CMP Associates Regulation Blog

Chart VA-2 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers not seasonally adjusted (NSA) in millions of dollars. The series without adjustment shows sharp jagged behavior because of monthly fluctuations following seasonal patterns. There is sharp recovery from the global recession in a robust trend, which is mixture of price and quantity effects because data are not adjusted for price changes. There is stability in the final segment with monthly marginal strength.

Chart VA-2, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Jun 2014

US Census Bureau

Businesses added cautiously to inventories to replenish stocks. Retailers’ inventories added 0.5 percent in Jun 2014 and 0.2 percent in May with growth of 6.0 percent in 12 months, as shown in Table VA-2. Total business increased inventories by 0.4 percent in Jun, 0.5 percent in May and 5.8 percent in 12 months. Inventories sales/ratios of total business continued at a level close to 1.29 under careful management to avoid costs and risks. Inventory/sales ratios of manufacturers and retailers are higher than for merchant wholesalers. There is stability in inventory/sales ratios in individual months and relative to a year earlier.

Table VA-2, US, Percentage Changes for Inventories of Manufacturers, Retailers and Merchant Wholesalers and Inventory/Sales Ratios

Inventory Change	Jun 14 Millions of Dollars NSA	Jun 14/ May 14 ∆% SA	May 14/ Apr 14 ∆% SA	Jun 14/ Jun 13 ∆% NSA
Total Business	1,721,621	0.4	0.5	5.8
Manufacturers	648,593	0.3	0.8	4.0
Retailers	546,954	0.5	0.2	6.0
Merchant Wholesalers	526,074	0.3	0.3	7.9
Inventory/ Sales Ratio NSA	Jun 14 Millions of Dollars NSA	Jun 2014 SA	May 2014 SA	Jun 2013 SA
Total Business	1,732,814	1.29	1.29	1.28
Manufacturers	656,822	1.31	1.31	1.30
Retailers	548,243	1.42	1.41	1.39
Merchant Wholesalers	527,749	1.17	1.17	1.16

Source: US Census Bureau http://www.census.gov/mtis/

Chart VA-3 of the US Census Bureau provides total business inventories of manufacturers, retailers and merchant wholesalers seasonally adjusted (SA) in millions of dollars from Jan 1992 to Jun 2014. The impact of the two recessions of 2001 and IVQ2007 to IIQ2009 is evident in the form of sharp reductions in inventories. Inventories have surpassed the peak before the global recession. Data are not adjusted for price changes.

Chart VA-3, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Jun 2014

US Census Bureau

Chart VA-4 provides total business inventories of manufacturers, retailers and merchant wholesalers not seasonally adjusted (NSA) from Jan 1992 to Jun 2014 in millions of dollars. The recessions of 2001 and IVQ2007 to IIQ2009 are evident in the form of sharp reductions of inventories. There is sharp upward trend of inventory accumulation after both recessions. Total business inventories are higher than in the peak before the global recession.

Chart VA-4, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Jun 2014

US Census Bureau

http://www2.census.gov/retail/releases/historical/mtis/img/mtisbrf.gif

Inventories follow business cycles. When recession hits sales inventories pile up, declining with expansion of the economy. In a fascinating classic opus, Lloyd Meltzer (1941, 129) concludes:

“The dynamic sequences (i) through (6) were intended to show what types of behavior are possible for a system containing a sales output lag. The following conclusions seem to be the most important:

(i) An economy in which business men attempt to recoup inventory losses will always undergo cyclical fluctuations when equilibrium is disturbed, provided the economy is stable.

This is the pure inventory cycle.

(2) The assumption of stability imposes severe limitations upon the possible size of the marginal propensity to consume, particularly if the coefficient of expectation is positive.

(3) The inventory accelerator is a more powerful de-stabilizer than the ordinary acceleration principle. The difference in stability conditions is due to the fact that the former allows for replacement demand whereas the usual analytical formulation of the latter does not. Thus, for inventories, replacement demand acts as a de-stabilizer. Whether it does so for all types of capital goods is a moot question, but I believe cases may occur in which it does not.

(4) Investment for inventory purposes cannot alter the equilibrium of income, which depends only upon the propensity to consume and the amount of non-induced investment.

(5) The apparent instability of a system containing both an accelerator and a coefficient of expectation makes further investigation of possible stabilizers highly desirable.”

Chart VA-5 shows the increase in the inventory/sales ratios during the recession of 2007-2009. The inventory/sales ratio fell during the expansions. The inventory/sales ratio declined to a trough in 2011, climbed and then stabilized at current levels in 2012, 2013 and 2014.

Chart VA-5, Total Business Inventories/Sales Ratios 2005 to 2014

Source: US Census Bureau

Sales of retail and food services changed 0.0 percent in Jul 2014 after increasing 0.2 percent in Jun 2014 seasonally adjusted (SA), growing 3.7 percent in Jan-Jul 2014 relative to Jan-Jul 2013 not seasonally adjusted (NSA), as shown in Table VA-3. Excluding motor vehicles and parts, retail sales increased 0.1 percent in Jul 2014, increasing 0.4 percent in Jun 2014 SA and increasing 2.7 percent NSA in Jan-Jul 2014 relative to a year earlier. Sales of motor vehicles and parts decreased 0.2 percent in Jul 2014 after decreasing 0.3 percent in Jul 2014 SA and increasing 7.6 percent NSA in Jan-Jul 2014 relative to a year earlier. Gasoline station sales increased 0.1 percent SA in Jul 2014 after decreasing 0.8 percent in Jun 2014 in oscillating prices of gasoline that are moderating, decreasing 1.2 percent in Jan-Jul 2014 relative to a year earlier.

Table VA-3, US, Percentage Change in Monthly Sales for Retail and Food Services, ∆%

	Jul/Jun ∆% SA	Jun/May ∆% SA	Jan-Jul 2014 Million Dollars NSA	Jan-Jul 2014 from Jan-Jul 2013 ∆% NSA
Retail and Food Services	0.0	0.2	2,998,558	3.7
Excluding Motor Vehicles and Parts	0.1	0.4	2,383,288	2.7
Motor Vehicles & Parts Dealers	-0.2	-0.3	615,270	7.6
Retail	0.0	0.2	2,671,005	3.6
Building Materials	0.2	1.0	194,129	4.8
Food and Beverage	0.3	0.9	383,338	2.9
Grocery	0.2	0.7	342,410	2.3
Health & Personal Care Stores	0.4	1.0	170,301	5.8
Clothing & Clothing Accessories Stores	0.4	0.2	135,024	1.5
Gasoline Stations	0.1	-0.8	320,021	-1.2
General Merchandise Stores	-0.5	0.4	365,012	1.2
Food Services & Drinking Places	0.2	0.2	327,553	4.6

Source: US Census Bureau http://www.census.gov/retail/

Chart VA-6 provides monthly percentage changes of sales of retail and food services. There is significant monthly volatility that prevents identification of clear trends.

Chart VA-6, US, Monthly Percentage Change of Retail and Food Services Sales, Jan 1992-Jul 2014

Source: US Census Bureau

http://www.census.gov/retail/

Chart VA-7 of the US Census Bureau provides total sales of retail trade and food services seasonally adjusted (SA) from Jan 1992 to Jul 2014 in millions of dollars. The impact on sales of the shallow recession of 2001 was much milder than the sharp contraction in the global recession from IVQ2007 to IIQ2009. There is flattening in the final segment of the series followed by another increase. Data are not adjusted for price changes.

Chart VA-7, US, Total Sales of Retail Trade and Food Services, SA, Jan 1992-Jul 2014, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/retail/

Chart VA-8 of the US Census Bureau provides total sales of retail trade and food services not seasonally adjusted (NSA) in millions of dollars from Jan 1992 to Jul 2014. Data are not adjusted for seasonality, which explains sharp jagged behavior, or price changes. There was contraction during the global recession from IVQ2007 to IIQ2009 with strong rebound to a higher level and stability followed by strong increase in the final segment.

Chart VA-8, US, Total Sales of Retail Trade and Food Services, NSA, Jan 1992-Jul 2014, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/retail/

Risk aversion channels funds toward US long-term and short-term securities that finance the US balance of payments and fiscal deficits benefitting from risk flight to US dollar denominated assets. There are now temporary interruptions because of fear of rising interest rates that erode prices of US government securities because of mixed signals on monetary policy and exit from the Fed balance sheet of four trillion dollars of securities held outright. Net foreign purchases of US long-term securities (row C in Table VA-4) decreased from $18.6 billion in May 2014 to minus $18.7 billion in Jun 2014. Foreign (residents) purchases minus sales of US long-term securities (row A in Table VA-4) in May 2014 of $34.6 billion decreased to minus $18.4 billion in Jun 2014. Net US (residents) purchases of long-term foreign securities (row B in Table VA-4) improved from minus $16.0 billion in May 2014 to minus $0.4 billion in Jun 2014. In Jun 2014,

C = A + B = -$18.4 billion - $0.4 billion = $18.7 billion

There are minor rounding errors. There is weakening demand in Table VA-4 in Jun in A1 private purchases by residents overseas of US long-term securities of minus $44.6 billion of which deterioration in A11 Treasury securities of minus $40.8 billion, deterioration in A12 of minus $1.6 billion in agency securities, improvement of minus $3.3 billion of corporate bonds and deterioration of $1.1 billion in equities. Worldwide risk aversion causes flight into US Treasury obligations with significant oscillations. Official purchases of securities in row A2 increased $26/3 billion with increase of Treasury securities of $20.0 billion in Jun 2014. Official purchases of agency securities increased $5.0 billion in Jun. Row D shows decrease in Jun 2014 of $5.7 billion in purchases of short-term dollar denominated obligations. Foreign private holdings of US Treasury bills decreased $4.3 billion (row D11) with foreign official holdings decreasing $20.2 billion while the category “other” increased $10.2 billion. Foreign private holdings of US Treasury bills increased $4.3 billion in what could be arbitrage of duration exposures. Risk aversion of default losses in foreign securities dominates decisions to accept zero interest rates in Treasury securities with no perception of principal losses. In the case of long-term securities, investors prefer to sacrifice inflation and possible duration risk to avoid principal losses with significant oscillations in risk perceptions.

Table VA-4, Net Cross-Borders Flows of US Long-Term Securities, Billion Dollars, NSA

	Jun 2013 12 Months	Jun 2014 12 Months	May 2014	Jun 2014
A Foreign Purchases less Sales of US LT Securities	323.7	199.7	34.6	-18.4
A1 Private	132.5	149.4	10.2	-44.6
A11 Treasury	-12.7	179.9	5.3	-40.8
A12 Agency	69.3	2.8	2.8	-1.6
A13 Corporate Bonds	8.0	-23.8	-9.0	-3.3
A14 Equities	68.0	-9.5	11.0	1.1
A2 Official	191.2	50.3	24.4	26.3
A21 Treasury	110.0	17.1	19.7	20.0
A22 Agency	53.6	41.1	3.7	5.0
A23 Corporate Bonds	19.5	6.7	1.2	-0.3
A24 Equities	8.2	-14.5	-0.2	1.5
B Net US Purchases of LT Foreign Securities	-145.8	-195.0	-16.0	-0.4
B1 Foreign Bonds	-35.2	-21.7	0.2	-13.2
B2 Foreign Equities	-110.6	-173.3	-16.2	12.8
C Net Foreign Purchases of US LT Securities	178.0	4.7	18.6	-18.7
D Increase in Foreign Holdings of Dollar Denominated Short-term	48.5	-39.0	2.3	-5.7
D1 US Treasury Bills	45.3	-48.5	-5.0	-15.9
D11 Private	47.0	-26.8	-1.8	4.3
D12 Official	-1.7	-21.7	-3.2	-20.2
D2 Other	3.2	9.5	7.2	10.2

C = A + B;

A = A1 + A2

A1 = A11 + A12 + A13 + A14

A2 = A21 + A22 + A23 + A24

B = B1 + B2

D = D1 + D2

Sources: United States Treasury

http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticpress.aspx

Table VA-5 provides major foreign holders of US Treasury securities. China is the largest holder with $1268.4 billion in Jun 2014, decreasing 0.6 percent from $1275.8 billion in Jun 2013 while decreasing $2.5 billion from May 2014 or 0.2 percent. The United States Treasury estimates US government debt held by private investors at $9800 billion in Mar 2014. China’s holding of US Treasury securities represent 12.9 percent of US government marketable interest-bearing debt held by private investors (http://www.fms.treas.gov/bulletin/index.html). Min Zeng, writing on “China plays a big role as US Treasury yields fall,” on Jul 16, 2004, published in the Wall Street Journal (http://online.wsj.com/articles/china-plays-a-big-role-as-u-s-treasury-yields-fall-1405545034?tesla=y&mg=reno64-wsj), finds that acceleration in purchases of US Treasury securities by China has been an important factor in the decline of Treasury yields in 2014. Japan increased its holdings from $1083.3 billion in Jun 2013 to $1219.5 billion in Jun 2014 or 12.6 percent. The combined holdings of China and Japan in Jun 2014 add to $2488 billion, which is equivalent to 25.4 percent of US government marketable interest-bearing securities held by investors of $9800 billion in Mar 2014 (http://www.fms.treas.gov/bulletin/index.html). Total foreign holdings of Treasury securities rose from $5595.0 billion in Jun 2013 to $6013.0 billion in Jun 2014, or 7.5 percent. The US continues to finance its fiscal and balance of payments deficits with foreign savings (see Pelaez and Pelaez, The Global Recession Risk (2007)). A point of saturation of holdings of US Treasury debt may be reached as foreign holders evaluate the threat of reduction of principal by dollar devaluation and reduction of prices by increases in yield, including possibly risk premium. Shultz et al (2012) find that the Fed financed three-quarters of the US deficit in fiscal year 2011, with foreign governments financing significant part of the remainder of the US deficit while the Fed owns one in six dollars of US national debt. Concentrations of debt in few holders are perilous because of sudden exodus in fear of devaluation and yield increases and the limit of refinancing old debt and placing new debt. In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):

“Imagine that fiscal policy dominates monetary policy. The fiscal authority independently sets its budgets, announcing all current and future deficits and surpluses and thus determining the amount of revenue that must be raised through bond sales and seignorage. Under this second coordination scheme, the monetary authority faces the constraints imposed by the demand for government bonds, for it must try to finance with seignorage any discrepancy between the revenue demanded by the fiscal authority and the amount of bonds that can be sold to the public. Suppose that the demand for government bonds implies an interest rate on bonds greater than the economy’s rate of growth. Then if the fiscal authority runs deficits, the monetary authority is unable to control either the growth rate of the monetary base or inflation forever. If the principal and interest due on these additional bonds are raised by selling still more bonds, so as to continue to hold down the growth of base money, then, because the interest rate on bonds is greater than the economy’s growth rate, the real stock of bonds will growth faster than the size of the economy. This cannot go on forever, since the demand for bonds places an upper limit on the stock of bonds relative to the size of the economy. Once that limit is reached, the principal and interest due on the bonds already sold to fight inflation must be financed, at least in part, by seignorage, requiring the creation of additional base money.”

Table VA-5, US, Major Foreign Holders of Treasury Securities $ Billions at End of Period

	Jun 2014	May 2014	Jun 2013
Total	6013.2	5976.5	5595.0
China	1268.4	1270.9	1275.8
Japan	1219.5	1220.1	1083.3
Belgium	364.1	362.4	176.2
Caribbean Banking Centers	308.3	310.9	286.3
Oil Exporters	262.1	257.9	256.9
Brazil	253.7	250.1	253.7
Taiwan	179.4	174.4	186.1
Switzerland	175.9	174.0	180.3
United Kingdom	173.7	179.9	162.6
Hong Kong	158.2	155.8	124.2
Luxembourg	146.2	142.0	150.5
Russia	113.9	111.4	138.0
Ireland	113.0	108.0	121.2
Foreign Official Holdings	4108.2	4092.2	4012.2
A. Treasury Bills	341.0	361.2	362.7
B. Treasury Bonds and Notes	3767.2	3731.0	3649.5

Source: United States Treasury

http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticpress.aspx

Table VA-6 provides additional information required for understanding the deficit/debt situation of the United States. The table is divided into four parts: Treasury budget in the 2014 fiscal year beginning on Oct 1, 2013 and ending on Sep 30, 2014; federal fiscal data for the years from 2009 to 2013; federal fiscal data for the years from 2005 to 2008; and Treasury debt held by the public from 2005 to 2013. Receipts increased 8.0 percent in the cumulative fiscal year 2014 ending in Jul 2014 relative to the cumulative in fiscal year 2013. Individual income taxes increased 4.9 percent relative to the same fiscal period a year earlier. Outlays increased 1.2 percent relative to a year earlier. There are also receipts, outlays, deficit and debt for fiscal year 2013. Total revenues of the US from 2009 to 2012 accumulate to $9021 billion, or $9.0 trillion, while expenditures or outlays accumulate to $14,109 billion, or $14.1 trillion, with the deficit accumulating to $5090 billion, or $5.1 trillion. Revenues decreased 6.5 percent from $9653 billion in the four years from 2005 to 2008 to $9021 billion in the years from 2009 to 2012. Decreasing revenues were caused by the global recession from IVQ2007 (Dec) to IIQ2009 (Jun) and also by growth of only 2.2 percent on average in the cyclical expansion from IIIQ2009 to IIQ2014. In contrast, the expansion from IQ1983 to IIIQ1987 was at the average annual growth rate of 4.9 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html). Because of mediocre GDP growth, there are 26.8 million unemployed or underemployed in the United States for an effective unemployment rate of 16.3 percent (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html). Weakness of growth and employment creation is analyzed in II Collapse of United States Dynamism of Income Growth and Employment Creation (http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html). In contrast with the decline of revenue, outlays or expenditures increased 30.2 percent from $10,839 billion, or $10.8 trillion, in the four years from 2005 to 2008, to $14,109 billion, or $14.1 trillion, in the four years from 2009 to 2012. Increase in expenditures by 30.2 percent while revenue declined by 6.5 percent caused the increase in the federal deficit from $1186 billion in 2005-2008 to $5090 billion in 2009-2012. Federal revenue was 14.9 percent of GDP on average in the years from 2009 to 2012, which is well below 17.4 percent of GDP on average from 1973 to 2012. Federal outlays were 23.3 percent of GDP on average from 2009 to 2012, which is well above 20.4 percent of GDP on average from 1973 to 2012. The lower part of Table VA-6 shows that debt held by the public swelled from $5803 billion in 2008 to $11,982 billion in 2013, by $5478 billion or 106.5 percent. Debt held by the public as percent of GDP or economic activity jumped from 39.3 percent in 2008 to 72.1 percent in 2013, which is well above the average of 38.0 percent from 1973 to 2012. The United States faces tough adjustment because growth is unlikely to recover, creating limits on what can be obtained by increasing revenues, while continuing stress of social programs restricts what can be obtained by reducing expenditures.

Table VA-6, US, Treasury Budget in Fiscal Year to Date Million Dollars

Jul 2014	Fiscal Year 2014	Fiscal Year 2013	∆%
Receipts	2,469,178	2,287,172	8.0
Outlays	2,929,628	2,894,593	1.2
Deficit	-460,450	-607,420
Individual Income Tax	1,143,476	1,090,250	4.9
Corporation Income Tax	243,298	212,764	14.4
Social Insurance	617,381	559,239	10.4
	Receipts	Outlays	Deficit (-), Surplus (+)
$ Billions
Fiscal Year 2013	2,775	3,455	-680
% GDP	16.7	20.8	-4.1
Fiscal Year 2012	2,450	3,537	-1,087
% GDP	15.2	22.0	-6.8
Fiscal Year 2011	2,304	3,603	-1,300
% GDP	15.0	23.4	-8.4
Fiscal Year 2010	2,163	3,457	-1,294
% GDP	14.6	23.4	-8.8
Fiscal Year 2009	2,105	3,518	-1,413
% GDP	14.6	24.4	-9.8
Total 2009-2012	9,021	14,109	-5,090
Average % GDP 2009-2012	14.9	23.3	-8.4
Fiscal Year 2008	2,524	2,983	-459
% GDP	17.1	20.2	-3.1
Fiscal Year 2007	2,568	2,729	-161
% GDP	17.9	19.0	-1.1
Fiscal Year 2006	2,407	2,655	-248
% GDP	17.6	19.4	-1.8
Fiscal Year 2005	2,154	2,472	-318
% GDP	16.7	19.2	-2.5
Total 2005-2008	9,653	10,839	-1,186
Average % GDP 2005-2008	17.3	19.5	-2.1
Debt Held by the Public	Billions of Dollars	Percent of GDP
2005	4,592	35.6
2006	4,829	35.3
2007	5,035	35.1
2008	5,803	39.3
2009	7,545	52.3
2010	9,019	61.0
2011	10,128	65.8
2012	11,281	70.1
2013	11,982	72.1

Source: http://www.fms.treas.gov/mts/index.html CBO (2012NovMBR). CBO (2011AugBEO); Office of Management and Budget 2011. Historical Tables. Budget of the US Government Fiscal Year 2011. Washington, DC: OMB; CBO. 2011JanBEO. Budget and Economic Outlook. Washington, DC, Jan. CBO. 2012AugBEO. Budget and Economic Outlook. Washington, DC, Aug 22. CBO. 2012Jan31. Historical budget data. Washington, DC, Jan 31. CBO. 2012NovCDR. Choices for deficit reduction. Washington, DC. Nov. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO (2013Aug12). 2013AugHBD. Historical budget data—August 2013. Washington, DC, Congressional Budget Office, Aug. CBO, Historical Budget Data—February 2014, Washington, DC, Congressional Budget Office, Feb. CBO, Historical budget data—April 2014 release. Washington, DC, Congressional Budget Office, Apr.

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/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:

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

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

Fiscal Year Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2013
Apr 2014	+2.2 to +2.3 [+2.2]	+0.8
Jan 2014	+2.5 to +2.9 [+2.7]	+0.7 to +0.9 [+0.7]
Oct 2013	+2.6 to +3.0 [+2.7]	+0.6 to +1.0 [+0.7]
Jul 2013	+2.5 to +3.0 [+2.8]	+0.5 to +0.8 [+0.6]
2014
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™ deteriorated with the Flash Japan Manufacturing PMI™ decreasing from 51.5 in Jun to 50.8 in Jul and the Flash Japan Manufacturing Output Index™ decreasing from 52.4 in Jun to 50.0 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/f8d4bd367e0f4b03a2e4ae0c08f76e54). New export orders increased for the first in four months. Amy Brownbill, Economist at Markit, finds improving encouraging increase in employment (http://www.markiteconomics.com/Survey/PressRelease.mvc/f8d4bd367e0f4b03a2e4ae0c08f76e54). 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	May month SA ∆% 0.6 12-month NSA ∆% -1.6 Blog 7/27/14
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 Jun 12 months ∆%: minus 2.0 Imports Jun 12 months ∆% 8.4 Blog 7/27/14

Links to blog comments in Table JPY:

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

4/27/14

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

Japan’s economy grew 1.5 percent in IQ2014, seasonally adjusted, partly because of anticipation of purchases to avoid the increase in the tax on value added of consumption in Apr 2014, contracting 1.7 percent in IIQ2014, as shown in Table VB-1, incorporating the latest estimates and revisions. The economy of Japan grew 0.0 percent in IVQ2013 after 0.4 percent in IIIQ2013, 0.9 percent in IIQ2013 and 1.3 percent in IQ2013. Japan’s GDP decreased 0.1 percent in IVQ2012 relative to IIIQ2012. IQ2012 GDP growth was revised to 1.0 percent; IIQGDP growth was revised to -0.5 percent; and IIIQ2012 growth was revised to -0.7 percent. The economy of Japan had already weakened in IVQ2010 when GDP fell revised 0.5 percent. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell 1.8 percent in IQ2011 and fell again 0.7 percent in IIQ2011 because of the disruption of the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Recovery was robust in the first two quarters of 2010 but GDP grew at 1.4 percent in IIIQ2010 and fell 0.5 percent in IVQ2010. The deepest quarterly contractions in the recession were 3.3 percent in IVQ2008 and 4.0 percent in IQ2009.

Table VB-1, Japan, Real GDP ∆% Changes from the Previous Quarter Seasonally Adjusted ∆%

	IQ	IIQ	IIIQ	IVQ
2014	1.5	-1.7
2013	1.3	0.9	0.4	0.0
2012	1.0	-0.5	-0.7	-0.1
2011	-1.8	-0.7	2.6	0.2
2010	1.5	1.1	1.4	-0.5
2009	-4.0	1.7	0.1	1.7
2008	0.7	-1.2	-1.1	-3.3
2007	1.0	0.1	-0.4	0.9
2006	0.4	0.4	-0.1	1.3
2005	0.2	1.3	0.4	0.2
2004	0.9	0.1	0.1	-0.3
2003	-0.6	1.3	0.4	1.0
2002	-0.2	1.0	0.6	0.4
2001	0.6	-0.2	-1.1	-0.1
2000	1.6	0.2	-0.3	0.7
1999	-0.9	0.4	-0.2	0.5
1998	-1.9	-0.5	0.3	0.6
1997	0.7	-0.9	0.4	-0.1

Source: Japan Economic and Social Research Institute, Cabinet Office

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

Table VB-2 provides contributions to real GDP at seasonally adjusted annual rates (SAAR). Japan contracted at 6.8 percent in IIQ2014 with deduction of 12.4 percentage points of personal consumption expenditures, deduction of 3.0 percentage points of gross fixed capital formation. Trade added 4.4 percentage points from GDP growth in IIQ2014; private inventory investment added 3.9 percentage points; and government expenditures added 0.3 percentage points. The GDP of Japan expanded at 6.1 percent in IQ2014 with contributions of 5.1 percent by personal consumption and 4.0 percent of gross fixed capital formation. There were deductions of 0.8 percent by trade, 2.1 percent by inventory divestment and 0.1 percent by government expenditures. The GDP of Japan Japan’s GDP contracted at 0.2 percent annual equivalent in IVQ2013 with growth of personal consumption expenditures of 0.9 percent and GFCF at 1.3 percent. Trade deducted 2.4 percentage points. Japan grew at 1.4 percent in IIIQ 2013 with contribution of 0.5 percentage points by personal consumption and 2.2 percentage points by GFCF. Trade deducted 1.6 percentage points. Japan grew at 3.4 percent SAAR in IIQ2013 driven by contributions of 1.8 percent of personal consumption (PC), 0.5 percent of net trade and gross fixed capital formation (GFCF) at 2.0 percent. In IQ2013, Japan’s GDP increased at the SAAR of 5.2 percent in large part because of 2.6 percent in personal consumption and 1.7 percent in trade. The SAAR of GDP in IVQ2012 was minus 0.3 percent: 1.1 percentage points from growth of personal consumption expenditures (PC) less 0.5 percentage points of net trade (exports less imports) less 1.1 percentage points of private inventory investment (PINV) plus 0.5 percentage points of government consumption and minus 0.3 percentage points of gross fixed capital formation (GFCF). The SAAR of GDP in IIIQ2011 was revised to a high 10.7 percent. Net trade deducted from GDP growth in three quarters of 2011 and provided the growth impulse of 3.9 percentage points in IIIQ2011. Growth in 2011 and IQ2012 was driven by personal consumption expenditures that deducted 1.2 percentage points from GDP growth in IIIQ2012 but added 1.1 percentage points to GDP growth in IVQ2012.

Table VB-2, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %

	GDP	PC	GFCF	Trade	PINV	GOVC
2014
I	6.1	5.1	4.0	-0.8	-2.1	-0.1
II	-6.8	-12.4	-3.0	4.4	3.9	0.3
2013
I	5.2	2.6	-0.2	1.7	0.4	0.8
II	3.4	1.8	2.0	0.2	-1.2	0.4
III	1.4	0.5	2.2	-1.6	0.2	0.1
IV	-0.2	0.9	1.3	-2.4	-0.3	0.2
2012
I	4.1	0.9	-0.2	0.4	1.7	1.2
II	-2.2	1.0	0.3	-1.5	-1.5	-0.5
III	-2.8	-1.2	-0.9	-1.9	0.7	0.3
IV	-0.3	1.1	-0.3	-0.5	-1.1	0.5
2011
I	-6.9	-4.1	-0.1	-1.2	-1.6	0.1
II	-2.7	2.3	0.1	-4.5	-1.0	0.2
III	10.7	4.0	1.4	3.9	1.3	0.1
IV	0.7	1.4	3.1	-3.0	-1.0	0.2
2010
I	6.1	1.7	0.3	2.2	2.4	-0.5
II	4.3	-0.1	1.1	0.0	2.2	1.2
III	5.8	3.2	0.9	0.5	1.0	0.3
IV	-2.1	-0.8	-1.2	-0.3	-0.1	0.3
2009
I	-15.0	-1.9	-1.9	-4.4	-7.5	0.8
II	7.0	4.0	-3.1	7.3	-1.9	0.6
III	0.2	0.0	-1.4	2.2	-1.6	1.0
IV	7.1	3.5	0.0	2.8	0.5	0.3
2008
I	2.7	1.5	0.4	1.2	-0.4	0.0
II	-4.7	-3.2	-2.3	0.4	1.1	-0.8
III	-4.1	-0.5	-0.9	0.0	-2.7	0.0
IV	-12.5	-2.8	-4.6	-11.4	5.7	0.3
2007
I	4.1	0.9	0.5	1.2	1.3	0.4
II	0.5	0.6	-1.5	0.7	0.0	0.5
III	-1.5	-1.0	-1.7	2.0	-0.6	-0.2
IV	3.5	0.3	0.2	1.4	0.9	0.6

Note: PC: Private Consumption; GFCF: Gross Fixed Capital Formation; PINV: Private Inventory; Trade: Net Exports; GOVC: Government Consumption

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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/en/sna/sokuhou/sokuhou_top.html

Japan’s percentage growth of GDP not seasonally adjusted in a quarter relative to the same quarter a year earlier is shown in Table VB-4. Contraction of GDP in a quarter relative to the same quarter a year earlier extended over seven quarters from IIQ2008 through IVQ2009. Contraction was sharpest in IQ2009 with output declining 9.4 percent relative to a year earlier. Yearly quarterly rates of growth of Japan were relatively high for a mature economy through the decade with the exception of the contractions from IVQ2001 to IIQ2002 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused flat GDP in IQ2011 at 0.0 percent relative to the same quarter a year earlier and decline of 1.5 percent in IIQ2011. GDP fell 0.5 percent in IIIQ2011 relative to a year earlier and increased 0.1 percent in IVQ2011 relative to a year earlier. Growth resumed with 3.3 percent in IQ2012 relative to a year earlier. Growth of 3.2 percent in IIQ2012 is largely caused by the low level in IIQ2011 resulting from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP decreased 0.2 percent in IIIQ2012 relative to a year earlier and 0.3 percent in IVQ2012 relative to a year earlier. GDP increased 0.1 percent in IQ2013 relative to a year earlier and 1.2 percent in IIQ2013. Growth of 2.3 percent in IIIQ2013 relative to a year earlier is partly due to the decline of 0.7 percent in GDP in IIIQ2012. GDP increased 2.5 percent in IVQ2013 relative to a year earlier. The GDP of Japan increased 3.0 percent in IQ2014 relative to a year earlier. Japan’s GDP contracted 0.1 percent in IIQ2014 relative to a year earlier. Japan faces the challenge of recovery from the devastation of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in an environment of declining world trade and bouts of risk aversion that cause appreciation of the Japanese yen that erode the country’s competitiveness in world markets.

Table VB-4, Japan, Real GDP ∆% Changes from Same Quarter Year Earlier, NSA ∆%

	IQ	IIQ	IIIQ	IVQ
2014	3.0	-0.1
2013	0.1	1.2	2.3	2.5
2012	3.3	3.2	-0.2	-0.3
2011	0.0	-1.5	-0.5	0.1
2010	4.9	4.4	6.0	3.3
2009	-9.4	-6.6	-5.6	-0.5
2008	1.4	-0.1	-0.6	-4.7
2007	2.8	2.3	2.0	1.6
2006	2.6	1.3	0.9	2.0
2005	0.4	1.4	1.5	1.9
2004	4.0	2.6	2.2	0.7
2003	1.7	1.8	1.5	1.8
2002	-1.6	-0.2	1.4	1.6
2001	1.6	0.9	0.0	-1.0
2000	2.7	2.4	2.2	1.8
1999	-0.3	0.1	-0.1	-0.5
1998	-2.4	-1.8	-2.3	-1.5
1997	3.5	1.5	1.7	-0.2

Source: Japan Economic and Social Research Institute, Cabinet Office

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

Japan’s total machinery orders seasonally adjusted in Table VB-1 decreased 17.1 percent seasonally adjusted in Jun 2014. Private sector orders increased 0.5 percent and increased 8.8 percent excluding volatile orders. Orders from overseas increased 62.8 percent and manufacturing orders increased 6.7 percent. Government orders decreased 24.0 percent.

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

2014	Jun 14	May 14	Apr 14	Mar 14
Total	-17.1	-30.5	34.8	4.0
Private Sector	0.5	-19.6	-2.1	17.3
Excluding Volatile Orders	8.8	-19.5	-9.1	19.1
Manufacturing	6.7	-18.6	-9.4	23.7
Non-Manufacturing ex Volatile	4.0	-17.8	0.9	8.5
Government	-24.0	22.4	40.5	-18.5
From Overseas	62.8	-45.9	71.3	3.2
Through Agencies	3.1	2.2	27.3	-22.0

Note: Mfg: manufacturing

Source: Japan Economic and Social Research Institute, Cabinet Office

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

Chart VB-1, Japan, Machinery Orders

Source: Japan Economic and Social Research Institute, Cabinet Office

Table VB-6 provides values and percentage changes from a year earlier of Japan’s machinery orders without seasonal adjustment. Total orders of JPY 2,673,711 million in Jun 2014 are divided between JPY 1,309,405 million overseas orders, or 52.0 percent of the total, and domestic orders of JPY 816,595 million, or 30.5 percent of the total, with orders through agencies of JPY 108,024 million, or 4.0 percent of the total. Orders through agencies are not in Table VB-2 because of the minor value and appear only in the note to the table. Twelve-month percentages changes in May 2014 were mixed with decreases of 2.9 percent for domestic orders and 3.0 percent for private excluding volatile components with increase of 30.3 percent for total orders. Overseas orders increased 87.5 percent in 12 months.

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

	Total	Overseas	Domestic	Private ex Volatile
Value Jun 2014	2,673,711	1,390,405	1,175,282	816,595
% Total	100.0	52.0	44.0	30.5
Value Jun 2013	2,051,847	741,702	1,210,029	841,639
% Total	100.0	36.1	59.0	41.0
12-month ∆%	30.3	87.5	-2.9	-3.0
Jun 2014	30.3	87.5	-2.9	-3.0
May 2014	-2.6	-0.2	-5.5	-14.3
Apr 2014	53.6	101.7	21.5	17.6
Mar 2014	-0.3	-4.3	4.1	16.1
Feb 2014	20.0	31.9	12.4	10.8
Jan 2014	28.8	29.8	29.0	23.6
Dec 2013	15.1	25.0	8.3	6.7
Nov 2013	8.9	1.3	14.4	16.6
Oct 2013	24.6	29.7	21.4	17.8
Sep 2013	30.3	57.4	18.4	11.4
Aug 2013	25.9	41.8	17.1	10.3
Jul 2013	5.3	4.4	6.9	6.5
Jun 2013	2.7	0.1	4.1	4.9
May 2013	18.1	17.1	20.8	16.5
Apr 2013	-4.3	6.7	-9.9	-1.1
Mar 2013	11.5	27.5	3.3	2.4
Feb 2013	-14.8	-21.0	-10.7	-11.3
Jan 2013	-24.8	-36.7	-11.8	-9.7
Dec 2012	-12.5	-24.1	-3.3	-3.4
Nov 2012	-8.6	-9.6	-8.5	0.3
Oct 2012	-6.9	-12.8	-2.6	1.2
Sep 2012	-7.8	-18.4	-1.8	-7.8
Aug 2012	-18.6	-31.1	-10.2	-6.1
Jul 2012	2.6	-1.9	3.2	1.7
Jun 2012	-10.9	-11.3	-12.4	-9.9
May 2012	-6.8	-7.0	-8.6	1.0
Apr 2012	7.5	-9.6	23.0	6.6
Mar 2012	8.1	-10.0	19.0	-1.1
Feb 2012	-9.3	-8.9	-11.2	8.9
Jan 2012	9.8	18.3	0.5	5.7
Dec 2011	0.8	12.6	-8.5	6.3
Nov 2011	11.0	8.0	13.5	12.5
Oct 2011	-6.8	-15.6	-1.0	1.5
Dec 2010	9.4	3.5	14.1	-0.6
Dec 2009	1.8	0.4	3.6	-1.9
Dec 2008	-23.3	-29.4	-17.4	-24.7
Dec 2007	1.3	9.8	-4.3	-6.4
Dec 2006	0.8	0.9	-0.1	0.1

Note: Total machinery orders = overseas + domestic demand + orders through agencies. Orders through agencies in Jun 2014 were JPY 108,024 million or 4.0 percent of the total and JPY 100,116 or 4.9 percent of the total in Jun 2013, and are not shown in the table. The data are the original numbers without any adjustments and differ from the seasonally adjusted data.

Source: Japan Economic and Social Research Institute, Cabinet Office

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

The tertiary activity index of Japan increased 0.1 percent SA in Jun 2014 and decreased 1.5 percent NSA in the 12 months ending in Jun 2014, as shown in Table VB-7. There are effects of the increase in the tax on value added of consumption in Apr 2014. The index is showing significant volatility with increases of 0.5 percent in Feb 2013 and 0.5 percent in May 2013 but decreases in multiple months. The indexed increased 2.6 percent in Mar 2014 largely because of anticipation of expenditures to avoid the increase in the tax on consumption in Apr 2014. The index fell 5.7 percent in Apr 2014 because of the increases in the tax on consumption. The tertiary activity index fell 5.2 percent in 2009, growing 1.3 percent in 2010, 0.1 percent in 2011 and 1.4 percent in 2012. The tertiary activity index increased 0.7 percent in 2013.

Table VB-7, Japan, Tertiary Activity Index, ∆%

	Month ∆% SA	12 Months ∆% NSA
Jun 2014	0.1	-1.5
May	0.9	-2.5
Apr	-5.7	-2.6
Mar	2.6	3.2
Feb	-0.9	0.9
Jan	1.5	2.0
Dec 2013	-0.1	0.8
Nov	0.3	0.5
Oct	-0.5	0.1
Sep	0.1	1.4
Aug	0.2	0.8
Jul	-0.1	1.5
Jun	-0.3	0.6
May	0.5	1.8
Apr	-0.1	1.5
Mar	0.1	0.7
Feb	0.5	-1.5
Jan	0.0	0.3
Dec 2012	0.2	-0.1
Nov	-0.1	1.0
Oct	0.2	1.3
Sep	0.0	0.1
Aug	0.2	0.6
Jul	-0.3	0.8
Jun	0.0	0.8
May	0.5	3.1
Apr	-0.2	2.4
Mar	-0.3	4.2
Feb	0.2	2.4
Jan	-0.8	0.3
Calendar Year
2013		0.7
2012		1.4
2011		0.1
2010		1.3
2009		-5.2
2008		-1.0
2007		1.0
2006		1.8
2005		1.9
2004		1.8

Source: Japan, Ministry of Economy, Trade and Industry http://www.meti.go.jp/english/statistics/index.html

Month and 12-month rates of growth of the tertiary activity index of Japan and components in Jun 2014 are provided in Table VB-8. Electricity, gas, heat supply and water decreased 0.2 percent in Jun 2014 and decreased 1.1 percent in the 12 months ending in Jun 2014. Wholesale and retail trade decreased 1.9 percent in Jun 2014, rebounding from decline of 14.6 percent in the month of Apr because of the increase in the tax on value added of consumption. The index of wholesale and retail trade decreased 2.2 percent in 12 months ending in Jun 2014. Information and communications increased 0.1 percent in Jun and decreased 0.3 percent in 12 months.

Table VB-8, Japan, Tertiary Index and Components, Month and 12-Month Percentage Changes ∆%

Jun 2014	Weight	Month ∆% SA	12 Months ∆% NSA
Tertiary Index	10,000.0	-0.1	-1.5
Electricity, Gas, Heat Supply & Water	372.9	-0.2	-1.1
Information & Communications	951.2	0.1	-0.3
Wholesale & Retail Trade	2,641.2	-1.9	-5.2
Finance & Insurance	971.1	2.7	-0.8
Real Estate & Goods Rental & Leasing	903.4	-0.6	-1.7
Scientific Research, Professional & Technical Services	551.3	3.0	-2.4
Accommodations, Eating, Drinking	496.0	-2.4	-2.4
Living-Related, Personal, Amusement Services	552.7	-2.0	-3.3
Learning Support	116.9	0.4	-1.0
Medical, Health Care, Welfare	921.1	-0.1	2.9
Miscellaneous ex Government	626.7	2.9	0.3

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

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

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

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

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

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

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/c4c0c76c6c43441ca84449c5c6111d16) is improving. The overall Flash HSBC China Manufacturing PMI^™ increased from 50.7 in Jun to 52.0 in Jul, while the Flash HSBC China Manufacturing Output Index increased from 51.8 in Jun to 52.8 in Jul, indicating expansion at the highest rate in sixteen months. Exports orders indicate expansion at faster rate. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the index is consistent with manufacturing improving (http://www.markiteconomics.com/Survey/PressRelease.mvc/c4c0c76c6c43441ca84449c5c6111d16). 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:

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

Cumulative and 12-months rates of value added of industry in China are provided in Table VC-1. Industry’s value added grew 8.8 percent in Jan-July 2014 relative to a year earlier and 9.0 percent in the 12 months ending in Jul 2014. Value added of industry grew 8.8 percent in Jan-Jun 2014 relative to a year earlier and 9.2 percent in the 12 months ending in Jun 2014. Value added of industry grew 8.7 percent in Jan-May 2014 relative to a year earlier and 8.8 percent in 12 months. Manufacturing grew 9.9 percent in Jan-Jul 2014 relative to a year earlier and 10.0 percent in 12 months. Mining and quarrying grew 5.0 percent in Jan-Jul 2014 relative to a year earlier and 6.2 percent in 12 months. Growth of total industry decelerated from cumulative 14.4 percent in Jan-Mar 2011 to 9.7 percent in Jan-Dec 2013 and 8.8 percent in Jan-Jul 2014.

Table VC-1, China, Growth Rate of Value Added of Industry ∆%

	Industry	Mining & Quarrying	Manufacturing	State Owned	Joint-Stock
2014
Jan-Jul	8.8	5.0	9.9	5.5	3.4
12M Jul	9.0	6.2	10.0	5.8	4.4
Jan-Jun	8.8	4.6	9.9	5.5	10.2
12M Jun	9.2	7.9	9.8	7.3	10.8
Jan-May	8.7	3.8	9.9	5.1	10.1
12M May	8.8	4.3	9.9	6.1	10.3
Jan-Apr	8.7	3.6	9.9	4.8	10.1
12M Apr	8.7	4.5	9.8	5.7	10.3
Jan-Mar	8.7	3.3	9.9	4.5	10.0
12 M Mar	8.8	2.9	9.9	4.6	10.1
Jan-Feb	8.6	3.5	9.8	4.4	9.9
2013
Jan-Dec	9.7	6.4	10.5	6.9	11.0
12M Dec	9.7	5.4	10.7	8.3	10.8
Jan-Nov	9.7	6.4	10.5	6.8	4.4
12M Nov	10.0	5.6	11.0	9.1	2.4
Jan-Oct	9.7	6.5	10.4	6.5	11.0
12M Oct	10.3	4.3	11.4	8.4	11.1
Jan-Sep	9.6	6.7	10.3	6.3	11.0
12M Sep	10.2	4.9	11.1	7.8	11.1
Jan-Aug	9.5	6.9	10.2	6.1	11.0
12M Aug	10.4	5.8	10.9	9.5	11.7
Jan-Jul	9.4	7.1	10.1	5.6	10.9
12M Jun	9.7	5.5	10.5	8.1	11.1
Jan-Jun	9.3	7.3	10.0	5.2	10.9
12M Jun	8.9	5.8	9.6	6.3	10.5
Jan-May	9.4	8.5	9.7	4.9	11.0
12M May	9.2	8.0	9.8	4.4	10.7
Jan-Apr	9.4	8.6	9.7	4.9	11.1
12 M Apr	9.3	8.5	9.6	4.3	10.9
Jan-Mar	9.5	8.7	9.8	5.2	11.3
12 M Mar	8.9	8.2	9.1	4.3	11.0
Jan-Feb	9.9	9.1	10.2	5.8	11.4
2012
Jan-Dec 2012	10.0	10.1	9.9	6.4	11.8
12 M Dec	10.3	9.6	10.6	8.0	12.1
Jan-Nov	10.0	10.2	9.8	6.3	11.8
12 M Nov	10.1	9.2	10.5	7.2	11.8
Jan-Oct	10.0	10.3	9.7	6.4	11.8
12 M Oct	9.6	9.1	9.7	7.0	11.7
Jan-Sep	10.0	10.4	9.7	6.3	11.8
12 M Sep	9.2	9.0	9.3	6.3	11.0
Jan-Aug	10.1	10.5	9.8	6.3	15.4
12 M Aug	8.9	8.6	9.0	5.3	14.3
Jan-Jul	10.3	10.8	9.9	6.6	12.1
12 M Jul	9.2	10.1	8.8	4.8	10.9
Jan-Jun	10.5	11.1	10.1	7.0	12.4
12 M Jun	9.5	9.0	9.6	6.5	11.5
Jan-May	10.7	11.5	10.3	6.7	12.4
12 M May	9.6	9.1	9.8	6.6	11.0
Jan-Apr	11.0	12.3	10.5	6.6	12.9
12 M Apr	9.3	10.3	8.9	4.3	10.7
Jan-Mar	11.6	13.2	11.0	7.2	13.8
12 M Mar	11.9	13.9	11.2	8.0	13.7
Jan-Feb	11.4	12.7	10.9	7.3	13.9
2011
Jan-Dec	13.9	13.0	14.3	9.9	15.8
12 M Dec	12.8	12.6	13.0	9.2	14.7
Jan-Nov	14.0	13.0	14.4	9.9	16.0
12 M Nov	12.4	12.4	12.4	7.8	14.4
Jan-Oct	14.1	13.0	14.5	10.1	9.1
12 M Oct	13.2	12.1	13.7	8.9	15.1
Jan-Sep	14.2	13.1	14.6	10.4	16.1
12 M Sep	13.8	12.8	14.3	9.9	16.0
Jan-Aug	14.2	13.1	14.6	10.4	16.1
12 M Aug	13.5	13.4	13.5	9.4	15.5
Jan-Jul	14.3
12 M Jul	14.0	12.8	14.5	9.5
Jan-Jun	14.3	13.1	14.7	10.7	19.7
12 M Jun	15.1	13.9	15.6	10.7	20.8
Jan-May	14.0	12.9	14.4	10.7	19.3
12 M May	13.3	12.9	13.5	8.9	18.7
Jan-Apr	14.2	12.9	14.7	11.2	19.5
12 M Apr	13.4	11.9	14.0	10.4	18.0
Jan-Mar	14.4	13.1	14.9	11.4	19.8
12 M Mar	14.8	12.8	15.6	12.9	19.2
12 M Feb	14.9	13.1	15.6	10.5	21.7
Jan-Feb	14.1	13.3	14.4	10.6	20.3

*After Jun 2013 Heavy Industry is Manufacturing and Light Industry is Mining and Quarrying

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

Chart VC-1 provides 12-month percentage changes of value added of industry in China. The yearly rate of industry fell from 10.4 percent in Aug 2013 to 9.0 percent in Jul 2014.

Chart VC-1, China, Growth Rate of Total Value Added of Industry, 12-Month ∆%

Source: National Bureau of Statistics of China

Yearly rates of growth for the past 12 months and cumulative relative to the earlier year of various segments of industrial production in China are provided in Table VC-2. There is deceleration to 5.5 percent of electricity output in Jan-Jul 2014 relative to a year earlier. There are weaker readings in most segments with exception of 10.9 percent for autos. Rates from Jan to Dec 2011 relative to the same period a year earlier fluctuated but remained mostly above 10 percent with the exception of motor vehicles and crude oil. There is deceleration in Jan-Dec 2012 of percentage change with no segment showing growth exceeding 10 percent with exception of 12-month growth of 13.5 percent for pig iron and 16.7 percent for nonferrous metals. In Jan-Sep 2013, many segments grew at rates exceeding or around 10 percent with exception of electricity at 6.8 percent, crude oil at 4.2 percent and pig iron at 6.9 percent. Electricity fell from growth of 16.2 percent in the 12 months ending in Jun 2011 to 0.0 percent in the 12 months ending in Jun 2012, rebounding to 4.8 percent in Aug 2012 but declining to 1.5 percent in Sep 2012, increasing to 3.9 percent in Oct 2012, 7.9 percent in Nov 2012 and 7.6 percent in Dec 2012. Electricity grew 6.8 percent in Jan-Jul 2013 relative to a year earlier and increased 8.2 percent in the 12 months ending in Sep 2013. Electricity output increased 7.6 percent in Jan-Dec 2013 relative to a year earlier and 8.3 percent in 12 months ending in Dec 2013. Auto production jumped to 18.4 percent in Jan-Dec 2013 relative to a year earlier and 22.8 percent in 12 months ending in Dec 2013.

Table VC-2, China, Industrial Production Operation ∆%

	Elec- tricity	Pig Iron	Cement	Crude Oil	Non- ferrous Metals	Autos
2014
Jan-Jul	5.5	0.4	3.7	2.8	5.9	10.9
12M Jul	3.3	-0.6	3.5	2.0	7.8	10.5
Jan-Jun	5.8	0.5	3.6	2.9	5.4	10.9
12 M Jun	5.7	2.3	0.8	5.8	4.6	11.2
Jan-May	5.7	0.2	4.1	2.3	4.9	10.8
12 M May	5.9	0.2	3.2	3.5	3.6	12.2
Jan-Apr	5.6	0.2	4.3	1.8	5.4	8.3
12 M Apr	4.4	-0.8	3.9	3.8	4.3	7.9
Jan-Mar	5.8	0.1	4.0	0.7	6.7	10.8
12 M Mar	6.2	-0.9	5.9	2.6	7.1	7.3
Jan-Feb	5.5	0.2	2.4	-1.0	6.1	12.5
2013
Jan-Dec	7.6	6.2	9.6	3.3	9.9	18.4
12M Dec	8.3	5.9	10.8	0.2	2.3	22.8
Jan-Nov	7.0	5.9	9.2	3.6	10.5	18.1
12M Nov	6.8	0.6	10.0	-0.6	13.7	25.6
Jan-Oct	7.0	6.5	9.0	4.1	10.3	17.2
12M Oct	8.4	7.7	8.9	3.1	12.9	25.5
Jan-Sep	6.8	6.9	8.9	4.2	9.8	15.3
12M Sep	8.2	11.2	6.4	-1.2	10.1	17.5
Jan-Aug	6.4	6.6	9.2	4.7	9.7	15.1
12M Aug	13.4	11.1	8.2	5.5	5.7	14.8
Jan-Jul	5.2	6.0	9.6	4.5	10.3	15.1
12 M Jul	8.1	5.0	9.1	7.1	9.8	15.4
Jan-Jun	4.4	5.7	9.7	4.1	10.0	15.2
12 M Jun	6.0	2.9	8.8	10.8	6.7	13.5
Jan-May	4.0	10.8	8.9	2.9	10.9	15.4
12 M May	4.1	11.3	8.5	2.4	7.5	15.7
Jan-Apr	3.8	10.5	8.4	3.2	11.4	15.4
12 M Apr	6.2	8.1	8.7	2.5	10.3	18.3
Jan-Mar	2.9	12.3	8.2	4.3	10.6	13.5
12 M Mar	2.1	9.2	6.9	5.5	9.9	12.4
Jan-Feb	3.4	14.2	10.8	3.0	13.5	12.4
2012
Jan-Dec	4.7	7.7	7.4	3.7	9.3	6.3
12 M Dec	7.6	13.5	5.4	8.4	16.7	5.3
Jan-Nov	4.4	7.2	7.5	3.2	8.4	6.5
12 M Nov	7.9	16.5	9.4	9.1	15.2	3.9
Jan-Oct	3.9	6.3	6.7	2.6	7.7	6.9
12 M Oct	6.4	11.7	11.5	6.7	14.0	3.8
Jan-Sep	3.6	5.7	6.7	2.2	7.1	7.3
12 M Sep	1.5	4.9	12.0	7.0	7.1	6.3
Jan-Aug	3.8	-0.5	8.7	2.5	13.8	10.4
12 M Aug	4.8	2.6	5.9	-0.4	13.8	9.7
Jan-Jul	3.8	6.1	5.3	1.6	6.7	7.4
12M Jul	2.1	6.5	6.1	1.1	4.1	12.3
Jan-Jun	3.7	6.1	5.5	1.7	6.7	6.7
12 M Jun	0.0	6.7	6.5	-0.6	5.8	13.8
Jan-May	4.7	6.3	5.0	2.2	5.1	6.2
12 M May	2.7	6.3	4.3	0.7	6.6	18.5
Jan-Apr	5.0	6.2	5.5	2.9	4.6	3.1
12 M Apr	0.7	7.9	4.9	-0.3	2.3	10.7
Jan-Mar	7.1	6.5	7.3	3.1	5.8	0.0
12 M Mar	7.2	10.2	7.9	2.0	3.3	5.1
Jan-Feb	7.1	4.6	4.8	4.0	8.4	-1.8
2011
Jan-Dec	12.0	8.4	16.1	4.9	10.6	3.0
12 M Dec	9.7	3.7	7.0	4.0	13.2	-6.5
Jan-Nov	12.0	13.1	17.2	5.3	10.2	3.9
12 M Nov	8.5	7.8	11.2	3.2	8.2	-1.3
Jan-Oct	12.3	13.7	18.0	5.4	10.4	5.2
12 M Oct	9.3	13.4	16.5	-0.9	3.7	1.3
Jan-Sep	12.7	13.9	18.1	6.0	11.2	5.5
12 M Sep	11.5	18.8	15.7	1.5	13.9	2.5
Jan-Aug	13.0	13.1	18.4	6.6		4.7
12 M Aug	10.0	12.9	12.8	4.5	15.6	9.5
Jan-Jul	13.3	13.0	19.2	6.9	9.9	4.0
12 M Jul	13.2	14.9	16.8	5.9	9.8	-1.3
12 M Jun	16.2	14.8	19.9	-0.7	9.8	3.6
12 M May	12.1	10.6	19.2	6.0	14.2	-1.9
12 M Apr	11.7	8.3	22.4	6.8	6.1	-1.6
12 M Mar	14.8	13.7	29.8	8.0	11.6	9.9
12 M Feb	11.7	14.5	9.1	10.9	14.4	10.3
12 M Jan	5.1	3.5	16.4	12.2	1.4	23.9
12 M Dec 2010	5.6	4.6	17.3	10.3	-1.9	27.6

M: month

Source: National Bureau of Statistics of China

Monthly growth rates of industrial production in China are provided in Table VC-3. Monthly rates have fluctuated around 1 percent. Jan and Feb 2012 are somewhat weaker but there was improvement to 1.25 percent in Mar 2012. The rate of 0.33 percent in Apr 2012 is the lowest in the monthly series from Feb 2011 to Jul 2014. Monthly sales growth remained below 1 percent in all months from Jan 2012 to Dec 2013 with the exception of Mar 2012. Value added of industry increased 0.77 percent in Jun 2014 and 0.68 percent in Jul 2014.

Table VC-3, China, Industrial Production Operation, Month ∆%

2011	Month ∆%
Feb	0.93
Mar	0.99
Apr	1.32
May	0.79
Jun	1.30
Jul	0.82
Aug	0.85
Sep	0.95
Oct	0.71
Nov	0.68
Dec	0.94
Jan 2012	0.50
Feb	0.61
Mar	1.25
Apr	0.33
May	0.89
Jun	0.83
Jul	0.59
Aug	0.61
Sep	0.89
Oct	0.76
Nov	0.86
Dec	0.90
Jan 2013	0.61
Feb	0.78
Mar	0.72
Apr	0.80
May	0.74
Jun	0.62
Jul	0.90
Aug	0.88
Sep	0.65
Oct	0.77
Nov	0.69
Dec	0.68
Jan 2014	0.61
Feb	0.62
Mar	0.82
Apr	0.71
May	0.72
Jun	0.77
Jul	0.68

Source: National Bureau of Statistics of China

Table VC-4 provides cumulative growth of investment in fixed assets in China in Jan-Dec 2011, Jan-Dec 2012, Jan-Dec 2013 and Jan-Jul 2014 relative to a year earlier. Total fixed investment had grown at a high rate fluctuating around 25 percent and fixed investment in real estate development has grown at rates in excess of 30 percent but rates have declined significantly to still quite high percentages. In Jan-Jul 2014, investment in fixed assets in China grew 17.0 percent relative to a year earlier and 13.7 percent in real estate development. There was slight deceleration in the final two months of 2011 that continued into Jan-Dec 2013 and Jan-Jul 2014.

Table VC-4, China, Investment in Fixed Assets ∆% Relative to a Year Earlier

	Total	State	Real Estate Development
Jan-Jul 2014	17.0	14.7	13.7
Jan-Jun	17.3	14.8	14.1
Jan-May	17.2	15.1	14.7
Jan-Apr	17.3	14.4	16.4
Jan-Mar	17.6	14.5	16.8
Jan-Feb	17.9	NA	19.3
Jan-Dec 2013	19.6	16.3	19.8
Jan-Nov	19.9	16.8	19.5
Jan-Oct	20.1	17.1	19.2
Jan-Sep	20.2	17.6	19.7
Jan-Aug	20.3	NA	19.3
Jan-Jul	20.1	17.5	20.5
Jan-Jun	20.1	17.5	20.3
Jan-May	20.4	17.7	20.6
Jan-Apr	20.6	18.1	21.1
Jan-Mar	20.9	18.7	20.2
Jan-Feb	21.2	16.9	22.8
Jan-Dec 2012	20.6	14.7	16.2
Jan-Nov	20.7	14.5	16.7
Jan-Oct	20.7	14.2	15.4
Jan-Sep	20.5	13.6	15.4
Jan-Aug	20.2	12.9	15.6
Jan-Jul	20.4	12.6	15.4
Jan-Jun	20.4	13.8	16.6
Jan-May	20.1	10.0	18.5
Jan-Apr	20.2	9.5	18.7
Jan-Mar	20.9	9.0	23.5
Jan-Feb	21.5	8.8	27.8
Jan-Dec 2011	23.8	11.1	27.9
Jan-Nov	24.5	11.7	29.9
Jan-Oct	24.9	12.4	31.1
Jan-Sep	24.9	12.7	32.0
Jan-Aug	25.0	12.1	33.2
Jan-Jul	25.4	13.6	33.6
Jan-Jun	25.6	14.6	32.9
Jan-May	25.8	14.9	34.6
Jan-Apr	25.4	16.6	34.3
Jan-Mar	25.0	17.0	34.1
Jan-Feb	24.9	15.6	35.2

Source: National Bureau of Statistics of China

Chart VC-2 provides percentage changes of cumulative fixed asset investment in China relative to a year earlier from 2013 to 2014. Growth fell from 20.9 percent in Jan-Mar 2013 to 17.0 percent in Jan-Jul 2014.

Chart VC-2, China, Investment in Fixed Assets, ∆% Cumulative over Year Earlier

Source: National Bureau of Statistics of China

China has used restriction of reserves of banks to moderate real estate investment. These policies have been reversed because of lower inflation and weakening economic growth. Chart VC-3 shows decline of fluctuating cumulative growth rates of investment in real estate development relative to a year earlier from 21.1 percent in Jan-Apr 2013 to 13.7 percent in Jan-Jul 2014.

Chart VC-3, China, Investment in Real Estate Development, ∆% Cumulative over Year Earlier

Source: National Bureau of Statistics of China

Growth rates of China’s retail sales in 12 months and cumulative relative to a year earlier are in Table VC-5. There is decline of growth rates to cumulative 12.1 percent in Jan-Jul 2014 relative to a year earlier from 19.9 percent in Jan 2011 and 17.1 percent in Dec 2011.

Table VC-5, China, Retail Sales 12-Month ∆% and Cumulative ∆% Relative to Year Earlier

	12-Month ∆%	Cumulative ∆%/ Cumulative Year Earlier
2014
Jan-Jul	12.2	12.1
Jan-Jun	12.4	12.1
Jan-May	12.5	12.1
Jan-Apr	11.9	12.0
Jan-Mar	12.2	12.0
Jan-Feb	11.8	NA
2013
Dec	13.6	13.1
Nov	13.7	13.0
Oct	13.3	13.0
Sep	13.3	12.9
Aug	13.4	12.8
Jul	13.2	12.8
Jun	13.3	12.7
May	12.9	12.6
Apr	12.8	12.5
Mar	12.6	12.4
Feb	12.3	12.3
2012
Dec	15.2	14.3
Nov	14.9	14.2
Oct	14.5	14.1
Sep	14.2	14.1
Aug	13.2	14.1
Jul	13.1	14.2
Jun	13.7	14.4
May	13.8	14.5
Apr	14.1	14.7
Mar	15.2	14.8
Feb	14.7	14.7
2011
Dec	18.1	17.1
Nov	17.3	17.0
Oct	17.2	17.0
Sep	17.7	17.0
Aug	17.0	16.9
Jul	17.2	16.8
Jun	17.7	16.8
May	16.9	16.6
Apr	17.1	16.5
Mar	17.4	17.4
Feb	11.6	15.8
Jan	19.9	19.9

Source: National Bureau of Statistics of China

Chart VC-4 of the National Bureau of Statistics of China provides 12-month rates of growth of retail sales from 2013 to 2014. There is again a drop into 2013 with the lowest percentages in Chart VC-4 followed by moderate increases. The growth rate of retail sales fell to 12.2 percent in Jan-Jul 2014 relative to a year earlier.

Chart VC-4, China, Total Retail Sales of Consumer Goods 12-Month ∆%

Source: National Bureau of Statistics of China

Table VC-6 provides monthly percentage changes of retail sales in China. Although the rate of 0.19 percent in Jan 2012 is the lowest in Table VC-6, the rate of 1.32 percent in Sep 2012 is relatively high and 1.23 percent in Dec 2012 is closer to rates in 2011. Sales are lower in Jan-Feb 2013 because of the Lunar New Year celebrations, rebounding in Mar-Dec 2013. There is weakness in Jan-Feb 2014 also partly under influence of the celebration of the Lunar New Year followed with 1.40 percent in Mar 2014. Retail sales increased 0.86 percent in Jul 2014.

Table VC-6, China, Retail Sales, Month ∆%

2011	Month ∆%
Feb	1.35
Mar	1.26
Apr	1.30
May	1.39
Jun	1.49
Jul	1.57
Aug	1.50
Sep	1.33
Oct	1.36
Nov	1.26
Dec	1.41
2012
Jan	0.19
Feb	0.99
Mar	1.21
Apr	0.93
May	1.11
Jun	1.12
Jul	1.03
Aug	1.11
Sep	1.32
Oct	1.18
Nov	1.21
Dec	1.23
Jan 2013	0.14
Feb	0.87
Mar	1.50
Apr	0.99
May	0.95
Jun	1.09
Jul	1.08
Aug	0.92
Sep	1.05
Oct	0.98
Nov	1.01
Dec	1.00
2014
Jan	0.91
Feb	0.51
Mar	1.40
Apr	0.81
May	1.14
Jun	0.95
Jul	0.86

Source: National Bureau of Statistics of China