Monetary Policy, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Commercial Banks Assets and Liabilities, Congressional Budget Office Long-term Budget Outlook, World Cyclical Slow Growth and Global Recession Risk: Part VI

 

Monetary Policy, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Commercial Banks Assets and Liabilities, Congressional Budget Office Long-term Budget Outlook, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IB1 Theory

IB2 Policy

IB3 Evidence

IB4 Unwinding Strategy

IC United States Inflation

IC Long-term US Inflation

ID Current US Inflation

IE 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

IIA United States Commercial Banks Assets and Liabilities

IA Transmission of Monetary Policy

IB Functions of Banking

Appendix on Monetary Policy

IA1 Theory

IA2 Policy

IA3 Evidence

IA4 Unwinding Strategy

IC United States Commercial Banks Assets and Liabilities

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

IIB The Congressional Budget Office Long-term Budget Outlook

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

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/ns/cs.aspx?id=28) to show GDP in dollars in 2012 and the growth rate of real GDP of the world and selected regional countries from 2013 to 2016. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has changed its forecast of the world economy to 3.0 percent in 2013 but accelerating to 3.6 percent in 2014, 3.9 percent in 2015 and 3.9 percent in 2016. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $34,543 billion of world output of $72,106 billion, or 47.9 percent, but are projected to grow at much lower rates than world output, 2.0 percent on average from 2013 to 2016 in contrast with 3.6 percent for the world as a whole. While the world would grow 15.2 percent in the four years from 2013 to 2016, the G7 as a whole would grow 8.5 percent. The difference in dollars of 2012 is rather high: growing by 15.2 percent would add around $11.0 trillion of output to the world economy, or roughly, two times the output of the economy of Japan of $5,938 billion but growing by 8.5 percent would add $6.1 trillion of output to the world, or about the output of Japan in 2012. The “two speed” concept is in reference to the growth of the 150 countries labeled as emerging and developing economies (EMDE) with joint output in 2012 of $27,080 billion, or 37.6 percent of world output. The EMDEs would grow cumulatively 21.9 percent or at the average yearly rate of 5.1 percent, contributing $5.9 trillion from 2013 to 2016 or the equivalent of somewhat less than the GDP of $8,229 billion of China in 2012. The final four countries in Table V-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output in 2012 adds to $14,340 billion, or 19.9 percent of world output, which is equivalent to 41.5 percent of the combined output of the major advanced economies of the G7.

Table V-1, IMF World Economic Outlook Database Projections of Real GDP Growth

	GDP USD 2012	Real GDP ∆% 2013	Real GDP ∆% 2014	Real GDP ∆% 2015	Real GDP ∆% 2016
World	72,106	3.0	3.6	3.9	3.9
G7	34,543	1.4	2.2	2.3	2.3
Canada	1,821	2.0	2.3	2.4	2.4
France	2,613	0.3	1.0	1.5	1.7
DE	3,428	0.5	1.7	1.6	1.4
Italy	2,014	-1.8	0.6	1.1	1.3
Japan	5,938	1.5	1.4	1.0	0.7
UK	2,484	1.8	2.9	2.5	2.4
US	16,245	1.9	2.8	3.0	3.0
Euro Area	12,192	-0.5	1.2	1.5	1.5
DE	3,428	0.5	1.7	1.6	1.4
France	2,613	0.3	1.0	1.5	1.7
Italy	2,014	-1.8	0.6	1.1	1.3
POT	212	-1.4	1.2	1.5	1.7
Ireland	211	-0.3	1.7	2.5	2.5
Greece	249	-3.9	0.6	2.9	3.7
Spain	1,323	-1.2	0.9	1.0	1.1
EMDE	27,080	4.7	4.9	5.3	5.4
Brazil	2,248	2.3	1.8	2.7	3.0
Russia	2,004	1.3	1.3	2.3	2.5
India	1,859	4.4	5.4	6.4	6.5
China	8,229	7.7	7.5	7.3	7.0

Notes; DE: Germany; EMDE: Emerging and Developing Economies (150 countries); POT: Portugal

Source: IMF World Economic Outlook databank http://www.imf.org/external/ns/cs.aspx?id=28

Continuing high rates of unemployment in advanced economies constitute another characteristic of the database of the WEO (http://www.imf.org/external/ns/cs.aspx?id=28). Table V-2 is constructed with the WEO database to provide rates of unemployment from 2012 to 2016 for major countries and regions. In fact, unemployment rates for 2013 in Table V-2 are high for all countries: unusually high for countries with high rates most of the time and unusually high for countries with low rates most of the time. The rates of unemployment are particularly high in 2013 for the countries with sovereign debt difficulties in Europe: 16.3 percent for Portugal (POT), 13.1 percent for Ireland, 27.3 percent for Greece, 26.4 percent for Spain and 12.2 percent for Italy, which is lower but still high. The G7 rate of unemployment is 7.1 percent. Unemployment rates are not likely to decrease substantially if slow growth persists in advanced economies.

Table V-2, IMF World Economic Outlook Database Projections of Unemployment Rate as Percent of Labor Force

	% Labor Force 2012	% Labor Force 2013	% Labor Force 2014	% Labor Force 2015	% Labor Force 2016
World	NA	NA	NA	NA	NA
G7	7.4	7.1	6.7	6.5	6.3
Canada	7.3	7.0	7.0	6.9	6.8
France	10.2	10.8	11.0	10.7	10.3
DE	5.5	5.3	5.2	5.2	5.2
Italy	10.7	12.2	12.4	11.9	11.1
Japan	4.3	4.0	3.9	3.9	3.9
UK	8.0	7.6	6.9	6.6	6.3
US	8.1	7.4	6.4	6.2	6.1
Euro Area	11.4	12.1	11.9	11.6	11.1
DE	5.5	5.3	5.2	5.2	5.2
France	10.2	10.8	11.0	10.7	10.3
Italy	10.7	12.2	12.4	11.9	11.1
POT	15.7	16.3	15.7	15.1	14.5
Ireland	14.7	13.1	11.2	10.5	10.1
Greece	24.2	27.3	26.3	24.4	21.4
Spain	25.0	26.4	25.5	24.9	24.2
EMDE	NA	NA	NA	NA	NA
Brazil	5.5	5.4	5.6	5.8	6.0
Russia	5.5	5.5	6.2	6.2	6.0
India	NA	NA	NA	NA	NA
China	4.1	4.1	4.1	4.1	4.1

Notes; DE: Germany; EMDE: Emerging and Developing Economies (150 countries)

Source: IMF World Economic Outlook databank http://www.imf.org/external/ns/cs.aspx?id=28

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog from IQ2012 to IVQ2013 available now for all countries. There are preliminary estimates for all countries for IIQ2014. Growth is weak throughout most of the world.

• Japan. The GDP of Japan increased 1.0 percent in IQ2012, 4.1 percent at SAAR (seasonally adjusted annual rate) and 3.3 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP fell 0.5 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 2.2 percent, which is much lower than 4.1 percent in IQ2012. Growth of 3.2 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan’s GDP contracted 0.7 percent in IIIQ2012 at the SAAR of minus 2.8 percent and decreased 0.2 percent relative to a year earlier. Japan’s GDP decreased 0.1 percent in IVQ2012 at the SAAR of minus 0.3 percent and decreased 0.3 percent relative to a year earlier. Japan grew 1.3 percent in IQ2013 at the SAAR of 5.2 percent and increased 0.1 percent relative to a year earlier. Japan’s GDP increased 0.9 percent in IIQ2013 at the SAAR of 3.4 percent and increased 1.2 percent relative to a year earlier. Japan’s GDP grew 0.4 percent in IIIQ2013 at the SAAR of 1.4 percent and increased 2.3 percent relative to a year earlier. In IVQ2013, Japan’s GDP changed 0.2 percent at the SAAR of minus 0.2 percent, increasing 2.5 percent relative to a year earlier. Japan’s GDP increased 1.5 percent in IQ2014 at the SAAR of 6.1 percent and increased 3.0 percent relative to a year earlier. In IIQ2014, Japan’s GDP fell 1.7 percent at the SAAR of minus 6.8 percent and fell 0.1 percent relative to a year earlier.
• China. China’s GDP grew 1.4 percent in IQ2012, annualizing to 5.7 percent, and 8.1 percent relative to a year earlier. The GDP of China grew at 2.1 percent in IIQ2012, which annualizes to 8.7 percent and 7.6 percent relative to a year earlier. China grew at 2.0 percent in IIIQ2012, which annualizes at 8.2 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 1.9 percent, which annualizes at 7.8 percent, and 7.9 percent in IVQ2012 relative to IVQ2011. In IQ2013, China grew at 1.6 percent, which annualizes at 6.6 percent and 7.7 percent relative to a year earlier. In IIQ2013, China grew at 1.8 percent, which annualizes at 7.4 percent and 7.5 percent relative to a year earlier. China grew at 2.3 percent in IIIQ2013, which annualizes at 9.5 percent and 7.8 percent relative to a year earlier. China grew at 1.7 percent in IVQ2013, which annualized to 7.0 percent and 7.7 percent relative to a year earlier. China’s GDP grew 1.5 percent in IQ2014, which annualizes to 6.1 percent, and 7.4 percent relative to a year earlier. China’s GDP grew 2.0 percent in IIQ2014, which annualizes at 8.2 percent, and 7.5 percent relative to a year earlier. There is decennial change in leadership in China (http://www.xinhuanet.com/english/special/18cpcnc/index.htm). Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2014.
• Euro Area. GDP fell 0.1 percent in the euro area in IQ2012 and decreased 0.2 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.3 percent IIQ2012 and fell 0.5 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.2 percent and declined 0.7 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.5 percent relative to the prior quarter and fell 1.0 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.2 percent and decreased 1.1 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IIQ2013 and fell 0.6 percent relative to a year earlier. In IIIQ2013, euro area GDP increased 0.1 percent and fell 0.3 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IVQ2013 and increased 0.5 percent relative to a year earlier. In IQ2014, the GDP of the euro area increased 0.2 percent and 0.9 percent relative to a year earlier. The GDP of the euro area changed 0.0 percent in IIQ2014 and increased 0.7 percent relative to a year earlier.
• Germany. The GDP of Germany increased 0.3 percent in IQ2012 and 1.5 percent relative to a year earlier. In IIQ2012, Germany’s GDP decreased 0.3 percent and decreased 0.5 percent relative to a year earlier but 0.8 percent relative to a year earlier when adjusted for calendar (CA) effects. In IIIQ2012, Germany’s GDP increased 0.1 percent and 0.1 percent relative to a year earlier. Germany’s GDP contracted 0.4 percent in IVQ2012 and decreased 0.4 percent relative to a year earlier. In IQ2013, Germany’s GDP decreased 0.2 percent and fell 1.1 percent relative to a year earlier. In IIQ2013, Germany’s GDP increased 0.8 percent and 0.5 percent relative to a year earlier. The GDP of Germany increased 0.3 percent in IIIQ2013 and 0.8 percent relative to a year earlier. In IVQ2013, Germany’s GDP increased 0.4 percent and 1.0 percent relative to a year earlier. The GDP of Germany increased 0.7 percent in IQ2014 and 2.5 percent relative to a year earlier. In IIQ2014, Germany’s GDP contracted 0.2 percent and increased 0.8 percent relative to a year earlier.
• United States. Growth of US GDP in IQ2012 was 0.6 percent, at SAAR of 2.3 percent and higher by 2.6 percent relative to IQ2011. US GDP increased 0.4 percent in IIQ2012, 1.6 percent at SAAR and 2.3 percent relative to a year earlier. In IIIQ2012, US GDP grew 0.6 percent, 2.5 percent at SAAR and 2.7 percent relative to IIIQ2011. In IVQ2012, US GDP grew 0.0 percent, 0.1 percent at SAAR and 1.6 percent relative to IVQ2011. In IQ2013, US GDP grew at 2.7 percent SAAR, 0.7 percent relative to the prior quarter and 1.7 percent relative to the same quarter in 2013. In IIQ2013, US GDP grew at 1.8 percent in SAAR, 0.4 percent relative to the prior quarter and 1.8 percent relative to IIQ2012. US GDP grew at 4.5 percent in SAAR in IIIQ2013, 1.1 percent relative to the prior quarter and 2.3 percent relative to the same quarter a year earlier (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html) with weak hiring (http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html). In IVQ2013, US GDP grew 0.9 percent at 3.5 percent SAAR and 3.1 percent relative to a year earlier. In IQ2014, US GDP decreased 0.5 percent, increased 1.9 percent relative to a year earlier and fell 2.1 percent at SAAR. In IIQ2014, US GDP increased 1.0 percent at 4.0 percent SAAR and increased 2.4 percent relative to a year earlier.
• United Kingdom. In IQ2012, UK GDP changed 0.0 percent, increasing 0.6 percent relative to a year earlier. UK GDP fell 0.4 percent in IIQ2012 and increased 0.1 percent relative to a year earlier. UK GDP increased 0.8 percent in IIIQ2012 and increased 0.3 percent relative to a year earlier. UK GDP fell 0.2 percent in IVQ2012 relative to IIIQ2012 and increased 0.2 percent relative to a year earlier. UK GDP increased 0.5 percent in IQ2013 and 0.7 percent relative to a year earlier. UK GDP increased 0.7 percent in IIQ2013 and 1.8 percent relative to a year earlier. In IIIQ2013, UK GDP increased 0.8 percent and 1.8 percent relative to a year earlier. UK GDP increased 0.7 percent in IVQ2013 and 2.7 percent relative to a year earlier. In IQ2014, UK GDP increased 0.8 percent and 3.0 percent relative to a year earlier. UK GDP increased 0.8 percent in IIQ2014 and 3.1 percent relative to a year earlier.
• Italy. Italy has experienced decline of GDP in nine consecutive quarters from IIIQ2011 to IIIQ2013. Italy’s GDP fell 1.1 percent in IQ2012 and declined 1.7 percent relative to IQ2011. Italy’s GDP fell 0.5 percent in IIQ2012 and declined 2.4 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.4 percent and declined 2.6 percent relative to a year earlier. The GDP of Italy contracted 0.9 percent in IVQ2012 and fell 2.9 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.6 percent and fell 2.4 percent relative to a year earlier. Italy’s GDP fell 0.3 percent in IIQ2013 and 2.2 percent relative to a year earlier. The GDP of Italy decreased 0.1 percent in IIIQ2013 and declined 1.9 percent relative to a year earlier. Italy’s GDP increased 0.1 percent in IVQ2013 and decreased 0.9 percent relative to a year earlier. In IQ2014, Italy’s GDP decreased 0.1 percent and fell 0.4 percent relative to a year earlier. The GDP of Italy fell 0.2 percent in IIQ2014 and declined 0.3 percent relative to a year earlier.
• France. France’s GDP increased 0.2 percent in IQ2012 and increased 0.6 percent relative to a year earlier. France’s GDP decreased 0.3 percent in IIQ2012 and increased 0.4 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.3 percent and increased 0.5 percent relative to a year earlier. France’s GDP fell 0.3 percent in IVQ2012 and changed 0.0 percent relative to a year earlier. In IQ2013, France GDP changed 0.0 percent and declined 0.2 percent relative to a year earlier. The GDP of France increased 0.7 percent in IIQ2013 and 0.7 percent relative to a year earlier. France’s GDP decreased 0.1 percent in IIIQ2013 and increased 0.3 percent relative to a year earlier. The GDP of France increased 0.2 percent in IVQ2013 and 0.8 percent relative to a year earlier. In IQ2014, France’s GDP changed 0.0 percent and increased 0.8 percent relative to a year earlier. In IIQ2014, France’s GDP changed 0.0 percent and increased 0.1 percent relative to a year earlier.

Table V-3, Percentage Changes of GDP Quarter on Prior Quarter and on Same Quarter Year Earlier, ∆%

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.6        SAAR: 2.3	2.6
Japan	QOQ: 1.0 SAAR: 4.1	3.3
China	1.4	8.1
Euro Area	-0.1	-0.2
Germany	0.3	1.5
France	0.2	0.6
Italy	-1.1	-1.7
United Kingdom	0.0	0.6
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.4         SAAR: 1.6	2.3
Japan	QOQ: -0.5 SAAR: -2.2	3.2
China	2.1	7.6
Euro Area	-0.3	-0.5
Germany	0.1	0.3 0.8 CA
France	-0.3	0.4
Italy	-0.5	-2.4
United Kingdom	-0.4	0.1
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.6  SAAR: 2.5	2.7
Japan	QOQ: –0.7 SAAR: –2.8	-0.2
China	2.0	7.4
Euro Area	-0.2	-0.7
Germany	0.1	0.1
France	0.3	0.5
Italy	-0.4	-2.6
United Kingdom	0.8	0.3
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: 0.1	1.6
Japan	QOQ: -0.1 SAAR: -0.3	-0.3
China	1.9	7.9
Euro Area	-0.5	-1.0
Germany	-0.4	-0.3
France	-0.3	0.0
Italy	-0.9	-2.9
United Kingdom	-0.2	0.2
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.7 SAAR: 2.7	1.7
Japan	QOQ: 1.3 SAAR: 5.2	0.1
China	1.6	7.7
Euro Area	-0.2	-1.1
Germany	-0.4	-1.8
France	0.0	-0.2
Italy	-0.6	-2.4
UK	0.5	0.7
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.4 SAAR: 1.8	1.8
Japan	QOQ: 0.9 SAAR: 3.4	1.2
China	1.8	7.5
Euro Area	0.3	-0.6
Germany	0.8	0.5
France	0.7	0.7
Italy	-0.3	-2.2
UK	0.7	1.8
	IIIQ2013/IIQ2013	III/Q2013/  IIIQ2012
USA	QOQ: 1.1 SAAR: 4.5	2.3
Japan	QOQ: 0.4 SAAR: 1.4	2.3
China	2.3	7.8
Euro Area	0.1	-0.3
Germany	0.3	0.8
France	-0.1	0.3
Italy	-0.1	-1.9
UK	0.8	1.8
	IVQ2013/IIIQ2013	IVQ2013/IVQ2012
USA	QOQ: 0.9 SAAR: 3.5	3.1
Japan	QOQ: 0.0 SAAR: -0.2	2.5
China	1.7	7.7
Euro Area	0.3	0.5
Germany	0.4	1.0
France	0.2	0.8
Italy	0.1	-0.9
UK	0.7	2.7
	IQ2014/IVQ2013	IQ2014/IQ2013
USA	QOQ -0.5 SAAR -2.1	1.9
Japan	QOQ: 1.5 SAAR: 6.1	3.0
China	1.5	7.4
Euro Area	0.2	0.9
Germany	0.7	2.5
France	0.0	0.8
Italy	-0.1	-0.4
UK	0.8	3.0
	IIQ2014/IQ2014	IIQ2014/IIQ2013
USA	QOQ 1.0 SAAR 4.0	2.4
Japan	QOQ: -1.7 SAAR: -6.8	-0.1
China	2.0	7.5
Euro Area	0.0	0.7
Germany	-0.2	0.8
France	0.0	0.1
Italy	-0.2	-0.3
UK	0.8	3.2

QOQ: Quarter relative to prior quarter; SAAR: seasonally adjusted annual rate

Source: Country Statistical Agencies http://www.census.gov/aboutus/stat_int.html

Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP.

• Japan. Japan provides the most worrisome data (Section VB and earlier http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/interest-rate-risks-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html and earlier http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html and earlier http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-zero-interest-rates-world.html http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations_8763.html http://cmpass ocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html and earlier http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and_4699.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and for GDP http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html and earlier http://cmpassocreulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html). In Jul 2014, Japan’s exports increased 3.9 percent percent in 12 months while imports increase 2.3 percent. The second part of Table V-4 shows that net trade deducted 1.5 percentage points from Japan’s growth of GDP in IIQ2012, deducted 1.9 percentage points from GDP growth in IIIQ2012 and deducted 0.5 percentage points from GDP growth in IVQ2012. Net trade added 0.4 percentage points to GDP growth in IQ2012, 1.7 percentage points in IQ2013 and 0.2 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.6 percentage points from GDP growth in Japan. Net trade ducted 2.4 percentage points from GDP growth in Japan in IVQ2013. Net trade deducted 0.8 percentage point from GDP growth of Japan in IQ2014. Net trade added 4.4 percentage points to GDP growth in IIQ2014.

• China. In Jul 2014, China exports increased 14.5 percent relative to a year earlier and imports decreased 1.6 percent.
• Germany. Germany’s exports increased 0.9 percent in the month of Jun 2014 and increased 1.1 percent in the 12 months ending in Jun 2014. Germany’s imports increased 4.5 percent in the month of Jun and increased 4.5 percent in the 12 months ending in Jun. Net trade contributed 0.8 percentage points to growth of GDP in IQ2012, contributed 0.3 percentage points in IIQ2012, contributed 0.3 percentage points in IIIQ2012, deducted 0.5 percentage points in IVQ2012, deducted 0.3 percentage points in IQ2013 and added 0.1 percentage points in IIQ2013. Net traded deducted 0.5 percentage points from Germany’s GDP growth in IIIQ2013 and added 0.4 percentage points to GDP growth in IVQ2013. Net trade added 0.1 percentage points to GDP growth in IQ2014.
• United Kingdom. Net trade deducted 0.7 percentage points from UK value added in IQ2012, deducted 0.8 percentage points in IIQ2012, added 0.9 percentage points in IIIQ2012 and subtracted 0.4 percentage points in IVQ2012. In IQ2013, net trade added 0.6 percentage points to UK’s growth of value added and contributed 0.0 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.2 percentage points from UK growth. Net trade contributed 0.7 percentage points to UK value added in IVQ2013. Net trade contributed 0.3 percentage points to UK value added in IQ2014.
• France. France’s exports increased 1.8 percent in Jun 2014 while imports increased 2.2 percent. France’s imports increased 2.2 percent in the month of Jun 2014 and 3.2 percent relative to a year earlier. Net traded added 0.1 percentage points to France’s GDP in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.1 percentage points from France’s GDP growth in IQ2013 and added 0.3 percentage points in IIQ2013, deducting 0.4 percentage points in IIIQ2013. Net trade added 0.3 percentage points to France’s GDP in IVQ2013 and deducted 0.0 percentage points in IQ2014. Net trade deducted 0.1 percentage points from France’s GDP growth in IIQ2014.
• United States. US exports increased 0.1 percent in Jun 2014 and goods exports increased 2.9 percent in Jan-Jun 2014 relative to a year earlier. Imports decreased 1.2 percent in Jun 2014 and goods imports increased 3.2 percent in Jan-Jun 2014 relative to a year earlier. Net trade deducted 0.04 percentage points from GDP growth in IIQ2012 and added 0.39 percentage points in IIIQ2012 and 0.79 percentage points in IVQ2012. Net trade deducted 0.08 percentage points from US GDP growth in IQ2013 and deducted 0.54 percentage points in IIQ2013. Net traded added 0.59 percentage points to US GDP growth in IIIQ2013. Net trade added 1.08 percentage points to US GDP growth in IVQ2013. Net trade deducted 1.66 percentage points from US GDP growth in IQ2014 and deduced 0.61 percentage points in IIQ2014. Industrial production increased 0.4 percent in Jul 2014 after increasing 0.4 percent in Jun 2014 and increasing 0.3 percent in May 2014, as shown in Table I-1, with all data seasonally adjusted. The Federal Reserve completed its annual revision of industrial production and capacity utilization on Mar 28, 2014 (http://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm). The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production increased 0.4 percent in July for its sixth consecutive monthly gain. Manufacturing output advanced 1.0 percent in July, its largest increase since February. The production of motor vehicles and parts jumped 10.1 percent, while output in the rest of the manufacturing sector rose 0.4 percent. The production at mines moved up 0.3 percent, its ninth consecutive monthly increase. The output of utilities dropped 3.4 percent, as weather that was milder than usual for July reduced demand for air conditioning. At 104.4 percent of its 2007 average, total industrial production in July was 5.0 percent above its year-earlier level. Capacity utilization for total industry edged up 0.1 percentage point to 79.2 percent in July, a rate 1.7 percentage points above its level of a year earlier and 0.9 percentage point below its long-run (1972–2013) average.”

In the six months ending in Jul 2014, United States national industrial production accumulated increase of 3.0 percent at the annual equivalent rate of 6.2 percent, which is higher than growth of 5.0 percent in the 12 months ending in Jul 2014. Excluding growth of 0.9 percent in Feb 2014 and 0.9 percent in Mar 2014, growth in the remaining four months from Feb to Jul 2014 accumulated to 1.2 percent or 3.7 percent annual equivalent. Industrial production stagnated in one of the past six months. Industrial production expanded at annual equivalent 4.5 percent in the most recent quarter from May to Jul 2014 and at 7.9 percent in the prior quarter Feb-Apr 2014. Business equipment accumulated growth of 5.4 percent in the six months from Feb to Jul 2014 at the annual equivalent rate of 11.1 percent, which is higher than growth of 7.0 percent in the 12 months ending in Jul 2014. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for total industry edged up 0.1 percentage point to 79.2 percent in July, a rate 1.7 percentage points above its level of a year earlier and 0.9 percentage point below its long-run (1972–2013) average.” United States industry apparently decelerated to a lower growth rate with possible acceleration in past months.

United States industry apparently decelerated to a lower growth rate with possible acceleration in past months. Manufacturing fell 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased by 19.9 percent from the trough in Apr 2009 to Dec 2013. Manufacturing grew 22.4 percent from the trough in Apr 2009 to Jul 2014. Manufacturing output in Jul 2014 is 4.4 percent below the peak in Jun 2007. Growth at trend in the entire cycle from IVQ2007 to IIQ2014 would have accumulated to 22.1 percent. GDP in IIQ2014 would be $18,305.0 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,319.3 billion than actual $15,985.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.8 million unemployed or underemployed equivalent to actual unemployment of 16.3 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html). US GDP in IIQ2014 is 12.7 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $15,985.7 billion in IIQ2014 or 6.6 percent at the average annual equivalent rate of 1.0 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. 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. There is similar behavior in manufacturing. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Jul 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 122.8881 in Jul 2014. The actual index NSA in Jul 2014 is 98.4978, which is 19.8 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.2650 in Jul 2014. The output of manufacturing at 98.4978 in Jul 2014 is 14.5 percent below trend under this alternative calculation.

Table V-4, Growth of Trade and Contributions of Net Trade to GDP Growth, ∆% and % Points

	Exports M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	0.1 Jun	2.9 Jan-Jun	-1.2 Jun	3.2 Jan-Jun
Japan		Jul 3.9 Jun -2.0 May 2014 -2.7 Apr 2014 5.1 Mar 2014 1.8 Feb 2014 9.5 Jan 2014 9.5 Dec 2013 15.3 Nov 2013 18.4 Oct 2013 18.6 Sep 2013 11.5 Aug 2013 14.7 Jul 2013 12.2 Jun 2013 7.4 May 2013 10.1 Apr 2013 3.8 Mar 2013 1.1 Feb 2013 -2.9 Jan 2013 6.4 Dec -5.8 Nov -4.1 Oct -6.5 Sep -10.3 Aug -5.8 Jul -8.1		Jul 2.3 Jun 8.4 May 2014 -3.6 Apr 2013 3.4 Mar 2014 18.1 Feb 2014 9.0 Jan 2014 25.0 Dec 2013 24.7 Nov 2013 21.1 Oct 2013 26.1 Sep 2013 16.5 Aug 2013 16.0 Jul 2013 19.6 Jun 2013 11.8 May 2013 10.0 Apr 2013 9.4 Mar 2013 5.5 Feb 2013 7.3 Jan 2013 7.3 Dec 1.9 Nov 0.8 Oct -1.6 Sep 4.1 Aug -5.4 Jul 2.1
China		2014 14.5 Jul 7.2 Jun 7.0 May 0.9 Apr -6.6 Mar -18.1 Feb 10.6 Jan 2013 4.3 Dec 12.7 Nov 5.6 Oct -0.3 Sep 7.2 Aug 5.1 Jul -3.1 Jun 1.0 May 14.7 Apr 10.0 Mar 21.8 Feb 25.0 Jan		2014 -1.6 Jul 5.5 Jun -1.6 May -0.8 Apr -11.3 Mar 10.1 Feb 10.0 Jan 2013 8.3 Dec 5.3 Nov 7.6 Oct 7.4 Sep 7.0 Aug 10.9 Jul -0.7 Jun -0.3 May 16.8 Apr 14.1 Mar -15.2 Feb 28.8 Jan
Euro Area	2.9 12-M Jun	0.9 Jan-Jun	2.5 12-M Jun	0.1 Jan-Jun
Germany	0.9 Jun CSA	1.1 Jun	4.5 Jun CSA	2.1 Jun
France Jun	1.8	2.2	2.2	3.2
Italy May	2.2	0.2	3.2	0.9
UK	-2.9 Apr	-2.9 Feb-Apr 14 /Feb-Apr 13	0.6 Apr	-3.7 Feb-Apr 14 13/Feb-Apr 13
Net Trade % Points GDP Growth	% Points
USA	IIQ2014 -0.61 IQ2014 -1.66 IVQ2013 1.08 IIIQ2013 0.59 IIQ2013 -0.54 IQ2013 -0.08 IVQ2012 +0.79 IIIQ2012 0.39 IIQ2012 -0.04 IQ2012 -0.11
Japan	0.4 IQ2012 -1.5 IIQ2012 -1.9 IIIQ2012 -0.5 IVQ2012 1.7 IQ2013 0.2 IIQ2013 -1.6 IIIQ2013 -2.4 IVQ2013 -0.8 IQ2014 4.4 IIQ2014
Germany	IQ2012 0.8 IIQ2012 0.4 IIIQ2012 0.3 IVQ2012 -0.5 IQ2013 -0.3 IIQ2013 0.1 IIIQ2013 -0.5 IVQ2013 0.4 IQ2014 0.1
France	0.1 IIIQ2012 0.1 IVQ2012 -0.1 IQ2013 0.3 IIQ2013 -0.4 IIIQ2013 0.3 IVQ2013 0.0 IQ2014 -0.1 IIQ2014
UK	-0.7 IQ2012 -0.8 IIQ2012 +0.9 IIIQ2012 -0.4 IVQ2012 0.6 IQ2013 0.0 IIQ2013 -1.2 IIIQ2013 0.7 IVQ2013 0.3 IQ2014

Sources: Country Statistical Agencies http://www.census.gov/foreign-trade/ http://www.bea.gov/iTable/index_nipa.cfm

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table V5-5 for Jul 2014. The share of Asia in Japan’s trade is close to one-half for 53.8 percent of exports and 43.2 percent of imports. Within Asia, exports to China are 18.3 percent of total exports and imports from China 20.3 percent of total imports. While exports to China increased 2.6 percent in the 12 months ending in Jul 2014, imports from China decreased 2.5 percent. The second largest export market for Japan in Jul 2014 is the US with share of 18.2 percent of total exports, which is close to that of China, and share of imports from the US of 9.0 percent in total imports. Japan’s exports to the US increased 2.1 percent in the 12 months ending in Jul 2014 and imports from the US increased 6.2 percent. Western Europe has share of 10.7 percent in Japan’s exports and of 10.5 percent in imports. Rates of growth of exports of Japan in Jul 2014 are 2.1 percent for exports to the US, minus 9.0 percent for exports to Brazil and 6.2 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 Jul 2014 are mixed. Imports from Asia decreased 1.2 percent in the 12 months ending in Jul 2014 while imports from China decreased 2.5 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 V-5, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Jul 2014	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,188,609	3.9	7,152,602	2.3
Asia	3,330,875 % Total 53.8	3.4	3,086,704 % Total 43.2	-1.2
China	1,132,758 % Total 18.3	2.6	1,454,358 % Total 20.3	-2.5
USA	1,128,273 % Total 18.2	2.1	644,579 % Total 9.0	6.2
Canada	71,509	7.8	128,546	13.1
Brazil	47,825	-9.0	85,933	-5.6
Mexico	99,683	15.9	35,922	-10.5
Western Europe	662,768 % Total 10.7	13.3	751,376 % Total 10.5	2.0
Germany	169,170	6.2	208,457	3.8
France	55,490	2.6	100,915	-0.9
UK	115,035	22.5	60,792	10.8
Middle East	255,167	23.0	1,371,583	9.6
Australia	146,203	0.9	465,077	0.4

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

World trade projections of the IMF are in Table V-6. There is increasing growth of the volume of world trade of goods and services from 3.0 percent in 2013 to 5.3 percent in 2015 and 5.7 percent on average from 2016 to 2019. World trade would be slower for advanced economies while emerging and developing economies (EMDE) experience faster growth. World economic slowdown would be more challenging with lower growth of world trade.

Table V-6, IMF, Projections of World Trade, USD Billions, USD/Barrel and Annual ∆%

	2013	2014	2015	Average ∆% 2016-2019
World Trade Volume (Goods and Services)	3.0	4.3	5.3	5.7
Exports Goods & Services	3.1	4.5	5.3	5.7
Imports Goods & Services	2.9	4.2	5.2	5.7
World Trade Value of Exports Goods & Services USD Billion	23,083	23,990	25,123	Average ∆% 2006-2015 20,390
Value of Exports of Goods USD Billion	18,591	19,281	20,132	Average ∆% 2006-2015 16,396
Average Oil Price USD/Barrel	104.07	104.17	97.92	Average ∆% 2006-2015 88.84
Average Annual ∆% Export Unit Value of Manufactures	-1.1	-0.3	-0.4	Average ∆% 2006-2015 1.4
Exports of Goods & Services	2013	2014	2015	Average ∆% 2016-2019
Euro Area	1.4	3.4	4.2	4.7
EMDE	4.4	5.0	6.2	6.2
G7	1.4	3.9	4.5	4.9
Imports Goods & Services
Euro Area	0.3	2.8	3.5	4.7
EMDE	5.6	5.2	6.3	6.4
G7	1.1	3.2	4.2	4.9
Terms of Trade of Goods & Services
Euro Area	-0.3	-0.2	-0.7	-0.1
EMDE	0.7	-0.4	-0.6	-0.4
G7	0.7	-0.044	0.3	0.0
Terms of Trade of Goods
Euro Area	0.8	-0.044	0.1	-0.2
EMDE	-0.6	-0.9	-0.9	-0.8
G7	-0.1	-0.3	-0.9	-0.7

Notes: Commodity Price Index includes Fuel and Non-fuel Prices; Commodity Industrial Inputs Price includes agricultural raw materials and metal prices; Oil price is average of WTI, Brent and Dubai

Source: International Monetary Fund World Economic Outlook databank

http://www.imf.org/external/ns/cs.aspx?id=28

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, increased to 55.5 in Jul from 55.4 in Jun, indicating expansion at slightly faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/b30c6463061942a885574801c8fe938b). This index has remained above the contraction territory of 50.0 during 60 consecutive months. The employment index decreased from 52.7 in Jun to 51.6 in Jul with input prices rising at slower rate, new orders increasing at slower rate and output increasing at faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/b30c6463061942a885574801c8fe938b). Joseph Lupton, Senior Economist at JP Morgan, finds possible higher growth than trend in the second half of the year (http://www.markiteconomics.com/Survey/PressRelease.mvc/b30c6463061942a885574801c8fe938b). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, decreased to 52.5 in Jul from 52.6 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/ec33aaa61b864711beca257c5d3751cf). New export orders expanded for the thirteenth consecutive month (http://www.markiteconomics.com/Survey/PressRelease.mvc/ec33aaa61b864711beca257c5d3751cf). David Hensley, Director of Global Economic Coordination at JP Morgan finds improvement of the index with above-trend growth at 4.5 percent annual equivalent (http://www.markiteconomics.com/Survey/PressRelease.mvc/ec33aaa61b864711beca257c5d3751cf). The HSBC Brazil Composite Output Index, compiled by Markit, decreased from 49.9 in Jun to 49.3 in Jul, indicating marginal decline in activity of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/faa14d4aac2348acb305d4f0b35edd40). The HSBC Brazil Services Business Activity index, compiled by Markit, decreased from 51.4 in Jun to 50.2 in Jul, indicating marginally expanding services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/faa14d4aac2348acb305d4f0b35edd40). André Loes, Chief Economist, Brazil, at HSBC, finds risks of weak economic activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/faa14d4aac2348acb305d4f0b35edd40). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased marginally from 48.7 in Jun to 49.1 in Jul, indicating moderate deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d195bcd711d47e0ab2ec6b365ebfbb5). André Loes, Chief Economist, Brazil at HSBC, finds weakening industrial activity in Brazil but with effects of the World Cup in Jun and Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d195bcd711d47e0ab2ec6b365ebfbb5).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased to 58.0 in Aug from 55.8 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/5412a5fceb6b4d4794ccb3fd07bd9f72). New export orders increased at a faster rate of expansion. Tim More, Senior Economist at Markit, finds that manufacturing activity is expansing at the highest rate in more than four years (http://www.markiteconomics.com/Survey/PressRelease.mvc/5412a5fceb6b4d4794ccb3fd07bd9f72). The Markit Flash US Services PMI™ Business Activity Index did not change from 61.0 in Jun to 61.0 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/85edf9371b6f400186c65d9cfe3041ae). Tim Moore, Senior Economist at Markit, finds that the surveys are consistent with the highest rate of economic activity since before the global recession and good prospects for IIIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/85edf9371b6f400186c65d9cfe3041ae). The Markit US Composite PMI™ Output Index of Manufacturing and Services decreased to 60.6 in Jul from 61.0 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/d4d22d88d4f54cf69dcc6e2fa12cb082). The Markit US Services PMI™ Business Activity Index decreased from 61.0 in Jun to 60.8 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/d4d22d88d4f54cf69dcc6e2fa12cb082). Chris Williamson, Chief Economist at Markit, finds the indexes consistent with US growth at a high rate in IIIQ2014 after annual rate of 4.0 percent in IIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/d4d22d88d4f54cf69dcc6e2fa12cb082). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) decreased to 55.8 in Jul from 57.3 in Jun, which indicates expansion at slowter rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/ef159a10e5db45c08517182a5ee21106). Growth of export orders slowed. Chris Williamson, Chief Economist at Markit, finds that the index suggests output growth at around the fastest pace since the Global Recession in IIQ2014 will continue into IIIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/ef159a10e5db45c08517182a5ee21106). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 0.8 percentage points from 55.3 in Jun to 57.1 in Jul, which indicates growth at higher rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 4.5 percentage points from 58.9 in Jun to 63.4 in Jul. The index of new export orders decreased 1.5 percentage point from 54.5 in Jun to 53.0 in Jul, growing at a slower rate. The Non-Manufacturing ISM Report on Business^® PMI increased 2.7 percentage points from 56.0 in Jun to 58.7 in Jul, indicating growth of business activity/production during 60 consecutive months, while the index of new orders increased 3.7 percentage points from 61.2 in Jun to 64.9 in Jul (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Jul 12 months NSA ∆%: 2.0; ex food and energy ∆%: 1.9 Jul month SA ∆%: 0.1; ex food and energy ∆%: 0.1 Blog 8/24/14
Producer Price Index	Finished Goods Jul 12-month NSA ∆%: 2.9; ex food and energy ∆% 1.8 Jul month SA ∆% = 0.1; ex food and energy ∆%: 0.1 Final Demand Jul 12-month NSA ∆%: 1.7; ex food and energy ∆% 1.6 Jul month SA ∆% = 0.1; ex food and energy ∆%: 0.2 Blog 8/17/14 8/24/14
PCE Inflation	Jun 12-month NSA ∆%: headline 1.6; ex food and energy ∆% 1.5 Blog 8/3/14
Employment Situation	Household Survey: Jul Unemployment Rate SA 6.2% Blog calculation People in Job Stress Jun: 26.8 million NSA, 16.3% of Labor Force Establishment Survey: Jul Nonfarm Jobs +209,000; Private +198,000 jobs created  Jun 12-month Average Hourly Earnings Inflation Adjusted ∆%: -0.1 Blog 8/3/14
Nonfarm Hiring	Nonfarm Hiring fell from 63.3 million in 2006 to 54.2 million in 2013 or by 9.1 million Private-Sector Hiring Jun 2014 5.555 million lower by 0.490 million than 6.045 million in Jun 2006 Blog 8/17/14
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.6 IIQ2012/IIQ2011 2.83 IIIQ2012/IIIQ2011 2.7 IVQ2012/IVQ2011 1.6 IQ2013/IQ2012 1.7 IIQ2013/IIQ2012 1.8 IIIQ2013/IIIQ2012 2.3 IVQ2013/IVQ2012 3.1 IQ2014/IQ2013 1.9 IIQ2014/IIQ2013 2.4 IQ2012 SAAR 2.3 IIQ2012 SAAR 1.6 IIIQ2012 SAAR 2.5 IVQ2012 SAAR 0.1 IQ2013 SAAR 2.7 IIQ2013 SAAR 1.8 IIIQ2013 SAAR 4.5 IVQ2013 SAAR 3.5 IQ2014 SAAR -2.1 IIQ2014 SAAR 4.0 Blog 8/3/14
Real Private Fixed Investment	SAAR IIQ2014 5.9 ∆% IVQ2007 to IIQ2014: minus 0.5% Blog 8/3/14
Corporate Profits	IQ2014 SAAR: Corporate Profits -9.1; Undistributed Profits -17.5 Blog 6/29/14
Personal Income and Consumption	Jun month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.2 Real Personal Consumption Expenditures (RPCE): 0.2 12-month Jun NSA ∆%: RDPI: 2.3; RPCE ∆%: 2.3 Blog 8/3/14
Quarterly Services Report	IQ14/IQ13 NSA ∆%: Information 5.8 Financial & Insurance 5.3 Blog 6/15/14
Employment Cost Index	Compensation Private IIQ2014 SA ∆%: 0.7 Jun 12 months ∆%: 2.0 Blog 8/3/14
Industrial Production	Jul month SA ∆%: 0.4 Jul 12 months SA ∆%: 5.0 Manufacturing Jul SA ∆% 1.0 Jul 12 months SA ∆% 4.9, NSA 4.2 Capacity Utilization: 79.2 Blog 8/17/14
Productivity and Costs	Nonfarm Business Productivity IIQ2014∆% SAAE 2.5; IIQ2014/IIQ2013 ∆% 1.2; Unit Labor Costs SAAE IIQ2014 ∆% 0.6; IIQ2014/IIQ2013 ∆%: 1.9 Blog 8/10/14
New York Fed Manufacturing Index	General Business Conditions From Jul 25.60 to Aug 14.69 New Orders: From Jul 18.77 to Aug 14.14 Blog 8/17/14
Philadelphia Fed Business Outlook Index	General Index from Jul 23.9 to Aug 28.0 New Orders from Jul 34.2 to Aug 14.7 Blog 8/24/14
Manufacturing Shipments and Orders	New Orders SA Jun ∆% 1.1 Ex Transport 1.1 Jan-Jun NSA New Orders ∆% 2.5 Ex transport 2.4 Blog 8/10/14
Durable Goods	Jun New Orders SA ∆%: 0.7; ex transport ∆%: 0.8 Jan-Jun 14/Jan-Jun 13 New Orders NSA ∆%: 3.5; ex transport ∆% 3.9 Blog 7/27/14
Sales of New Motor Vehicles	Jan-Jul 2014 9,599,284; Jan-Jul 2013 9,144,335. Jul 14 SAAR 16.48 million, Jun 14 SAAR 16.90 million, Jul 2013 SAAR 15.76 million Blog 8/10/14
Sales of Merchant Wholesalers	Jan-Jun 2014/Jan-Jun 2013 NSA ∆%: Total 5.7; Durable Goods: 4.9; Nondurable Goods: 6.3 Blog 8/10/14
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Jun 14 12-M NSA ∆%: Sales Total Business 6.1; Manufacturers 4.6 Retailers 4.2; Merchant Wholesalers 9.4 Blog 8/17/14
Sales for Retail and Food Services	Jan-Jul 2014/Jan-Jun 2013 ∆%: Retail and Food Services 3.7; Retail ∆% 3.6 Blog 8/17/14
Value of Construction Put in Place	Jun SAAR month SA ∆%: minus 1.8 Jun 12-month NSA: 4.3 Blog 8/10/14
Case-Shiller Home Prices	May 2014/May 2013 ∆% NSA: 10 Cities 9.4; 20 Cities: 9.3 ∆% May SA: 10 Cities -0.3 ; 20 Cities: -0.3 Blog 8/3/14
FHFA House Price Index Purchases Only	Apr SA ∆% 0.0; 12 month NSA ∆%: 6.0 Blog 6/29/14
New House Sales	Jun 2014 month SAAR ∆%: minus 8.1 Jan-Jun 2014/Jan-May 2013 NSA ∆%: -4.9 Blog 7/27/14
Housing Starts and Permits	Jul Starts month SA ∆% minus 15.7; Permits ∆%: minus 8.1 Jan-Jul 2014/Jan-Jul 2013 NSA ∆% Starts 9.1; Permits  ∆% 3.2 Blog 8/24/14
Trade Balance	Balance Jun SA -$41,538 million versus May -$44,663 million Exports Jun SA ∆%: 0.1 Imports Jun SA ∆%: -1.2 Goods Exports Jan-Jun 2014/Jan-Jun 2013 NSA ∆%: 2.9 Goods Imports Jan-Jun 2014/Jan-Jun 2012 NSA ∆%: 3.2 Blog 8/10/14
Export and Import Prices	Jul 12-month NSA ∆%: Imports 0.8; Exports 0.4 Blog 8/17/14
Consumer Credit	Jun ∆% annual rate: Total 6.5; Revolving 1.3; Nonrevolving 8.4 Blog 8/10/14
Net Foreign Purchases of Long-term Treasury Securities	Jun Net Foreign Purchases of Long-term US Securities: minus $18.7 billion Major Holders of Treasury Securities: China $1268 billion; Japan $1220 billion; Total Foreign US Treasury Holdings Jun $6013 billion Blog 8/17/14
Treasury Budget	Fiscal Year 2014/2013 ∆% Jul: Receipts 8.0; Outlays 1.2; Individual Income Taxes 4.9 Deficit Fiscal Year 2011 $1,300 billion Deficit Fiscal Year 2012 $1,087 billion Deficit Fiscal Year 2013 $680 billion Blog 8/17/2014
CBO Budget and Economic Outlook	2012 Deficit $1087 B 6.8% GDP Debt 11,281 B 70.1% GDP 2013 Deficit $680 B, 4.1% GDP Debt 11,982 B 72.1% GDP 2039: Long-term Debt/GDP 106% Blog 8/26/12 11/18/12 2/10/13 9/22/13 2/16/14 8/24/12
Commercial Banks Assets and Liabilities	Jul 2014 SAAR ∆%: Securities 11.5 Loans 9.q Cash Assets 6.8 Deposits 7.9 Blog 8/24/14
Flow of Funds	IQ2014 ∆ since 2007 Assets +$13,322.5 BN Nonfinancial $120.8 BN Real estate -$565.4 BN Financial +13,201.7 BN Net Worth +$13,931.7 BN Blog 6/29/14
Current Account Balance of Payments	IQ2014 -86,131 MM % GDP 2.6 Blog 6/22/14
Collapse of United States Dynamism of Income Growth and Employment Creation	Blog 8/24/14

Links to blog comments in Table USA:

8/17/2014 http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html

8/10/14 http://cmpassocregulationblog.blogspot.com/2014/08/volatility-of-valuations-of-risk_10.html

8/3/14 http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

7/27/14 http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html

7/20/14 http://cmpassocregulationblog.blogspot.com/2014/07/financial-irrational-exuberance.html

6/29/14 http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html

6/22/14 http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html

6/15/2014 http://cmpassocregulationblog.blogspot.com/2014/06/financialgeopolitical-risks-recovery.html

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

9/22/13 http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html

2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html

The Business Outlook Survey Diffusion Index of the Federal Reserve Bank of Philadelphia in Table VA-1 also shows improvement after prior deterioration followed by current improvement. The general index moved out of contraction at 1.7 in May 2013 to 28.0 in Aug 2014 together with 14.7 for new orders. Expectations for the next six months are brighter with the general index at 66.4 in Aug 2014 and the index of new orders at 58.9.

Table VA-1, FRB of Philadelphia Business Outlook Survey Diffusion Index

	Current General Index	Current New Orders	Current Ship- ments	Future General Index	Future New Orders	Future   Ship- ments
Jan-11	15.3	19.1	10.9	42.9	35.1	36.8
Feb-11	27.0	15.8	22.3	41.1	37.4	42.4
Mar-11	34.7	32.4	27.5	54.7	52.8	52.6
Apr-11	13.7	13.2	20.9	30.5	28	34.5
May-11	5.5	7.6	8	24.8	24.1	27.4
Jun-11	-0.6	-1.7	7.6	8.3	10.3	9.7
Jul-11	8.2	5.2	9.4	29.7	33.4	29.3
Aug-11	-17.1	-17.5	-2.4	14.6	28.9	25.9
Sep-11	-11.9	-4.7	-8	23.2	22.8	24.9
Oct-11	7.7	7.0	10	27.6	29.6	30.5
Nov-11	6.6	4.3	7.9	39.1	37.5	34.8
Dec-11	3.8	5.0	6	35.5	39	32.2
Jan-12	4.9	8.8	3.8	42.6	42.3	41.6
Feb-12	6.4	5.7	6	28.7	30.1	25.7
Mar-12	6.2	-2.3	-1.4	26.8	33.2	27.9
Apr-12	6.3	-0.3	-3.3	31.8	37.2	31.2
May-12	-2.1	0.6	6.4	22	32.8	28.3
Jun-12	-12.0	-13.3	-10.9	25.5	36.6	38.1
Jul-12	-10.7	-1.3	-7.2	23.8	28.2	22.6
Aug-12	1.1	1.7	-2.3	23.6	29.6	21.9
Sep-12	-0.9	2.1	-10.7	38.2	47.2	39.5
Oct-12	1	-3.5	-5.6	19.4	22.2	21.9
Nov-12	-6.9	-3.2	-4.4	21.2	25.1	26.1
Dec-12	4.4	3.6	13.9	25.3	29.8	28.9
Jan-13	-5.6	-4.5	-0.2	26.2	30.1	33.3
Feb-13	-11.9	-7.7	-1.4	29.2	35.6	29.3
Mar-13	-1.4	-1.9	1.4	30.1	32.7	30
Apr-13	1	-0.8	4	19.9	27.1	28.2
May-13	-1.7	-6.6	-3.9	35.1	37.9	35
Jun-13	14.4	17.3	8.2	37.2	43	40.4
Jul-13	18	11.3	14.5	45	56	49.1
Aug-13	13.1	8.9	3.9	44.1	44.8	46
Sep-13	20	20.8	21.9	57	57.2	54.4
Oct-13	15.6	23.8	17.3	58.3	63.4	52.6
Nov-13	9.2	14	7.8	48.1	49.3	43.5
Dec-13	6.4	12.9	11.9	44.8	45.7	42
Jan-14	9.4	5.1	12.1	34.4	38.4	33.2
Feb-14	-6.3	-5.2	-9.9	40.2	35.4	36
Mar-14	9	5.7	5.7	35.4	32.2	41.1
Apr-14	16.6	14.8	22.7	26.6	29.7	32.8
May-14	15.4	10.5	14.2	37.4	36.5	38.7
Jun-14	17.8	16.8	15.5	52	57.8	48
Jul-14	23.9	34.2	34.2	58.1	53.5	57.9
Aug-14	28	14.7	16.5	66.4	58.9	67.4

Source: Federal Reserve Bank of Philadelphia

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

Chart VA-1 of the Federal Reserve Bank of Philadelphia is very useful, providing current and future general activity indexes from Jan 1995 to Jul 2014. The shaded areas are the recession cycle dates of the National Bureau of Economic Research (NBER) (http://www.nber.org/cycles.html). The Philadelphia Fed index dropped during the initial period of recession and then led the recovery, as industry overall. There was a second decline of the index into 2011 followed now by what hopefully appeared as renewed strength from late 2011 into Jan 2012. There is decline to negative territory of the current activity index in Nov 2012 and return to positive territory in Dec 2012 with decline of current conditions into contraction in Jan-Feb 2013 and rebound to mild expansion in Mar-Apr 2013. The index of current activity moved into expansion in Jun-Oct 2013 with weakness in Nov-Dec 2013, improving in Jan 2014. There is renewed deterioration in Feb 2014 with rebound in Apr-Aug 2014.

Chart VA-1, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Activity Indexes

Source: Federal Reserve Bank of Philadelphia

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

The index of current new orders of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia in Chart VA-2 illustrates the weakness of the cyclical expansion. The index weakened in 2006 and 2007 and then fell sharply into contraction during the global recession. There have been twelve readings into contraction from Jan 2012 to May 2013 and generally weak readings with some exceptions. The index of new orders moved into expansion in Jun-Oct 2013 with moderation in Nov-Dec 2013 and into Jan 2014. The index fell into contraction in Feb 2014, recovering in Mar-Apr 2014 but weaker reading in May 2014. There is marked improvement in Jun-Jul 2014 with slowing in Aug 2014.

Chart VA-2, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current New Orders Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

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

Seasonally adjusted annual rates (SAAR) of housing starts and permits are shown in Table VA-2. Housing starts increased 15.7 percent in Jul 2014 after wide oscillations that included increases of 11.9 percent in Apr, 2.4 percent in Mar, 3.5 percent in Feb, decreases of 4.0 percent in Jun, 7.4 percent in May and 13.2 percent in Jan. There were increases of 18.1 percent in Nov 2013, decline of 14.7 percent in Apr 2013 and 9.2 percent in Jun 2013. Housing starts increased 21.7 percent from the SAAR of 898 in Jul 2013 to the SAAR of 1093 in Jul 2014. Housing permits, indicating future activity, increased 8.1 percent in Jul 2014 and decreased 3.2 percent in Jun 2014 and 5.1 percent in May 2014. There were significant oscillations with increase of 2.9 percent from 1022 SSAR in Dec 2013 to SSAR of 1052 in Jul 2014. While single unit houses starts increased 8.3 percent in Jul 2014, seasonally adjusted, structures with five units or more increased 33.0 percent. Multifamily residential construction is increasing at a faster rate than single-family construction with wide monthly oscillations. Monthly rates in starts and permits fluctuate significantly as shown in Table VA-2.

Table VA-2, US, Housing Starts and Permits SSAR Month ∆%

	Housing  Starts SAAR	Month ∆%	Housing Permits SAAR	Month ∆%
Jul 2014	1093	15.7	1052	8.1
Jun	945	-4.0	973	-3.2
May	984	-7.4	1005	-5.1
Apr	1063	11.9	1059	5.9
Mar	950	2.4	1000	-1.1
Feb	928	3.5	1011	7.7
Jan	897	-13.2	939	-8.1
Dec 2013	1034	-6.4	1022	-1.4
Nov	1105	18.1	1037	-2.8
Oct	936	8.5	1067	7.5
Sep	863	-2.5	993	4.7
Aug	885	-1.4	948	-3.0
Jul	898	8.1	977	4.2
Jun	831	-9.2	938	-7.1
May	915	7.9	1010	-2.9
Apr	848	-14.7	1040	12.3
Mar	994	4.5	926	-5.1
Feb	951	6.1	976	3.1
Jan	896	-8.2	947	1.0
Dec 2012	976	17.2	938	0.9
Nov	833	-9.0	930	3.9
Oct	915	8.0	895	-2.8
Sep	847	12.3	921	10.7
Aug	754	1.9	832	-1.0
Jul	740	-2.2	840	6.3
Jun	757	6.9	790	-2.1
May	708	-6.0	807	8.0
Apr	753	8.3	747	-6.3
Mar	695	-1.3	797	8.7
Feb	704	-2.6	733	2.5
Jan	723	4.2	715	2.6
Dec 2011	694	-2.4	697	-1.3
Nov	711	16.6	706	5.2
Oct	610	-6.2	671	10.0
Sep	650	11.1	610	-5.7
Aug	585	-6.1	647	4.2
Jul	623	2.5	621	-2.4
Jun	608	8.4	636	2.9
May	561	1.3	618	6.4
Apr	554	-7.7	581	-0.3
Mar	600	16.1	583	7.6
Feb	517	-17.9	542	-5.9
Jan	630	16.9	576	-8.9
Dec 2010	539	-1.1	632	12.9
Nov	545	0.4	560	0.4
Oct	543	-8.6	558	-0.9
Sep	594	-0.8	563	-2.9

SAAR: Seasonally Adjusted Annual Rate

Source: US Census Bureau http://www.census.gov/construction/nrc/

Housing starts and permits in Jan-Jul not-seasonally adjusted are in Table VA-3. Housing starts increased 9.1 percent in Jan-Jul 2014 relative to Jan-Jul 2013 and new permits increased 3.2 percent. Construction of new houses in the US remains at very depressed levels. Housing starts fell 49.0 percent in Jan-Jul 2014 relative to Jan-Jul 2006 and fell 51.7 percent relative to Jan-Jul 2005. Housing permits fell 49.7 percent in Jan-Jul 2014 relative to Jan-Jun 2006 and fell 52.9 percent relative to Jan-Jul 2005.

Table VA-3, US, Housing Starts and New Permits, Thousands of Units, NSA, and %

	Housing Starts	New Permits
Jan-Jul 2014	584.9	595.5
Jan-Jul 2013	536.3	576.9
∆% Jan-Jul 2014/Jan-Jul 2013	9.1	3.2
Jan-Jul 2006	1145.8	1183.0
∆% Jan-Jul 2014/Jan-Jul 2006	-49.0	-49.7
Jan-Jul 2005	1211.1	1263.3
∆% Jan-Jul 2014/Jan-Jul 2005	-51.7	-52.9

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-3 of the US Census Bureau shows the sharp increase in construction of new houses from 2000 to 2006. Housing construction fell sharply through the recession, recovering from the trough around IIQ2009. The right-hand side of Chart VA-9 shows a mild downward trend or stagnation from mid-2010 to the present in single-family houses with a recent mild upward trend in recent months in the category of two or more units but marginal decline in some recent months. While single unit houses starts increased 9.1 percent in Jan-Jul 2014 relative to a year earlier, not seasonally adjusted, structures with two to four units decreased 15.2 percent and with five units or more increased 23.9 percent. Single unit houses were 66.8 percent of total housing starts in 2013, increasing 15.4 percent relative to 2012, while construction of five units of more were 31.8 percent, increasing 25.6 percent, and construction of two to four units were 1.5 percent of the total, increasing 19.3 percent.

Chart VA-3, US, Total and Single-Family New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate)

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr020.html

Table VA-4 provides new housing units that started in the US at seasonally adjusted annual rates (SAAR) in Dec and from Jan to Jul of the years from 2000 to 2014. SAARs have dropped from high levels around 2 million in 2005-2006 to the range of 848,000 in Apr 2013 to 1,034,000 in Dec 2013 and 1,093,000 in Jul 2014, which is an improvement over the range of 517,000 in Feb 2011 to 711,000 in Nov 2011. Improvement continued with 1,034,000 in Dec 2013 relative to 976,000 in Dec 2012. The rate of housing starts increased to 1,093,000 in Jul 2014 relative to 898,000 in Jul 2013.

Table VA-4, US, New Housing United Started at Seasonally Adjusted Rates, Thousand Units

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Dec
2000	1,636	1,737	1,604	1,626	1,575	1,559	1,463	1,532
2001	1,600	1,625	1,590	1,649	1,605	1,636	1,670	1,568
2002	1,698	1,829	1,642	1,592	1,764	1,717	1,655	1,788
2003	1,853	1,629	1,726	1,643	1,751	1,867	1,897	2,057
2004	1,911	1,846	1,998	2,003	1,981	1,828	2,002	2,042
2005	2,144	2,207	1,864	2,061	2,025	2,068	2,054	1,994
2006	2,273	2,119	1,969	1,821	1,942	1,802	1,737	1,649
2007	1,409	1,480	1,495	1,490	1,415	1,448	1,354	1,037
2008	1,084	1,103	1,005	1,013	973	1,046	923	560
2009	490	582	505	478	540	585	594	581
2010	614	604	636	687	583	536	546	539
2011	630	517	600	554	561	608	623	694
2012	723	704	695	753	708	757	740	976
2013	896	951	994	848	915	831	898	1,034
2014	897	928	950	1,063	984	945	1,093	NA

Source: US Census Bureau

http://www.census.gov/construction/nrc/

Chart VA-5 of the US Census Bureau provides construction of new housing units started in the US at seasonally adjusted annual rate (SAAR) from Jan 1959 to Jul 2014 that helps to analyze in historical perspective the debacle of US new house construction. There are three periods in the series. (1) There is stationary behavior with wide fluctuations from 1959 to the beginning of the decade of the 1970s. (2) There is sharp upward trend from the 1990s to 2006 propelled by the US housing subsidy, politics of Fannie Mae and Freddie Mac and unconventional monetary policy of near zero interest rates from Jun 2003 to Jun 2004 and suspension of the auction of 30-year Treasury bonds intended to lower mortgage rates. The financial crisis and global recession were caused by interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html. (3) There is insufficient recovery during the weak expansion after IIIQ2009.

Chart VA-5, US, New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate), Thousands of Units, Jan 1959-Jul 2014

Source: US Census Bureau http://www.census.gov/construction/nrc/

Table VA-4 provides actual new housing units started in the US, not seasonally adjusted, in Dec and from Jan to Jul in the years from 2000 to 2014. The number of housing units started fell from the peak of 197.9 thousand in May 2005 to 67.6 thousand in Dec 2013 or decline of 65.8 percent in large part because of lower seasonal activity at the end of the year. The number of housing units started jumped from 69.2 thousand in Jul 2012 to 101.0 thousand in Jul 2014 or by 46.0 percent and increased 75.3 percent from 57.6 thousand in Jun 2011. The number of housing units started increased from 84.0 thousand in Jul 2013 to 101.0 thousand in Jul 2014 or 20.2 percent.

Table VA-4, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Dec
2000	104.0	119.7	133.4	149.5	152.9	146.3	135.0	100.7
2001	106.4	108.2	133.2	151.3	154.0	155.2	154.6	104.6
2002	110.4	120.4	138.2	148.8	165.5	160.3	155.9	123.1
2003	117.8	109.7	147.2	151.2	165.0	174.5	175.8	144.2
2004	124.5	126.4	173.8	179.5	187.6	172.3	182.0	140.2
2005	142.9	149.1	156.2	184.6	197.9	192.8	187.6	136.0
2006	153.0	145.1	165.9	160.5	190.2	170.2	160.9	112.4
2007	95.0	103.1	123.8	135.6	136.5	137.8	127.9	68.9
2008	70.8	78.4	82.2	89.5	91.7	102.5	86.7	37.7
2009	31.9	39.8	42.7	42.5	52.2	59.1	56.8	36.6
2010	38.9	40.7	54.7	62.0	56.2	53.8	51.5	33.8
2011	40.2	35.4	49.9	49.0	54.0	60.5	57.6	42.7
2012	47.2	49.7	58.0	66.8	67.8	74.7	69.2	63.2
2013	58.7	66.1	83.3	76.3	87.2	80.7	84.0	67.6
2014	60.7	65.1	80.2	94.9	92.5	90.5	101.0	NA

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-6 of the US Census Bureau provides new housing units started in the US not seasonally adjusted (NSA) from Jan 1959 to Jul 2014. There is the same behavior as in Chart VA-5 SA but with sharper fluctuations in the original series without seasonal adjustment. There are the same three periods. (1) The series is virtually stationary with wide fluctuations from 1959 to the late 1980s. (2) There is downward trend during the savings and loans crisis of the 1980s. Benston and Kaufman (1997, 139) find that there was failure of 1150 US commercial and savings banks between 1983 and 1990, or about 8 percent of the industry in 1980, which is nearly twice more than between the establishment of the Federal Deposit Insurance Corporation in 1934 through 1983. More than 900 savings and loans associations, representing 25 percent of the industry, were closed, merged or placed in conservatorships (see Pelaez and Pelaez, Regulation of Banks and Finance (2008b), 74-7). The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) created the Resolution Trust Corporation (RTC) and the Savings Association Insurance Fund (SAIF) that received $150 billion of taxpayer funds to resolve insolvent savings and loans. The GDP of the US in 1989 was $4346.7 billion (http://www.bea.gov/iTable/index_nipa.cfm), such that the partial cost to taxpayers of that bailout was around 3.45 percent of GDP in a year. US GDP in 2013 is estimated at $16,799.7 billion, such that the bailout would be equivalent to cost to taxpayers of about $579.6 billion in current GDP terms. A major difference with the Troubled Asset Relief Program (TARP) for private-sector banks is that most of the costs were recovered with interest gains whereas in the case of savings and loans there was no recovery. (3) There is vertical drop of new housing construction in the US during the global recession from (Dec) IVQ2007 to (Jun) IIQ2009 (http://www.nber.org/cycles/cyclesmain.html). The final segment shows upward trend but it could be simply part of yet another fluctuation. Marginal improvement in housing in the US should not obscure the current depressed levels relative to earlier periods.

Chart VA-6, US, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units, Jan 1959-Jul 2014

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-7 of the US Census Bureau provides single-family houses started without seasonal adjustment. There was sharp increase from 1992 to 2007 followed by sharp decline. The recovery is sluggish.

Chart VA-7, US, Single-family Houses Started, Thousands of Units, Jan-1959-Jul 2014, NSA

Source: US Census Bureau http://www.census.gov/construction/nrc

Chart VA-8 of the US Census Bureau provides housing units started with five units or more. Construction was stagnant before the drop in the global recession. Recovery is stronger than in the case of single-family units.

Chart VA-8, US, Housing Units Stated in Buildings with Five Units or More, Thousands of Units, Jan-1959-Jun 2014, NSA

Source: US Census Bureau http://www.census.gov/construction/nrc/

A longer perspective on residential construction in the US is provided by Table VA-9 with annual data from 1960 to 2013. Housing starts fell 55.3 percent from 2005 to 2013, 41.0 percent from 2000 to 2013 and 35.3 percent relative to the average from 1959 to 1963. Housing permits fell 54.0 percent from 2005 to 2013, 37.8 percent from 2000 to 2013 and 14.5 percent from the average of 1969-1963 to 2013. Housing starts rose 31.8 from 2000 to 2005 while housing permits grew 35.4 percent. From 1990 to 2000, housing starts increased 31.5 percent while permits increased 43.3 percent.

Table VA-9, US, Annual New Privately Owned Housing Units Authorized by Building Permits in Permit-Issuing Places and New Privately Owned Housing Units Started, Thousands

	Starts	Permits
2013	924.9	990.8
2012	780.6	829.7
∆% 2013/2012	18.5	19.4
∆% 2013/2011	51.9	58.8
∆% 2013/2010	57.6	63.9
∆% 2013/2006	-48.6	-46.1
∆% 2013/2005	-55.3	-54.0
∆% 2013/2000	-41.0	-37.8
∆% 2013/Av 1959-1963	-35.3	-14.5
2011	608.8	624.1
∆% 2012/2005	-62.3	-61.5
∆% 2012/2000	-50.2	-47.9
∆% 2012/Av 1959-1963	-45.4	-28.4
2011	608.8	624.1
2010	586.9	604.6
2009	554.0	583.0
2008	905.5	905.4
2007	1,355,0	1,398.4
2006	1,800.9	1,838.9
2005	2,068.3	2,155.3
∆% 2005/2000	31.8	35.4
2004	1,955.8	2,070.1
2003	1,847.7	1,889.2
2002	1,704.9	1,747.7
2001	1,602.7	1,636.7
2000	1,568.7	1,592.3
∆% 2000/1990	31.5	43.3
1990	1,192,7	1,110.8
1980	1,292.2	1,190.6
1970	1,433.6	1,351.5
Average 1959-63	1,429.7	1,158.2

Source: US Census Bureau

http://www.census.gov/construction/nrc/

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) with changes on Jul 14, 2014 (https://www.boj.or.jp/en/announcements/release_2014/k140715a.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 3.2 to 3.5 percent in 2014, 1.9 to 2.8 percent in 2015 and 2.0 to 3.0 in 2016 (https://www.boj.or.jp/en/announcements/release_2014/k140715a.pdf). Consumer price inflation in Japan excluding fresh food was 0.4 percent in Apr 2014 and 3.4 percent in 12 months (http://www.stat.go.jp/english/data/cpi/1581.htm), significantly because of the increase of the tax on value added of consumption in Apr 2014. 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:

1. 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).
2. 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.
3. 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).
4. 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.
5. 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
Jul 2014	+0.6 to +1.3 [+1.0]	+3.2 to +3.5 [+3.3]	+1.2 to +1.5 [+1.3]
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
Jul 2014	+1.2 to +1.6 [+1.5]	+1.9 to +2.8 [+2.6]	+1.2 to +2.1 [+1.9]
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
Jul 2014	+1.0 to +1.5 [+1.3]	+2.0 to +3.0 [+2.8]	+1.3 to +2.3 [+2.1]
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/announcements/release_2014/k140715a.pdf

The Markit/JMMA Flash Japan Manufacturing PMI Index™ improved with the Flash Japan Manufacturing PMI™ increasing from 50.5 in Jul to 52.4 in Aug and the Flash Japan Manufacturing Output Index™ increasing from 49.8 in Jul to 53.2 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/f1f27ed3360242288e275d1fd7414f37). New export orders increased at a faster pace. Amy Brownbill, Economist at Markit, finds improving Japan’s manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/f1f27ed3360242288e275d1fd7414f37). Private-sector activity in Japan was in standstill with the Markit Composite Output PMI Index increasing from 50.0 in Jun to 50.2 in Jul, indicating marginal improvement (http://www.markiteconomics.com/Survey/PressRelease.mvc/ac0ba8bb14dd46e59803ee221d4091e2). The Markit Business Activity Index of Services increased to 50.4 in Jul from 49.0 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/ac0ba8bb14dd46e59803ee221d4091e2). Amy Brownbill, Ecoomist at Markit and author of the report, finds improvement with growth of output (http://www.markiteconomics.com/Survey/PressRelease.mvc/ac0ba8bb14dd46e59803ee221d4091e2). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 51.5 in Jun to 50.5 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/48ce4a2c82f9461989084f8b3ef12f6e). New orders increased marginally and output decreased moderately. Amy Brownbill, Economist at Markit and author of the report, finds continuing effects of the increase of the sales tax in Apr with output deteriorating and new orders increasing marginally (http://www.markiteconomics.com/Survey/PressRelease.mvc/48ce4a2c82f9461989084f8b3ef12f6e).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	Jul ∆% 0.3 12 months ∆% 4.3 Blog 8/17/14
Consumer Price Index	Jun NSA ∆% -0.1; Jun 12 months NSA ∆% 3.6 Blog 7/27/14
Real GDP Growth	IIQ2014 ∆%: -1.7 on IQ2014;  IIQ2014 SAAR -6.8; ∆% from quarter a year earlier: -0.1 % 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 6/15/14 8/17/14
Employment Report	Jun Unemployed 2.45 million Change in unemployed since last year: minus 150 thousand Unemployment rate: 3.7 % Blog 8/3/14
All Industry Indices	Jun month SA ∆% -0.4 12-month NSA ∆% -0.5 Blog 8/24/14
Industrial Production	Jun SA month ∆%: -3.3 12-month NSA ∆% 3.2 Blog 8/3/14
Machine Orders	Total Jun ∆% -17.1 Private ∆%: 0.5 Jun ∆% Excluding Volatile Orders 8.8 Blog 8/17/14
Tertiary Index	Jun month SA ∆% 0.1 Jun 12 months NSA ∆% minus 1.5 Blog 8/17/14
Wholesale and Retail Sales	Jun 12 months: Total ∆%: -0.8 Wholesale ∆%: -0.7 Retail ∆%: -0.6 Blog 8/3/14
Family Income and Expenditure Survey	Jun 12-month ∆% total nominal consumption 1.3, real -3.0 Blog 8/3/14
Trade Balance	Exports Jul 12 months ∆%: minus 3.9 Imports Jul 12 months ∆% 2.3 Blog 8/24/14

Links to blog comments in Table JPY:

8/17/2014 http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html

8/3/14 http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

7/27/14 http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html

6/15/2014 http://cmpassocregulationblog.blogspot.com/2014/06/financialgeopolitical-risks-recovery.html

5/18/14 http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.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 decreased 1.7 percent in IIQ2014 (Table VB-1 at http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html an earlier at http://cmpassocregulationblog.blogspot.com/2014/06/financialgeopolitical-risks-recovery.html), industry decreased 3.8 percent, the tertiary sector decreased 3.8 percent, government increased 0.7 percent and construction decreased 4.4 percent. The report shows that the all industry index decreased 3.3 percent in IIQ2014. Industry deducted 0.69 percentage points to growth of the all industry index and the tertiary index deducted 2.51 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 and subsequent decline in IIQ2014. 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/2014/08/weakening-world-economic-growth.html an earlier at http://cmpassocregulationblog.blogspot.com/2014/06/financialgeopolitical-risks-recovery.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 0.7 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 (Table VB-1 and Table VB-4 at http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html an earlier at http://cmpassocregulationblog.blogspot.com/2014/06/financialgeopolitical-risks-recovery.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
IIQ2014	-4.4	-3.8	-3.8	0.7	-3.3	-1.7
Cont to IIQ % Change	-0.22	-0.69	-2.51	0.08
IQ2014	-2.7	3.0	1.8	-0.5	1.6	1.5
2013
IVQ	2.8	1.8	-0.2	0.4	0.3	0.0
IIIQ	4.3	1.8	0.1	-0.2	0.5	0.4
IIQ	3.6	1.6	0.3	0.0	0.6	0.9
IQ	0.9	0.4	0.5	-0.3	0.4	1.3
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	-0.7
IIQ	1.3	-2.1	0.0	0.0	-0.2	-0.5
IQ	2.0	1.6	0.0	0.2	0.1	1.0

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 Jun 2014, the all industry activity index decreased 0.4 percent with industry decreasing 3.4 percent and services decreasing 0.1 percent while construction increased 0.7 percent and government increased 0.1 percent. Industry deducted 0.62 percentage points and services deducted 0.07 percentage points while construction added 0.04 percentage points and government added 0.01 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. The index increased 1.7 percent in Mar 2014 in the rush of expenditures in anticipation of the sales tax increase in Apr 2014 and fell 4.4 percent in Apr 2014 because of the impact of the sales tax. The all industry index rebounded 0.6 percent in May 2014 and fell 0.4 percent in Jun 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 0.3 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. Industry increased 0.7 percent in Mar 2014 and fell 2.9 percent in Apr 2014. Industry increased 0.7 percent in May 2014 and decreased 3.4 percent in Jun 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
Jun 2014	0.7	-3.4	-0.1	0.1	-0.4
Cont to Jun % Change	0.04	-0.62	-0.07	0.01
May 2014	-0.2	0.7	0.9	-0.3	0.6
Apr	-3.2	-2.9	-5.7	1.2	-4.4
Mar	-1.5	0.7	2.6	-0.7	1.7
Feb	-1.3	-2.3	-0.9	0.5	-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

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

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 decreased 0.9 percent in IIQ2014 relative to a year earlier and GDP decreased 0.1 percent relative to a year earlier (Table VB-4 at http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html an earlier at http://cmpassocregulationblog.blogspot.com/2014/06/financialgeopolitical-risks-recovery.html). Industry increased 2.6 percent relative to a year earlier while the tertiary sector decreased 2.2 percent, deducting combined 1.03 percentage points to growth of the all industry activity index of minus 0.9 percent while construction deducted 0.02 percentage points and government added 0.05 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 1.5 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	1.5
Cont to 2013 % Change	0.48	-0.13	0.46	-0.01
2012	3.2	0.1	1.4	0.3	1.2	1.5
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
IIQ	-0.4	2.6	-2.2	0.4	-0.9	-0.1
Cont to IIQ % Change	-0.02	0.45	-1.48	0.05
IQ	8.1	8.3	2.1	-0.3	3.2	3.0
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	2.3
IIQ	8.8	-3.1	1.3	-0.2	0.6	1.2
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	3.3

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

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 decreased 0.5 percent in Jun 2014 relative to Jun 2013. Industry increased 3.1 percent in Jun 2014 relative to a year earlier, adding 0.54 percentage points to growth of the all industry activity index. The tertiary sector decreased 1.5 percent, subtracting 0.99 percentage points. Construction deducted 0.10 percentage points from the index and government deducted 0.02 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
Jun 2014	-2.1	3.1	-1.5	-0.2	-0.5
Cont to Jun % Change	-0.10	0.54	-0.99	-0.02
May	-0.7	0.9	-2.5	0.9	-1.4
Apr	2.0	3.8	-2.6	-0.7	-0.9
Mar	6.3	7.3	3.2	-0.4	3.8
Feb	8.2	7.0	0.9	0.0	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

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

The structure of exports and imports of Japan is in Table VB-5. 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 32.8 percent of Japan’s imports and increased 7.0 percent in the 12 months ending in Jul 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 increase of 1.5 percent in the 12 months ending in Jul 2014. Machinery contributes 19.0 percent of Japan’s exports with increase of 2.2 percent in the 12 months ending in Jul 2014. Electrical machinery contributes 17.1 percent of Japan’s exports with increase of 3.8 percent in the 12 months ending in Jul 2014. Exports of transport equipment with share of 24.2 percent in total exports increased 4.5 percent in the 12 months ending in Jul 2014 but had been increasing at high rates 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-5 shows increase of the major categories of motor vehicles of 8.1 percent: cars increased 7.2 percent with increase of 21.3 percent in the minor category of buses and trucks, increase of 3.4 percent for parts of motor vehicles, increase of 24.3 percent for motorcycles and decrease of 27.6 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-5 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-5, Japan, Structure and Growth of Exports and Imports % and ∆% Millions Yens

Jul 2014	Value JPY Millions	% of Total	12 Months ∆%	Contribution Degree %
Exports	6,188,609	100.0	3.9	3.9
Foodstuffs	38,877	0.6	10.0	0.1
Raw Materials	112,058	1.8	16.9	0.3
Mineral Fuels	131,035	2.1	-7.0	-0.2
Chemicals	643,951	10.4	2.6	0.3
Manufactured Goods	792,879	12.8	1.5	0.2
Machinery	1,173,068	19.0	2.2	0.4
Electrical Machinery	1,061,331	17.1	3.8	0.7
Transport Equipment	1,496,770	24.2	4.5	1.1
Motor Vehicles	995,049	16.1	8.1	1.2
Cars	852,002	13.8	7.2	1.0
Buses & Trucks	134,833	2.2	21.3	0.4
Parts of Motor Vehicles	306,461	5.0	3.4	0.2
Motorcycles	21,198	0.3	24.3	0.1
Ships	104,436	1.7	-27.6	-0.7
Other	738,641	11.9	9.5	1.1
Imports	7,152,602	100.0	2.3	2.3
Foodstuffs	599,430	8.4	3.6	0.3
Raw Materials	478,313	6.7	-4.5	-0.3
Mineral Fuels	2,347,398	32.8	7.0	2.2
Chemicals	609,055	8.5	1.4	0.1
Manufactured Goods	602,546	8.4	6.8	0.5
Machinery	572,025	8.0	4.3	0.3
Electrical Machinery	827,954	11.6	-1.5	-0.2
Transport Equipment	242,250	3.4	-8.3	-0.3
Other	873,630	12.2	-3.0	-0.4

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

Table VB-6 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-6, 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 VB-7 for Jul 2014. The share of Asia in Japan’s trade is close to one-half for 53.8 percent of exports and 43.2 percent of imports. Within Asia, exports to China are 18.3 percent of total exports and imports from China 20.3 percent of total imports. While exports to China increased 2.6 percent in the 12 months ending in Jul 2014, imports from China decreased 2.5 percent. The second largest export market for Japan in Jul 2014 is the US with share of 18.2 percent of total exports, which is close to that of China, and share of imports from the US of 9.0 percent in total imports. Japan’s exports to the US increased 2.1 percent in the 12 months ending in Jul 2014 and imports from the US increased 6.2 percent. Western Europe has share of 10.7 percent in Japan’s exports and of 10.5 percent in imports. Rates of growth of exports of Japan in Jul 2014 are 2.1 percent for exports to the US, minus 9.0 percent for exports to Brazil and 6.2 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 Jul 2014 are mixed. Imports from Asia decreased 1.2 percent in the 12 months ending in Jul 2014 while imports from China decreased 2.5 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-7, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Jul 2014	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,188,609	3.9	7,152,602	2.3
Asia	3,330,875 % Total 53.8	3.4	3,086,704 % Total 43.2	-1.2
China	1,132,758 % Total 18.3	2.6	1,454,358 % Total 20.3	-2.5
USA	1,128,273 % Total 18.2	2.1	644,579 % Total 9.0	6.2
Canada	71,509	7.8	128,546	13.1
Brazil	47,825	-9.0	85,933	-5.6
Mexico	99,683	15.9	35,922	-10.5
Western Europe	662,768 % Total 10.7	13.3	751,376 % Total 10.5	2.0
Germany	169,170	6.2	208,457	3.8
France	55,490	2.6	100,915	-0.9
UK	115,035	22.5	60,792	10.8
Middle East	255,167	23.0	1,371,583	9.6
Australia	146,203	0.9	465,077	0.4

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 Jul 2014. The significantly large deficits of JPY 1,116,416 million with the Middle East, JPY 321,600 million with China, JPY 318,874 million with Australia and JPY 88,608 million with Western Europe exceed surpluses of JPY 483,694 million with the US, JPY 63,761 million with Mexico and JPY 52,243 million with the UK.

Table VB-8, Japan, Trade Balance, Millions of Yen

Jul 2014	Millions of Yen
Total	-963,993
Asia	244,171
China	-321,600
USA	483,694
Canada	-57,037
Brazil	-38,108
Mexico	63,761
Western Europe	-88,608
Germany	-39,287
France	-45,245
UK	54,243
Middle East	-1,116,416
Australia	-318,874

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 3.9 percent in IIIQ2011. Net trade added 1.7 percentage points to GDP growth in IQ2013 and 0.2 percentage points in IIQ2013 but deducted 1.6 percentage points in IIIQ2013 and deducted 2.4 percentage points in IVQ2013. Net trade deducted 0.8 percentage points from GDP growth in IQ2014. Net trade added 4.4 percentage points to GDP growth in IIQ2014. 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	-0.8	4.2	-5.0
II	4.4	-0.3	4.7
2013
I	1.7	2.4	-0.8
II	0.2	1.8	-1.5
III	-1.6	-0.4	-1.2
IV	-2.4	0.2	-2.5
2012
I	0.4	1.7	-1.3
II	-1.5	-0.3	-1.2
III	-1.9	-2.5	0.5
IV	-0.5	-1.9	1.3
2011
I	-1.2	-0.4	-0.7
II	-4.5	-4.6	0.2
III	3.9	5.7	-1.9
IV	-3.0	-1.9	-1.0
2010
I	2.2	3.5	-1.3
II	0.0	2.6	-2.7
III	0.5	1.4	-0.9
IV	-0.3	0.1	-0.4
2009
I	-4.4	-16.4	12.0
II	7.3	4.7	2.7
III	2.2	5.3	-3.1
IV	2.8	4.1	-1.3
2008
I	1.2	2.1	-0.9
II	0.4	-1.6	2.0
III	0.0	0.2	-0.2
IV	-11.4	-10.2	-1.2
2007
I	1.2	1.7	-0.5
II	0.7	1.6	-0.9
III	2.0	1.5	0.6
IV	1.4	2.1	-0.6

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 IV-5 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-5 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 108.2 in Jul 2014 for a gain of 15.1 percent relative to Jan 2012 and 3.1 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-5, 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-5A 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 98.2 in Jul 2014 or minus 4.8 percent relative to Apr 2012 and gained 0.3 percent to 98.2 in Jul 2014 relative to Jun 2009.

Chart IV-5A, 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-6 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 126.2 in Jul 2014 or gain of 11.6 percent relative to Apr 2012 and 35.0 percent relative to Jun 2009.

Chart IV-6, 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-6A 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 Jul 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 0.3 percent from Jun 2009 to Jul 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-6A, 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-6 provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Jul 2014. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Jul 2014, the export index on the contract currency basis decreased 1.0 percent and decreased 6.3 percent on the yen basis. For the entire period from Jan 2008 to Jul 2014, the import price index increased 12.0 percent on the contract currency basis and increased 6.1 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-6, 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	109.2	112.8	127.0
2014-05	98.3	108.4	112.6	126.1
2014-06	98.1	108.3	112.7	126.4
2014-07	98.2	108.2	112.8	126.2

Source: Bank of Japan

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

Chart IV-7 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2014. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from policy interest rates rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Chart IV-5 and associated table at http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states_49.html http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical_6089.html http://cmpassocregulationblog.blogspot.com/2014/06/financial-instability-mediocre-cyclical_4827.html http://cmpassocregulationblog.blogspot.com/2014/03/financial-uncertainty-mediocre-cyclical_8145.html http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world_1.html and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or_561.html and at http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk_1.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).

Chart IV-7, 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-8, 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-7. 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 1.4 percent in Jul 2014 and increased 11.9 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, changed 0.0 percent in Jul 2014 and increased 3.0 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-7, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Jul 2014	Weight	Month ∆%	12 Month ∆%
Total	1000.0	0.3	4.3
Food, Beverages, Tobacco, Feedstuffs	137.5	0.2	3.0
Petroleum & Coal	57.4	1.4	11.9
Production Machinery	30.8	0.0	3.0
Electronic Components	31.0	0.0	-1.8
Electric Power, Gas & Water	52.7	3.0	9.4
Iron & Steel	56.6	-0.2	5.6
Chemicals	92.1	0.6	3.2
Transport Equipment	136.4	0.0	2.8

Source: Bank of Japan

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

Percentage point contributions to change of the corporate goods price index (CGPI) in Jul 2014 are provided in Table IV-8 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 0.3 percent in Jul 2014, the energy shock is evident in the contribution of 0.21 percentage points by electric power, gas and water and 0.11 percentage points in petroleum and coal products in new carry trades of exposures in commodity futures. The exports CGPI increased 0.1 percent on the basis of the contract currency with contribution of 0.11 percentage points by chemicals and products and 0.06 percentage points by transportation equipment. The imports CGPI increased 0.1 percent on the contract currency basis. Petroleum, coal and natural gas products added 0.45 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 0.4 percent.

Table IV-8, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Jul 2014	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change:  0.3%
Electric Power, Gas & Water	0.21
Petroleum & Coal Products	0.11
Chemicals & Related Products	0.06
Nonferrous Metals	0.06
Food, Beverages, Tobacco & Feedstuffs	0.02
Agriculture, Forestry & Fishery Products	-0.06
Other Manufacturing Industry Products	-0.02
B. Export Price Index	Monthly Change:    0.1% contract currency
Chemicals & Related Products	0.11
Transportation Equipment	0.06
Other Primary Products & Manufactured Goods	-0.05
General Purpose, Production & Business Oriented Machinery	-0.02
C. Import Price Index	Monthly Change: 0.1% contract currency basis
Petroleum, Coal & Natural Gas	0.45
Chemicals & Related Products	0.03
Metals & Related Products	-0.31
Foodstuffs & Feedstuffs	-0.08
Wood, Lumber & Related Products	-0.02
D. Domestic Corporate Goods Price Index Excluding Consumption Tax	Monthly Change: 0.4%
Electric Power, Gas & Water	0.21
Petroleum & Coal Products	0.11
Chemicals & Related Products	0.06
Nonferrous Metals	0.06
Food, Beverages, Tobacco & Feedstuffs	0.02
Agriculture, Forestry & Fishery Products	-0.06
Other Manufacturing Industry Products	-0.02

Source: Bank of Japan

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

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 Aug 2014. The index of current prices paid or costs of inputs increased from 16.13 in Dec 2012 to 27.27 in Aug 2014 while the index of current prices received or sales prices increased from 1.08 in Dec 2012 to 7.95 in Aug 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 27.27 in Aug 2014 are expanding at faster pace than prices received or of sales of products at 7.95. 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 42.05 in Aug 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 21.59 in Aug 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
Aug 2014	27.27	7.95	42.05	21.59
Jul	25.00	6.82	37.50	18.18
Jun	17.20	4.30	36.56	16.13
May	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-5. As inflation waves throughout the world (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.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 induced by zero interest rates. The index of prices paid or prices of inputs increased from 20.6 in Dec 2012 to 24.9 in Aug 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 4.2 in Aug 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 24.9 in Jul 2014 indicates faster increase than the index of current prices received or sales prices of production at 4.2. The index of future prices paid increased to 50.3 in Aug 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 Aug 2014. Expectations are incorporating faster increases in prices of inputs or costs of production, 50.3 in Aug 2014, than of sales prices of produced goods, 29.5 in Aug 2014, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages investment and hiring.

Table IV-5, 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
Dec-10	42.6	6.0	56.8	25.7
Jan-11	47.9	12.1	58.7	34.1
Feb-11	61.1	13.2	62.6	30.7
Mar-11	57.6	17.0	62.1	32.4
Apr-11	50.9	20.8	55.3	33.7
May-11	49.3	20.5	54.6	28.5
Jun-11	38.9	7.7	41.6	6.8
Jul-11	35.6	6.3	48.3	16.7
Aug-11	24.6	-4	45.2	23.4
Sep-11	32	7.1	40.9	22.2
Oct-11	24.3	2.8	42.9	27.8
Nov-11	22.8	6.3	35.4	28.3
Dec-11	25	7	43.1	24.7
Jan-12	25.3	8	47.5	20.8
Feb-12	31.9	9.4	43.4	24.8
Mar-12	14.1	5.3	37.8	22.6
Apr-12	18.1	6.2	35.2	20.2
May-12	7.7	0.7	39.5	9.7
Jun-12	5.5	-3.7	34.8	16.9
Jul-12	10.8	4.9	27.9	20.3
Aug-12	18	5.6	39.5	25
Sep-12	15.8	3.5	42.2	27.5
Oct-12	19.9	7.1	45.8	15.3
Nov-12	23.6	6.5	47.6	12.8
Dec-12	20.6	10.9	41.9	27.3
Jan-13	11.8	-1.6	33.9	20
Feb-13	10.6	-1.3	25.4	20.6
Mar-13	7.6	-1.3	32.4	16.8
Apr-13	5	-7.2	28.9	9.9
May-13	9.7	0.2	33.5	19.9
Jun-13	23.7	14.6	33.3	24.3
Jul-13	22.7	8	41	25.6
Aug-13	20.4	11.1	40.7	24.5
Sep-13	25.9	12.5	43	31.6
Oct-13	21	12.8	43.1	34.6
Nov-13	25.4	9	43.5	38.1
Dec-13	16.4	10.8	39.1	34.8
Jan-14	18.7	5.1	35.3	11.8
Feb-14	14.2	7.6	18.2	16.3
Mar-14	13.9	4.3	29.4	15.9
Apr-14	11.3	4.3	35.1	13
May-14	23	17	36.1	29.5
Jun-14	35	14.1	44.5	30
Jul-14	34.7	16.8	38.2	23.5
Aug-14	24.9	4.2	50.3	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 index decreased to 54.2 in Jun 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 decreased to 50.7 in Jul 2014.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Jul 2014	54.2	50.7	53.4	49.5	61.5
Jun	55.0	50.7	56.0	50.8	60.4
May	55.5	52.7	54.5	49.0	60.7
Apr	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, easing to 54.2 in Jul 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 51.7 in Jul 2014. The index of new orders fell from 54.5 in Apr 2012 to 51.2 in Dec 2012. The index of new orders fell from 52.3 in Nov 2013 to 52.0 in Dec 2013. The index fell to 50.9 in Jan 2014 and increase to 53.6 in Jul 2014.

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

	IPM	PI	NOI	INV	EMP	SDEL
Jul 2014	51.7	54.2	53.6	49.0	48.3	50.2
Jun	51.0	53.0	52.8	48.0	48.6	50.5
May	50.8	52.8	52.3	48.0	48.2	50.3
Apr	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 increased to 51.7 in Jul 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 IIQ2014 relative to the same period in 2013 was 7.4 percent, as shown in Table VC-GDP. Secondary industry accounts for 46.0 percent of cumulative GDP in IIQ2014. In cumulative IIQ2014, industry alone accounts for 39.7 percent of GDP and construction with the remaining 6.3 percent. Tertiary industry accounts for 46.6 percent of cumulative GDP in IIQ2014 and primary industry for 7.4 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 6.6 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 6.1 percent in IQ2014 and increasing to 8.2 percent in IIQ2014.

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

Cumulative GDP IIQ2014	Value Current CNY Billion	2014 Year-on-Year Constant Prices ∆%
GDP	26,904.4	7.4
Primary Industry	1981.2	3.9
Farming	1981.2	3.9
Secondary Industry	12,387.1	7.4
Industry	10,681.4	7.2
Construction	1,705.7	9.2
Tertiary Industry	12,536.1	8.0
Transport, Storage, Post	1411.4	6.8
Wholesale, Retail Trades	2,542.2	9.8
Hotel & Catering Services	531.8	6.2
Financial Intermediation	1,846.3	9.7
Real Estate	1,745.3	2.5
Other	4,459.1	8.9
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2014
IIQ2014	2.0	8.2
IQ2014	1.5	6.1
2013
IVQ2013	1.7	7.0
IIIQ2013	2.3	9.5
IIQ2013	1.8	7.4
IQ2013	1.6	6.6
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 IIQ2014 relative to the same period in 2013 was 7.5 percent, as shown in Table VC-GDPA. Secondary industry accounts for 46.0 percent of GDP of which industry alone for 39.7 percent in cumulative IIQ2014 and construction with the remaining 6.3 percent. Tertiary industry accounts for 46.6 percent of GDP in cumulative IIQ2014 and primary industry for 7.4 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 7.7 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 1.5 percent in IQ2014 that is equivalent to 6.1 percent per year. GP grew 7.5 percent in IIQ2014 relative to a year earlier and 2.0 percent relative to the prior quarter, which is equivalent 8.2 percent.

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	IIQ 2014
GDP	7.7	7.5	7.8	7.7	7.4	7.5
Primary Industry	3.4	3.0	3.4	4.0	3.5	3.9
Secondary Industry	7.8	7.6	7.8	7.8	7.3	7.4
Tertiary Industry	8.3	8.3	8.4	8.3	7.1	8.0
GDP ∆% Relative to a Prior Quarter	1.6	1.8	2.3	1.7	1.5	2.0
	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/7e343c74b29f40e9bbaf5ed95d6a04a7) is deteriorating. The overall Flash HSBC China Manufacturing PMI^™ decreased from 51.7 in Jul to 50.3 in Aug, while the Flash HSBC China Manufacturing Output Index decreased from 52.8 in Jul to 51.3 in Aug, indicating expansion at the lowest rate in three months. Exports orders indicate expansion at slower rate. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds need for monetary and fiscal stimulus (http://www.markiteconomics.com/Survey/PressRelease.mvc/7e343c74b29f40e9bbaf5ed95d6a04a7). The HSBC China Services PMI^™, compiled by Markit, shows improvement in business activity in China with the HSBC Composite Output, combining manufacturing and services, decreasing from 52.4 in Jun to 51.6 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/d5b7f39661274eb0a160bb2f4cc9e8c6). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds need of policies in consolidating growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/d5b7f39661274eb0a160bb2f4cc9e8c6). The HSBC China Services Business Activity index decreased from 53.1 in Jun to 50.0 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/d5b7f39661274eb0a160bb2f4cc9e8c6). Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds that the services PMI at 50.0 was the lowest in the history of the index since 2005 (http://www.markiteconomics.com/Survey/PressRelease.mvc/d5b7f39661274eb0a160bb2f4cc9e8c6). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 51.7 in Jul from 50.7 in May, indicating improving manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/9b4c5a4107d9459ca2c5c4309b3fa267). New export orders and total new orders increased. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds strengthening demand in China with possible need of policy enhancement (http://www.markiteconomics.com/Survey/PressRelease.mvc/9b4c5a4107d9459ca2c5c4309b3fa267). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Jul 12-month ∆%: minus 0.9 Jul month ∆%: -0.1 Blog 8/17/14
Consumer Price Index	Jul month ∆%: 0.1 Jul 12 months ∆%: 2.3 Blog 8/17/14
Value Added of Industry	Jul month ∆%: 0.68 Jan-Jul 2014/Jan-Jul 2013 ∆%: 8.8 Blog 8/17/14
GDP Growth Rate	Year IIQ2014 ∆%: 7.5 First Half 2014 ∆%: 7.4 Quarter IIQ2014 AE ∆%: 8.2 Blog 7/20/14
Investment in Fixed Assets	Total Jan-Jul 2014 ∆%: 17.0 Real estate development: 13.7 Blog 8/17/14
Retail Sales	Jul month ∆%: 0.86 Jul 12 month ∆%: 12.2 Jan-Jul ∆%: 12.1 Blog 8/17/14
Trade Balance	Jul balance $47.3 billion Exports 12M ∆% 14.5 Imports 12M ∆% -1.6 Cumulative Jan-Jul: $150.6 billion Blog 8/10/14

Links to blog comments in Table CNY:

8/17/2014 http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html

8/10/14 http://cmpassocregulationblog.blogspot.com/2014/08/volatility-of-valuations-of-risk_10.html

7/20/14 http://cmpassocregulationblog.blogspot.com/2014/07/financial-irrational-exuberance.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 53.8 in Jun to 52.8 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/df839e9df3334511bc07ff6b990e4ce6). Rob Dobson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the index is consistent with growth of GDP about 0.3 to 0.4 percent in IIIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/df839e9df3334511bc07ff6b990e4ce6). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP increased from 52.8 in Jun to 53.8 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/f523dd67e3de47928407770a6c24107b). Chris Williamson, Chief Economist at Markit, finds growth of GDP at close to 0.4 percent per quarter (http://www.markiteconomics.com/Survey/PressRelease.mvc/f523dd67e3de47928407770a6c24107b). The Markit Eurozone Services Business Activity Index increased from 52.8 in Jun to 54.2 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/f523dd67e3de47928407770a6c24107b). The Markit Eurozone Manufacturing PMI^® did not change to 51.8 in Jul from 51.8 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/40d26e0db4184aecb5106f6deae2bb2c). New orders and export orders increased for the thirteenth consecutive month. Chris Williamson, Chief Economist at Markit, finds slowing industrial growth in the euro area (http://www.markiteconomics.com/Survey/PressRelease.mvc/40d26e0db4184aecb5106f6deae2bb2c). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIQ2014 ∆% 0.0; IIQ2014/IIQ2013 ∆% 0.7 Blog 8/17/14
Unemployment	Jun 2014: 11.5 % unemployment rate; Jun 2014: 18.412 million unemployed Blog 8/3/14
HICP	Jul month ∆%: -0.7 12 months Jul ∆%: 0.4 Blog 8/17/14
Producer Prices	Euro Zone industrial producer prices Jun ∆%: 0.1 Jun 12-month ∆%: -0.8 Blog 8/10/14
Industrial Production	Jun month ∆%: -0.3; Jun 12 months ∆%: 0.0 Blog 8/17/14
Retail Sales	Jun month ∆%: 0.4 Jun 12 months ∆%: 2.4 Blog 8/10/14
Confidence and Economic Sentiment Indicator	Sentiment 102.2 Jul 2014 Consumer minus 8.4 Jul 2014 Blog 8/3/14
Trade	Jan-Jun 2014/Jan-Jun 2013 Exports ∆%: 0.9 Imports ∆%: 0.1 Jun 2014 12-month Exports ∆% 2.8 Imports ∆% 2.5 Blog 8/24/14

Links to blog comments in Table EUR:

8/17/2014 http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html

8/10/14 http://cmpassocregulationblog.blogspot.com/2014/08/volatility-of-valuations-of-risk_10.html

8/3/14 http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

Growth of euro zone trade continues to be relatively resilient as shown in Table VD-1 but with deceleration at the margin. Exports grew 0.9 percent and imports increased 0.1 percent in Jan-Jun 2014 relative to Jan-Jun 2013. The 12-month rate of growth of exports was 2.9 percent in Jun 2014 while imports increased 2.5 percent. In May 2014, exports increased 0.4 percent in 12 months and imports decreased 0.1 percent. At the margin, rates of growth of trade are declining in part because of moderation of commodity prices.

Table VD-1, Euro Zone, Exports, Imports and Trade Balance, Billions of Euros and Percent, NSA

	Exports	Imports
Jan-Jun 2014	948.4	869.4
Jan-Jun 2013	940.0	868.8
∆%	0.9	0.1
Jun 2014	162.2	145.4
Jun 2013	157.6	141.9
∆%	2.9	2.5
May 2014	160.0	144.6
May 2013	159.4	144.8
∆%	0.4	-0.1
Trade Balance	Jan-Jun 2014	Jan-Jun 2013
€ Billions	71.2	79.0

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 structure of trade of the euro zone in May 2014 is provided in Table VD-2. Data are still not available for trade structure for Jun 2014. Manufactured exports increased 2.0 percent in Jan-May 2014 relative to Jan-May 2013 while imports increased 3.2 percent. The trade surplus in manufactured products was higher than the trade deficit in primary products in Jan-May 2014 but not by as much in Jan-May 2013 partly because of the commodity shock caused by carry trades.

Table VD-2, Euro Zone, Structure of Exports, Imports and Trade Balance, € Billions, NSA, ∆%

	Primary	Manufactured	Other	Total
Exports
Jan-May 2014 € B	122.9	643.2	20.1	786.2
Jan-May 2013 € B	127.4	631.0	24.0	782.4
∆%	-3.5	2.0	-16.3	0.5
Imports
Jan-May 2014 € B	248.3	462.6	13.1	724.0
Jan-May 2013  € B	264.8	448.1	13.9	726.8
∆%	-6.2	3.2	-5.8	-0.4
Trade Balance € B
Jan-May 2014	-125.4	180.5	7.0	62.2
Jan-May 2013	-137.4	182.9	10.1	55.5

Note: there are minor rounding errors

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

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
Average ∆% 1991-2013	1.3
Average ∆% 1991-1999	1.5
Average ∆% 2000-2007	1.4
Average ∆% 2003-2007	2.2
Average ∆% 2007-2013	0.5
Average ∆% 2009-2013	2.0
2013	0.1	0.2
2012	0.4	0.6
2011	3.6	3.7
2010	4.1	3.9
2009	-5.6	-5.6
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.9
2004	1.2	0.7
2003	-0.7	-0.7
2002	0.0	0.0
2001	1.7	1.8
2000	3.0	3.2
1999	2.0	1.9
1998	2.0	1.7
1997	1.8	1.9
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/FactsFigures/NationalEconomyEnvironment/NationalAccounts/DomesticProduct/CurrentRevision.html

https://www.destatis.de/EN/Methods/NationalAccountRevision/Revision2014_BackgroundPaper.pdf?__blob=publicationFile

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, decreased from 55.7 in Jul to 54.9 in Aug. The index of manufacturing output reached 51.9 in Aug, decreasing from 53.8 in Jul, while the index of services decreased to 56.4 in Aug from 56.4 in Jul. The overall Flash Germany Manufacturing PMI^® decreased from 52.4 in Jul to 52.0 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/a2f4ac116982481f8ce1820b6658581d). New export work volumes increased. Oliver Kolodseike, Economist at Markit, finds continuing expansion of Germany’s private sector with strength in new orders and output (http://www.markiteconomics.com/Survey/PressRelease.mvc/a2f4ac116982481f8ce1820b6658581d). 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 54.0 in Jun to 55.7 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/659bfdc5b6d44d75bffafd870277bb48). Oliver Kolodseike, Senior Economist at Markit and author of the report, finds prospects of improvement in the beginning of the third quarter of 2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/659bfdc5b6d44d75bffafd870277bb48). The Germany Services Business Activity Index increased from 54.6 in Jun to 56.7 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/659bfdc5b6d44d75bffafd870277bb48). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 52.0 in Jun to 52.4 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/b13c2accb1ef47dea9c9f27e6e5231a7). New export orders increased for the twelfth consecutive month. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds renewed strength in new export orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/b13c2accb1ef47dea9c9f27e6e5231a7).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIQ2014 -0.2 ∆%; II/Q2014/IIQ2013 ∆% 0.8 2013/2012: 0.1% 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 8/17/14
Consumer Price Index	Jul month NSA ∆%: 0.3 Jul 12-month NSA ∆%: 0.8 Blog 8/17/14
Producer Price Index	Jul month ∆%: -0.01 NSA, minus 0.1 CSA 12-month NSA ∆%: -0.8 Blog 8/24/14
Industrial Production	MFG Jun month CSA ∆%: minus 0.0 12-month NSA: -2.5 Blog 8/10/14
Machine Orders	MFG Jun month ∆%: -3.2 Jun 12-month ∆%: -4.3 Blog 8/10/14
Retail Sales	Jun Month ∆% 0.4 12-Month ∆% 1.3 Blog 8/3/14
Employment Report	Unemployment Rate SA Jun 5.1% Blog 8/3/14
Trade Balance	Exports Jun 12-month NSA ∆%: 1.1 Imports Jun 12 months NSA ∆%: 2.1 Exports Jun month CSA ∆%: 0.9; Imports Jun month CSA minus 4.5 Blog 8/10/14

Links to blog comments in Table DE:

8/17/2014 http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html

8/10/14 http://cmpassocregulationblog.blogspot.com/2014/08/volatility-of-valuations-of-risk_10.html

8/3/14 http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

5/25/14 http://cmpassocregulationblog.blogspot.com/2014/05/united-states-commercial-banks-assets.html

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

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, 1949-2013

Period	Average ∆%
1949-2013	3.2
2007-2013	0.3
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=20140814

The Markit Flash France Composite Output Index increased from 49.4 in Jul to 50.0 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/0fc100060e304796884a24175e8066c0). Jack Kennedy, Senior Economist at Markit and author of the report, finds continuing weak performance (http://www.markiteconomics.com/Survey/PressRelease.mvc/0fc100060e304796884a24175e8066c0). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased from 48.1 in Jun to 49.4 in Jul, indicating marginal contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/77f782d26579400b8cb020e60fea14d3). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds weak demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/77f782d26579400b8cb020e60fea14d3). The Markit France Services Activity index increased from 48.2 in Jun to 50.4 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/77f782d26579400b8cb020e60fea14d3). The Markit France Manufacturing Purchasing Managers’ Index^® decreased to 47.8 in Jul from 48.2 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/f270cecbb6274c17af2d703d3c9cf913). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds deteriorating conditions because of weakness in new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/f270cecbb6274c17af2d703d3c9cf913). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Jul month ∆% -0.3 12 months ∆%: 0.5 8/17/14
PPI	Jun month ∆%: 0.0 Jun 12 months ∆%: 0.4 Blog 8/3/14
GDP Growth	IIQ2014/IQ2014 ∆%:0.0 IIQ2014/IIQ2013 ∆%: 0.1 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 6/29/14 8/17/14
Industrial Production	Jun ∆%: Manufacturing 1.6 12-Month ∆%: Manufacturing minus 0.1 Blog 8/10/14
Consumer Spending	Manufactured Goods Jun ∆%: 1.3 Jun 12-Month Manufactured Goods ∆%: 2.0 Blog 8/3/14
Employment	Unemployment Rate: IQ2014 9.7% Blog 6/8/14
Trade Balance	Jun Exports ∆%: month 1.8, 12 months 2.2 Jun Imports ∆%: month 2.2, 12 months minus 3.2 Blog 8/10/14
Confidence Indicators	Historical average 100 Jul Mfg Business Climate 97.0 Blog 7/27/14

Links to blog comments in Table FR:

8/17/2014 http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html

8/10/14 http://cmpassocregulationblog.blogspot.com/2014/08/volatility-of-valuations-of-risk_10.html

8/3/14 http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

7/27/14 http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html

6/29/14 http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html

6/8/14 http://cmpassocregulationblog.blogspot.com/2014/06/financial-risks-rules-discretionary.html

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

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

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 2.9 percent in IVQ2012, minus 2.4 percent in IQ2013, minus 2.2 percent in IIQ2013 and minus 1.9 percent in IIIQ2013. GDP fell 0.9 percent in IVQ2013 relative to a year earlier. GDP fell 0.9 percent in IQ2014 relative to a year earlier. GDP fell 0.4 percent in IQ2014 relative to a year earlier and fell 0.3 percent in IIQ2014 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. In IQ2014, consumption fell 0.3 percent relative to a year earlier and GFCF fell 1.3 percent.

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

	GDP	Imports	Consumption	GFCF	Exports
2014
IQ	-0.4	1.3	-0.3	-1.3	3.3
IIQ	-0.3
2013
IVQ	-0.9	-0.1	-1.1	-2.8	1.0
IIIQ	-1.9	-2.0	-1.8	-4.6	-0.4
IIQ	-2.2	-4.4	-2.8	-4.8	0.0
IQ	-2.4	-5.0	-3.0	-6.1	-0.7
2012
IVQ	-2.9	-6.4	-4.0	-7.3	1.0
IIIQ	-2.6	-7.1	-4.0	-8.3	2.0
IIQ	-2.4	-7.0	-3.4	-8.5	2.2
IQ	-1.7	-7.9	-3.2	-8.1	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/124710

The Markit/ADACI Business Activity Index decreased from 53.9 in Jun to 52.8 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/10c71c8a34f143f3b7ad790e00b2088c). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds services with the highest quarterly growth in four years (http://www.markiteconomics.com/Survey/PressRelease.mvc/10c71c8a34f143f3b7ad790e00b2088c). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), decreased from 52.6 in Jun to 51.9 in Jul, which constitutes improvement in Italy’s manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/2f64b0ede0c340bf927e6d020d85edd8). Growth of new export orders was strong at slower rate. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds continuing growth of manufacturing with slowing from the prior quarterly index at the highest performance in about three years (http://www.markiteconomics.com/Survey/PressRelease.mvc/2f64b0ede0c340bf927e6d020d85edd8). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Jul month ∆%: -0.1 Jul 12-month ∆%: 0.1 Blog 8/17/14
Producer Price Index	Jun month ∆%: 0.1 Jun 12-month ∆%: -1.9 Blog 8/3/14
GDP Growth	IIQ2014/IQ2014 SA ∆%: minus 0.2 IIQ2014/IIQ2013 NSA ∆%: minus 0.3 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 6/15/14 8/10/14
Labor Report	Jun 2014 Participation rate 63.7% Employment ratio 55.7% Unemployment rate 12.3% Youth Unemployment 43.7% Blog 8/3/14
Industrial Production	Jun month ∆%: 0.9 12 months CA ∆%: 0.4 Blog 8/10/14
Retail Sales	May month ∆%: -0.7 May 12-month ∆%: -0.5 Blog 7/27/14
Business Confidence	Mfg Jul 99.7, Mar 99.3 Construction Jul 83.2, Mar 76.0 Blog 8/3/14
Trade Balance	Balance May SA €3592 million versus Apr €3796 Exports May month SA ∆%: 2.2; Imports May month ∆%: 3.2 Exports 12 months May NSA ∆%: 0.2 Imports 12 months NSA ∆%: 0.9 Blog 7/20/14

Links to blog comments in Table IT:

8/17/2014 http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html

8/10/14 http://cmpassocregulationblog.blogspot.com/2014/08/volatility-of-valuations-of-risk_10.html

8/3/14 http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

7/27/14 http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html

7/20/14 http://cmpassocregulationblog.blogspot.com/2014/07/financial-irrational-exuberance.html

6/15/2014 http://cmpassocregulationblog.blogspot.com/2014/06/financialgeopolitical-risks-recovery.html

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

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*	-1.3
2000-2013	1.5

*Absolute change from 2007 to 2012 an from 2007 to 2013

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q1-2014/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from 57.7 in Jun to 59.1 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2c8dc66ce114ec28cc28545223ee38e). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at 0.8 percent in IIIQ2014 if activity continues at current rates (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2c8dc66ce114ec28cc28545223ee38e). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) decreased to 55.4 in Jul from 57.2 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/fddb65e3f7734f7489a302482e5a00bf). New export orders increased for the sixteenth consecutive month. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing conditions continue at solid pace significantly higher than long-term trends (http://www.markiteconomics.com/Survey/PressRelease.mvc/fddb65e3f7734f7489a302482e5a00bf). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Jul month ∆%: -0.3 Jul 12-month ∆%: 1.6 Blog 8/24/14
Output/Input Prices	Output Prices: Jul 12-month NSA ∆%: -0.1; excluding food, petroleum ∆%: 0.9 Input Prices: Jul 12-month NSA ∆%: -7.3 Excluding ∆%: -5.2 Blog 8/24/14
GDP Growth	IIQ2014 prior quarter ∆% 0.8; year earlier same quarter ∆%: 3.2 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 6/29/14 7/27/14 8/17/14
Industrial Production	Jun 2014/Jun 2013 ∆%: Production Industries 1.2; Manufacturing 1.9 Blog 8/10/14
Retail Sales	Jul month ∆%: -0.1 Jul 12-month ∆%: 2.6 Blog 8/24/14
Labor Market	Apr-Jun Unemployment Rate: 6.4%; Claimant Count 3.0%; Earnings Growth -0.2% Blog 8/17/14 LMGDP 8/17/14
GDP and the Labor Market	IIQ2014 Weekly Hours 103.8, GDP 100.2, Employment 103.7 IQ2008 =100 GDP IIQ14 100.2 IQ2008=100 Blog 8/17/14
Trade Balance	Balance SA Jun minus ₤2459 million Exports Jun ∆%: -0.9; Apr-Jun ∆%: -5.7 Imports Jun ∆%: -0.6 Apr-Jun ∆%: -3.4 Blog 8/10/14

Links to blog comments in Table UK:

8/17/2014 http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth.html

8/10/14 http://cmpassocregulationblog.blogspot.com/2014/08/volatility-of-valuations-of-risk_10.html

7/27/14 http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html

6/29/14 http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html

5/25/14 http://cmpassocregulationblog.blogspot.com/2014/05/united-states-commercial-banks-assets.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

3/2/14 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 volume of retail sales in the UK decreased 0.1 percent in Jul 2014 and increased 2.6 percent in the 12 months ending in Jul 2014, as shown in Table VH-1. 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 and 0.4 percent in Mar 2013. The quarter ending in Jul 2013 is quite strong with growth of 2.1 percent in May, 0.3 percent in Jun and 1.1 percent in Jul, interrupted by decline of 1.1 percent in Aug 2013 followed by increase of 1.0 percent in Sep 2013. The volume of retail sales fell 1.0 percent in Oct 2013, increasing 0.2 percent in Nov 2013 and jumping 3.2 percent in Dec 2013. Retail sales decreased 2.9 percent in Jan 2014 and increased 0.5 percent in Apr 2014. Retail sales increased 3.4 percent in the 12 months ending in Jul 2014.

Table VH-1, UK, Volume of Retail Sales ∆%

		Month ∆%	12-Month ∆%
2011	Sep	0.6	0.1
	Oct	1.2	0.6
	Nov	0.2	0.3
	Dec	-0.3	2.3
2012	Jan	0.8	0.7
	Feb	-0.7	0.4
	Mar	2.2	2.7
	Apr	-2.3	-2.0
	May	0.6	1.5
	Jun	-0.3	1.8
	Jul	0.6	1.8
	Aug	0.2	2.1
	Sep	0.9	2.0
	Oct	-0.3	0.3
	Nov	0.1	0.5
	Dec	-0.9	-0.1
2013	Jan	-0.1	-1.1
	Feb	1.9	1.9
	Mar	-0.4	-0.9
	Apr	-0.9	0.7
	May	2.1	1.6
	Jun	0.3	1.7
	Jul	1.4	2.4
	Aug	-1.1	1.4
	Sep	1.0	2.2
	Oct	-1.0	1.7
	Nov	0.2	1.9
	Dec	3.2	5.9
2014	Jan	-2.9	3.6
	Feb	1.2	3.1
	Mar	0.7	4.5
	Apr	0.5	6.2
	May	-0.7	3.5
	Jun	0.7	3.4
	Jul	-0.1	2.6

Source: UK Office for National Statistics

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

Retail sales in the UK struggle with oscillating and relatively high inflation, declining recently. Table VH-2 provides 12-month percentage changes of the implied deflator of UK retail sales. The implied deflator of all retail sales declined 0.9 percent in the 12 months ending in Jul 2014 while that of sales excluding auto fuel decreased 0.6 percent. The 12-month increase of the implied deflator of auto fuel in Jun 2014 was minus 2.5 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-2, 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	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	0.6	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	-0.5	0.2	1.8	-0.7	-5.8
	Apr	-0.5	0.1	0.9	-0.6	-4.4
	May	-0.7	-0.4	0.4	-0.7	-2.2
	Jun	-	0.3	0.8	0.2	-2.5
	Jul	-0.9	-0.6	0.2	-0.7	-2.5

Source: UK Office for National Statistics

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

UK monthly retail volume of sales is quite volatile, as shown in Table VH-3. Total volume of sales decreased 0.9 percent in Apr 2013 and increased 2.1 percent in May 2013, 0.3 percent in Jun 2013 and 1.4 percent in Jul 2013 but declined 1.1 percent in Aug 2013. Retail sales increased 1.0 percent in Sep 2013 and fell 1.0 percent in Oct 2013. Retail sales increased 0.2 percent in Nov 2013 and 3.2 percent in Dec 2013. Total volume of retail sales fell 2.9 percent in Jan 2014 and increased 1.2 percent in Feb 2014. Total volume of retail sales increased 0.7 percent in Mar 2014 and 0.5 percent in Apr 2014. Retail sales fell 0.7 percent in May 2014. Retail sales increased 0.7 percent in Jun 2014 and fell 0.1 percent in Jul 2014. There was increase of 0.1 percent in retail sales excluding auto fuels in Jul 2014 and increase of 0.1 percent in food stores, increase of 0.1 percent in nonfood stores and decrease of 1.7 percent in auto fuel stores. Multiple positive and negative variations and changes in magnitudes confirm high volatility.

Table VH-3, UK, Growth of Retail Sales Volume by Component Groups Month SA ∆%

		All Retail	All Retail Ex Auto Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Fuel Stores
2011	Sep	0.6	0.5	0.6	0.3	1.3
	Oct	1.2	1.1	0.3	1.9	1.6
	Nov	0.2	-0.2	-0.2	-0.9	3.6
	Dec	-0.3	-0.2	0.3	-	-1.4
2012	Jan	0.8	0.7	0.6	0.7	1.7
	Feb	-0.7	-0.3	0.4	-1.0	-3.6
	Mar	2.2	1.8	-0.3	3.8	5.4
	Apr	-2.3	-1.3	-0.1	-2.7	-10.0
	May	0.6	0.4	0.3	0.4	2.0
	Jun	-0.3	0.4	0.2	0.7	-5.8
	Jul	0.6	0.3	0.1	-0.2	2.9
	Aug	0.2	-0.1	0.6	0.4	2.2
	Sep	0.9	0.4	0.3	-0.3	4.2
	Oct	-0.3	-	-0.6	0.1	-2.5
	Nov	0.1	0.4	0.3	0.5	-2.5
	Dec	-0.9	-1.0	-0.2	-2.1	0.4
2013	Jan	-0.1	0.2	0.4	-0.4	-2.3
	Feb	1.9	1.7	-0.1	3.6	3.2
	Mar	-0.4	-0.2	2.8	-4.1	-1.4
	Apr	-0.9	-1.0	-4.0	3.1	0.1
	May	2.1	2.4	3.7	0.5	-0.6
	Jun	0.3	0.4	-	0.6	-0.2
	Jul	1.4	1.2	2.9	-0.8	3.1
	Aug	-1.1	-1.1	-2.4	-0.1	-0.5
	Sep	1.0	1.2	-	2.8	-1.0
	Oct	-1.0	-0.5	0.1	-1.4	-4.4
	Nov	0.2	0.3	0.3	0.1	-0.2
	Dec	3.2	3.3	3.1	3.1	1.6
2014	Jan	-2.9	-2.9	-4.3	-0.8	-2.3
	Feb	1.2	1.4	1.7	-0.2	-0.3
	Mar	0.7	0.5	-0.4	1.9	2.8
	Apr	0.5	1.0	2.4	-1.1	-3.2
	May	-0.7	-0.7	-2.3	0.5	-0.3
	Jun	0.7	0.5	0.5	0.5	2.6
	Jul	-0.1	0.1	0.1	0.1	-1.7

Source: UK Office for National Statistics

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

Percentage growth in 12 months of retail sales volume by component groups in the UK is provided in Table VH-4. Total retail sales increased 2.6 percent in the 12 months ending in Jul 2014 with increase of 3.4 percent in sales excluding auto fuel. Sales of food stores decreased 1.5 percent in the 12 months ending in Jul 2014 while sales of nonfood stores increased 6.5 percent. Sales of auto fuel stores decreased 4.7 percent in Jul 2014 relative to a year earlier.

Table VH-4, 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	Sep	0.1	-0.3	-0.3	-1.8	3.2
	Oct	0.6	0.3	0.4	-1.0	2.7
	Nov	0.3	-0.4	-1.1	-1.8	5.4
	Dec	2.3	1.1	1.0	0.3	13.8
2012	Jan	0.7	0.3	1.0	-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	-7.5
	May	1.5	2.0	1.0	1.7	-2.3
	Jun	1.8	2.7	1.3	3.4	-5.2
	Jul	1.8	2.3	0.5	2.5	-2.5
	Aug	2.1	2.5	0.8	4.1	-1.6
	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	-9.3
	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	-4.6
	Mar	-0.9	0.2	1.2	-3.4	-10.1
	Apr	0.7	0.5	-3.0	2.2	2.9
	May	1.6	1.9	-0.3	1.9	-0.7
	Jun	1.7	1.7	-0.3	1.2	1.8
	Jul	2.4	2.6	2.3	0.8	0.6
	Aug	1.4	1.7	-0.7	0.4	-0.7
	Sep	2.2	2.8	-0.8	4.0	-3.1
	Oct	1.7	2.2	-0.1	2.4	-2.6
	Nov	1.9	2.2	0.5	1.7	-1.0
	Dec	5.9	6.8	4.2	7.1	-1.6
2014	Jan	3.6	4.2	-0.1	7.2	-1.1
	Feb	3.1	3.6	1.6	3.2	-1.5
	Mar	4.5	4.5	-2.1	10.0	4.3
	Apr	6.2	7.1	6.2	5.4	-1.1
	May	3.5	4.3	0.5	5.7	-3.4
	Jun	3.4	3.8	0.6	4.7	-
	Jul	2.6	3.4	-1.5	6.5	-4.7

Source: UK Office for National Statistics

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

Table VH-5 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 2.6 percent in the 12 months ending in Jul 2014. Sales of predominantly food stores with weight of 41.5 percent decreased 1.5 percent in the 12 months ending in Jul 2014, subtracting 0.6 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 13.1 percent and positive contribution of 0.8 percentage points. Automotive fuel with weight of 11.5 percent and growth of minus 4.7 percent deducted 0.4 percentage points. The value of retail sales increased 1.7 percent in the 12 months ending in Jul 2014. There were positive contributions: 2.3 percentage points for predominantly nonfood stores and 0.7 percentage points for non-store retailing. Automotive fuel stores deducted 0.8 percentage points while food stores deducted 0.5 percentage points.

Table VH-5, UK, Volume and Value of Retail Sales 12-month ∆% and Percentage Points Contributions by Sectors

Jul 2014	Weight % of All Retailing	Volume SA 12- Month ∆%	PP Cont. % points	Value SA 12- Month ∆%	PP Cont. % points
All Retailing	100.0	2.6		1.7
Mostly Food Stores	41.5	-1.5	-0.6	-1.3	-0.5
Mostly Nonfood Stores	41.3	6.5	2.8	5.6	2.3
Non-store Retailing	5.7	13.1	0.8	12.1	0.7
Automotive Fuel	11.5	-4.7	-0.4	-6.9	-0.8

Cont.: Contribution

Source: UK Office for National Statistics

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

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014.