8
11-Nov	22.8	6.3	35.4	28.3
11-Dec	25	7	43.1	24.7
12-Jan	25.3	8	47.5	20.8
12-Feb	31.9	9.4	43.4	24.8
12-Mar	14.1	5.3	37.8	22.6
12-Apr	18.1	6.2	35.2	20.2
12-May	7.7	0.7	39.5	9.7
12-Jun	5.5	-3.7	34.8	16.9
12-Jul	10.8	4.9	27.9	20.3
12-Aug	18	5.6	39.5	25
12-Sep	15.8	3.5	42.2	27.5
12-Oct	19.9	7.1	45.8	15.3
12-Nov	23.6	6.5	47.6	12.8
12-Dec	20.6	10.9	41.9	27.3
13-Jan	11.8	-1.6	33.9	20
13-Feb	10.6	-1.3	25.4	20.6
13-Mar	7.6	-1.3	32.4	16.8
13-Apr	5	-7.2	28.9	9.9
13-May	9.7	0.2	33.5	19.9
13-Jun	23.7	14.6	33.3	24.3
13-Jul	22.7	8	41	25.6
13-Aug	20.4	11.1	40.7	24.5
13-Sep	25.9	12.5	43	31.6
13-Oct	21	12.8	43.1	34.6
13-Nov	25.4	9	43.5	38.1
13-Dec	16.4	10.8	39.1	34.8
14-Jan	18.7	5.1	35.3	11.8
14-Feb	14.2	7.6	18.2	16.3
14-Mar	13.9	4.3	29.4	15.9
14-Apr	11.3	4.3	35.1	13
14-May	23	17	36.1	29.5

Source: Federal Reserve Bank of Philadelphia

http://www.phil.frb.org/index.cfm

Chart IV-1 of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices paid or prices of inputs from 2006 to 2014. Recession dates are in shaded areas. In the middle of deep global contraction after IVQ2007, input prices continued to increase in speculative carry trades from central bank policy rates falling toward zero into commodities futures. The index peaked above 70 in the second half of 2008. Inflation of inputs moderated significantly during the shock of risk aversion in late 2008, even falling briefly into contraction territory below zero during several months in 2009 in the flight away from risk financial assets into US government securities (Cochrane and Zingales 2009) that unwound carry trades. Return of risk appetite induced carry trade with significant increase until return of risk aversion in the first round of the European sovereign debt crisis in Apr 2010. Carry trades returned during risk appetite in expectation that the European sovereign debt crisis was resolved. The various inflation waves originating in carry trades induced by zero interest rates with alternating episodes of risk aversion are mirrored in the prices of inputs after 2011, in particular after Aug 2012 with the announcement of the Outright Monetary Transactions Program of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). Subsequent risk aversion and flows of capital away from commodities into stocks and high-yield bonds caused sharp decline in the index of prices paid followed by another recent rebound with marginal decline and new increase. The index falls and then rebounds in the final segment but there are no episodes of contraction after 2009.

Chart IV-1, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

http://www.philadelphiafed.org/index.cfm

Chart IV-2 of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices received from 2006 to 2014. The significant difference between the index of current prices paid in Chart IV-1 and the index of current prices received in Chart IV-2 is that increases in prices paid are significantly sharper than increases in prices received. There were several periods of negative readings of prices received from 2010 to 2014 but none of prices paid. Prices paid relative to prices received deteriorate most of the time largely because of the carry trades from zero interest rates to commodity futures. Profit margins of business are compressed intermittently by fluctuations of commodity prices induced by unconventional monetary policy of zero interest rates, frustrating production, investment and hiring decisions of business, which is precisely the opposite outcome pursued by unconventional monetary policy.

Chart IV-2, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

http://www.philadelphiafed.org/index.cfm

VC China. China estimates an index of nonmanufacturing purchasing managers based on a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. The total index increased from 55.7 in Jan 2011 to 58.0 in Mar 2012, decreasing to 53.9 in Aug 2013. The index decreased from 56.0 in Nov 2013 to 54.6 in Dec 2013, easing to 53.4 in Jan 2014. The total index increased to 55.0 in Feb 2014, falling to 54.5 in Mar 2014. The index increased marginally to 54.8 in Apr 2014. The index of new orders increased from 52.2 in Jan 2012 to 54.3 in Dec 2012 but fell to 50.1 in May 2013, barely above the neutral frontier of 50.0. The index of new orders stabilized at 51.0 in Nov-Dec 2013, easing to 50.9 in Jan 2014. The index of new orders increased to 51.4 in Feb 2014 decreasing to 50.8 in Mar-Apr 2014.

Table CIPMNM, China, Nonmanufacturing Index of Purchasing Managers, %, Seasonally Adjusted

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Apr 2014	54.8	50.8	52.4	49.4	61.5
Mar	54.5	50.8	52.8	49.5	61.5
Feb	55.0	51.4	52.1	49.0	59.9
Jan	53.4	50.9	54.5	50.1	58.1
Dec 2013	54.6	51.0	56.9	52.0	58.7
Nov	56.0	51.0	54.8	49.5	61.3
Oct	56.3	51.6	56.1	51.4	60.5
Sep	55.4	53.4	56.7	50.6	60.1
Aug	53.9	50.9	57.1	51.2	62.9
Jul	54.1	50.3	58.2	52.4	63.9
Jun	53.9	50.3	55.0	50.6	61.8
May	54.3	50.1	54.4	50.7	62.9
Apr	54.5	50.9	51.1	47.6	62.5
Mar	55.6	52.0	55.3	50.0	62.4
Feb	54.5	51.8	56.2	51.1	62.7
Jan	56.2	53.7	58.2	50.9	61.4
Dec 2012	56.1	54.3	53.8	50.0	64.6
Nov	55.6	53.2	52.5	48.4	64.6
Oct	55.5	51.6	58.1	50.5	63.4
Sep	53.7	51.8	57.5	51.3	60.9
Aug	56.3	52.7	57.6	51.2	63.2
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

Notes: Interm.: Intermediate; Subs: Subscription; Exp: Business Expectations

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. The index fell from 56.1 in Dec 2012 to 53.9 in Jun 2013. The index recovered to 56.3 in Oct 2013, decreasing marginally to 54.6 in Dec 2013. The index fell to 53.4 in Jan 2014, increasing to 54.8 in Apr 2014.

Chart CIPMNM, China, Nonmanufacturing Index of Purchasing Managers, Seasonally Adjusted

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr 2012, falling to 49.2 in Aug 2012, rebounding to 50.6 in Dec 2012. The index fell to 50.1 in Jun 2013, barely above the neutral frontier at 50.0, recovering to 51.4 in Nov 2013 but falling to 51.0 in Dec 2013. The index fell to 50.5 in Jan 2014 and 50.4 in Mar 2014. The index of new orders fell from 57.2 in Apr 2012 to 52.0 in Dec 2012. The index of new orders fell from 54.5 in Nov 2013 to 53.9 in Dec 2013. The index fell to 53.0 in Jan 2014 and 52.5 in Apr 2014.

Table CIPMMFG, China, Manufacturing Index of Purchasing Managers, %, Seasonally Adjusted

	IPM	PI	NOI	INV	EMP	SDEL
Apr 2014	50.4	52.5	51.2	48.1	48.3	50.1
Mar	50.3	52.7	50.6	47.8	48.3	49.8
Feb	50.2	52.6	50.5	47.4	48.0	49.9
Jan	50.5	53.0	50.9	47.8	48.2	49.8
Dec 2013	51.0	53.9	52.0	47.6	48.7	50.5
Nov	51.4	54.5	52.3	47.8	49.6	50.6
Oct	51.4	54.4	52.5	48.6	49.2	50.8
Sep	51.1	52.9	52.8	48.5	49.1	50.8
Aug	51.0	52.6	52.4	48.0	49.3	50.4
Jul	50.3	52.4	50.6	47.6	49.1	50.1
Jun	50.1	52.0	50.4	47.4	48.7	50.3
May	50.8	53.3	51.8	47.6	48.8	50.8
Apr	50.6	52.6	51.7	47.5	49.0	50.8
Mar	50.9	52.7	52.3	47.5	49.8	51.1
Feb	50.1	51.2	50.1	49.5	47.6	48.3
Jan	50.4	51.3	51.6	50.1	47.8	50.0
Dec 2012	50.6	52.0	51.2	47.3	49.0	48.8
Nov	50.6	52.5	51.2	47.9	48.7	49.9
Oct	50.2	52.1	50.4	47.3	49.2	50.1
Sep	49.8	51.3	49.8	47.0	48.9	49.5
Aug	49.2	50.9	48.7	45.1	49.1	50.0
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

IPM: Index of Purchasing Managers; PI: Production Index; NOI: New Orders Index; EMP: Employed Person Index; SDEL: Supplier Delivery Time Index

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers. The index fell to 50.1 in Jun 2013. The index decreased from 51.4 in Nov 2013 to 51.0 in Dec 2013. The index fell to 50.4 in Apr 2014.

Chart CIPMMFG, China, Manufacturing Index of Purchasing Managers, Seasonally Adjusted

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Cumulative growth of China’s GDP in IQ2014 relative to the same period in 2013 was 7.4 percent, as shown in Table VC-GDP. Secondary industry accounts for 44.9 percent of GDP in IQ2014. In IQ2014, industry alone accounts for 39.9 percent of GDP and construction with the remaining 5.0 percent. Tertiary industry accounts for 49.0 percent of cumulative GDP in IQ2014 and primary industry for 6.1 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The strategy is shifting to lower growth rates with improvement in living standards. The bottom block of Table VC-GDP provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 5.7 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.1 percent and to 7.4 percent in IIQ2013, rebounding to 9.5 percent in IIIQ2013. Annual equivalent growth was 7.0 percent in IVQ2013, declining to 5.7 percent in IQ2014.

Table VC-GDP, China, Quarterly Growth of GDP, Current CNY 100 Million and Inflation Adjusted ∆%

Cumulative GDP IQ2014	Value Current CNY Billion	2014 Year-on-Year Constant Prices ∆%
GDP	12,821.3	7.4
Primary Industry	777.6	3.5
Farming	777.6	3.5
Secondary Industry	5,758.7	7.3
Industry	5,121.7	7.1
Construction	637.0	9.3
Tertiary Industry	6,285.0	7.8
Transport, Storage, Post	691.7	5.7
Wholesale, Retail Trades	1,298.2	9.8
Hotel & Catering Services	266.8	5.9
Financial Intermediation	929.1	9.5
Real Estate	880.5	3.0
Other	2,218.7	8.9
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2014
IQ2014	1.4	5.7
2013
IVQ2013	1.7	7.0
IIIQ2013	2.3	9.5
IIQ2013	1.8	7.4
IQ2013	1.5	6.1
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.1	8.7
IQ2012	1.4	5.7
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.5	10.4
IQ2011	2.3	9.5

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Growth of China’s GDP in IQ2014 relative to the same period in 2013 was 7.4 percent, as shown in Table VC-GDPA. Secondary industry accounts for 44.9 percent of GDP of which industry alone for 39.9 percent in cumulative IQ2014 and construction with the remaining 5.0 percent. Tertiary industry accounts for 49.0 percent of GDP in cumulative IQ2014 and primary industry for 6.1 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The strategy is changing to lower growth rates while improving living standards. GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.7 percent in IQ2013, 7.5 percent in IIQ2013 and 7.8 percent in IIIQ2013. GDP grew 7.4 percent in IVQ2013 relative to a year earlier and 1.7 percent relative to IIIQ2013, which is equivalent to 7.0 percent per year. GDP grew 7.4 percent in IQ2014 relative to a year earlier and 1.4 percent in IQ2014 that is equivalent to 5.7 percent per year.

Table VC-GDPA, China, Growth Rate of GDP, ∆% Relative to a Year Earlier and ∆% Relative to Prior Quarter

	IQ 2013	IIQ 2013	IIIQ 2013	IVQ 2013	IQ 2014
GDP	7.7	7.5	7.8	7.7	7.4
Primary Industry	3.4	3.0	3.4	4.0	3.5
Secondary Industry	7.8	7.6	7.8	7.8	7.3
Tertiary Industry	8.3	8.3	8.4	8.3	7.1
GDP ∆% Relative to a Prior Quarter	1.5	1.8	2.3	1.7	1.4
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ 2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.5	2.2	1.8	1.4	2.1	2.0	1.9
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Chart VC-GDP of the National Bureau of Statistics of China provides annual value and growth rates of GDP. China’s GDP growth in 2013 is still high at 7.7 percent but at the lowest rhythm in five years.

Chart VC-GDP, China, Gross Domestic Product, Million Yuan and ∆%, 2009-2013

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Chart VC-FXR provides China’s foreign exchange reserves. FX reserves grew from $2399.2 billion in 2009 to $3821.3 billion in 2013 driven by high growth of China’s trade surplus.

Chart VC-FXR, China, Foreign Exchange Reserves, 2009-2013

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english

Chart VC-Trade provides China’s imports and exports. Exports exceeded imports with resulting large trade balance surpluses that increased foreign exchange reserves.

Chart VC-Trade, China, Imports and Exports of Goods, 2009-2013, $100 Million US Dollars

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey/PressRelease.mvc/4c63770d8c2c4bdaacecda6d436d4cbf) is stabilizing. The overall Flash HSBC China Manufacturing PMI^™ increased from 48.1 in Apr to 49.7 in May, while the Flash HSBC China Manufacturing Output Index increased from 47.9 in Apr to 50.3 in May, indicating moderate expansion. Exports orders changed direction to expansion. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the index is consistent with manufacturing stabilizing at weak levels, requiring policy to stabilize growth in the rest of the year (http://www.markiteconomics.com/Survey/PressRelease.mvc/4c63770d8c2c4bdaacecda6d436d4cbf). The HSBC China Services PMI^™, compiled by Markit, shows marginal stability in business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 49.3 in Mar to 49.5 in Apr, indicating standstill (http://www.markiteconomics.com/Survey/PressRelease.mvc/edde378848494848b95e2f9a78838413). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds need of policies to prevent decelerating growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/edde378848494848b95e2f9a78838413). The HSBC Business Activity index decreased from 51.9 in Mar to 51.4 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/edde378848494848b95e2f9a78838413). Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds that services continue improving with the economy expanding moderately (http://www.markiteconomics.com/Survey/PressRelease.mvc/edde378848494848b95e2f9a78838413). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased marginally to 48.1 in Apr from 48.0 in Mar, indicating marginally deteriorating manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/9431bf0b83c04209820fd77c2b2ff856). New export orders decreased moderately with sharp contraction of total new orders. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds soft demand in China with possible loss of impulse, requiring policy enhancement (http://www.markiteconomics.com/Survey/PressRelease.mvc/9431bf0b83c04209820fd77c2b2ff856). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Apr 12-month ∆%: minus 2.0 Apr month ∆%: -0.2 Blog 5/18/14
Consumer Price Index	Apr month ∆%: -0.3 Apr 12 months ∆%: 1.8 Blog 5/18/14
Value Added of Industry	Apr month ∆%: 0.82 Jan-Apr 2014/Jan-Apr 2013 ∆%: 8.7 Blog 5/18/14
GDP Growth Rate	Year IQ2014 ∆%: 7.4 Quarter IQ2014 AE ∆%: 5.7 Blog 4/20/14
Investment in Fixed Assets	Total Jan-Apr 2013 ∆%: 17.3 Real estate development: 16.4 Blog 5/18/14
Retail Sales	Apr month ∆%: 0.83 Apr 12 month ∆%: 11.9 Jan-Apr ∆%: 12.0 Blog 5/18/14
Trade Balance	Apr balance $18.45 billion Exports 12M ∆% 0.9 Imports 12M ∆% 0.8 Cumulative Jan-Apr: $35.19 billion Blog 5/11/14

Links to blog comments in Table CNY:

5/18/14 http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html

5/11/14 http://cmpassocregulationblog.blogspot.com/2014/05/rules-discretionary-authorities-and.html

4/20/14 http://cmpassocregulationblog.blogspot.com/2014/04/imf-view-world-inflation-waves-squeeze.html

VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.3 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.6 percent in 2011. EUROSTAT estimates growth of GDP of the euro area of minus 0.7 percent in 2012 and minus 0.4 percent in 2013 but 1.1 percent in 2014 and 1.7 percent in 2015.

Table VD-EUR, Euro Area, Yearly Percentage Change of Harmonized Index of Consumer Prices, Unemployment and GDP ∆%

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	9.6	2.9
2000	2.2	8.8	3.8
2001	2.4	8.2	2.0
2002	2.3	8.5	0.9
2003	2.1	9.0	0.7
2004	2.2	9.2	2.2
2005	2.2	9.1	1.7
2006	2.2	8.4	3.3
2007	2.2	7.5	3.0
2008	3.3	7.6	0.4
2009	0.3	9.6	-4.5
2010	1.6	10.1	1.9
2011	2.7	10.1	1.6
2012	2.5	11.3	-0.7
2013*	1.3	12.0	-0.4
2014*			1.1
2015*			1.7

*EUROSTAT forecast Source: EUROSTAT

http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database

The GDP of the euro area in 2012 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $12,199.1 billion or 16.9 percent of world GDP of $72,216.4 billion (http://www.imf.org/external/pubs/ft/weo/2012/02/weodata/index.aspx). The sum of the GDP of France $2613.9 billion with the GDP of Germany of $3429.5 billion, Italy of $2014.1 billion and Spain $1323.5 billion is $9381.0 billion or 76.9 percent of total euro area GDP and 13.0 percent of World GDP. The four largest economies account for slightly more than three quarters of economic activity of the euro area. Table VD-EUR1 is constructed with the dataset of EUROSTAT, providing growth rates of the euro area as a whole and of the largest four economies of Germany, France, Italy and Spain annually from 1996 to 2011 with the estimate of 2012 and forecasts for 2013, 2014 and 2015 by EUROSTAT. The impact of the global recession on the overall euro area economy and on the four largest economies was quite strong. There was sharp contraction in 2009 and growth rates have not rebounded to earlier growth with exception of Germany in 2010 and 2011.

Table VD-EUR1, Euro Area, Real GDP Growth Rate, ∆%

	Euro Area	Germany	France	Italy	Spain
2015*	1.7	1.9	1.7	1.2	1.7
2014*	1.1	1.7	0.9	0.7	0.5
2013*	-0.4	0.4	0.2	-1.9	-1.2
2012	-0.7	0.7	0.0	-2.4	-1.6
2011	1.6	3.3	2.0	0.4	0.1
2010	1.9	4.0	1.7	1.7	-0.2
2009	-4.5	-5.1	-3.1	-5.5	-3.8
2008	0.4	1.1	-0.1	-1.2	0.9
2007	3.0	3.3	2.3	1.7	3.5
2006	3.3	3.7	2.5	2.2	4.1
2005	1.7	0.7	1.8	0.9	3.6
2004	2.2	1.2	2.5	1.7	3.3
2003	0.7	-0.4	0.9	0.0	3.1
2002	0.9	0.0	0.9	0.5	2.7
2001	2.0	1.5	1.8	1.9	3.7
2000	3.8	3.1	3.7	3.7	5.0
1999	2.9	1.9	3.3	1.5	4.7
1998	2.8	1.9	3.4	1.4	4.5
1997	2.6	1.7	2.2	1.9	3.9
1996	1.5	0.8	1.1	1.1	2.5

Source: EUROSTAT

http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, decreased from 54.0 in Apr to 53.9 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/b1ef2c10fe5d406ab003ebab100f7e39). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the index is consistent with growth of GDP as high as 0.5 percent in IIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/b1ef2c10fe5d406ab003ebab100f7e39). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP increased from 53.1 in Mar, to 54.0 in Apr, which is the fastest in about three years (http://www.markiteconomics.com/Survey/PressRelease.mvc/bcdeb736b9d34fdaac84bca7fd083726). Chris Williamson, Chief Economist at Markit, finds growth of GDP at 0.5 percent in IIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/bcdeb736b9d34fdaac84bca7fd083726). The Markit Eurozone Services Business Activity Index increased from 52.2 in Mar to 53.1 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/bcdeb736b9d34fdaac84bca7fd083726). The Markit Eurozone Manufacturing PMI^® increased to 53.4 in Apr from 53.0 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/f4205f8a880548918bad798c1ed295cc). New orders and export orders increased for the tenth consecutive month. Chris Williamson, Chief Economist at Markit, finds industrial growth in the euro area at a quarterly rate around 1.0 percent. (http://www.markiteconomics.com/Survey/PressRelease.mvc/f4205f8a880548918bad798c1ed295cc). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IQ2014 ∆% 0.2; IQ2014/IVQ2013 ∆% 0.9 Blog 5/18/14
Unemployment	Mar 2014: 11.8 % unemployment rate; Mar 2014: 18.913 million unemployed Blog 5/4/14
HICP	Apr month ∆%: 0.2 12 months Apr ∆%: 0.7 Blog 5/18/14
Producer Prices	Euro Zone industrial producer prices Mar ∆%: -0.2 Mar 12-month ∆%: -1.6 Blog 5/11/14
Industrial Production	Mar month ∆%: -0.3; Mar 12 months ∆%: -0.1 Blog 5/18/14
Retail Sales	Mar month ∆%: 0.3 Mar 12 months ∆%: 0.9 Blog 5/11/14
Confidence and Economic Sentiment Indicator	Sentiment 102.0 Apr 2014 Consumer minus 8.6 Apr 2014 Blog 5/4/14
Trade	Jan-Mar 2014/Jan-Mar 2013 Exports ∆%: 1.0 Imports ∆%: -0.1 Mar 2014 12-month Exports ∆% -0.7 Imports ∆% 2.5 Blog 5/18/14

Links to blog comments in Table EUR:

5/18/14 http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html

5/11/14 http://cmpassocregulationblog.blogspot.com/2014/05/rules-discretionary-authorities-and.html

5/4/2014 http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1971 to 2013, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.1 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.0 percent in 2010, 3.3 percent in 2011 and 0.7 percent in 2012. Growth decelerated to 0.4 percent in 2013.

The Federal Statistical Agency of Germany analyzes the fall and recovery of the German economy (http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/Content/Statistics/VolkswirtschaftlicheGesamtrechnungen/Inlandsprodukt/Aktuell,templateId=renderPrint.psml):

“The German economy again grew strongly in 2011. The price-adjusted gross domestic product (GDP) increased by 3.0% compared with the previous year. Accordingly, the catching-up process of the German economy continued during the second year after the economic crisis. In the course of 2011, the price-adjusted GDP again exceeded its pre-crisis level. The economic recovery occurred mainly in the first half of 2011. In 2009, Germany experienced the most serious post-war recession, when GDP suffered a historic decline of 5.1%. The year 2010 was characterised by a rapid economic recovery (+3.7%).”

Table VE-DE, Germany, GDP ∆% on Prior Year

	Price Adjusted Chain-Linked	Price- and Calendar-Adjusted Chain Linked
2013	0.4	0.5
2012	0.7	0.9
2011	3.3	3.4
2010	4.0	3.8
2009	-5.1	-5.1
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.8
2004	1.2	0.7
2003	-0.4	-0.4
2002	0.0	0.0
2001	1.5	1.6
2000	3.1	3.3
1999	1.9	1.7
1998	1.9	1.7
1997	1.7	1.8
1996	0.8	0.8
1995	1.7	1.8
1994	2.5	2.5
1993	-1.0	-1.0
1992	1.9	1.5
1991	5.1	5.2
1990	5.3	5.5
1989	3.9	4.0
1988	3.7	3.4
1987	1.4	1.3
1986	2.3	2.3
1985	2.3	2.3
1984	2.8	2.9
1983	1.6	1.5
1982	-0.4	-0.5
1981	0.5	0.6
1980	1.4	1.3
1979	4.2	4.3
1978	3.0	3.1
1977	3.3	3.5
1976	4.9	4.5
1975	-0.9	-0.9
1974	0.9	1.0
1973	4.8	5.0
1972	4.3	4.3
1971	3.1	3.0
1970	NA	NA

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/PressServices/Press/pr/2014/02/PE14_048_811.html

https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_278_811.html https://www.destatis.de/EN/PressServices/Press/pr/2013/11/PE13_381_811.html

https://www.destatis.de/EN/PressServices/Press/pr/2014/01/PE14_016_811.html

https://www.destatis.de/DE/PresseService/Presse/Pressekonferenzen/2014/BIP2013/Pressebroschuere_BIP2013.html

https://www.destatis.de/EN/PressServices/Press/pr/2014/05/PE14_167_811.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, was unchanged from 56.1 in Apr to 56.1 in May. The index of manufacturing output reached 55.3 in May, decreasing from 58.8 in Apr, while the index of services increased to 56.4 in May from 54.7 in Apr. The overall Flash Germany Manufacturing PMI^® decreased from 54.1 in Apr to 52.9 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/38439f40599a481591f420a71f97a9d1). New export work volumes increased for a tenth consecutive month with business originating in the US, Europe and Asia. Oliver Kolodseike, Economist at Markit, finds continuing expansion of Germany’s private sector with strength in new orders and activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/38439f40599a481591f420a71f97a9d1). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 54.3 in Mar to 56.1 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/d6d0009719dd48d9a04d632447b0b192). Oliver Kolodseike, Senior Economist at Markit and author of the report, finds improving activity by the German private sector with output above average in IQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/d6d0009719dd48d9a04d632447b0b192). The Germany Services Business Activity Index decreased from 53.0 in Mar to 54.7 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/d6d0009719dd48d9a04d632447b0b192). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 53.7 in Mar to 54.1 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/137a190a582340c58029f6ed25d70d42). New export orders increased for the tenth consecutive month with demand from the US, Spain and China. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds manufacturing output growing at the second fastest pace in about three years (http://www.markiteconomics.com/Survey/PressRelease.mvc/137a190a582340c58029f6ed25d70d42).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IQ2014 0.8 ∆%; I/Q2014/IQ2013 ∆% 2.5 2013/2012: 0.4% GDP ∆% 1970-2013 Blog 8/26/12 5/27/12 11/25/12 2/24/13 5/19/13 5/26/13 8/18/13 8/25/13 11/17/13 11/24/13 1/26/14 2/16/14 3/2/14 5/18/14 5/25/14
Consumer Price Index	Apr month NSA ∆%: -0.2 Apr 12-month NSA ∆%: 1.3 Blog 5/18/14
Producer Price Index	Apr month ∆%: -0.1 CSA, minus 0.1 12-month NSA ∆%: -0.9 Blog 5/25/14
Industrial Production	MFG Mar month CSA ∆%: minus 0.4 12-month NSA: 5.2 Blog 5/11/14
Machine Orders	MFG Mar month ∆%: -2.8 Mar 12-month ∆%: 3.1 Blog 5/11/14
Retail Sales	Mar Month ∆% -0.7 12-Month ∆% -1.9 Blog 5/4/14
Employment Report	Unemployment Rate SA Mar 5.1% Blog 5/4/14
Trade Balance	Exports Mar 12-month NSA ∆%: 1.9 Imports Mar 12 months NSA ∆%: 5.6 Exports Mar month CSA ∆%: minus 1.8; Imports Mar month CSA minus 0.9 Blog 5/11/14

Links to blog comments in Table DE:

5/18/14 http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html

5/11/14 http://cmpassocregulationblog.blogspot.com/2014/05/rules-discretionary-authorities-and.html

5/4/2014 http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html

3/2/14 http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html

2/16/14 http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html

1/26/14 http://cmpassocregulationblog.blogspot.com/2014/01/capital-flows-exchange-rates-and.html

11/24/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-zero-interest-rates-world.html

11/17/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-unwinding-monetary-policy.html

8/25/13 http://cmpassocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

Table VE-1 provides percentage change of Germany’s GDP in one quarter relative to the prior quarter from 2001 to 2014. Germany’s GDP contracted during four consecutive quarters from IIQ2008 to IQ2009. The deepest contraction was 4.1 percent in IQ2009. Growth was quite strong from IIIQ2009 to IQ2011 for cumulative growth of 7.5 percent in seven quarters or at the average rate of 1.0 percent per quarter, which is equivalent to 4.2 percent per year. Economic growth decelerated in IIQ2011 to 0.1 percent and 0.4 percent in IIIQ2011. The economy grew 0.1 percent in IVQ2011 and grew 0.7 percent in IQ2012 but contracted 0.1 percent in IIQ2012. GDP growth in IIIQ2012 was 0.2 percent relative to IIQ2012. Germany’s GDP contracted 0.5 percent in IVQ2012 relative to IIIQ2012. GDP changed 0.0 percent in IQ2013 and increased 0.7 percent in IIQ2013. Growth of GDP was 0.3 percent in IIIQ2013 and 0.4 percent in IVQ2013. Germany’s growth was robust at 0.8 percent in IQ2014 or 3.2 percent in annual equivalent.

Table VE-1, Germany Quarter GDP ∆% Relative to Prior Quarter, Seasonally and Calendar Adjusted

	IQ	IIQ	IIIQ	IV
2014	0.8
2013	0.0	0.7	0.3	0.4
2012	0.7	-0.1	0.2	-0.5
2011	1.5	0.1	0.4	0.1
2010	0.5	2.0	0.8	0.8
2009	-4.1	0.2	0.7	1.0
2008	1.0	-0.4	-0.5	-2.0
2007	0.6	0.6	0.8	0.4
2006	1.1	1.5	1.0	1.3
2005	-0.1	0.6	0.8	0.3
2004	0.0	0.3	-0.2	0.0
2003	-0.8	-0.1	0.5	0.4
2002	-0.3	0.3	0.4	-0.2
2001	1.5	0.1	-0.3	0.2

Seasonal and calendar adjusted Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Table VE-2 provides percentage changes of Germany’s GDP in a quarter relative to the same quarter a year earlier. Growth was weak in the recovery from the recession of 2001 through 2005, as in most of the euro area (see Pelaez and Pelaez, The Global Recession Risk (2007), 116-46). Germany’s economy then grew robustly in 2006 and 2007 until the global recession after 2007. Germany recovered with strong growth in 2010 and vigorous 5.7 percent in IQ2011. The economy decelerated in the final three quarters of 2011, growing 1.8 percent in IQ2012 relative to IQ2011. Growth decelerated further to 0.6 percent in IIQ2012 without calendar adjustment and 1.1 percent with calendar adjustment and to 0.4 percent in IIIQ2012. Growth in IVQ2012 relative to IVQ2011 was 0.0 percent. GDP fell 1.6 percent in IQ2013 relative to a year earlier and increased 0.9 percent in IIQ2013 relative to a year earlier. GDP increased 1.1 percent in IIIQ2013 relative to a year earlier and 1.3 percent in IVQ2013 relative to a year earlier. GDP increased 2.5 percent in IQ2014 relative to a year earlier.

Table VE-2, Germany, Quarter GDP ∆% Relative to Same Quarter a Year Earlier, Price Adjusted NCSA

	IQ	IIQ	IIIQ	IV
2014	2.5
2013	-1.6	0.9	1.1	1.3
2012	1.8	0.6	0.4	0.0
2011	5.7	3.4	2.9	1.6
2010	2.7	4.7	4.4	4.2
2009	-6.5	-7.5	-5.0	-1.6
2008	2.1	3.1	1.1	-1.9
2007	4.3	3.4	3.3	2.2
2006	4.3	2.4	3.5	4.6
2005	-0.8	1.2	1.2	1.0
2004	1.5	1.6	0.6	0.9
2003	0.0	-1.1	-0.5	0.1
2002	-1.1	0.2	1.0	-0.1
2001	2.2	1.4	1.2	1.3

Price adjusted NSA Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

There are strong calendar effects in economic activity in Germany. Table VE-3 provides Germany’s percentage change in a quarter relative to the same quarter a year earlier adjusting for price changes and calendar effects. Germany’s GDP increased 1.1 percent in IIQ2012 calendar-adjusted in contrast with only 0.6 percent without calendar adjustment. GDP growth adjusting for calendar effects was 0.9 percent in IIIQ2012 relative to IIIQ2011 and 0.4 percent without calendar adjustment. Growth in IVQ2012 was 0.3 percent calendar and price adjusted in contrast with 0.0 percent without calendar adjustment. Growth in IQ2013 was minus 0.3 percent relative to a year earlier with adjustment for calendar effects and minus 1.6 percent without adjustment. GDP without calendar adjustment increased 0.9 percent in IIQ2013 relative to a year earlier and 0.5 percent with calendar adjustment. In IIIQ2013, growth without calendar adjustment was 1.1 percent in contrast with 0.6 percent calendar adjusted. In IVQ2013, GDP with calendar adjustment increased 1.4 percent relative to a year earlier and 1.3 percent without calendar adjustment. In IQ2014, GDP increased 2.5 percent without calendar adjustment and 2.3 percent with calendar adjustment.

Table VE-3, Germany, Quarter GDP ∆% Relative to Same Quarter a Year Earlier, Calendar and Price Adjusted NSA

	IQ	IIQ	IIIQ	IV
2014	2.3
2013	-0.3	0.5	0.6	1.4
2012	1.3	1.1	0.9	0.3
2011	5.3	3.3	3.0	2.1
2010	2.6	4.3	4.4	4.1
2009	-6.7	-6.3	-5.1	-2.3
2008	2.9	1.8	0.5	-1.9
2007	4.6	3.4	3.3	2.3

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Table VE-4 provides annual growth rates of the German economy from 1970 to 2013, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.1 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.0 percent in 2010, 3.3 percent in 2011 and 0.7 percent in 2012. Growth in 2013 was 0.4 percent.

Table VE-4, Germany, GDP ∆% on Prior Year

	Price Adjusted Chain-Linked	Price- and Calendar-Adjusted Chain Linked
2013	0.4	0.5
2012	0.7	0.9
2011	3.3	3.4
2010	4.0	3.8
2009	-5.1	-5.1
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.8
2004	1.2	0.7
2003	-0.4	-0.4
2002	0.0	0.0
2001	1.5	1.6
2000	3.1	3.3
1999	1.9	1.7
1998	1.9	1.7
1997	1.7	1.8
1996	0.8	0.8
1995	1.7	1.8
1994	2.5	2.5
1993	-1.0	-1.0
1992	1.9	1.5
1991	5.1	5.2
1990	5.3	5.5
1989	3.9	4.0
1988	3.7	3.4
1987	1.4	1.3
1986	2.3	2.3
1985	2.3	2.3
1984	2.8	2.9
1983	1.6	1.5
1982	-0.4	-0.5
1981	0.5	0.6
1980	1.4	1.3
1979	4.2	4.3
1978	3.0	3.1
1977	3.3	3.5
1976	4.9	4.5
1975	-0.9	-0.9
1974	0.9	1.0
1973	4.8	5.0
1972	4.3	4.3
1971	3.1	3.0
1970	NA	NA

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/PressServices/Press/pr/2014/02/PE14_048_811.html

https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_278_811.html https://www.destatis.de/EN/PressServices/Press/pr/2013/11/PE13_381_811.html

https://www.destatis.de/EN/PressServices/Press/pr/2014/01/PE14_016_811.html

https://www.destatis.de/DE/PresseService/Presse/Pressekonferenzen/2014/BIP2013/Pressebroschuere_BIP2013.html

https://www.destatis.de/EN/PressServices/Press/pr/2014/05/PE14_167_811.html

The Statistisches Bundesamt (Federal Statistical Office of Germany) provides the analysis of percentage point contributions to GDP on growth from a quarter a year earlier, shown in Table VE-5. The original data are adjusted for price but not for seasonality. There is strong internal demand, or consumption and investment, which is uncommon in advanced economies. Consumption added 0.8 percentage points in IQ2014. Growth of fixed capital formation (GFCF) added 1.2 percentage points to growth of GDP in IQ2014. Domestic uses added 2.5 percentage points in IQ2014. Net exports contributed 0.1 percentage points in IQ2014. The rates of growth of exports and imports fell from over 10 percent to single digits. Exports grew 5.5 percent in IQ2014 relative to the same quarter a year earlier and imports 6.2 percent.

Table VE-5, Germany, Percentage Point Contributions of Use of Gross Domestic Product on Growth from Same Quarter of Prior Year, Price Adjusted

	IIQ 13 PP	∆% IIQ 13	IIIQ 13 PP	∆% IIIQ 13	IVQ 13 PP	∆% IVQ 13	IQ14 PP	∆% IQ 14
Consumption Total	0.8	1.0	1.2	1.5	0.6	0.7	0.8	1.0
Households Consumption	0.7	1.3	1.0	1.8	0.6	0.9	0.6	1.1
Government Consumption	0.1	0.3	0.1	0.8	0.0	0.1	0.1	0.5
Gross Capital Formation	0.0	0.2	0.5	2.7	0.3	2.1	1.7	9.8
Gross Fixed Capital Formation (GFCF)	0.0	0.2	0.3	1.6	0.2	1.3	1.2	8.1
GFCF in Machinery & Equipment	-0.1	-1.1	0.0	-0.2	0.0	0.0	0.3	6.0
GFCF in Construction	0.1	0.6	0.3	2.4	0.2	2.0	0.8	10.2
Change in Inventories	0.0		0.2		0.1		0.5
Domestic Uses	0.8	0.9	1.7	1.7	0.9	1.0	2.5	2.7
Net Exports	0.1		-0.5		0.4		0.1
Exports		1.5		0.9		4.0		5.5
Imports		1.5		2.3		3.7		6.2
GDP		0.9		1.1		1.3		2.5
GDP per Person in Employment		0.4		0.5		0.7		1.7
GDP per Hour Worked		-0.3		0.0		0.7		-0.3

PP: Percentage Points

Source: Statistisches Bundesamt Deutschland (Destatis

https://www.destatis.de/EN/PressServices/Press/pr/2014/05/PE14_180_811.html

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Table VE-6 provides segments of Germany’s GDP with growth in IQ2014 and contributions to growth in percentage points. The impulse of growth of GDP in IQ2014 consisted of contributions of 1.3 percentage points by gross capital formation of which 0.6 percentage points by gross fixed capital formation (GFCF). Total consumption contributed 0.5 percentage points. Net exports deducted 0.9 percentage points. Exports grew 0.2 percent in IQ2014 and imports 2.2 percent.

Table VE-6, Germany, Percentage Point Contributions of Use of Gross Domestic Product on Growth from Prior Quarter, Price Adjusted

	IIQ 13 PP	∆% IIQ 13	IIIQ 13 PP	∆% IIIQ 13	IVQ 13 PP	∆% IVQ 13	IQ14 PP	∆% IQ 14
Consumption Total	0.3	0.5	0.3	0.4	-0.2	-0.3	0.5	0.6
Households Consumption	0.4	0.7	0.2	0.3	-0.2	-0.3	0.4	0.7
Government Consumption	0.0	-0.2	0.1	0.7	-0.1	-0.3	0.1	0.4
Gross Capital Formation	-0.2	-1.2	0.4	2.5	-0.1	-0.4	1.3	7.4
Gross Fixed Capital Formation (GFCF)	0.2	1.2	0.2	1.3	0.1	0.7	0.6	3.2
GFCF in Machinery & Equipment	0.0	0.5	0.0	0.1	0.1	1.4	0.2	3.3
GFCF in Construction	0.2	1.7	0.2	2.1	0.0	0.2	0.4	3.6
Change in Inventories	-0.4		0.2		-0.2		0.7
Domestic Uses	0.1	0.1	0.7	0.8	-0.3	-0.3	1.7	1.9
Net Exports	0.6		-0.5		0.7		-0.9
Exports		2.5		-0.1		2.5		0.2
Imports		1.5		0.8		1.3		2.2
GDP		0.7		0.3		0.4		0.8
GDP per Person in Employment		0.6		0.1		0.2		0.5
GDP per Hour Worked		-0.5		-0.1		1.0		-0.6

PP: Percentage Points

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/PressServices/Press/pr/2014/05/PE14_180_811.html

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Percentage changes from year earlier of gross value added by economic sectors in Germany are in Table VE-7. Industry ex construction and manufacturing experienced sharp reductions in yearly growth rates from double digits in 2010, upper single digits in 2011, contractions in 2012 and IQ2013 and mild growth in IIQ2013 and IIIQ2013. Industry grew 2.9 percent in IVQ2013 relative to a year earlier and manufacturing 3.3 percent. Industry grew 3.7 percent in IQ2014 relative to a year earlier and manufacturing 4.8 percent. Finance and insurance rebounded from decline of 1.7 percent in 2007 to growth from 2010 to 2012 and IQ2013 but sharp decline in IIQ2013, IIIQ2013 and IVQ2013. Finance and insurance increased 0.3 percent in IQ2014 relative to a year earlier. Business services also grew at relatively higher rates from minus 12.3 percent in 2007 to 5.5 percent in 2010, 3.1 percent in 2011, 2.9 percent in 2012, 1.2 percent in IQ2013, 3.9 percent in IIQ2013 and 4.0 percent in IIIQ2013. Business services increased 3.6 percent in IVQ2013 relative to a year earlier and 3.7 percent in IQ2014 relative to a year earlier.

Table VE-7, Germany, Percentage Change from Year Earlier of Gross Value Added by Economic Sector, Price Adjusted NSA

	IQ2013	IIQ 2013	IIIQ 2013	IVQ2013	IQ2014
Agriculture	-2.2	-1.2	-0.9	0.6	6.7
Industry ex Construction	-4.0	0.8	0.9	2.9	3.7
Manufacturing	-4.5	1.0	1.0	3.3	4.8
Construction	-7.5	-1.0	1.0	2.0	7.0
Trade, Transport, Accommodation & Food Services	-2.4	1.0	2.2	2.2	3.3
Information & Communications	1.2	1.5	0.4	0.4	1.9
Finance & Insurance	-0.3	-3.5	-3.4	-7.5	0.3
Real Estate	1.2	1.0	1.0	1.4	0.6
Business Services	1.2	3.9	4.0	3.6	3.7
Public Services, Education & Health	-0.2	0.3	0.0	0.5	1.2
Other Services	-1.9	-0.4	-0.4	0.0	0.4
Total Gross Value Added	-1.5	0.8	1.1	1.5	2.6

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/PressServices/Press/pr/2014/05/PE14_180_811.html

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Chart VE-1 of the Statistisches Bundesamt Deutschland (Federal Statistics Agency of Germany) provides GDP at current prices from 2005 to 2013. The German economy is productive with significant dynamism over the long term. There are fluctuations in an increasing trend since 2009.

Chart VE-1, Germany, GDP, Current Prices, Billion Euro

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Table VE-1A provides US GDP in current prices at seasonally adjusted annual rates (SAAR) from 2005 to 2014. There is sharp decline with the recession beginning in IVQ2007 and upward trend during the expansion after IIIQ2009.

Chart VE-1A, US, Gross Domestic Product, Current Prices, Seasonally Adjusted at Annual Rates, Billions of Dollars, 2005-2014

Sources: Bureau of Economic Analysis

http://www.bea.gov/iTable/index_nipa.cfm

Chart VE-2 of the Statistisches Bundesamt Deutschland (Federal Statistics Agency of Germany) provides the index of price-adjusted chain-linked GDP of Germany from 2009 to 2013. Germany was growing rapidly before the global contraction and rebounded with significant strength along a strong upward trend that could be increasing again.

Chart VE-2, Germany, Index of Price-Adjusted Chain-Linked GDP, 2000=100

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Chart VE-2A provides US real GDP, seasonally adjusted at annual rates (SAAR) in billions of chained dollars of 2005 from 2009 to 2014. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 19 quarters from IIIQ2009 to IQ2014. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the first estimate of GDP for IQ2014 (http://www.bea.gov/newsreleases/national/gdp/2014/pdf/gdp1q14_adv.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html and earlier). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.9 percent, 5.4 percent from IQ1983 to IIIQ1986, 5.2 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987 and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2014 would have accumulated to 21.2 percent. GDP in IQ2014 would be $18,175.3 billion if the US had grown at trend, which is higher by $2,228.7 billion than actual $15,946.6 billion. There are about two trillion dollars of GDP less than at trend, explaining the 27.4 million unemployed or underemployed equivalent to actual unemployment of 16.8 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/04/interest-rate-risks-twenty-eight.html). US GDP grew from $14,996.1 billion in IVQ2007 in constant dollars to $15,946.6 billion in IQ2014 or 6.3 percent at the average annual equivalent rate of 1.0 percent. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation.

Chart VE-2A, US, Real Gross Domestic Product, Seasonally Adjusted at Annual Rates, Billions of Chained 2009 Dollars, 2010-2014

Sources: Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm

Table VE-8 provides Germany’s GDP of €697.88 billion in IVQ2013 and €689.05 billion in IQ2014 and its uses. Annual 2013 GDP is €2742.13 billion. Private consumption is 55.3 percent of GDP in IQ2014 and gross capital formation 18.9 percent with government consumption of 19.3 percent and net exports 6.5 percent. Germany’s savings ratio has been in the range of 8.8 percent to 11.5 percent. Structural reforms in the early 2000s provided strength and dynamism to Germany’s economic performance.

Table VE-8, Germany, GDP and Uses, Euro Billions and %

	IVQ2013	IQ2014
GDP Euro Billions	697.88	689.05
Percent Distribution of Uses
Gross Capital Formation	15.5	18.9
Household and NPISH Consumption	57.5	55.3
Balance of Exports and Imports	6.6	6.5
Government Consumption	20.4	19.3
Memo: Savings Ratio %	8.8	13.1
2013	10.0
2012	10.3
2011	10.4
2010	10.9
2009	10.9
2008	11.5

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/PressServices/Press/pr/2014/05/PE14_180_811.html

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Chart VE-3 provides US personal savings as a percentage of disposable personal income from IQ1980 to IQ2014. The US savings ratio recovered during the global recession but fell again because of financial repression of zero interest rates.

Chart VE-3, US, Personal Savings as Percent of Disposable Personal Income, Quarterly, 1980-2014

Sources: Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm

VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IVQ1949 to IVQ2012 is quite high at 3.2 percent. France’s growth rates were quite high in the four decades of the 1950s, 1960, 1970s and 1980s with an average growth rate of 4.0 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 2.0 percent in the 1990s and 1.8 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using fourth quarter data, is 1.1 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. The growth rate from 2000 to 2012 is 1.1 percent. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.

Table VF-FR, France, Average Growth Rates of GDP Fourth Quarter, 1949-2012

Period	Average ∆%
1949-2013	3.2
2000-2013	1.1
2000-2012	1.1
2000-2007	1.8
1990-1999	2.0
1980-1989	2.6
1970-1979	3.7
1960-1969	5.7
1950-1959	4.2

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20140515

The Markit Flash France Composite Output Index decreased from 50.6 in Apr to 49.3 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/d349dc59325e4b8393f119abfcfe9764). Jack Kennedy, Senior Economist at Markit and author of the report, finds continuing weak performance in IIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/d349dc59325e4b8393f119abfcfe9764). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, e3creased from 51.8 in Mar to 50.6 in Apr, indicating marginal growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/a8bd96f07d6f42a3bb9776efe2ce974a). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds standstill in services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/a8bd96f07d6f42a3bb9776efe2ce974a). The Markit France Services Activity index decreased from 51.5 in Mar to 50.4 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/a8bd96f07d6f42a3bb9776efe2ce974a). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 52.1 in Mar from 49.7 in Feb for the highest reading since Jun 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/af898c044ea5428885e085ff7ae49690). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds improving conditions supported by strong growth of new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/af898c044ea5428885e085ff7ae49690). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Apr month ∆% 0.0 12 months ∆%: 0.7 5/18/14
PPI	Mar month ∆%: -0.5 Feb 12 months ∆%: -2.1 Blog 5/4/14
GDP Growth	IQ2014/IVQ2013 ∆%:0.0 IQ2014/IQ2013 ∆%: 0.8 Blog 3/31/13 5/19/12 6/30/13 9/29/13 11/17/13 12/29/13 2/16/14 4/6/14 5/18/14
Industrial Production	Mar ∆%: Manufacturing -0.7 12-Month ∆%: Manufacturing 1.5 Blog 5/11/14
Consumer Spending	Manufactured Goods Mar ∆%: 0.4 Mar 12-Month Manufactured Goods ∆%: 0.6 Blog 5/4/14
Employment	Unemployment Rate: IVQ2013 9.8% Blog 3/9/13
Trade Balance	Mar Exports ∆%: month 0.6, 12 months 0.5 Mar Imports ∆%: month 3.4, 12 months 1.1 Blog 5/11/14
Confidence Indicators	Historical average 100 May Mfg Business Climate 99 Blog 5/25/14

Links to blog comments in Table FR:

5/18/14 http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html

5/11/14 http://cmpassocregulationblog.blogspot.com/2014/05/rules-discretionary-authorities-and.html

5/4/2014 http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html

4/6/14 http://cmpassocregulationblog.blogspot.com/2014/04/interest-rate-risks-twenty-eight.html

3/9/14 http://cmpassocregulationblog.blogspot.com/2014/03/rules-discretionary-authorities-and.html

2/16/14 http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html

12/29/13 http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html

11/17/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-unwinding-monetary-policy.html

9/29/13 http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html

6/30/13 http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

Table VF-1 shows the INSEE business climate indicator for manufacturing. The headline composite indicator decreased from 92 in Jan 2013 to 88 in Apr 2013 but rebounded to 92 in May 2013, 93 in Jun 2013, 95 in Jul 2013 and 98 in Aug 2013. The index fell marginally to 97 in Sep 2013 and increased to 98 in Oct 13 and 98 in Nov 2013, approaching the long-term average of 100 since 1976. The index reached 100 in Dec 2013, 100 in Jan 2014 and 100 in Feb 2014. The index continued at 101 in Mar 2013 and 100 in Mar-Apr 2014. The index fell marginally to 99 in May 2014. The final row shows general production expectations deteriorating from minus 34 in Feb 2013 to minus 49 in Apr 2013 and improving to minus 46 in May 2013, minus 41 in Jun 2013 and minus 30 in Jul 2013. There is further improvement of general production expectations to minus 18 in Aug 2013, to minus 10 in Sep 2013 and to minus 6 in Oct 2013, which is close to the long-term average of minus 10. General production expectations deteriorated to minus 17 in Nov 2013, improving to minus 11 in Dec 2013. There is further improvement to -4 in Jan 2014 with decline to -6 in Feb 2014 and -10 in Mar 2014. There is deterioration to minus 14 in Apr 2014 and minus 13 in May 2014. The indicator of demand and export order levels improved from minus 30 in Feb 2013 to minus 29 in May 2013 and minus 28 in Jun 2013, continuing improvement to minus 22 in Aug. There is further improvement to minus 21 in Sep 2013, minus 21 in Oct 2013 and minus 21 in Nov 2013. The index improved to minus 21 in Dec 2013 and minus 17 in Jan 2014, deteriorating to minus 21 in Feb 2014 and -12 in Mar 2013. The index deteriorated to minus 18 in Apr 2014 and minus 22 in May 2014.

Table VF-1, France, Manufacturing Business Climate Indicators of INSEE

Mfg 2014	Average since 1976	May 14	Apr 14	Mar 14	Feb 14
Composite Indicator	100	99	100	101	100
Past Activity	4	9	1	5	4
Finished- Goods Inventory Level	13	10	11	9	9
Global Order Books	-18	-22	-18	-20	-22
Export Order Books	-14	-22	-18	-12	-21
Personal Production Expectations	5	4	11	9	8
General Production Expectations	-9	-13	-14	-10	-6

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20140522

Chart VF-1 of the Institut National de la Statistique et des Études Économiques (INSEE) provides the history of the manufacturing business climate indicator of INSEE since 1992. The index fell during the contractions of 1991, 2001 and 2008. After rapid recovery beginning in 2009 the synthetic index shows declining trend in 2011 with upward reversal in 2012 interrupted in Apr through Jul 2012 and a marginal upward move in Aug-Sep 2012 but new decline in Oct 2012. The manufacturing composite indicator marginally reversed in Nov 2012 with stability in Dec 2012 and decline in Jan 2013 but improvement in Feb 2013 and stability in Mar 2013, deteriorating in Apr 2013 and recovering in May-Aug 2013. The composite indicator of manufacturing eased slightly in Sep 2013 and improved marginally in Oct-Nov 2013, close to the long-term average of 100. The index reached 100 in Dec 2013, 100 in Jan 2014, 100 in Feb 2014 and 100 in Mar 2014. The index stood at 100 in Apr 2014 and 99 in May 2014.

Chart VF-1, France, INSEE Industrial Business Climate Composite Indicator

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20140522

Chart VF-2 of the Institut National de la Statistique et des Études Économiques (INSEE) shows strong drops of the turning point indicator in the recessions of 1991, 2001 and 2008. There have been other drops of this index. The turning point indicator has fallen to levels in the direction of past contractions and after rebounding in Oct and Nov 2011 is showing declining trend in Jan 2012 with slight reversal in Feb followed by significant improvement in Mar and deterioration in Apr through Jul 2012. There is new improvement in Aug 2012 followed by decline in Sep-Oct 2012 followed by rebound in Nov 2012 and stability in Dec 2012 to Jan-Mar 2013, deteriorating in Apr-May 2013. The index improved in Jun-Sep 2013 and stabilized in Oct 2013, declining in Nov 2013. The index increased in Dec 2013 and in Jan 2014, declining in Feb 2014 and stabilizing in Mar 2014. The index stabilized in Apr-May 2014.

Chart VF-2, INSEE Business Climate Manufacturing Turning Point Indicator

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20140522

Chart VF-4 of the Institut National de la Statistique et des Études Économiques (INSEE) of France provides the composite climate indicator for French business. There is recovery in Jul-Sep 2013 and stability in Oct-Nov 2013. The index fell marginally in Dec 2013 and in Jan-Feb 2014. The index increased marginally in Mar 2014, stabilizing in Apr-May 2014.

Chart VF-1, France, Composite Indicator of Business Climate of INSEE

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=105&date=20140522

VG Italy. Table VG-IT provides percentage changes in a quarter relative to the same quarter a year earlier of Italy’s expenditure components in chained volume measures. GDP has been declining at sharper rates from minus 0.6 percent in IVQ2011 to minus 2.8 percent in IVQ2012, minus 2.4 percent in IQ2013, minus 2.1 percent in IIQ2013 and minus 1.9 percent in IIIQ2013. GDP fell 0.9 percent in IVQ2013 relative to a year earlier. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates. The rates of decline of GDP, consumption and GFCF were somewhat milder in IIIQ2013 and IVQ2013 than in IQ2013 and the final three quarters of 2012.

Table VG-IT, Italy, GDP and Expenditure Components, Chained Volume Measures, Quarter ∆% on Same Quarter Year Earlier

	GDP	Imports	Consumption	GFCF	Exports
2013
2014
IQ	-0.5
IVQ	-0.9	-0.1	-1.1	-2.4	1.0
IIIQ	-1.9	-2.0	-1.8	-4.4	-0.4
IIQ	-2.1	-4.4	-2.8	-5.0	0.0
IQ	-2.4	-5.0	-2.9	-6.6	-0.7
2012
IVQ	-2.8	-6.5	-4.1	-7.4	1.0
IIIQ	-2.6	-7.1	-3.9	-8.3	2.0
IIQ	-2.4	-6.9	-3.4	-8.5	2.2
IQ	-1.7	-7.9	-3.2	-8.0	3.0
2011
IVQ	-0.6	-6.8	-1.9	-3.8	3.5
IIIQ	0.4	0.6	-1.1	-2.4	6.1
IIQ	1.1	3.6	0.3	-1.0	7.5
IQ	1.4	9.1	0.6	0.6	11.0
2010
IVQ	2.2	15.6	1.0	1.3	13.4
IIIQ	1.8	13.2	1.2	2.3	12.1
IIQ	1.8	13.4	0.8	1.0	12.0
IQ	0.9	7.0	1.0	-2.4	7.1
2009
IVQ	-3.5	-6.3	0.2	-8.2	-9.3
IIIQ	-5.0	-12.2	-0.8	-12.6	-16.4
IIQ	-6.6	-17.9	-1.4	-13.6	-21.4
IQ	-6.9	-17.2	-1.8	-12.4	-22.8
2008
IVQ	-3.0	-8.2	-0.9	-8.3	-10.3
IIIQ	-1.9	-5.0	-0.8	-4.5	-3.9
IIQ	-0.2	-0.1	-0.3	-1.5	0.4
IQ	0.5	1.7	0.1	-1.0	2.9

GFCF: Gross Fixed Capital Formation

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/114963

http://www.istat.it/it/archivio/122146

The Markit/ADACI Business Activity Index increased from 49.5 in Mar to 51.1 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/41228b605b0c41ea8a1ebace36762642). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds limited contribution of services to growth with recovery mostly in production (http://www.markiteconomics.com/Survey/PressRelease.mvc/41228b605b0c41ea8a1ebace36762642). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 52.4 in mar to 554.0 in Apr, which is the fastest in three years (http://www.markiteconomics.com/Survey/PressRelease.mvc/09348dd047034ef5aeb2d1ac1248ded0). New export orders grew at the highest rate since Nov. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds continuing growth with new export orders at the fastest pace in more than three years (http://www.markiteconomics.com/Survey/PressRelease.mvc/09348dd047034ef5aeb2d1ac1248ded0). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Apr month ∆%: 0.2 Apr 12-month ∆%: 0.6 Blog 5/18/14
Producer Price Index	Mar month ∆%: -0.2 Mar 12-month ∆%: -1.9 Blog 5/4/14
GDP Growth	IQ2014/IVQ2013 SA ∆%: minus 0.1 IQ2014/IQ2013 NSA ∆%: minus 0.5 Blog 3/17/13 6/16/13 8/11/13 9/15/13 11/17/13 12/15/13 2/16/14 3/16/14 5/18/14
Labor Report	Mar 2014 Participation rate 63.8% Employment ratio 55.6% Unemployment rate 12.7% Youth Unemployment 42.7% Blog 5/4/14
Industrial Production	Mar month ∆%: -0.5 12 months CA ∆%: -0.4 Blog 5/11/14
Retail Sales	Mar month ∆%: -0.2 Mar 12-month ∆%: -3.5 Blog 5/25/14
Business Confidence	Mfg Apr 99.9, Dec 98.3 Construction Apr 74.8, Dec 81.8 Blog 5/4/14
Trade Balance	Balance Mar SA €3563 million versus Feb €3517 Exports Mar month SA ∆%: minus 0.8; Imports Mar month ∆%: -1.0 Exports 12 months Mar NSA ∆%: 1.2 Imports 12 months NSA ∆%: -1.3 Blog 5/18/14

Links to blog comments in Table IT:

5/18/14 http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html

5/11/14 http://cmpassocregulationblog.blogspot.com/2014/05/rules-discretionary-authorities-and.html

5/4/2014 http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

2/16/14 http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

11/17/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-unwinding-monetary-policy.html

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

3/17/13 http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.htmlLinks to blog comments in Table IT:

5/18/14 http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html

5/11/14 http://cmpassocregulationblog.blogspot.com/2014/05/rules-discretionary-authorities-and.html

5/4/2014 http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

2/16/14 http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

11/17/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-unwinding-monetary-policy.html

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

3/17/13 http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html

An important part of the analysis of Blanchard (2011WEOSep, 2012WEOApr) is the much more difficult adjustment of economies with need of fiscal consolidation in the presence of weak economic growth. Demand has significantly weakened throughout the advanced economies. There are many sound fundamentals in Italy such as high income and competitive companies. The restraints consist of low economic growth with high debt/GDP ratio. Table VG-1 provides growth of retail sales for Italy. Retail sales fell 0.4 percent in Mar 2014 relative to Feb 2014, decreased 0.3 percent in Jan-Mar 2014 relative to Oct-Dec 2013, decreased 3.5 percent in Mar 2014 relative to Mar 2013 and decreased 1.8 percent cumulatively in Jan-Mar 2014 relative to Jan-Mar 2013. Food retail sales underperform non-food retail sales.

Table VG-1, Italy, Retail Sales ∆%

	Mar 2014/ Feb 2014 SA	Jan-Mar 14/ Oct-Dec 13 SA	Mar 2014/ Mar 2013 NSA	Jan-Mar 2014/ Jan-Mar 2013
Food	-0.4	-0.5	-6.8	-2.9
Non-food	0.0	-0.2	-1.5	-1.3
Total	-0.2	-0.3	-3.5	-1.8

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/123004

Chart VG-1 provides 12-month percentage changes of retail sales at current prices. There is improvement in the final segment from Feb to May 2013 with sharper decline in Jun 2013 and recovery in Jul-Aug 2013. Sales declined again in Sep 2013, increasing in Oct-Nov 2013. Sales fell in Dec 2013 and improved in Jan 2014. Sales stabilized in Feb 2014 and deteriorated in Mar 2014.

Chart VG-1, Italy, Percentage Changes of Retail Sales in 12 Months

Source: Istituto Nazionale di Statistica

http://www.istat.it/en/

A longer perspective of retail sales in Italy is provided by monthly and 12-month percentage changes in 2011, Jan-Dec 2012, Jan-Dec 2013, Jan-Mar 2014 and annual rates for 2011, 2012 and 2013 in Table VG-2. Retail sales did not decline very sharply during the global recession but fell 0.8 percent in 2011, 1.7 percent in 2012 and 2.1 percent in 2013. There is an evident declining trend in 2011 with few monthly increases and similar weakness in 2012 with multiple monthly declines. Negative percentage changes in 12 months increased to more than 3 percent with decrease of 3.2 percent in the 12 months ending in Mar 2013 and decrease of 3.0 percent in the 12 months ending in Jun 2013. Retail sales fell 0.2 percent in Mar 2014 and fell 3.5 percent in 12 months.

Table VG-2, Italy, Retail Sales Month and 12-Month ∆%

	Month ∆% SA	12-Month ∆% NSA
Mar 2014	-0.2	-3.5
Feb	0.0	-1.0
Jan	0.0	-0.9
Dec 2013	-0.3	-2.6
Nov	0.0	0.2
Oct	-0.1	-1.6
Sep	-0.2	-2.8
Aug	-0.1	0.2
Jul	-0.1	-0.8
Jun	-0.1	-3.0
May	0.1	-1.2
Apr	0.0	-2.9
Mar	-0.1	-3.2
Feb	-0.2	-4.8
Jan	-0.4	-2.8
Dec 2012	0.1	-3.4
Nov	-0.2	-2.4
Oct	-0.7	-3.4
Sep	-0.1	-1.0
Aug	0.0	-0.4
Jul	-0.2	-3.1
Jun	-0.1	0.2
May	-0.1	-1.1
Apr	-1.2	-6.3
Mar	0.3	2.3
Feb	-0.4	0.7
Jan	1.0	-0.9
Dec 2011	-0.9	-3.2
Nov	-0.5	-1.5
Oct	0.7	-0.9
Sep	-0.3	-1.1
Aug	-0.4	0.1
July	0.0	-1.7
Jun	-0.4	-0.6
May	-0.5	-0.3
Apr	0.9	3.3
Mar	-0.2	-1.9
Feb	-0.3	0.1
Jan	-0.2	-0.5
Dec 2010	0.5	0.6
2013		-2.1
2012		-1.7
2011		-0.8

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/123004

VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 5.2 percent in 2009 after dropping 0.8 percent in 2008. Recovery of 1.7 percent in 2010 is relatively low in comparison with annual growth rates in 2007 and earlier years. Growth was only 1.1 percent in 2011 and 0.3 percent in 2012. Growth increased to 1.7 percent in 2013. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.6 percent per year on average between 1948 and 2013, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 percent. Growth in the current cyclical expansion has been only at 1.2 percent as advanced economies struggle with weak internal demand and world trade. GDP in 2013 was lower by 1.4 percent relative to 2007.

Table VH-UK, UK, Gross Domestic Product, ∆%

	∆% on Prior Year
1998	3.6
1999	2.9
2000	4.4
2001	2.2
2002	2.3
2003	3.9
2004	3.2
2005	3.2
2006	2.8
2007	3.4
2008	-0.8
2009	-5.2
2010	1.7
2011	1.1
2012	0.3
2013	1.7
Average Growth Rates ∆% per Year
1948-2013	2.6
1950-1959	2.7
1960-1969	3.3
1970-1979	2.5
1980-1989	3.2
1990-1999	2.9
2000-2007	3.0
2007-2012*	-3.0
2007-2013*	-1.4
2000-2013	1.5

*Absolute change from 2007 to 2012

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from 57.6 in Mar to 58.7 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/b73ab147eb084d98bc3b90513addad13). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at 0.8 percent in IIQ2014 and job increases at 100 thousand per month (http://www.markiteconomics.com/Survey/PressRelease.mvc/b73ab147eb084d98bc3b90513addad13). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased to 57.3 in Apr from 55.8 in Nar (http://www.markiteconomics.com/Survey/PressRelease.mvc/f2f50828f3fc4791a78c146bc4da1c18). New export orders increased for the thirteenth consecutive month. New orders increased from North America, Europe, Asia and the Middle East. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing conditions continue at solid pace with probable growth at 1.5 percent for IIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/f2f50828f3fc4791a78c146bc4da1c18). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Apr month ∆%: 0.4 Apr 12-month ∆%: 1.8 Blog 5/25/14
Output/Input Prices	Output Prices: Apr 12-month NSA ∆%: 0.6; excluding food, petroleum ∆%: 1.0 Input Prices: Apr 12-month NSA ∆%: -5.5 Excluding ∆%: -5.0 Blog 5/25/14
GDP Growth	IQ2014 prior quarter ∆% 0.8; year earlier same quarter ∆%: 3.1 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13 9/29/13 10/27/13 12/1/13 12/22/13 2/2/14 3/2/14 4/6/14 5/4/14 5/25/14
Industrial Production	Mar 2014/Mar 2013 ∆%: Production Industries 2.3; Manufacturing 3.3 Blog 5/11/14
Retail Sales	Apr month ∆%: 1.3 Apr 12-month ∆%: 6.9 Blog 5/25/14
Labor Market	Jan-Mar Unemployment Rate: 6.8%; Claimant Count 3.3%; Earnings Growth 1.7% Blog 5/18/14 LMGDP 5/18/14
GDP and the Labor Market	IQ2014 Weekly Hours 102.8, GDP 99.3, Employment 103.1 IQ2008 =100 GDP IQ14 99.3 IQ2008=100 Blog 5/25/14
Trade Balance	Balance SA Mar minus ₤1284 million Exports Mar ∆%: 2.8; Jan-Mar ∆%: -2.7 Imports Mar ∆%: 1.6 Jan-Mar ∆%: -2.8 Blog 5/11/14

Links to blog comments in Table UK:

5/18/14 http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html

5/11/14 http://cmpassocregulationblog.blogspot.com/2014/05/rules-discretionary-authorities-and.html

5/4/2014 http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html

44/6/14 http://cmpassocregulationblog.blogspot.com/2014/04/interest-rate-risks-twenty-eight.html

3/2/14 http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html

12/22/13 http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

12/1/13 http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world.html

10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html

9/29/13 http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html

8/25/13 http://cmpassocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html

7/28/13 http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html

4/28/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html

03/31/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html

The UK Office for National Statistics provides important analysis of the relation of GDP and the labor market (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--may-gdp-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--april-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q4--march-gdp-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--february-labour-market-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q4--january-gdp-update/sum-jan13.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q4--february-labour-market-update/sum-2012-q4---february-labour-update.html). The UK economy grew 0.8 percent in IVQ2013 but output is still 0.6 percent below the level before the global recession in IQ2008 (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--april-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q4--march-gdp-update/index.html

(http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--december-gdp-update/sum-dec-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html). Chart VH-1 of the UK Office for National Statistics (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--may-gdp-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--april-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html) shows weakening output but relatively faster increases in employment and hours worked. Output growth and labor market improvement are converging.

Chart VH-1, UK, Employment Level Ages 16 and Over, Total Weekly Hours, GDP and Output per Hour, 2008-2014

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--may-gdp-update/index.html

Table VH-L1 of the UK Office for national Statistics provides the data for GDP and the labor market (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--may-gdp-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--april-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q4--march-gdp-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--february-gdp-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--february-labour-market-update/index.html

Table VH-L1, UK, Indices of Quarterly Employment Ages 16 and Over, Total Hours Worked, GDP and Output per Hour, 2008-2014

	GDP, CVM	Employment, Aged 16 +	Total weekly hours, Aged 16 +	Output per hour worked
	YBEZ	MGRZ	YBUS	LZVB
2008 Q1	100.0	100.0	100.0	100.0
Q2	99.1	100.1	98.9	99.6
Q3	97.6	99.6	98.9	98.6
Q4	95.6	99.4	98.3	96.4
2009 Q1	93.2	98.9	96.7	95.7
Q2	92.8	97.9	96.3	95.1
Q3	92.8	97.8	95.8	95.6
Q4	93.2	97.9	95.8	94.5
2010 Q1	93.7	97.6	95.7	97.1
Q2	94.6	98.2	96.5	96.4
Q3	95.0	98.9	97.0	96.8
Q4	94.8	98.7	97.4	96.1
2011 Q1	95.3	99.0	97.4	96.5
Q2	95.4	99.0	96.3	97.9
Q3	95.9	98.5	97.1	97.7
Q4	95.8	98.8	97.3	97.4
2012 Q1	95.8	99.2	98.0	96.7
Q2	95.5	99.9	98.5	95.8
Q3	96.1	100.2	99.6	95.6
Q4	95.9	100.8	99.8	95.1
2013 Q1	96.3	100.7	100.1	95.2
Q2	97.1	100.9	100.4	95.7
Q2	97.8	101.5	101.4	95.5
Q4	98.5	102.2	101.8	95.7
2014 Q1	99.3	103.1	102.8

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--may-gdp-update/index.html

Chart VH-2 of the UK Office for National Statistics provides comparison of output performance during four cycles in the 1970s, 1980s, 1990s and 2000s. Output is indexed to the pre-recession peak. For example, the index for the current economic cycles is 100 for IQ2008. Output performance was stronger in the earlier economic cycles.

Chart VH-2, UK, Index of Output in Economic Cycles

UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html

Table VH-L2 provides output in the four economic cycles. Output increased 8.8 percent in the cycle of the early 1970s, 11.7 percent in the cycle of the 1980s and 15.8 percent in the cycle of the 1990s. Output is 1.3 percent below the pre-recession peak in IQ2008.

Table VH-L2, Index of Output in Economic Cycles, Pre-Contraction = 100

Early 70s (1973 Q2=100)	Early 80s (1979 Q4=100)	Early 90s (1990 Q2=100)	Latest (2008 Q1=100)
ABMI	ABMI	ABMI	ABMI
100.0	100.0	100.0	100.0
99.1	99.0	99.1	99.1
99.1	97.3	98.4	97.6
96.8	97.1	98.3	95.6
98.6	95.8	97.9	93.2
99.5	95.4	97.6	92.8
98.4	95.4	97.9	92.8
98.6	96.6	98.4	93.2
97.2	96.6	98.6	93.7
97.0	97.1	99.4	94.6
98.4	98.3	100.3	95.0
100.0	98.3	101.4	94.8
99.1	99.0	102.1	95.3
100.0	100.4	103.2	95.4
102.1	101.3	104.1	95.9
102.3	102.5	105.5	95.8
101.8	103.8	107.1	95.7
102.5	104.8	108.7	95.4
104.1	104.2	109.6	96.1
104.6	104.6	110.1	96.0
105.5	106.3	110.9	96.5
106.7	107.5	112.3	97.3
107.6	109.2	112.9	98.0
106.7	109.2	114.2	98.7
111.3	110.1	114.8
108.8	111.7	115.8

UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html

Table VH-1 provides quarter on quarter chained value measures of GDP since 1998 in the second estimate for IQ2014 (http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html). GDP grew 0.8 percent in IQ2014 relative to IVQ2013. Growth of 0.8 percent in IIIQ2012 interrupted three consecutive quarters of weakness in GDP growth. Most advanced economies are underperforming relative to the period before the global recession. The UK Office for National Statistics analyzes that the decline in the impulse of growth in the UK originated in weakness in markets in the UK and worldwide. The UK Office for National Statistics estimates that GDP in IQ2014 is lower by 0.6 percent relative to the peak in IQ2008 (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--may-gdp-update/sum-may-gdp.html). The UK Office for National Statistics estimates the contraction of 7.2 percent from peak to trough (http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/stb-second-estimate-of-gdp-q1-2014.html), which is roughly equal at 7.1 percent to compounding the quarterly rates in Table VH-1 from IIQ2008 to IIQ2009.

Table VH-1, UK, Percentage Change of GDP from Prior Quarter, Chained Value Measures ∆%

	IQ	IIQ	IIIQ	IV
2014	0.8
2013	0.4	0.8	0.8	0.7
2012	0.0	-0.4	0.8	-0.2
2011	0.5	0.1	0.6	-0.1
2010	0.5	1.0	0.4	-0.2
2009	-2.5	-0.4	0.0	0.4
2008	0.1	-0.9	-1.4	-2.1
2007	1.0	1.3	1.2	0.1
2006	0.4	0.3	0.2	0.8
2005	0.8	1.3	1.0	1.3
2004	0.7	0.4	0.1	0.7
2003	0.5	1.3	1.3	1.3
2002	0.5	0.7	0.8	1.0
2001	0.8	0.7	0.5	0.1
2000	1.4	1.0	0.3	0.3
1999	0.3	0.0	1.9	1.3
1998	0.8	0.8	0.7	1.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

There are four periods in growth of GDP in a quarter relative to the same quarter a year earlier in the UK in the years from 2000 to the present as shown in Table VH-2. (1) Growth rates were quite high from 2000 to 2007. (2) There were six consecutive quarters of contraction of GDP from IIIQ2008 to IVQ2009. Contractions relative to the quarter a year earlier were quite sharp with the highest of 4.3 percent in IVQ2008, 6.8 percent in IQ2009, 6.3 percent in IIQ2009 and 5.0 percent in IIIQ2009. (3) The economy bounced strongly with 2.0 percent in IIQ2010, 2.4 percent in IIIQ2010 and 1.8 percent in IVQ2010. (4) Recovery in 2011 did not continue at rates comparable to those in 2000 to 2007 and even relative to those in the final three quarters of 2010. Growth relative to the same quarter a year earlier fell from 1.8 percent in IVQ2010 to 1.7 percent in IQ2011, 0.8 percent in IIQ2011, 1.0 percent in IIIQ2011 and 1.1 percent in IVQ2011 but only 0.6 percent in IQ2012, increase of 0.1 percent in IIQ2012 relative to IQ2011, increase of 0.3 percent in IIIQ2012 and 0.2 percent in IVQ2012. In IQ2012, GDP changed 0.0 percent and increased 0.6 percent relative to a year earlier. In IIQ2012, GDP fell 0.4 percent relative to IQ2012 and increased 0.1 percent relative to a year earlier. In IIIQ2012, GDP increased 0.8 percent and increased 0.3 percent relative to the same quarter a year earlier. In IVQ2012, GDP fell 0.2 percent and increased 0.2 percent relative to a year earlier. Fiscal consolidation in an environment of weakening economic growth is much more challenging. Growth increased to 0.5 percent in IQ2013 relative to a year earlier and 0.4 percent in IQ2013 relative to IVQ2012. In IIQ2013, GDP increased 0.8 percent and 1.7 percent relative to a year earlier. GDP increased 0.8 percent in IIIQ2013 and 1.8 percent relative to a year earlier. GDP increased 0.7 percent in IVQ2013 and 2.7 percent relative to a year earlier. In IQ2014, GDP increased 0.8 percent and 3.1 percent relative to a year earlier.

Table VH-2, UK, Percentage Change of GDP from Same Quarter a Year Earlier, Chained Value Measures ∆%

	IQ	IIQ	IIIQ	IV
2014	3.1
2013	0.5	1.7	1.8	2.7
2012	0.6	0.1	0.3	0.2
2011	1.7	0.8	1.0	1.1
2010	0.5	2.0	2.4	1.8
2009	-6.8	-6.3	-5.0	-2.5
2008	2.8	0.6	-2.1	-4.3
2007	2.4	3.3	4.3	3.7
2006	4.0	3.0	2.3	1.8
2005	2.0	2.8	3.7	4.4
2004	4.7	3.7	2.5	1.9
2003	3.2	3.8	4.3	4.5
2002	1.8	1.9	2.3	3.2
2001	2.4	2.1	2.2	2.0
2000	4.7	5.7	4.1	3.0
1999	2.8	2.1	3.2	3.6
1998	4.0	3.5	3.4	3.4

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Table VH-3 provides annual percentage changes of gross value added and key components. Production fell 9.5 percent in 2009 and its most important component manufacturing fell 10.2 percent. Services fell 3.9 percent in 2009. Services grew in all years from 2010 to 2013 while manufacturing fell 1.7 percent in 2012 and 0.7 percent in 2013.

Table VH-3, UK, Gross Value Added by Components, ∆% on Prior Year

	TP	MF	CONS	SERV	GVA BP	GVA EX
2010 Weights	152	104	63	778	1000	981
1998	1.2	0.5	1.4	5.0	3.8	3.8
1999	1.2	0.5	1.3	3.8	3.1	2.9
2000	1.8	2.1	0.8	5.6	4.5	4.9
2001	-1.6	-1.7	1.8	3.0	1.8	2.2
2002	-1.4	-2.4	5.7	2.3	2.0	2.1
2003	-0.6	-0.5	4.9	5.2	4.1	4.5
2004	0.7	1.9	5.2	3.4	3.0	3.5
2005	-0.8	-0.2	-2.4	5.2	3.6	4.0
2006	0.2	1.8	0.7	3.4	2.7	3.1
2007	0.4	0.8	2.1	4.4	3.5	3.6
2008	-2.9	-2.8	-2.5	-	-0.6	-0.5
2009	-9.5	-10.2	-13.3	-3.9	-5.4	-5.4
2010	2.8	4.2	8.3	0.8	1.6	1.8
2011	-1.2	1.8	2.3	1.5	1.2	1.6
2012	-2.4	-1.7	-8.1	1.3	0.4	0.6
2013	-0.3	-0.7	1.1	1.8	1.7	1.8

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Percentage changes of gross value added and components are in Table VH-4A. Gross value added increased 0.8 percent in IQ2014 with growth of services of 0.9 percent and production of 0.7 percent while manufacturing expanded 1.3 percent.

Table VH-4A, UK, Gross Value Added by Components, ∆% on Previous Quarter

	TP	MF	CONS	SERV	GVA	GVA EXC
2010 Weights	152	104	63	778	1000	981
1998 Q2	-	-0.4	-1.9	1.6	1.0	1.0
1998 Q3	-0.6	-0.7	0.4	0.9	0.5	0.6
1998 Q4	-0.2	-0.7	0.2	1.6	1.1	1.0
1999 Q1	0.2	0.1	0.1	0.3	0.3	0.2
1999 Q2	0.3	0.3	0.7	0.2	0.3	0.3
1999 Q3	2.2	2.2	2.3	1.5	1.7	1.6
1999 Q4	0.5	0.3	-0.9	1.7	1.2	1.3
2000 Q1	0.2	0.4	1.4	1.6	1.3	1.3
2000 Q2	0.2	0.2	-0.7	2.0	1.5	1.8
2000 Q3	-0.3	-0.2	-1.7	0.6	0.3	0.4
2000 Q4	0.3	1.0	1.0	0.1	0.2	0.4
2001 Q1	-0.5	-0.7	-0.4	1.5	0.8	0.9
2001 Q2	-1.1	-1.7	2.8	0.5	0.2	0.2
2001 Q3	-0.1	-	0.2	0.4	0.3	0.4
2001 Q4	-1.3	-1.6	1.1	0.3	-	-
2002 Q1	0.3	0.1	1.1	0.4	0.6	0.7
2002 Q2	-0.5	-1.3	1.1	0.8	0.6	0.4
2002 Q3	-	1.0	3.6	0.9	0.9	1.3
2002 Q4	-0.2	-1.5	1.1	1.3	1.0	0.7
2003 Q1	-0.7	-0.4	-2.3	1.4	0.8	0.9
2003 Q2	-0.2	0.4	3.0	1.5	1.3	1.6
2003 Q3	0.8	0.7	2.7	1.3	1.3	1.4
2003 Q4	0.5	0.8	2.5	1.4	1.3	1.4
2004 Q1	0.2	0.9	2.9	0.4	0.5	0.6
2004 Q2	0.6	0.5	-1.3	0.5	0.4	0.4
2004 Q3	-1.8	-1.4	-0.7	0.6	0.1	0.3
2004 Q4	0.7	1.3	-1.0	0.9	0.7	0.8
2005 Q1	-0.6	-0.9	0.3	1.5	1.0	1.1
2005 Q2	0.9	0.8	-0.4	1.7	1.4	1.5
2005 Q3	-1.3	-0.6	-1.8	1.7	0.9	1.2
2005 Q4	0.4	0.1	-0.4	1.7	1.4	1.4
2006 Q1	0.8	0.7	0.7	0.3	0.4	0.4
2006 Q2	-0.6	0.9	0.8	0.3	0.2	0.4
2006 Q3	-	0.4	0.5	0.3	0.3	0.3
2006 Q4	0.2	0.8	1.8	0.8	0.7	0.8
2007 Q1	0.2	-0.5	1.0	1.3	1.1	1.0
2007 Q2	0.2	0.2	-0.4	1.8	1.3	1.4
2007 Q3	-0.2	-	-1.4	1.8	1.2	1.3
2007 Q4	0.4	0.2	1.3	-	0.1	0.1
2008 Q1	-0.6	0.1	0.9	0.1	0.2	0.2
2008 Q2	-1.0	-1.5	-1.4	-0.5	-0.6	-0.6
2008 Q3	-1.5	-1.6	-2.7	-1.3	-1.5	-1.5
2008 Q4	-4.6	-4.9	-5.3	-1.5	-2.3	-2.3
2009 Q1	-4.9	-5.8	-7.1	-1.6	-2.5	-2.5
2009 Q2	-0.1	0.1	-1.9	-0.6	-0.6	-0.7
2009 Q3	-0.9	-0.2	0.3	0.1	-	0.1
2009 Q4	0.7	1.3	1.0	0.2	0.3	0.3
2010 Q1	1.3	0.9	3.1	0.3	0.6	0.6
2010 Q2	1.7	2.0	5.9	0.4	1.0	1.0
2010 Q3	0.1	1.2	1.7	0.5	0.5	0.6
2010 Q4	0.7	0.8	-2.2	-0.3	-0.3	-0.2
2011 Q1	-1.0	0.2	1.6	0.5	0.4	0.5
2011 Q2	-1.1	0.2	1.0	0.4	0.2	0.4
2011 Q3	-0.3	-0.4	-1.1	1.0	0.6	0.7
2011 Q4	-0.6	-0.4	-0.6	-	-0.1	-
2012 Q1	-0.4	-0.1	-4.4	0.3	-	-
2012 Q2	-1.0	-1.3	-3.6	-0.1	-0.4	-0.3
2012 Q3	0.2	0.5	-2.1	1.0	0.8	0.8
2012 Q4	-2.1	-1.8	1.9	-0.1	-0.2	-
2013 Q1	0.4	-0.2	-1.3	0.5	0.4	0.4
2013 Q2	0.7	0.6	2.3	0.5	0.7	0.7
2013 Q3	0.6	0.8	2.6	0.7	0.8	0.8
2013 Q4	0.5	0.6	-0.2	0.8	0.7	0.7
2014 Q1	0.7	1.4	0.6	0.9	0.8	0.8

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Growth rates of gross value added (GVA) and output components of gross value added in a quarter from the preceding quarter are in Table VH-4. Growth of GVA in IQ2014 originated in growth of services of 0.9 percent and total production of 0.7 percent while manufacturing grew 1.4 percent and construction increased 0.6 percent.

VH-4, UK, Quarter on Quarter Growth of Value Added by Output Components, ∆% on Prior Quarter

Component	2013 Q1	2013 Q2	2013 Q3	2013 Q4	2014 Q1
GVA Output	0.3	0.7	0.8	0.7	0.8
Agriculture	-4.8	2.0	0.4	0.2	-0.7
Total Production	0.4	0.7	0.6	0.5	0.7
Manufacturing	-0.2	0.6	0.8	0.6	1.4
Extraction	4.5	1.8	0.5	-1.8	0.3
Electricity, gas and air	1.3	-2.1	-5.9	1.8	-5.1
Water and Sewerage	-0.6	2.9	5.0	1.6	0.9
Construction	-1.3	2.3	2.6	-0.2	0.6
Total Services	0.5	0.5	0.7	0.8	0.9
Distn, hotels and catering	1.2	1.6	1.2	0.5	1.7
Transport, storage and comms	1.4	0.0	-0.1	0.4	0.9
Business services and Finance	0.0	0.6	1.1	1.0	0.9
Government and other	0.3	0.0	0.4	0.8	0.3

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Services contributed 0.4 percentage points to growth of GVA in IIQ2013, 0.6 percentage points in IIQ2013, 0.6 percentage points in IVQ2013 and 0.7 percentage points in IQ2014, as shown in Table VH-5. Business services and finance contributed 0.3 percentage points in IIIQ2013, 0.3 percentage points in IVQ2013 and 0.3 percentage points in IQ2014. Manufacturing did not contribute to growth in IQ2013 and manufacturing and production contributed 0.1 percentage points in IIQ2013, 0.1 percentage points in IIIQ2013, 0.1 percentage points in IVQ2013 and 0.1 percentage points in IQ2014.

Table VH-5, UK, Contribution to Quarter on Prior Quarter of Growth of Value Added by Output Components, %

Component	2013 Q1	2013 Q2	2013 Q3	2013 Q4	2014 Q1
Agriculture	0.0	0.0	0.0	0.0	0.0
Total Production	0.1	0.1	0.1	0.1	0.1
Manufacturing	0.0	0.1	0.1	0.1	0.1
Extraction	0.1	0.0	0.0	0.0	0.0
Electricity, gas and air	0.0	0.0	-0.1	0.0	-0.1
Water and Sewerage	0.0	0.0	0.1	0.0	0.0
Construction	-0.1	0.1	0.2	0.0	0.0
Total Services	0.4	0.4	0.6	0.6	0.7
Distn, hotels and catering	0.2	0.2	0.2	0.1	0.2
Transport, storage and comms	0.2	0.0	0.0	0.0	0.1
Business services and Finance	0.0	0.2	0.3	0.3	0.3
Government and other	0.1	0.0	0.1	0.2	0.1

Components may not add because of rounding

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Table VH-6 provides UK growth of value added by output components in a quarter relative to the same quarter a year earlier for 2013 and 2014. Total production and manufacturing fell in all four quarters of 2012 and in the first three quarters of 2013 relative to the same quarter a year earlier. Total production increased 2.2 percent in IVQ2013 relative to a year earlier and 2.5 percent in IQ2014 while manufacturing increased 1.8 percent in IVQ2013 relative to a year earlier and 3.5 percent in IQ2014. Total services supported the economy with growth in all quarters relative to a year earlier from IQ2012 to IQ2014. Construction fell sharply in all four quarters of 2012 and in the first quarter of 2013 relative to a year earlier with growth of 0.7 percent in IIQ2013, 5.6 percent in IIIQ2013, 3.4 percent in IVQ2013 and 5.4 percent in IQ2014.

Table VH-6, UK, Growth of Value Added by Output Components, ∆% on Same Quarter of Prior Year

Component	2013 Q1	2013 Q2	2013 Q3	2013 Q4	2014 Q1
GVA Output	0.3	1.4	1.5	2.5	3.0
Agriculture	-7.4	-3.4	-2.8	-2.4	1.8
Total Production	-2.4	-0.7	-0.4	2.2	2.5
Manufacturing	-2.8	-0.9	-0.6	1.8	3.5
Extraction	-7.3	-3.0	-2.5	5.0	0.8
Electricity, gas and air	7.4	0.2	-3.5	-5.0	-10.9
Water and Sewerage	-1.2	3.1	8.0	9.2	10.8
Construction	-5.1	0.7	5.6	3.4	5.4
Total Services	1.2	1.9	1.6	2.5	2.9
Distn, hotels and catering	2.1	3.9	3.3	4.5	5.1
Transport, storage and comms	0.1	1.5	1.7	1.8	1.3
Business services and Finance	1.7	2.1	2.2	2.7	3.6
Government and other	0.7	0.7	-0.2	1.4	1.4

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Total production subtracted from growth of value added in all quarters of 2012 and the first three quarters of 2013 relative to a year earlier, contributing 0.3 percentage points in IVQ2013 and 0.4 percentage points in IQ2014, as shown in Table VH-7. Total services added to growth of value added in all four quarters of 2012 and all four quarters of 2013 relative to a year earlier. Total services contributed 2.4 percentage points to value added in IQ2014. Construction also deducted in all four quarters of 2012 and the first quarter of 2013 relative to a year earlier with contribution of 0.0 percentage points in IIQ2013, adding 0.3 percentage points in IIIQ2013 and 0.2 percentage points IVQ2013. Construction added 0.3 percentage points in IQ2014.

VH-7, UK, Contribution to Growth on Same Quarter of Prior Year of Value Added by Output Components, %

Component	2013 Q1	2013 Q2	2013 Q3	2013 Q4	2014 Q1
Agriculture	0.0	0.0	0.0	0.0	0.0
Total Production	-0.4	-0.1	-0.1	0.3	0.4
Manufacturing	-0.3	-0.1	-0.1	0.2	0.4
Extraction	-0.1	-0.1	0.0	0.1	0.0
Electricity, gas and air	0.1	0.0	0.0	-0.1	-0.1
Water and Sewerage	0.0	0.0	0.1	0.1	0.1
Construction	-0.3	0.0	0.3	0.2	0.3
Total Services	1.0	1.5	1.3	2.0	2.3
Distn, hotels and catering	0.3	0.5	0.5	0.6	0.7
Transport, storage and comms	0.0	0.2	0.2	0.2	0.1
Business services and Finance	0.5	0.7	0.7	0.9	1.2
Government and other	0.1	0.1	-0.1	0.3	0.3

Components may not add because of rounding

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Quarter-on-quarter growth of value added by expenditure components is in Table VH-8. Household final consumption expenditure grew 0.9 percent in IQ2013 relative to IVQ2012, 0.1 percent in IIQ2013, 0.9 percent in IIIQ2013 and 0.4 percent in IVQ2013. Household final consumption expenditures grew 0.8 percent in IQ2014. General government consumption decreased 0.5 percent in IQ2013 and increased 1.4 percent in IIQ2013, 0.6 percent in IIIQ2013 and 0.0 percent in IVQ2013. General government consumption increased 0.1 percent in IQ2014. Gross capital formation increased 9.3 percent in IIIQ2013 and gross fixed capital formation (GFCF) increased 1.9 percent. Gross capital formation decreased 3.2 percent in IVQ2013 and GFCF increased 1.9 percent. Gross capital formation increased 2.2 percent in IVQ2014 and GFCF 0.6 percent. Exports fell 1.0 percent in IQ2013 but grew 2.5 percent in IIQ2013 while imports fell 2.4 percent in IQ2013 and increased 2.3 percent in IIQ2013. In IIIQ2013, exports fell 1.9 percent and imports increased 1.5 percent. In IVQ2013, exports increased 2.8 percent and imports fell 0.4 percent. In IQ2014, exports fell 1.0 percent and imports fell 1.1 percent.

VH-8, UK, Quarter on Quarter Growth of Value Added by Expenditure Components, ∆% on Prior Quarter

	IQ2013	IIQ2013	IIIQ2013	IVQ2013	IQ2014
HFC	0.9	0.1	0.9	0.4	0.8
NPISH	3.0	4.9	-1.9	-1.5	-2.2
GOVT	–0.5	1.4	0.6	0.0	0.1
GCF	–3.7	2.1	9.3	-3.2	2.2
GFCF	0.9	4.0	1.9	1.9	0.6
BI	2.8	0.9	2.4	2.4	2.7
Exports	–1.0	2.5	-1.9	2.8	-1.0
Less Imports	–2.4	2.3	1.5	-0.4	-1.1

HFC: Household Final Consumption; NPISH: NPISH Final Consumption; GOVT: General Government; GCF: Gross Capital Formation; GFCF: Gross Fixed Capital Formation; BINV: Business Investment; EXP: Exports; IMP: Less Imports

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Table VH-9 provides contributions to value added by expenditure components in a quarter relative to the prior quarter. In IQ2013, household final consumption expenditure contributed 0.5 percentage points to growth, 0.0 percentage points in IIQ2013, 0.5 percentage points in IIIQ2013 and 0.2 percentage points in IVQ2013. Household final consumption contributed 0.5 percentage points in IQ2014. Net trade deducted 0.4 percentage points in IVQ2012 but added 0.5 percentage points in IQ2013 and 0.0 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.1 percentage points, adding 1.0 percentage points in IVQ2013. Net trade contributed 0.0 percentage points in IQ2014. Gross fixed capital formation (GFCF) deducted 0.4 percentage points in IIIQ2012 and 0.7 percentage points IVQ2012, adding 0.1 percentage points in IQ2013, 0.5 percentage points in IIQ2013, 0.3 percentage points in IIIQ2013 and 0.3 percentage points in IVQ2013. In IQ2014, GFCF added 0.1 percentage points

Table VH-9, UK, Contribution to Quarter on Prior Quarter of Growth of Value Added by Expenditure Components, %

	IQ2013	IIQ2013	IIIQ2013	IVQ2013	IQ2014
HFC	0.5	0.0	0.5	0.2	0.5
NPISH	0.1	0.1	-0.1	0.0	-0.1
GOVT	–0.1	0.3	0.1	0.0	0.0
GCF	–0.5	0.3	1.3	-0.5	0.3
GFCF	0.1	0.5	0.3	0.3	0.1
BI	0.2	0.1	0.2	0.2	0.2
Exports	–0.3	0.8	-0.6	0.9	-0.3
Less Imports	–0.8	0.7	0.5	-0.1	-0.3
Net Trade	0.5	0.0	-1.1	1.0	0.0

Components may not add because of rounding

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Table VH-10 provides UK growth of value added by expenditure components in a quarter relative to the same quarter a year earlier. Household final consumption expenditure grew 2.1 percent in IQ2013 relative to a year earlier, 1.9 percent in IIQ2013, 2.5 percent in IIIQ2013 and 2.2 percent in IVQ2013. In IQ2014, household financial consumption grew 2.1 percent relative to a year earlier. Household final consumption grew 1.8 percent in IVQ2012 after growing 1.8 percent in IIIQ2012, 1.4 percent in IIQ2012 and 1.0 percent in IQ2012. General government final consumption expenditure decreased 1.7 percent in IQ2013 and grew 1.3 percent in IIQ2013, 1.7 percent in IIIQ2013 and 1.6 percent in IVQ2013. General government consumption expenditure increased 2.2 percent in IQ2014 relative to a year earlier. Gross fixed capital formation (GFCF) fell 8.3 percent in IQ2013 and 3.2 percent in IIQ2013, increasing 1.4 percent in IIIQ2013 and 8.8 percent in IVQ2013. GFCF increased 8.5 percent in IQ2014 relative to a year earlier. Exports decreased 0.2 percent in IQ2013 with imports decreasing 0.7 percent but exports increased 3.7 percent in IIQ2013 and imports grew 0.4 percent. In IIIQ2013, exports fell 1.6 percent and imports increased 1.4 percent. Exports increased 2.3 percent in IVQ2013 while imports increased 1.0 percent. Exports increased 2.2 percent in IQ2014 relative to a year earlier and imports 2.3 percent.

Table VH-10, UK, Growth of Value Added by Expenditure Components, ∆% on Same Quarter of Prior Year

	IQ2013	IIQ2013	IIIQ2013	IVQ2013	IQ2014
HFC	2.1	1.9	2.5	2.2	2.1
NPISH	3.5	3.0	2.1	4.4	-0.9
GOVT	–1.7	1.3	1.7	1.6	2.2
GCF	–1.8	-3.9	6.8	4.1	10.4
GFCF	–8.3	-3.2	1.4	8.8	8.5
BI	–6.8	-3.5	-1.7	8.7	8.7
Exports	–0.2	3.7	-1.6	2.3	2.2
Less Imports	–0.7	0.4	1.4	1.0	2.3

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Table VH-11 provides contribution of value added by expenditure components in a quarter relative to the same quarter a year earlier. Household final consumption expenditure contributed 1.1 percentage points in IIIQ2012 and 1.1 percentage points in IVQ2012. In IQ2013, household final consumption added 1.3 percentage points, 1.2 percentage points in IIQ2013, 1.5 percentage points in IIIQ2013 and 1.4 percentage points in IVQ2013. Household final consumption added 1.3 percentage points. General government final consumption expenditure contributed 0.3 percentage points in IVQ2012, deducting 0.4 percentage points in IQ2013 and adding 0.3 percentage points in IIQ2013, 0.4 percentage points in IIIQ2013 and 0.4 percentage points in IVQ2013. General government final consumption added 0.5 percentage points in IQ2014. Net trade added 1.0 percentage points in IIQ2013 and added 0.2 percentage points in IQ2013. In IIIQ2013, net trade deducted 1.0 percentage points, adding 0.4 percentage points in IVQ2013. Net trade contributed 0.0 percentage points in IQ2014 relative to a year earlier.

VH-11, UK, Contribution to Growth on Same Quarter of Prior Year of Value Added by Expenditure Components, %

	IQ2013	IIQ2013	IIIQ2013	IVQ2013	IQ2014
HFC	1.3	1.2	1.5	1.4	1.3
NPISH	0.1	0.1	0.1	0.1	0.0
GOVT	–0.4	0.3	0.4	0.4	0.5
GCF	–0.3	-0.6	1.0	0.6	1.5
GFCF	–1.3	-0.5	0.2	1.2	1.2
BI	–0.6	-0.3	-0.1	0.7	0.7
Exports	–0.1	1.1	-0.5	0.7	0.7
Less Imports	–0.2	0.1	0.5	0.3	0.7
Net Trade	0.2	1.0	-1.0	0.4	0.0

Components may not add because of rounding

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Table VH-12 provides growth of value added by expenditure components in a year relative to the prior year. Household final consumption expenditure grew 2.2 percent in 2013. General government final consumption expenditure grew 0.7 percent in 2013. Gross capital formation increased 1.3 percent in 2013. GFCF increased 1.0 percent in 2013. Exports grew 1.0 percent in 2013.

Table VH-12, UK, Growth of Value Added by Expenditure Components, ∆% on Prior Year

	2013
HFC	2.2
NPISH	3.2
GOVT	0.7
GCF	1.3
GFCF	1.0
BI	-1.0
Exports	1.0
Less Imports	0.5

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

Contributions of value added by expenditure components in a year relative to the prior year are in Table VH-13. Household final consumption added 1.4 percentage points in 2013. Gross capital formation contributed 0.2 percentage points in 2013 but GFCF deducted 0.1 percentage points in 2013. Net trade added 0.2 percentage points in 2013.

VH-13, UK, Contribution to Growth on Prior Year of Value Added by Expenditure Components, %

	2013
HFC	1.4
NPISH	0.1
GOVT	0.2
GCF	0.2
GFCF	-0.1
BINV	-0.1
Exports	0.3
Less Imports	0.2
Net Trade	0.2

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2014/index.html

The volume of retail sales in the UK increased 0.1 percent in Mar 2014 and increased 4.2 percent in the 12 months ending in Mar 2014, as shown in Table VH-14. Percentage changes of retail sales in 12 months had been positive in several months since Sep 2011 with exceptions such as declines of 2.3 percent in Apr 2012, 0.5 percent in Jan 2013 and 0.8 percent in Mar 2013. The quarter ending in Jul 2013 is quite strong with growth of 2.1 percent in May, 0.1 percent in Jun and 1.1 percent in Jul, interrupted by decline of 1.0 percent in Aug 2013 followed by increase of 0.9 percent in Sep 2013. The volume of retail sales fell 0.8 percent in Oct 2013, increasing 0.2 percent in Nov 2013 and jumping 2.7 percent in Dec 2013. Retail sales decreased 1.3 percent in Jan 2014 and increased 1.3 percent in Apr 2014.

Table VH-14, UK, Volume of Retail Sales ∆%

		Month ∆%	12-Month ∆%
2011	Jun	-	-0.9

	Jul	0.3	-1.0
	Aug	-0.5	-1.3
	Sep	0.4	0.1
	Oct	1.2	0.6
	Nov	-	0.3
	Dec	-0.3	2.3

2012	Jan	0.6	0.6
	Feb	-1.1	0.4
	Mar	2.1	2.7
	Apr	-2.3	-2.0
	May	1.1	1.5
	Jun	0.2	1.8

	Jul	0.3	1.7
	Aug	-0.1	2.1
	Sep	0.4	2.0
	Oct	-0.4	0.3
	Nov	0.2	0.5
	Dec	-0.8	-0.1

2013	Jan	-0.5	-1.1
	Feb	2.0	1.9
	Mar	-0.8	-1.0
	Apr	-0.7	0.7
	May	2.1	1.7
	Jun	0.1	1.6

	Jul	1.1	2.4
	Aug	-1.0	1.6
	Sep	0.9	2.2
	Oct	-0.8	1.8
	Nov	0.2	1.8
	Dec	2.7	5.5

2014	Jan	-1.9	4.0
	Feb	1.5	3.4
	Mar	0.5	4.8
	Apr	1.3	6.9

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/april-2014/index.html

Retail sales in the UK struggle with oscillating and relatively high inflation, declining recently. Table VH-15 provides 12-month percentage changes of the implied deflator of UK retail sales. The implied deflator of all retail sales decreased 0.6 percent in the 12 months ending in Apr 2014 while that of sales excluding auto fuel changed 0.0 percent. The 12-month increase of the implied deflator of auto fuel in Apr 2014 was minus 4.4 percent. The 12-month increase of the implied deflator of auto fuel sales rose to 17.0 percent in Sep 2011, which is the highest 12-month increase in 2011, but then declined to 0.3 percent in Dec 2012 and minus 0.2 percent in Jan 2013. The 12-month implied deflator of auto fuel sales decreased 2.2 percent in May 2013, increasing 1.3 percent in Jun 2013 and 2.6 percent in Jul 2013. The percentage change of the implied deflator of sales of food stores at 2.3 percent in Dec 2013 is higher than for total retail sales of 0.5 percent. Increases in fuel prices at the retail level have occurred throughout most years since 2005 with exception of the decline of 9.7 percent in Dec 2008 when commodity carry trades were reversed in the panic of the financial crisis. UK inflation is particularly sensitive to changes in commodity prices.

Table VH-15, UK, Implied Deflator of Retail Sales, 12-Month Percentage Changes

		All Retail	All Retail Ex Auto Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Fuel Stores
2008	May	3.6	1.9	5.9	-1.2	18.5
	Jun	4.6	2.5	6.9	-1.0	22.5

	Jul	5.8	3.6	8.7	-0.4	24.2
	Aug	5.4	3.8	9.4	-0.5	19.5
	Sep	5.1	3.5	8.3	-0.3	18.6
	Oct	3.6	2.9	7.4	-0.7	9.2
	Nov	2.2	2.7	7.5	-1.1	-2.6
	Dec	-0.2	0.5	7.1	-3.9	-9.7

2009	Jan	-0.2	1.6	7.3	-2.9	-13.4
	Feb	1.0	2.6	8.4	-2.1	-11.0
	Mar	0.6	2.4	7.9	-2.0	-12.4
	Apr	0.2	1.7	6.2	-2.0	-11.1
	May	-	1.6	5.7	-1.9	-12.4
	Jun	-1.1	0.7	4.2	-2.4	-13.2

	Jul	-1.4	0.3	3.5	-2.4	-13.6
	Aug	-0.9	0.2	2.3	-1.8	-8.9
	Sep	-0.8	-	1.9	-1.5	-5.8
	Oct	0.3	0.5	2.5	-1.2	-0.8
	Nov	1.4	0.5	1.8	-0.8	10.0
	Dec	3.7	2.4	2.2	1.8	17.0

2010	Jan	4.1	2.0	2.7	1.2	23.3
	Feb	3.0	1.0	1.5	0.8	20.5
	Mar	3.6	1.4	2.2	0.9	22.7
	Apr	4.0	2.0	2.9	1.3	23.3
	May	3.4	1.5	2.0	1.1	20.9
	Jun	2.6	1.3	2.1	0.8	14.7

	Jul	2.7	1.6	3.0	0.5	13.5
	Aug	2.6	1.7	3.4	0.4	11.4
	Sep	3.1	2.6	4.3	1.2	8.3
	Oct	3.3	2.5	4.1	1.1	10.8
	Nov	3.6	3.0	4.9	1.3	9.8
	Dec	3.7	3.2	5.2	1.4	12.4

2011	Jan	4.4	3.3	5.4	1.4	14.5
	Feb	4.9	3.8	5.6	2.2	15.1
	Mar	4.3	3.0	4.3	1.9	14.9
	Apr	4.2	3.3	4.8	1.9	12.3
	May	4.6	3.5	5.6	1.8	13.2
	Jun	4.7	3.4	6.2	1.2	14.5

	Jul	5.1	3.9	6.0	2.2	14.5
	Aug	5.4	4.0	6.0	2.4	16.2
	Sep	5.1	3.7	6.2	1.7	17.0
	Oct	4.7	3.5	5.1	2.3	14.8
	Nov	4.0	3.0	4.7	1.7	12.6
	Dec	3.3	2.4	4.3	1.0	9.1

2012	Jan	2.6	2.2	3.6	1.1	5.3
	Feb	2.8	2.4	4.0	0.9	5.4
	Mar	3.0	2.7	4.5	1.1	4.9
	Apr	2.3	2.0	3.8	0.4	5.2
	May	1.4	1.5	3.1	0.2	1.2
	Jun	0.6	0.9	2.3	-0.2	-1.2

	Jul	0.4	0.7	2.0	-0.2	-1.4
	Aug	0.5	0.6	2.1	-0.8	0.4
	Sep	0.9	0.7	2.1	-0.4	2.9
	Oct	1.1	1.0	2.8	-0.4	2.6
	Nov	0.7	0.7	3.1	-1.0	1.3
	Dec	0.9	1.0	3.0	-0.3	0.3

2013	Jan	1.1	1.4	3.8	-0.7	-0.2
	Feb	1.0	1.0	3.2	-0.7	1.1
	Mar	0.9	1.2	3.1	-0.7	0.5
	Apr	0.6	1.1	3.4	-0.7	-3.0
	May	1.0	1.5	3.5	-0.1	-2.2
	Jun	1.7	1.8	3.4	0.5	1.3

	Jul	1.8	1.8	3.4	0.3	2.6
	Aug	1.6	1.6	3.4	0.3	1.5
	Sep	0.9	1.3	3.4	-0.2	-1.2
	Oct	0.7	1.3	3.3	-0.2	-3.5
	Nov	0.6	1.0	2.7	-0.1	-3.0
	Dec	0.5	0.7	2.3	-0.3	-1.0

2014	Jan	0.2	0.4	1.8	-0.5	-1.4
	Feb	-0.2	0.4	1.6	-0.4	-4.4
	Mar	-0.6	0.2	1.8	-0.7	-5.8
	Apr	-0.6	-	0.9	-0.6	-4.4

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/april-2014/index.html

UK monthly retail volume of sales is quite volatile, as shown in Table VH-16. Total volume of sales decreased 0.7 percent in Apr 2013 and increased 2.1 percent in May 2013, 0.1 percent in Jun 2013 and 1.1 percent in Jul 2013 but declined 1.0 percent in Aug 2013. Retail sales increased 0.9 percent in Sep 2013 and fell 0.8 percent in Oct 2013. Retail sales increased 0.2 percent in Nov 2013 and 2.7 percent in Dec 2013. Total volume of retail sales fell 1.9 percent in Jan 2014 and increased 1.5 percent in Feb 2014. Total volume of retail sales increased 0.5 percent in Mar 2014 and 1.3 percent in Apr 2014. There was decrease of 1.8 percent in retail sales excluding auto fuels in Apr 2014 and increase of 3.6 percent in food stores, decrease of 0.4 percent in nonfood stores and decrease of 3.7 percent in auto fuel stores. Multiple positive and negative variations and changes in magnitudes confirm high volatility.

Table VH-16, UK, Growth of Retail Sales Volume by Component Groups Month SA ∆%

Source: UK Office for National Statistics

		All Retail	All Retail Ex Auto Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Fuel Stores
2011	Jun	-	-0.1	-0.2	-0.5	0.3

	Jul	0.3	0.4	0.8	0.4	-0.6
	Aug	-0.5	-0.5	0.1	-1.2	-0.5
	Sep	0.4	0.4	0.1	0.6	0.7
	Oct	1.2	1.2	0.8	1.7	1.3
	Nov	-	-0.4	-0.5	-0.9	3.0
	Dec	-0.3	-0.1	-	0.4	-1.5

2012	Jan	0.6	0.6	0.6	0.5	0.9
	Feb	-1.1	-0.9	-0.6	-1.1	-2.8
	Mar	2.1	1.7	-0.3	3.5	5.4
	Apr	-2.3	-1.1	-0.1	-2.3	-12.2
	May	1.1	0.6	0.2	0.9	5.0
	Jun	0.2	0.5	0.1	1.0	-2.5

	Jul	0.3	0.1	-	-0.4	2.0
	Aug	-0.1	-0.2	0.3	0.4	0.5
	Sep	0.4	0.3	-	-0.4	1.4
	Oct	-0.4	-0.2	-0.9	0.1	-2.9
	Nov	0.2	0.4	-0.2	0.8	-1.8
	Dec	-0.8	-1.1	-0.1	-2.1	1.9

2013	Jan	-0.5	-0.3	-0.6	-0.6	-2.1
	Feb	2.0	2.0	0.3	3.7	2.0
	Mar	-0.8	-0.9	2.3	-4.4	-0.7
	Apr	-0.7	-0.9	-4.3	3.3	0.6
	May	2.1	2.2	2.9	0.7	1.2
	Jun	0.1	0.1	0.1	0.1	0.2

	Jul	1.1	1.2	2.8	-0.5	0.8
	Aug	-1.0	-1.0	-2.6	0.1	-0.7
	Sep	0.9	1.2	-0.3	2.9	-1.0
	Oct	-0.8	-0.7	-0.1	-1.4	-2.2
	Nov	0.2	0.2	0.3	-	-0.3
	Dec	2.7	2.9	2.8	2.7	1.1

2014	Jan	-1.9	-1.9	-3.9	0.4	-1.2
	Feb	1.5	1.5	2.2	-0.1	1.1
	Mar	0.5	0.1	-1.5	1.8	4.5
	Apr	1.3	1.8	3.6	-0.4	-3.7

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/april-2014/index.html

Percentage growth in 12 months of retail sales volume by component groups in the UK is provided in Table VH-17. Total retail sales increased 6.9 percent in the 12 months ending in Apr 2014 with increase of 7.7 percent in sales excluding auto fuel. Sales of food stores increased 6.3 percent in the 12 months ending in Apr 2014 while sales of nonfood stores increased 6.5 percent. Sales of auto fuel stores decreased 0.7 percent in Apr 2014 relative to a year earlier.

Table VH-17, UK, Growth of Retail Sales Volume by Component Groups 12-Month ∆%

		All Retail	All Retail Ex Auto Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Fuel Stores
2011	Jun	-0.9	-1.4	-4.1	-1.1	3.2

	Jul	-1.0	-1.4	-1.2	-2.8	1.9
	Aug	-1.3	-1.7	-0.7	-3.9	1.8
	Sep	0.1	-0.3	-0.3	-1.8	3.3
	Oct	0.6	0.3	0.4	-1.0	2.7
	Nov	0.3	-0.4	-1.1	-1.8	5.3
	Dec	2.3	1.2	1.1	0.3	13.8

2012	Jan	0.6	0.3	0.9	-1.3	3.3
	Feb	0.4	0.3	0.9	-1.2	1.0
	Mar	2.7	2.2	-	3.0	7.5
	Apr	-2.0	-1.3	-3.8	-0.4	-7.4
	May	1.5	2.0	1.0	1.7	-2.4
	Jun	1.8	2.6	1.3	3.3	-5.1

	Jul	1.7	2.3	0.5	2.5	-2.6
	Aug	2.1	2.5	0.8	4.1	-1.5
	Sep	2.0	2.3	0.6	3.1	-0.9
	Oct	0.3	0.9	-1.1	1.5	-4.9
	Nov	0.5	1.7	-0.8	3.3	-9.4
	Dec	-0.1	0.7	-1.0	0.7	-6.3

2013	Jan	-1.1	-0.2	-2.1	-0.3	-9.0
	Feb	1.9	2.7	-1.3	4.6	-4.5
	Mar	-1.0	0.2	1.2	-3.4	-10.1
	Apr	0.7	0.4	-3.0	2.1	3.0
	May	1.7	1.9	-0.4	2.0	-0.7
	Jun	1.6	1.5	-0.4	1.0	2.0

	Jul	2.4	2.6	2.4	1.0	0.8
	Aug	1.6	1.8	-0.6	0.6	-0.5
	Sep	2.2	2.8	-0.9	4.0	-2.8
	Oct	1.8	2.3	-	2.4	-2.2
	Nov	1.8	2.1	0.5	1.6	-0.6
	Dec	5.5	6.2	3.4	6.6	-1.4

2014	Jan	4.0	4.5	-	7.6	-0.5
	Feb	3.4	4.0	1.9	3.7	-1.4
	Mar	4.8	4.9	-1.8	10.4	3.8
	Apr	6.9	7.7	6.3	6.5	-0.7

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/april-2014/index.html

Table VH-18 provides the analysis of the UK Office for National Statistics of contributions to 12-month percentage changes of value and volume of retail sales in the UK. The volume of retail sales seasonally adjusted increased 6.9 percent in the 12 months ending in Apr 2014. Sales of predominantly food stores with weight of 41.5 percent increased 6.3 percent in the 12 months ending in Apr 2014, adding 2.7 percentage points. Mostly nonfood stores with weight of 41.3 percent increased 6.5 percent with contribution of 2.8 percentage points. Positive contribution to 12-month percentage changes of volume was made by non-store retailing with weight of 5.7 percent, growth of 25.1 percent and positive contribution of 1.5 percentage points. Automotive fuel with weight of 11.5 percent and growth of minus 0.7 percent deducted 0.1 percentage points. The value of retail sales increased 6.2 percent in the 12 months ending in Apr 2014. There were positive contributions: 2.5 percentage points for predominantly nonfood stores and 1.3 percentage points for non-store retailing. Automotive fuel stores deducted 0.6 percentage points while food stores added 3.0 percentage points.

Table VH-18, UK, Volume and Value of Retail Sales 12-month ∆% and Percentage Points Contributions by Sectors

Apr 2014	Weight % of All Retailing	Volume SA 12- Month ∆%	PP Cont. % points	Value SA 12- Month ∆%	PP Cont. % points
All Retailing	100.0	6.9		6.2
Mostly Food Stores	41.5	6.3	2.7	7.0	3.0
Mostly Nonfood Stores	41.3	6.5	2.8	5.9	2.5
Non-store Retailing	5.7	25.1	1.5	23.5	1.3
Automotive Fuel	11.5	-0.7	-0.1	-4.9	-0.6

Cont.: Contribution

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/april-2014/index.html

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United States Commercial Banks Assets and Liabilities, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Housing Collapse, World Cyclical Slow Growth and Global Recession Risk: Part V

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