Geopolitical and Financial Risks, Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars Below Trend, Stagnating Real Disposable Income and Consumption Expenditures, Financial Repression, United States Housing Collapse, World Cyclical Slow Growth and Global Recession Risk: Part V

 

Geopolitical and Financial Risks, Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars Below Trend, Stagnating Real Disposable Income and Consumption Expenditures, Financial Repression, United States Housing Collapse, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

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

I Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars Below Trend

IA Mediocre Cyclical United States Economic Growth

IA1 Contracting Real Private Fixed Investment

IA2 Swelling Undistributed Corporate Profits

IB Stagnating Real Disposable Income and Consumption Expenditures

IB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

II United States Housing Collapse

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

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 (Section I and 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 4.2 percent SAAR and increased 2.5 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 and in IQ2014 and IIQ2014. 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 0.2 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 4.2	2.5
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	-0.2
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 (http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html 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 0.43 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 $2,310.7 billion than actual $15,994.3 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 12.6 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $15,994.3 billion in IIQ2014 or 6.7 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 -0.43 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	Jul 12-month NSA ∆%: headline 1.6; ex food and energy ∆% 1.5 Blog 8/31/14
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 2.3 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 2.5 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 4.2 Blog 8/31/14
Real Private Fixed Investment	SAAR IIQ2014 8.1 ∆% IVQ2007 to IIQ2014: 0.0% Blog 8/31/14
Corporate Profits	IIQ2014 SAAR: Corporate Profits 8.0; Undistributed Profits 24.4 Blog 8/31/14
Personal Income and Consumption	Jul month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.1 Real Personal Consumption Expenditures (RPCE): -0.2 12-month Jul NSA ∆%: RDPI: 2.6; RPCE ∆%: 2.0 Blog 8/31/14
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	Jul New Orders SA ∆%: 22.6; ex transport ∆%: -0.8 Jan-Jul 14/Jan-Jul 13 New Orders NSA ∆%: 8.2; ex transport ∆% 4.8 Blog 8/31/14
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	Jun 2014/Jun 2013 ∆% NSA: 10 Cities 8.1; 20 Cities: 8.1 ∆% Jun SA: 10 Cities -0.1 ; 20 Cities: -0.2 Blog 8/31/14
FHFA House Price Index Purchases Only	Jun SA ∆% 0.4; 12 month NSA ∆%: 5.2 Blog 8/31/14
New House Sales	Jul 2014 month SAAR ∆%: minus 0.7 Jan-Jul 2014/Jan-Jul 2013 NSA ∆%: -4.9 Blog 8/31/14
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:

8/24/14 http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html

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

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

Manufacturers’ shipments of durable goods increased 3.3 percent in Jul 2014, increasing 1.2 percent in Jun 2014 and changing 0.0 percent in May 2014. New orders increased 22.6 percent in Jul 2014 after increasing 2.7 percent in Jun 2014 and decreasing 0.9 percent in May 2014, as shown in Table VA-1. These data are very volatile. Volatility is illustrated by decrease of 12.9 percent in Nov 2012 after increase of orders for nondefense aircraft of 2642.2 percent in Sep 2012 after decrease of 97.2 percent in Aug and increases of 51.1 percent in Jul 2012 and 32.5 percent in Jun 2012. Nondefense aircraft new orders increased 318.0 percent in Jul 2014 after increasing 11.1 percent in Jun 2014 and decreasing 2.9 percent in May 2014. New orders excluding transportation equipment decreased 0.8 percent in Jul 2014, increasing 3.0 percent in Jun 2014 and decreasing 0.1 percent in May 2014. Capital goods new orders, indicating investment, increased 52.7 percent in Jul 2014, increasing 5.0 percent in Jun 2014 and decreasing 5.2 percent in May 2014. New orders of nondefense capital goods increased 60.8 percent in Jul 2014, after increasing 5.1 percent in Jun 2014 and decreasing 2.3 percent in May 2014. Capital goods orders excluding volatile aircraft decreased 0.5 percent in Jul 2014, increasing 5.4 percent in Jun 2014 and decreasing 1.4 percent in May 2014.

Table VA-1, US, Durable Goods Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%

	Jul 2014 ∆%	Jun 2014 ∆%	May 2014  ∆%
Total
S	3.3	1.2	0.0
NO	22.6	2.7	-0.9
Excluding Transport
S	1.4	1.1	0.0
NO	-0.8	3.0	-0.1
Excluding Defense
S	3.4	1.3	0.1
NO	24.9	2.7	0.2
Machinery
S	2.4	-0.5	0.0
NO	-1.6	4.9	-1.0
Computers & Electronic Products
S	2.3	2.1	-1.5
NO	-1.2	4.0	-1.3
Computers
S	-4.8	5.1	-3.4
NO	-6.9	-1.2	13.4
Transport Equipment
S	7.9	1.4	-0.1
NO	74.2	2.1	-2.6
Motor Vehicles
S	10.4	-1.2	1.5
NO	10.2	-1.3	1.7
Nondefense Aircraft
S	2.9	14.1	-5.2
NO	318.0	11.1	-2.9
Capital Goods
S	1.4	2.6	-1.0
NO	52.7	5.0	-5.2
Nondefense Capital Goods
S	1.4	3.0	-1.0
NO	60.8	5.1	-2.3
Capital Goods ex Aircraft
S	1.5	0.9	0.1
NO	-0.5	5.4	-1.4

Note: Mfg: manufacturing; S: shipments; NO: new orders; Transport: transportation

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Chart VA-1 of the US Census Bureau provides new orders of durable goods seasonally adjusted since Jan 1992. New orders fell sharply during the global recession. New orders recovered at faster rates and then flattened together with the rest of the economy after 2012. There are also downward effects of lower inflation because data are nominal without adjustment for inflation.

Chart VA-1, US, Durable Goods New orders, SA

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Chart VA-2 provides monthly changes in durable goods new orders. There is significant volatility in these data, preventing clear identification of trends.

Chart VA-2, US, Manufacturers’ Durable Goods New Orders 2013-2014

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr021.html

Additional perspective on manufacturers’ shipments and new orders of durable goods is in Table VA-2. Values are cumulative millions of dollars in Jan-Jul 2014 not seasonally adjusted (NSA) and without adjustment for inflation. Shipments of all manufacturing industries in Jan-Jul 2014 total $1,659.0 billion and new orders total $1,704.6 billion, growing respectively by 4.8 percent and 8.2 percent relative to the same period in 2013. Excluding transportation equipment, shipments grew 4.9 percent and new orders increased 4.8 percent. Excluding defense, shipments grew 5.2 percent and new orders grew 8.0 percent. Important information not in Table VA-2 is the large share of nondurable goods. Capital goods have relatively high value of $594.2 billion for shipments, growing 3.9 percent, and new orders $674.6 billion, increasing 11.1 percent. Excluding aircraft, capital goods shipments reached $473.8 billion, growing by 4.2 percent, and new orders $495.1 billion, increasing 4.3 percent. Data weakened in 2013 with effects of lower inflation on nominal values with recovery later in the year.

Table VA-2, US, Value of Manufacturers’ Shipments and New Orders of Durable Goods, NSA, Millions of Dollars 

Jan-Jul 2014	Shipments	∆% 2014/ 2013	New Orders	∆% 2014/  2013
Total	1,659,042	4.8	1,704,625	8.2
Excluding Transport	1,174,872	4.9	1,150,214	4.8
Excluding Defense	1,579,253	5.2	1,623,889	8.0
Machinery	251,295	4.7	263,788	7.7
Computers & Electronic Products	198,107	5.4	150,435	3.7
Computers & Related Products	14,990	1.1	15,436	2.7
Transport Equipment	484,170	4.5	554,411	16.2
Motor Vehicles	322,639	4.9	322,646	5.1
Nondefense Aircraft	80,976	9.2	148,583	48.8
Capital Goods	594,230	3.9	674,637	11.1
Nondefense Capital Goods	529,241	4.7	609,464	10.9
Capital Goods ex Aircraft	473,783	4.2	495,146	4.3

Note: Transport: transportation

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Chart VA-3 of the US Census Bureau provides new orders of durable goods not seasonally adjusted since Jan 1992. New orders are oscillating around the highest value before the global recession, which could be lower in real terms because of continuing inflation.

Chart VA-3, US, Durable Goods New orders, NSA

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Chart VA-4 of the Board of Governors of the Federal Reserve System shows that output of durable manufacturing accelerated in the 1980s and 1990s with slower growth in the 2000s perhaps because processes matured. Growth was robust after the major drop during the global recession but appears to vacillate in the final segment.

Chart VA-4, US, Output of Durable Manufacturing, 1972-2014

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/Current/default.htm

Manufacturing jobs not seasonally adjusted increased 175,000 from Jul 2013 to
Jul 2014 or at the average monthly rate of 14,583. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. 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, 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.

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 $2,310.7 billion than actual $15,994.3 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 12.6 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $15,994.3 billion in IIQ2014 or 6.7 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 I-13 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 87.1 percent in IQ2014. Most of US national income is in the form of services. In Jul 2014, there were 138,666 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 118.031 million NSA in Jul 2014 accounted for 85.1 percent of total nonfarm jobs of 138.666 million, of which 12.215 million, or 10.3 percent of total private jobs and 8.8 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 98.577 million NSA in Jul 2014, or 71.1 percent of total nonfarm jobs and 83.5 percent of total private-sector jobs. Manufacturing has share of 11.0 percent in US national income in IQ2014 an durable goods 6.3 percent, as shown in Table I-13. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table I-13, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

	SAAR IQ2014	% Total	SAAR IIQ2014	% Total
National Income WCCA	14,982.0	100.0	15,262.2	100.0
Domestic Industries	14,771.0	98.6	15,041.2	98.6
Private Industries	13,055.8	87.1	13,320.0	87.3
Agriculture	161.0	1.1
Mining	273.1	1.8
Utilities	209.1	1.4
Construction	660.3	4.4
Manufacturing	1642.5	11.0
Durable Goods	950.2	6.3
Nondurable Goods	692.3	4.6
Wholesale Trade	908.7	6.1
Retail Trade	1029.8	6.9
Transportation & WH	465.6	3.1
Information	560.5	3.7
Finance, Insurance, RE	2638.0	17.6
Professional & Business Services	2026.8	13.5
Education, Health Care	1461.8	9.8
Arts, Entertainment	593.9	4.0
Other Services	424.7	2.8
Government	1715.1	11.5	1721.2	11.3
Rest of the World	211.0	1.4	221.0	1.4

Notes: SSAR: Seasonally-Adjusted Annual Rate; WCCA: Without Capital Consumption Adjustment by Industry; WH: Warehousing; RE, includes rental and leasing: Real Estate; Art, Entertainment includes recreation, accommodation and food services; BS: business services

Source: US Bureau of Economic Analysis

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

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	Jul NSA ∆% 0.0; Jul 12 months NSA ∆% 3.4 Blog 8/31/14
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	Jul Unemployed 2.48 million Change in unemployed since last year: minus 70 thousand Unemployment rate: 3.8 % Blog 8/31/14
All Industry Indices	Jun month SA ∆% -0.4 12-month NSA ∆% -0.5 Blog 8/24/14
Industrial Production	Jul SA month ∆%: 0.2 12-month NSA ∆% -0.9 Blog 8/31/14
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	Jul 12 months: Total ∆%: 0.1 Wholesale ∆%: -0.2 Retail ∆%: 0.5 Blog 8/31/14
Family Income and Expenditure Survey	Jul 12-month ∆% total nominal consumption -2.0, real -5.9 Blog 8/31/14
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:

8/24/14 http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html

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

Industrial production in Japan increased 0.2 percent in Jul 2014 and fell 0.9 percent in 12 months. Japan’s industrial production fell 3.4 percent in Jun 2014 an increased 3.1 percent in 12 months. In May 2014, industrial production in Japan increased 0.7 percent, rebounding from the increase in the sales tax, and increased 1.0 percent in the 12 months ending in May 2014, as shown in Table VB-1. Industrial production fell 2.8 percent in Apr 2014, mostly because of the increase in the tax on value added of consumption in Apr 2014, and increased 3.8 percent in 12 months. Decline of 2.8 percent in Jun 2013 interrupted four consecutive monthly increases from Feb through May 2013. Another interruption occurred in Aug with decrease of 0.5 percent and decline of 0.6 percent in 12 months. There was a third interruption with decline of 2.3 percent in Feb 2014 but increase of 7.0 percent in 12 months. Japan’s industrial production is strengthening 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, 2.1 percent in May 2013, 2.7 percent in Jul 2013, 1.5 percent in Sep 2013, 0.6 percent in Oct 2013 and 0.5 percent in Dec 2013. Improvement continued with 3.9 percent in Jan 2014 and rebound of 0.7 percent in May 2014 from the drop of 2.8 percent in Apr caused by the increases in the sales tax. Growth in 12 months improved from minus 10.0 percent in Feb 2013 to 7.2 percent in Dec 2013, 10.6 percent in Jan 2014, 7.0 percent in Feb 2014 and 7.4 percent in Mar 2014. The sales tax of Apr 2014 interrupted improvement but growth in 12 months was positive at 1.0 percent in May 2014 and 3.2 percent in Jun 2014. Industrial production fell 21.9 percent in 2009 after falling 3.4 percent in 2008 but recovered by 15.6 percent in 2010. The annual average in calendar year 2011 fell 2.8 percent largely because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Industrial production increased 0.6 percent in 2012 and fell 0.8 percent in 2013.

Table VB-1, Japan, Industrial Production ∆%

	∆% Month SA	∆% 12 Months NSA
Jul 2014	0.2	-0.9
Jun	-3.4	3.1
May	0.7	1.0
Apr	-2.8	3.8
Mar	0.7	7.4
Feb	-2.3	7.0
Jan	3.9	10.6
Dec 2013	0.5	7.2
Nov	0.3	4.8
Oct	0.6	5.4
Sep	1.5	5.3
Aug	-0.5	-0.6
Jul	2.7	1.9
Jun	-2.8	-4.7
May	2.1	-1.0
Apr	0.6	-3.2
Mar	0.3	-7.0
Feb	0.9	-10.0
Jan	-0.7	-6.4
Dec 2012	1.4	-7.6
Nov	-1.0	-5.5
Oct	0.3	-4.7
Sep	-2.2	-7.6
Aug	-1.4	-4.1
Jul	-0.5	0.1
Jun	-0.8	-0.6
May	-1.8	7.6
Apr	-0.5	15.1
Mar	0.2	16.6
Calendar Year
2013		-0.8
2012		0.6
2011		-2.8
2010		15.6

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

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

The employment report for Japan in Jul 2014 is in Table VB-2. The number unemployed reached 2.48 million in Jul 2014, declining 70 thousand from a year earlier or 2.7 percent. The rate of unemployment not seasonally adjusted reached 3.8 percent, decreasing 0.1 percent from a year earlier. Population changed 0.0 percent from a year earlier. The labor force increased 0.6 percentage points from a year earlier and the labor participation rate stood at 59.6, increasing 0.4 percentage points from a year earlier. The employment rate increased to 57.3 percent, which is higher by 0.4 percentage points relative to a year earlier.

Table VB-2, Japan, Employment Report Jul 2014 

Jul 2014 Unemployed	2.48 million
Change since last year	-70 thousand; ∆% –2.7
Unemployment rate	SA 3.8%, +0.1 from earlier month; NSA 3.8%, -0.1 from earlier year
Population ≥ 15 years	110.85 million
Change since last year	∆% 0.0
Labor Force	66.04 million
Change since last year	∆% 0.6
Employed	63.57 million
Change since last year	∆% 0.7
Labor force participation rate	59.6
Change since last year	0.4
Employment rate	57.3%
Change since last year	0.4

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/results/month/index.htm

Table VB-2A provides the rate of unemployment of Japan seasonally adjusted that increased to 3.8 percent in Jul 2014 from 3.7 percent in Jun 2014. The rate of unemployment SA fell 0.3 percentage points from 4.1 percent in Aug 2013 to 3.8 percent in Jul 2014.

Table VB-2A, Japan, Unemployment Rate, SA

	Unemployment Rate SA
Jul 2014	3.8
Jun	3.7
May	3.5
Apr	3.6
Mar	3.6
Feb	3.6
Jan	3.7
Dec 2013	3.7
Nov	3.9
Oct	4.0
Sep	4.0
Aug	4.1
Jul	3.9
Jun	3.9
May	4.1
Apr	4.1
Mar	4.1
Feb	4.3
Jan	4.2
Dec 2012	4.3
Nov	4.1
Oct	4.1
Sep	4.3
Aug	4.2
Jul	4.4
Jun	4.3
May	4.4

Source: Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/results/month/index.htm

Chart VB-1 of Japan’s Statistics Bureau at the Ministry of Internal Affairs and Communications provides the unemployment rate of Japan from 2011 to 2014. There is clear trend of decline with multiple oscillations and increase in Jun-Jul 2014.

Chart VB-1, Japan, Unemployment Rate, Seasonally Adjusted

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/results/month/index.htm

During the “lost decade” of the 1990s from 1991 to 2002 (Pelaez and Pelaez, The Global Recession Risk (2007), 82-3), Japan’s GDP grew at the average yearly rate of 1.0 percent, the CPI at 0.1 percent and the implicit deflator at minus 0.8 percent. Japan’s growth rate from the mid-1970s to 1992 was 4 percent (Ito 2004). Table VB-3 provides Japan’s rates of unemployment, participation in labor force and employment for selected years from 1953 to 1985 and yearly from 1990 to 2013. The rate of unemployment jumped from 2.1 percent in 1991 to 5.4 percent in 2002, which was a year of global economic weakness. The participation rate dropped from 64.0 percent in 1992 to 61.2 percent in 2002 and the employment rate fell from 62.6 percent in 1992 to 57.9 percent in 2002. The rate of unemployment rose from 3.9 percent in 2007 to 5.1 percent in 2010, falling to 4.6 percent in 2011, 4.3 percent in 2012 and 4.0 percent in 2013. The participation rate fell from 60.4 percent in 2007 to 59.6 percent in 2010, falling to 59.3 percent in 2011 and 59.1 in 2012 and increasing to 59.3 percent in 2013. The employment rate fell from 58.1 in percent in 2007 to 56.6 percent in 2010 and 56.5 percent in 2011 and 2012, increasing to 56.9 percent in 2013. The global recession adversely affected labor markets in advanced economies.

Table VB-3, Japan, Rates of Unemployment, Participation in Labor Force and Employment, %

	Participation Rate	Employment Rate	Unemployment Rate
1953	70.0	68.6	1.9
1960	69.2	68.0	1.7
1965	65.7	64.9	1.2
1970	65.4	64.6	1.1
1975	63.0	61.9	1.9
1980	63.3	62.0	2.0
1985	63.0	61.4	2.6
1990	63.3	61.9	2.1
1991	63.8	62.4	2.1
1992	64.0	62.6	2.2
1993	63.8	62.2	2.5
1994	63.6	61.8	2.9
1995	63.4	61.4	3.2
1996	63.5	61.4	3.4
1997	63.7	61.5	3.4
1998	63.3	60.7	4.1
1999	62.9	59.9	4.7
2000	62.4	59.5	4.7
2001	62.0	58.9	5.0
2002	61.2	57.9	5.4
2003	60.8	57.6	5.3
2004	60.4	57.6	4.7
2005	60.4	57.7	4.4
2006	60.4	57.9	4.1
2007	60.4	58.1	3.9
2008	60.2	57.8	4.0
2009	59.9	56.9	5.1
2010	59.6	56.6	5.1
2011	59.3	56.5	4.6
2012	59.1	56.5	4.3
2013	59.3	56.9	4.0

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/results/month/index.htm

The survey of household income and consumption of Japan in Table VB-4 is showing noticeable improvement in recent months relative to earlier months with interruption in Apr-May 2014 because of the increase in the tax on value added of consumption. Table VB-4 shows decrease of nominal consumption of 2.0 percent in the 12 months ending in Jul 2014 and decrease of 5.9 percent in real terms. There are likely effects of anticipating consumption before the increase in the value added tax on consumption in Apr 2014 with decline of consumption after the actual increase of the tax. There are segments of decreasing real consumption in Jul 2014: furniture and household utensils 10.9 percent in nominal terms and 14.6 percent in real terms. Transportation/communications decreased 1.6 percent in nominal terms and 5.2 percent in real terms. Clothing and footwear decreased 7.4 percent in real terms and 5.2 percent in nominal terms. Education increased 2.3 percent in real terms and 4.7 percent in nominal terms. Fuel, light and water charges decreased 0.2 percent in nominal terms and decreased 6.9 percent in real terms. Real household income decreased 6.2 percent; real disposable income decreased 5.2 percent; and real consumption expenditures decreased 6.2 percent.

Table VB-4, Japan, Family Income and Expenditure Survey, 12-month ∆% Relative to a Year Earlier

Jul 2014	Nominal	Real
Households of Two or More Persons
Total Consumption	-2.0	-5.9
Excluding Housing, Vehicles & Remittance	-2.5	-6.3
Food	0.2	-4.1
Housing	0.0	-1.4
Fuel, Light & Water Charges	-0.2	-6.9
Furniture & Household Utensils	-10.9	-14.6
Clothing & Footwear	-5.2	-7.4
Medical Care	-3.4	-4.8
Transport and Communications	-1.6	-5.2
Education	4.7	2.3
Culture & Recreation	-5.2	-9.6
Other Consumption Expenditures	-2.6	-6.4*
Workers’ Households
Income	-2.4	-6.2
Disposable Income	-1.3	-5.2
Consumption Expenditures	0.4	-3.6

*Real: nominal deflated by CPI excluding imputed rent

Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute

http://www.stat.go.jp/english/data/kakei/156.htm

Chart VB-2 of the Ministry of Internal Affairs and Communication provides year-on-year change of real consumption expenditures. There is improvement followed by deterioration in the final segment with wide oscillations. There was deterioration in Nov 2011, renewed strength in Dec 2011, another decline in Jan 2012 and increase in Feb and Mar 2012 with stabilization in Apr and May 2012 but sharp decline into Jun 2012. Recovery in Jul and Aug 2012 was interrupted in Sep-Oct 2012 and new increases in Nov 2012, Jan 2013, Feb 2013, Mar 2013 and Apr 2013 (http://www.stat.go.jp/english/data/kakei/156.htm). Total consumption decreased 1.6 percent in real terms in May 2013 and decreased 1.9 percent in nominal terms relative to a year earlier. Real consumption fell 0.4 percent in Jun 2013 and nominal consumption declined 0.1 percent. Consumption rebounded in Jul 2013 with increase of real consumption by 0.1 percent and nominal consumption by 1.0 percent. In Aug 2013, real consumption fell 1.6 percent relative to a year earlier and 0.5 percent in nominal terms. There was marked improvement in Sep 2013 with growth of nominal consumption of 5.2 percent in 12 months and 3.7 percent in real consumption. Nominal consumption increased 2.1 in Nov 2013 and real consumption increased 0.2 percent. Nominal consumption increased 2.7 percent in Dec 2013 and real consumption increased 0.7 percent. In Jan 2014, nominal consumption increased 2.8 percent and real consumption 1.1 percent. Nominal consumption decreased 0.6 percent in Feb 2014 and real consumption decreased 2.5 percent. Nominal consumption increased 9.3 percent in Mar 2014 and real consumption 7.2 percent. The final segment of Chart VB-2 shows contraction of nominal consumption expenditures of 0.7 percent in Apr 2014 and decline of real consumption of 4.6 percent largely because of the increase in the tax on value added of consumption. Contraction deepened with decline of nominal consumption expenditures by 3.9 percent in May 2014 and decline of real consumption expenditures by 8.0 percent. Recovery occurred in Jun 2014 with increase of nominal consumption by 1.3 percent and milder decline of real consumption by 3.0 percent. There is new deterioration in Jul 2013 with decline of 2.0 percent in nominal terms and 5.9 percent in real terms.

Chart VB-2, Japan, Real Percentage Change of Consumption Year-on-Year

Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute

http://www.stat.go.jp/english/data/kakei/156.htm

Percentage changes in 12 months of nominal and real consumption expenditures in Japan are provided in Table VB-5. In Jul 2014, real consumption declined 5.9 percent and nominal consumption fell 2.0 percent. Real consumption fell 3.0 percent in Jun 2014 while nominal consumption increased 1.3 percent. Real consumption fell 8.0 percent in the 12 months ending in May 2014 and nominal consumption fell 3.9 percent largely because of the increase in the sales tax in Apr 2014. Real consumption fell 4.6 percent in the 12 months ending in Apr 2014 and nominal consumption fell 0.7 percent because of the increase in the sales tax in Apr 2014. Real consumption increased 7.2 percent in the 12 months ending in Mar 2013 while nominal consumption increased 9.3 percent, partly in anticipation of the increase in the value added tax in Apr 2014. Real consumption fell 2.5 percent in the 12 months ending in Feb 2014 and nominal consumption fell 0.6 percent. Real consumption expenditures increased 1.1 percent in the 12 months ending in Jan 2014 and nominal consumption expenditures 2.8 percent. Real consumption expenditures increased 0.7 percent in the 12 months ending in Dec 2013 and nominal consumption expenditures increased 2.7 percent. Real consumption expenditures increased 0.2 percent in the 12 months ending in Nov 2013 and nominal consumption expenditures increased 2.1 percent. Real consumption expenditures increased 0.9 percent in the 12 months ending in Oct 2013 and nominal consumption expenditures increased 2.3 percent. Real consumption expenditures increased 3.7 percent in the 12 months ending in Sep 2013 and nominal consumption expenditures 5.2 percent. Real consumption expenditures fell 1.6 percent in Aug 2013 relative to a year earlier and nominal consumption expenditures fell 0.5 percent. There is recovery in Jul 2013 with real consumption expenditures increasing 0.1 percent and nominal consumption expenditures increasing 1.0 percent. Real consumption expenditures decreased 0.4 percent in the 12 months ending in Jun 2013 and 0.1 percent in nominal terms. Declines in May and Jun 2013 interrupted growth from Jan to Apr 2013. There was sharp decline in nominal consumption of 8.8 percent in Mar 2011 and 8.2 percent in real consumption because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Dec was the first month in 2011 with increases in 12 months in both nominal and real consumption expenditures followed by Feb 2012 through Aug 2012. Nominal and real consumption fell in both Sep and Oct 2012 and increased in Nov 2012. Real consumption fell 0.7 percent in the 12 months ending in Dec 2012 and nominal consumption fell 0.8 percent. Real consumption expenditures increased 2.4 percent in the 12 months ending in Jan 2013 and 2.1 percent in nominal terms. Nominal consumption increased 0.8 percent in Feb 2013 and nominal consumption increased 0.1 percent. Real consumption increased 5.2 percent in the 12 months ending in Mar 2013 and nominal consumption 4.1 percent. Real consumption fell 4.6 percent in the 12 months ending in Apr 2014 and nominal consumption fell 0.7 percent. Consumption was an important driver of GDP growth in Japan in IQ2012. Real GDP grew at the seasonally adjusted annual rate (SAAR) of 4.1 percent in IQ2012 with private consumption contributing 0.9 percentage points for the highest contribution to growth (Table VB-2 at http://cmpassocregulationblog.blogspot.com/2014/08/weakening-world-economic-growth_41.html). There was deceleration in IIQ2012 with growth of GDP at SAAR of minus 2.2 percent and contribution of 1.0 percentage points of personal consumption. In IIIQ2012, Japan’s GDP contracted at the SAAR of 2.8 percent and personal consumption deducted 1.2 percentage points. Japan’s GDP grew at the SAAR of minus 0.3 percent in IVQ2012 with personal consumption contributing 1.1 percentage points. Japan’s GDP growth in IQ2013 was at 5.2 percent SAAR with highest contribution of 2.6 percentage points by personal consumption expenditures. In IIQ2013, Japan’s GDP grew at 3.4 percent SAAR with personal consumption expenditures contributing 1.8 percentage points. Japan’s GDP grew at 1.4 percent SAAR in IIIQ2013 with personal consumption expenditures contributing 0.5 percentage points. In IVQ2013, Japan’s GDP grew at minus 0.3 percent SAAR with personal consumption expenditures contributing 0.9 percentage points. The GDP of Japan grew at 6.1 percent SAAR in IQ2014 with personal consumption expenditures contributing 5.1 percent. Japan’s GDP contracted at SAAR of 6.8 percent in IIQ2014 with personal consumption expenditures deducting 12.4 percent in large part because of the increase of the sales tax in Apr 2014.

Table VB-5, Japan, Family Income and Expenditure Survey 12-months ∆% Relative to a Year Earlier

	Nominal Consumption Expenditures ∆% Relative to a Year Earlier	Real Consumption Expenditures ∆% Relative to a Year Earlier
Jul 2014	-2.0	-5.9
Jun	1.3	-3.0
May	-3.9	-8.0
Apr	-0.7	-4.6
Mar	9.3	7.2
Feb	-0.6	-2.5
Jan	2.8	1.1
Dec 2013	2.7	0.7
Nov	2.1	0.2
Oct	2.3	0.9
Sep	5.2	3.7
Aug	-0.5	-1.6
Jul	1.0	0.1
Jun	-0.1	-0.4
May	-1.9	-1.6
Apr	0.8	1.5
Mar	4.1	5.2
Feb	0.1	0.8
Jan	2.1	2.4
Dec 2012	-0.8	-0.7
Nov	0.1	0.2
Oct	-0.5	-0.1
Sep	-1.2	-0.9
Aug	1.4	1.8
Jul	1.2	1.7
Jun	1.5	1.6
May	4.3	4.0
Apr	3.2	2.6
Mar	4.1	3.4
Feb	2.7	2.3
Jan	-2.1	-2.3
Dec 2011	0.3	0.5
Nov	-3.8	-3.2
Oct	-0.6	-0.4
Sep	-1.9	-1.9
Aug	-3.9	-4.1
Jul	-1.8	-2.1
Jun	-3.9	-3.5
May	-1.6	-1.2
Apr	-2.5	-2.0
Mar	-8.8	-8.2
Feb	-0.1	0.5
Jan	-0.9	-0.3
Dec 2010	-3.2	-3.3
Dec 2009	0.3	2.1

Source:

Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute

http://www.stat.go.jp/english/data/kakei/156.htm

Japan is experiencing weak internal demand as in most advanced economies, interrupted by strong growth in IQ2012 but renewed weakening at the end of IIQ2012, beginning of IIIQ2012 and in IVQ2012. There was recovery in IQ2013, IIQ2013 and IIIQ2013. Recovery interrupted in IVQ2013, accelerating in IQ2014. There was weakening again in IIQ2014. Table VB-6 provides Japan’s wholesale and retail sales. There is strong performance in May 2013 with growth of 0.8 percent for retail sales followed by 1.6 percent in Jun 2013. Retail sales fell 0.3 percent in Jul 2013, rebounding 1.1 percent in Aug 2013. Retail sales increased 3.0 percent in the 12 months ending in Sep 2013 and 2.4 percent in the 12 months ending in Oct 2013. Retail sales increased 4.1 percent in the 12 months ending in Nov 2013 and 2.5 percent in the 12 months ending in Dec 2013. Retail sales grew 4.4 percent in the 12 months ending in Jan 2014 and 3.6 percent in the 12 months ending in Feb 2014. Japan’s retail sales increased 11.0 percent in the 12 months ending in Mar 2014 in part anticipating the increase in the tax on the value added of consumption. Retail sales fell 4.3 percent in Apr 2014 after the increase in the sales tax. Retail sales fell 0.4 percent in the 12 months ending in May 2014 and fell 0.6 percent in the 12 months ending in Jun 2014. Retail sales increased 0.5 percent in the 12 months ending in Jul 2014. Retail sales are recovering from deep drops in Mar and Apr 2011 following the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Retail sales have been increasing in 12-month percentage changes from Dec 2011 through May 2012. Retail sales fell again by 1.3 percent in Jul 2012, increasing 1.3 percent in Aug 2012 and 0.4 percent in Sep 2012 but declining 1.2 percent in Oct 2012, rebounding by 0.9 percent in Nov 2012 and only 0.2 percent in Dec 2012 but contracting 1.1 percent in Jan 2013 and 2.2 percent in Feb 2013.

Table VB-6, Japan, Wholesale and Retail Sales 12 Month ∆%

	Total	Wholesale	Retail
Jul 2014	0.1	-0.2	0.5
Jun	-0.6	-0.5	-0.6
May	-1.0	-1.3	-0.4
Apr	-3.4	-3.0	-4.3
Mar	8.5	7.5	11.0
Feb	2.5	2.0	3.6
Jan	4.4	4.4	4.4
Dec 2013	2.8	2.9	2.5
Nov	2.9	2.4	4.1
Oct	2.0	1.8	2.4
Sep	2.8	2.7	3.0
Aug	0.6	0.4	1.1
Jul	1.3	2.0	-0.3
Jun	0.5	0.1	1.6
May	0.6	0.5	0.8
Apr	-0.1	-0.1	-0.2
Mar	-1.3	-1.8	-0.3
Feb	-1.6	-1.3	-2.2
Jan	-0.3	0.1	-1.1
Dec 2012	-1.7	-2.5	0.2
Nov	-0.9	-1.6	0.9
Oct	-1.6	-1.8	-1.2
Sep	-3.6	-5.1	0.4
Aug	-2.7	-4.4	1.3
Jul	-3.1	-4.0	-1.3
Jun	-2.6	-3.6	-0.2
May	2.7	2.6	3.0
Apr	1.8	0.4	5.0
Mar	3.2	0.9	9.3
Feb	-0.1	-1.3	3.1
Jan	-2.1	-3.8	1.6
Dec 2011	-0.8	-2.0	2.5
Nov	-2.3	-2.4	-2.2
Oct	1.1	0.8	1.9
Sep	0.3	0.8	-1.1
Aug	3.1	5.2	-2.6
Jul	2.3	3.0	0.6
Jun	3.1	3.8	1.2
May	1.3	2.3	-1.3
Apr	-2.6	-1.7	-4.8
Mar	-1.3	1.2	-8.3
Feb	5.3	7.2	0.1
Jan	3.3	4.6	0.1
Dec 2010	3.5	5.7	-2.1
Calendar Year
2013	0.9	0.8	1.0
2012	-0.9	-2.0	1.8
2011	1.0	1.9	-1.0
2010	2.4	2.3	2.6
2009	-20.5	-25.6	-2.3
2008	1.2	1.5	0.3

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

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

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	Jul 2014: 11.5 % unemployment rate; Jul 2014: 18.409 million unemployed Blog 8/31/14
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 100.6 Aug 2014 Consumer minus 10.0 Aug 2014 Blog 8/31/14
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:

8/24/14 http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html

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

EUROSTAT estimates the rate of unemployment in the euro area at 11.5 percent in Jul 2014, as shown in Table VD-1. The number of unemployed in Jul 2014 was 18.409 million, which was 0.725 million lower than 19.134 million in Jul 2013. The rate of unemployment stabilized from 12.0 percent in Apr 2013 to 11.5 percent in Jul 2014.

Table VD-1, Euro Area, Unemployment Rate and Number of Unemployed, % and Millions, SA 

	Unemployment Rate %	Number Unemployed Millions
Jul 2014	11.5	18.409
Jun	11.5	18.405
May	11.6	18.572
Apr	11.6	18.590
Mar	11.7	18.681
Feb	11.7	18.767
Jan	11.8	18.852
Dec 2013	11.8	18.866
Nov	11.9	19.044
Oct	11.9	19.075
Sep	12.0	19.202
Aug	12.0	19.150
Jul	11.9	19.134
Jun	12.0	19.210
May	12.0	19.188
Apr	12.0	19.195
Mar	12.0	19.134
Feb	11.9	19.114
Jan	11.9	19.083
Dec 2012	11.8	18.887
Nov	11.7	18.780
Oct	11.7	18.710
Sep	11.5	18.450
Aug	11.4	18.279
Jul	11.4	18.245
Jun	11.3	18.159
May	11.2	17.919
Apr	11.1	17.775
Mar	11.0	17.486
Feb	10.8	17.240
Jan	10.7	17.023
Dec 2011	10.6	16.919
Nov	10.5	16.808
Oct	10.4	16.548
Sep	10.3	16.374
Aug	10.2	16.136
Jul	10.1	15.974
Jun	9.9	15.762
May	9.9	15.698
Apr	9.8	15.549
Mar	9.9	15.634
Feb	9.9	15.660
Jan	9.9	15.738
Dec 2010	10.0	15.850

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

Table VD-2 shows the disparity in rates of unemployment in the euro area with 11.5 percent for the region as a whole and 18.409 million unemployed but 4.9 percent in Germany and 2.091 million unemployed. At the other extreme is Spain with rate of unemployment of 24.5 percent and 5.615 million unemployed. The rate of unemployment of the European Union in Jul 2014 is 10.2 percent with 24.850 million unemployed.

Table VD-2, Unemployed and Unemployment Rate in Countries and Regions, Millions and %

Jul 2014	Unemployment Rate %	Unemployed Millions
Euro Zone	11.5	18.409
Germany	4.9	2.091
France	10.3	3.026
Netherlands	6.7	0.594
Finland	8.7	0.232
Portugal	14.0	0.722
Ireland	11.5	0.247
Italy	12.6	3.220
Greece	27.2*	1.309*
Spain	24.5	5.615
Belgium	8.5	0.425
European Union	10.2	24.850

*May 2014

Source: EUROSTAT

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

Chart VD-1 of EUROSTAT illustrates the wide difference in rates of unemployment in countries and regions.

Chart VD-1, Unemployment Rate in Various Countries and Regions

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 Economic Sentiment Indicator of the European Economic Commission, Economic and Financial Affairs, provides correlation with the economic cycle since 1990, capturing all three recessions in the period and even the threat of recession from 1994 to 1995. The latest chart of this index accessible in the link in parenthesis shows trend of decline in 2011 and 2012 that has punctured the historical average of 100 and resumed downward trend in 2012 followed by recovery moving closer to the average (http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm). Table VD-1 provides the index increasing from 97.3 in Sep 2013 to 100.6 in Aug 2014. The index is above the minimum value of 70.1 reached in Mar 2009, surpassing the average of 100.

Table VD-3, Euro Area, Indicators of Confidence and Economic Sentiment SA

	ESI	IND	SERV	CON	RET	CONS
Historical Average	100.0	-6.9	9.0	-13.2	-9.1	-18.3
Maximum	118.6 05-00	7.9 04-07	35.4     08-98	2.4 05-00	5.2 06-90	6.0 02-90
Minimum	70.1 03-09	-38.1 03-09	-26.1 03-09	-34.3 03-09	-24.9 01-93	-46.0 09-93
Aug 2014	100.6	-5.3	3.1	-10.0	-4.6	-28.4
Jul	102.1	-3.8	3.6	-8.4	-2.3	-28.2
Jun	102.1	-4.3	4.4	-7.5	-1.9	-31.7
May	102.6	-3.1	3.8	-7.1	-2.5	-30.1
Apr	102.0	-3.5	3.5	-8.6	-2.6	-30.4
Mar	102.5	-3.3	4.5	-9.3	-2.6	-28.7
Feb	101.2	-3.5	3.3	-12.7	-3.1	-28.5
Jan	101.0	-3.8	2.4	-11.7	-3.5	-29.8
Dec 2013	100.4	-3.4	0.4	-13.5	-5.1	-26.4
Nov	98.8	-3.9	-0.8	-15.3	-7.6	-30.4
Oct	98.1	-5.0	-3.6	-14.4	-7.7	-29.1
Sep	97.3	-6.6	-3.2	-14.8	-6.8	-28.3

ESI: Economic Sentiment Index; IND: Industry; SERV: Services; CON: Consumer; RET: Retail Trade; CONS: Construction

Source: European Commission Services

http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm

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	Jul Month ∆% 0.7 12-Month ∆% -1.4 Blog 8/31/14
Employment Report	Unemployment Rate SA Jul 4.9% Blog 8/31/14
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:

8/24/14 http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html

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

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

Germany’s labor market continues to show strength not found in most of the advanced economies, as shown in Table VE-1. The number unemployed, not seasonally adjusted, decreased from 2.24 million in Jul 2013 to 2.03 million in Jul 2014, or 9.4 percent, while the unemployment rate fell from 5.3 percent in Jul 2013 to 4.8 percent in Jul 2014. The number of persons in employment, not seasonally adjusted, increased from 40.08 million in Jul 2013 to 40.41 million in Jul 2014, or 0.8 percent, while the employment rate increased from 63.7 percent in Jul 2013 to 64.3 percent in Jul 2014. The number unemployed, seasonally adjusted, stabilized from 2.12 million in Jun 2014 to 2.09 million in Jul 2014, while the unemployment rate fell to 4.9 percent in Jul 2014 relative to 5.0 percent in Jul 2014. The number of persons in employment, seasonally adjusted, stabilized from 40.49 million in Jun 2014 to 40.49 million in Jul 2014, or change of 0.0 percent. The employment rate seasonally adjusted did not change from 64.4 in Jun 2014 to 64.4 in Jul 2014.

Table VE-1, Germany, Unemployment Labor Force Survey

	Jul 2014	Jun 2014	Jul 2013
NSA
Number Unemployed Millions	2.03 ∆% Jul 2014 /Jun 2014: -4.2 ∆% Jul 2014/Jul 2013: -9.4	2.12	2.24
% Rate Unemployed	4.8	5.0	5.3
Persons in Employment Millions	40.41 ∆% Jul 2014/Jun 2014: 0.1 ∆% Jul 2014/Jul 2013: 0.8	40.37	40.08
Employment Rate	64.3	64.2	63.7
SA
Number Unemployed Millions	2.09 ∆% Jul 2014/Jun  2014: -1.4 ∆% Jul 2014/Jul 2013: –7.5	2.12	2.26
% Rate Unemployed	4.9	5.0	5.3
Persons in Employment Millions	40.49 ∆% Jul 2014/Jun 2014: 0.0 ∆% Jul 2014/Jul 2013: 0.2	40.49	40.41
Employment Rate	64.4	64.4	64.2

NSA: not seasonally adjusted; SA: seasonally adjusted

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2014/08/PE14_301_132.html

The unemployment rate in Germany as percent of the labor force in Table VE-2 stood at 6.5 percent in Sep, Oct and Nov 2012, increasing to 6.7 percent in Dec 2012, 7.4 percent in Jan 2013, 7.3 in Mar 2013 and 7.1 percent in Apr 2013. The unemployment rate fell to 6.8 percent in May 2013 and 6.6 percent in Jun 2013 and rose to 6.8 percent in Jul-Aug 2013. The rate fell to 6.6 percent in Sep 2013 and 6.5 percent in Oct 2013 and Nov 2013. The unemployment rate increased to 6.7 percent in Dec 2013 and 7.3 percent in Jan 2013. The unemployment rate reached 7.3 percent in Feb 2014 and 7.1 percent in Mar 2014. The unemployment rate fell to 6.8 percent in Apr 2014 and 6.6 percent in May 2014. The unemployment rate fell to 6.5 percent in Jun 2014, increasing to 6.6 percent in Jun 2014 and 6.7 percent in Aug 2014. The rate is much lower than 11.1 percent in 2005 and 9.6 percent in 2006.

Table VE-2, Germany, Unemployment Rate in Percent of Labor Force

Aug 2014	6.7
Jul	6.6
Jun	6.5
May	6.6
Apr	6.8
Mar	7.1
Feb	7.3
Jan	7.3
Dec 2013	6.7
Nov	6.5
Oct	6.5
Sep	6.6
Aug	6.8
Jul	6.8
Jun	6.6
May	6.8
Apr	7.1
Mar	7.3
Feb	7.4
Jan	7.4
Dec 2012	6.7
Nov	6.5
Oct	6.5
Sep	6.5
Aug	6.8
Jul	6.8
Jun	6.6
May	6.7
Apr	7.0
Mar	7.2
Feb	7.4
Jan	7.3
Dec 2011	6.6
Nov	6.4
Oct	6.5
Sep	6.6
Aug	7.0
Jul	7.0
Jun	6.9
May	7.0
Apr	7.3
Mar	7.6
Feb	7.9
Jan	7.9
Dec 2010	7.1
Dec 2009	7.8
Dec 2008	7.4
Dec 2007	8.1
Dec 2006	9.6
Dec 2005	11.1

Source: Statistisches Bundesamt Deutschland

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

Chart VE-1 of Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, shows the long-term decline of the rate of unemployment in Germany from more than 12 percent in early 2005 to 6.6 percent in Dec 2011, increasing to 6.7 percent in Dec 2012, 6.8 percent in Apr 2013 and 6.6 percent in May 2013. The unemployment rate rose slightly to 6.8 percent in Aug 2013, falling to 6.6 percent in Sep 2013 and 6.5 percent in Oct 2013. The rate remained at 6.5 percent in Nov 2013, increasing to 6.7 percent in Dec 2013 and 7.3 in Jan 2014. The rate remained at 7.3 percent in Feb 2014, declining to 7.1 percent in Mar 2014. The rate fell to 6.8 percent in Apr 2014, 6.6 percent in May 2014 and 6.5 percent in Jun 2014. The rate increased to 6.6 percent in Jul 2014 and 6.7 percent in Aug 2014.

Chart VE-1, Germany, Unemployment Rate, Unadjusted, Percent

Source: Statistisches Bundesamt Deutschland

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

Retail sales in Germany adjusted for inflation re provided in Table VE-3. There have been sharp fluctuations in monthly and 12-month percentage changes. In Jul 2014, retail sales increased 0.7 percent and decreased 1.4 percent in 12 months. Retail sales increased 0.1 percent in Jun 2014 and increased 1.0 percent in 12 months.

Table VE-3, Retail Sales in Germany Adjusted for Inflation

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Jul 2014	0.7	-1.4
Jun	0.1	1.0
May	2.4	-0.2
Apr	3.6	-0.5
Mar	-0.7	-0.5
Feb	2.4	0.6
Jan	0.9	1.6
Dec 2013	0.4	-1.3
Nov	1.7	1.7
Oct	0.0	-0.6
Sep	0.3	-0.1
Aug	0.6	0.4
Jul	3.4	0.1
Jun	-2.8	-1.3
May	0.3	0.8
Apr	2.6	0.4
Mar	-2.8	0.0
Feb	-3.2	-1.0
Jan	2.4	2.1
Dec 2012	-3.1	-0.9
Nov	0.5	0.4
Oct	1.5	-0.7
Sep	-3.1	0.2
Aug	0.0	0.2
Jul	-1.0	-1.2
Jun	4.6	0.9
May	-0.7	-0.1
Apr	-4.7	-0.5
Mar	4.2	0.8
Feb	2.5	1.1
Jan	2.0	-2.3
Dec 2011	0.8	1.4
Nov	0.9	-1.2
Oct	-0.4	0.6
Sep	1.2	0.2
Aug	3.4	-0.8
Jul	-2.4	0.7
Jun	-2.0	2.6
May	4.5	-2.4
Apr	4.8	1.2
Mar	-2.9	-2.6
Feb	3.0	1.5
Jan	3.3	0.6
Dec 2010	-0.2	0.5
Dec 2009	-2.2
Dec 2008	3.4
Dec 2007	-6.2
Dec 2006	1.3

Source: Statistisches Bundesamt Deutschland (Destatis)

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

Chart VE-4 of the Statistisches Bundesamt Deutschland, Federal Statistical Office of Germany, shows retail sales at constant prices from 2010 to 2014. There appear to be fluctuations without trend.

Chart VE-2, Germany, Turnover in Retail Trade at Constant Prices 2010=100

Source: Statistisches Bundesamt Deutschland (Destatis), Federal Statistical Office of Germany

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

Chart VE-3 of the Federal Statistical Office of Germany provides retail sales at current prices. The final segment suggests a trend of increase.

Chart VE-3, Germany, Turnover in Retail Sales at Current Prices, Original Values, 2010=100

Source: Statistisches Bundesamt Deutschland (Destatis), Federal Statistical Office of Germany

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.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	Jul month ∆%: -0.3 Jul 12 months ∆%: -0.6 Blog 8/31/14
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 Aug Mfg Business Climate 96.0 Blog 8/31/14

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

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

Table VF-1 shows the INSEE business climate indicator for manufacturing. The headline composite indicator improved to 99 in May 2014 close to the average 100, easing to 97 in Jun-Jul 2014 and 96 in Aug 2014. General production expectations deteriorated to minus 12 in May 2014. Deterioration continued to minus 19 in Jun-Jul 2014 and minus 20 in Aug 2014.

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

Mfg 2014	Average since 1976	Aug 14	Jul 14	Jun 14	May 14
Composite Indicator	100	96	97	97	99
Past Activity	4	2	4	10	11
Finished- Goods Inventory Level	13	12	12	12	13
Global Order Books	-18	-22	-23	-27	-23
Export Order Books	-14	-19	-21	-24	-21
Personal Production Expectations	5	-7	0	2	4
General Production Expectations	-9	-20	-19	-19	-12

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20140827

Chart VF-5 of the Institut National de la Statistique et des Études Économiques (INSEE) provides the history of the manufacturing business climate indicator of INSEE since 1992. The index fell during the contractions of 1991, 2001 and 2008. After rapid recovery beginning in 2009 the synthetic index shows declining trend in 2011 with upward reversal in 2012 interrupted in Apr through Jul 2012 and a marginal upward move in Aug-Sep 2012 but new decline in Oct 2012. The manufacturing composite indicator marginally reversed in Nov 2012 with stability in Dec 2012 and decline in Jan 2013 but improvement in Feb 2013 and stability in Mar 2013, deteriorating in Apr 2013 and recovering in May-Aug 2013. The composite indicator of manufacturing eased slightly in Sep 2013 and improved marginally in Oct-Nov 2013, close to the long-term average of 100. The index reached 100 in Dec 2013 and oscillated around the average. The index fell in the recent segment in 2014.

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

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20140827

Chart VF-6 of the Institut National de la Statistique et des Études Économiques (INSEE) shows strong drops of the turning point indicator in the recessions of 1991, 2001 and 2008. There have been other drops of this index. The turning point indicator has fallen to levels in the direction of past contractions and after rebounding in Oct and Nov 2011 is showing declining trend in Jan 2012 with slight reversal in Feb followed by significant improvement in Mar and deterioration in Apr through Jul 2012. There is new improvement in Aug 2012 followed by decline in Sep-Oct 2012 followed by rebound in Nov 2012 and stability in Dec 2012 to Jan-Mar 2013, deteriorating in Apr-May 2013. The index improved in Jun-Sep 2013 and stabilized in Oct 2013, declining in Nov 2013. The index increased in Dec 2013 and in Jan 2014, declining in Feb 2014 and stabilizing in Mar 2014. The index stabilized in Apr-May 2014 and fell in Jun 2014 with partial recovery in Jul-Aug 2014.

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

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20140827

Chart VF-7 of the Institut National de la Statistique et des Études Économiques (INSEE) of France provides the composite climate indicator for French business. There is recovery in Jul-Sep 2013 and stability in Oct-Nov 2013. The index fell marginally in Dec 2013 and in Jan-Feb 2014. The index increased marginally in Mar 2014, stabilizing in Apr-May 2014. The index fell in Aug 2014.

Chart VF-3, France, Composite Indicator of Business Climate of INSEE

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=105&date=20140827

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 0.4 percent in IQ2014 relative to a year earlier and decreased 0.2 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. Consumption fell 0.3 percent in IQ2014 and GFCF fell 2.1 percent. In IIQ2014, consumption increased 0.2 percent relative to a year earlier and GFCF fell 2.1 percent.

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

	GDP	Imports	Consumption	GFCF	Exports
2014
IIQ	-0.2	2.0	0.2	-2.1	1.9
IQ	-0.4	0.9	-0.3	-1.2	2.5
2013
IVQ	-0.9	-0.1	-1.1	-2.8	1.0
IIIQ	-1.9	-2.0	-1.7	-4.6	-0.4
IIQ	-2.2	-4.4	-2.9	-4.8	0.1
IQ	-2.4	-5.0	-3.0	-6.1	-0.8
2012
IVQ	-2.9	-6.5	-4.0	-7.3	0.9
IIIQ	-2.6	-7.1	-4.0	-8.3	2.0
IIQ	-2.4	-7.0	-3.4	-8.5	2.3
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/130505

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	Aug month ∆%: 0.2 Aug 12-month ∆%: -0.1 Blog 8/31/14
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 0.2 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 8/31/14
Labor Report	Jul 2014 Participation rate 63.7% Employment ratio 55.6% Unemployment rate 12.6% Youth Unemployment 42.9% Blog 8/31/14
Industrial Production	Jun month ∆%: 0.0 12 months CA ∆%: -2.6 Blog 8/10/14
Retail Sales	Jun month ∆%: -0.7 Jun 12-month ∆%: -0.5 Blog 8/31/14
Business Confidence	Mfg Aug 95.7, Apr 99.6 Construction Aug 77.0, Apr 75.1 Blog 8/31/14
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:

8/10/14 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

7/20/14 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

Table VG-1 provides revised percentage changes of GDP in Italy of quarter on prior quarter and quarter on same quarter a year earlier. Italy’s GDP fell 0.2 percent in IIQ2014 and declined 0.2 percent relative to a year earlier. The GDP of Italy contracted 0.1 percent in IQ2014 and fell 0.4 percent relative to a year earlier. Italy’s GDP increased 0.1 percent in IVQ2013, interrupting nine consecutive quarterly declines, and fell 0.9 percent relative to a year earlier. The GDP of Italy decreased 0.1 percent in IIIQ2013 and fell 1.9 percent relative to a year earlier. Italy’s GDP fell 0.3 percent in IIQ2013 and fell 2.2 percent relative to a year earlier. Italy’s GDP fell 0.6 percent in IQ2013 and declined 2.4 percent relative to IQ2012. GDP had been growing during six consecutive quarters but at very low rates from IQ2010 to IIQ2011. Italy’s GDP has fallen in nine consecutive quarters from IIIQ2011 to IIIQ2013 at increasingly higher rates of contraction from 0.2 percent in IIIQ2011 to 0.7 percent in IVQ2011, 1.1 percent in IQ2012 and 0.5 percent in IIQ2012 but at lower 0.4 percent in IIIQ2012. The pace of decline accelerated to minus 0.9 percent in IVQ2012 and 0.6 percent in IQ2013, declining to minus 0.3 percent in IIQ2013 and 0.1 percent in IIIQ2013. GDP contracted cumulatively 4.7 percent in nine consecutive quarterly contractions from IIIQ2011 to IIIQ2013 at the annual equivalent rate of 2.1 percent. The total contraction in the 11 quarters including the first two in 2014 accumulates to 5.0 percent. The yearly rate has fallen from 2.2 percent in IVQ2010 to 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 0.4 percent in IQ2014 relative to a year earlier and fell 0.2 percent in IIQ2014 relative to a year earlier. The fiscal adjustment of Italy is significantly more difficult with the economy not growing especially on the prospects of increasing government revenue. The strategy is for reforms to improve productivity, facilitating future fiscal consolidation.

Table VG-1, Italy, GDP ∆%

	Quarter ∆% Relative to Preceding Quarter	Quarter ∆% Relative to Same Quarter Year Earlier
IIQ2014	-0.2	-0.2
IQ2014	-0.1	-0.4
IVQ2013	0.1	-0.9
IIIQ2013	-0.1	-1.9
IIQ2013	-0.3	-2.2
IQ2013	-0.6	-2.4
IVQ2012	-0.9	-2.9
IIIQ2012	-0.4	-2.6
IIQ2012	-0.5	-2.4
IQ2012	-1.1	-1.7
IVQ2011	-0.7	-0.6
IIIQ2011	-0.2	0.4
IIQ2011	0.2	1.1
IQ2011	0.1	1.4
IVQ2010	0.3	2.2
IIIQ2010	0.4	1.8
IIQ2010	0.6	1.8
IQ2010	0.8	0.9
IVQ2009	-0.1	-3.5
IIIQ2009	0.4	-5.0
IIQ2009	-0.3	-6.6
IQ2009	-3.5	-6.9
IVQ2008	-1.6	-3.0
IIIQ2008	-1.3	-1.9
IIQ2008	-0.5	-0.2
IQ2008	0.5	0.5
IV2007	-0.4	0.1
IIIQ2007	0.3	1.7
IIQ2007	0.2	2.0
IQ2007	0.0	2.4

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/130505

Chart VG-1, Italy, GDP at Market Prices, ∆% on Same Quarter Year Earlier

Source: Istituto Nazionale di Statistica http://www.istat.it/en/

Table VG-2 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 0.4 percent in IQ2014 relative to a year earlier and decreased 0.2 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. Consumption fell 0.3 percent in IQ2014 and GFCF fell 2.1 percent. In IIQ2014, consumption increased 0.2 percent relative to a year earlier and GFCF fell 2.1 percent.

Table VG-2, Italy, GDP and Expenditure Components, Chained Volume Measures, Quarter ∆% on Same Quarter Year Earlier

	GDP	Imports	Consumption	GFCF	Exports
2014
IIQ	-0.2	2.0	0.2	-2.1	1.9
IQ	-0.4	0.9	-0.3	-1.2	2.5
2013
IVQ	-0.9	-0.1	-1.1	-2.8	1.0
IIIQ	-1.9	-2.0	-1.7	-4.6	-0.4
IIQ	-2.2	-4.4	-2.9	-4.8	0.1
IQ	-2.4	-5.0	-3.0	-6.1	-0.8
2012
IVQ	-2.9	-6.5	-4.0	-7.3	0.9
IIIQ	-2.6	-7.1	-4.0	-8.3	2.0
IIQ	-2.4	-7.0	-3.4	-8.5	2.3
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/130505

Table VG-3 provides percentage changes in a quarter relative to the same quarter a year earlier for GDP and value added components. Percentage declines of industry have been sharper from IVQ2011 to IVQ2013 than for services. Industry contracted 0.8 percent in IQ2014 relative to a year earlier while services contracted 0.1 percent. In IIQ2014, industry contracted 1.0 percent relative to a year earlier while services increased 0.1 percent.

Table VG-3, Italy, GDP and Valued Added of Components, Chained Volume Measures, Quarter ∆% on Same Quarter Year Earlier

	Agriculture	Industry	Services	VA	GDP Market Prices
% Value Added 2013	2.2	23.6	74.2
2014
IIQ	0.4	-1.0	0.1	-0.2	-0.2
IQ	-0.1	-0.8	-0.1	-0.2	-0.4
2013
IV	1.8	-2.2	-0.3	-0.7	-0.9
IIIQ	0.8	-4.5	-0.7	-1.6	-1.9
IIQ	-1.8	-4.3	-1.1	-1.9	-2.2
IQ	0.4	-4.3	-1.4	-2.0	-2.4
2012
IVQ	-6.7	-3.9	-2.1	-2.6	-2.9
IIIQ	-5.7	-2.9	-2.3	-2.5	-2.6
IIQ	-1.1	-4.2	-1.5	-2.2	-2.4
IQ	-3.5	-4.0	-0.6	-1.5	-1.7
2011
IVQ	1.4	-1.8	0.3	-0.2	-0.6
IIIQ	0.8	-0.3	1.0	0.6	0.4
IIQ	-0.4	1.4	1.2	1.2	1.1
IQ	0.4	3.3	0.8	1.5	1.4
2010
IVQ	0.2	3.5	1.9	2.3	2.2
IIIQ	-1.4	4.6	1.0	1.8	1.8
IIQ	0.0	4.9	0.8	1.8	1.8
IQ	0.4	1.2	0.8	0.9	0.9
2009
IVQ	-3.7	-7.4	-2.4	-2.0	-3.5
IIIQ	-0.3	-13.3	-2.1	-4.3	-5.0
IIQ	-4.1	-16.7	-3.0	-5.6	-6.6
IQ	-1.9	-16.5	-3.3	-6.6	-6.9
2008
IVQ	2.2	-8.2	-1.3	-2.1	-3.0
IIIQ	1.0	-3.9	-1.2	-1.7	-1.9
IIQ	2.3	-0.6	0.0	-1.4	-0.2
IQ	0.1	1.0	0.4	-0.1	0.5

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/130505

Chart VG-1 of the Italian National Institute of Statistics (ISTAT) provides growth of GDP of Italy at market prices. The year on year rate of growth pulled strongly out of the contraction. There is evident trend of deceleration with increasingly sharper contraction and mild moderation in 2013 and 2014.

Chart VG-1, Italy, GDP at Market Prices, ∆% on Same Quarter Year Earlier

Source: Istituto Nazionale di Statistica

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

Data on Italy’s labor market since 2004 are provided in Table VG-4. The unemployment rate has risen from 6.2 percent in Dec 2006 to 12.6 percent in Jul 2014. The rate of youth unemployment for ages 15 to 24 years increased from 20.2 percent in Dec 2006 to 43.7 percent in Jul 2014. As in other advanced economies, unemployment has reached high levels.

Table VG-4, Italy, Labor Report

	Participation Rate %	Employment Ratio %	Unemployment Rate %	Unemployment Rate 15-24 Years %
Jul 2014	63.7	55.6	12.6	42.9
Jun	63.7	55.7	12.3	43.7
May	63.7	55.5	12.6	43.0
Apr	63.5	55.4	12.5	43.5
Mar	63.7	55.7	12.4	42.8
Feb	63.6	55.5	12.6	42.6
Jan	63.6	55.5	12.6	42.5
Dec 2013	63.5	55.5	12.4	41.8
Nov	63.6	55.5	12.7	41.7
Oct	63.6	55.5	12.4	41.4
Sep	63.5	55.4	12.5	40.8
Aug	63.5	55.6	12.3	40.7
Jul	63.4	55.7	12.1	40.0
Jun	63.5	55.6	12.3	39.4
May	63.4	55.6	12.2	38.8
Apr	63.5	55.8	12.1	39.3
Mar	63.5	55.8	11.9	39.1
Feb	63.7	56.0	11.8	38.7
Jan	63.7	56.0	11.8	38.4
Dec 2012	63.7	56.3	11.4	37.4
Nov	63.6	56.4	11.2	37.5
Oct	63.8	56.4	11.3	36.4
Sep	63.7	56.6	10.9	36.2
Aug	63.6	56.7	10.7	34.5
Jul	63.8	56.8	10.8	35.4
Jun	63.8	56.8	10.8	34.6
May	63.8	57.0	10.4	35.7
Apr	63.8	56.9	10.7	34.8
Mar	63.5	56.8	10.4	35.1
Feb	63.4	57.0	10.0	33.6
Jan	63.1	57.0	9.5	32.2
Dec 2011	63.0	56.9	9.5	31.8
Nov	62.7	56.8	9.3	31.9
Oct	62.6	57.0	8.8	30.5
Sep	62.4	56.8	8.9	30.4
Aug	62.4	57.0	8.5	29.3
Jul	62.2	57.0	8.3	28.7
Jun	62.0	57.0	8.0	27.9
May	62.1	57.0	8.1	27.8
Apr	61.8	56.9	7.7	27.3
Mar	62.1	57.1	7.9	27.8
Feb	61.8	56.8	7.9	27.6
Jan	61.9	56.9	8.0	28.3
Dec 2010	62.1	56.9	8.2	28.5
Dec 2009	62.4	57.1	8.3	26.7
Dec 2008	62.5	58.2	6.8	22.7
Dec 2007	63.1	58.9	6.5	21.5
Dec 2006	62.5	58.5	6.2	20.2
Dec 2005	62.6	57.8	7.5	23.5
Dec 2004	62.5	57.5	7.9	23.7

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/130452

Table VG-5 provides more detail on the labor report for Italy in Jul 2014. The level of employment decreased 35,000 from Jun 2014 to Jul 2014 and decreased 71,000 from Jul 2013 to Jul 2014. Unemployment increased 69,000 in Jul 2014 and increased 143,000 from a year earlier. A dramatic aspect found in most advanced economies is the high rate of unemployment of youth at 42.9 percent in Jul 2014 for ages 15 to 24 years.

Table VG-5, Italy, Labor Report, NSA

Jul 2014	1000s	Change from Prior Month 1000s	∆% from Prior Month	Change from Prior Year 1000s	∆% from Prior Year
EMP	22,360	-35	-0.2	-71	-0.3
UNE	3,220	69	2.2	143	4.6
INA   15-64	14,293	-28	-0.2	-159	-1.1
EMP 15-24	939	36	3.9	-25	-2.5
UNE 15-24	705	3	0.5	64	10.0
INA 15-24	4,335	-40	-0.9	-81	-1.8
EMP %	55.6		-0.1		-0.1
UNE %	12.6		0.3		0.5
Youth UNE %  15-24	42.9		-0.8		2.9
INA % 15-64	36.3		-0.1		-0.3

Notes: EMP: Employed; UNE: Unemployed; INA 15-64: Inactive aged 15 to 64; EMP %: Employment Rate; UNE %: Unemployment Rate; Youth UNE % 15-24: Youth Unemployment Rate aged 15 to 24; INA % 15-64: Inactive Rate aged 15 to 64.

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/130452

Chart VG-2 provides the rate of unemployment in Italy increased from 12.1 percent in Jul 2013 to 12.6 percent in Jul 2014.

Chart VG-2, Italy, Rate of Unemployment, %

Source: Istituto Nazionale di Statistica

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

Chart VG-3 of the Istituto Nazionale di Statistica provides the total number of employed persons in Italy. The level of employment dropped from 22.431 million in Jul 2013 to 22.360 million in Jul 2014.

Chart VG-3, Italy, Total Number of Employed Persons, Millions, SA

Source: Istituto Nazionale di Statistica

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

There are many sound fundamentals in Italy such as high income and competitive companies. The restraints consist of low economic growth with high debt/GDP ratio. Table VG-6 provides growth of retail sales for Italy. Retail sales changed 0.0 percent in Jun 2014 relative to May 2014, decreased 0.2 percent in Apr-Jun 2014 relative to Jan-Mar 2014, decreased 2.6 percent in Jun 2014 relative to Jun 2013 and decreased 1.0 percent cumulatively in Jan-Jun 2014 relative to Jan-Jun 2013. Food retail sales outperform non-food retail sales.

Table VG-6, Italy, Retail Sales ∆%

	Jun 2014/  May 2014 SA	Apr-Jun 14/   Jan-Mar 14 SA	Jun 2014/ Jun 2013 NSA	Jan-Jun 2014/ Jan-Jun 2013
Food	0.1	0.1	-2.4	-0.7
Non-food	-0.1	-0.4	-2.8	-1.1
Total	0.0	-0.2	-2.6	-1.0

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/130370

Chart VG-4 provides 12-month percentage changes of retail sales at current prices. There is improvement in the final segment from Feb to May 2013 with sharper decline in Jun 2013 and recovery in Jul-Aug 2013. Sales declined again in Sep 2013, increasing in Oct-Nov 2013. Sales fell in Dec 2013 and improved in Jan 2014. Sales stabilized in Feb 2014 and deteriorated in Mar 2014. Sales improved in Apr 2014 and deteriorated in May-Jun 2014.

Chart VG-4, Italy, Percentage Changes of Retail Sales in 12 Months

Source: Istituto Nazionale di Statistica

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

A longer perspective of retail sales in Italy is provided by monthly and 12-month percentage changes in 2011, Jan-Dec 2012, Jan-Dec 2013, Jan-Jun 2014 and annual rates for 2011, 2012 and 2013 in Table VG-7. Retail sales did not decline very sharply during the global recession but fell 0.8 percent in 2011, 1.7 percent in 2012 and 2.1 percent in 2013. There is an evident declining trend in 2011 with few monthly increases and similar weakness in 2012 with multiple monthly declines. Negative percentage changes in 12 months increased to more than 3 percent with decrease of 3.2 percent in the 12 months ending in Mar 2013 and decrease of 3.0 percent in the 12 months ending in Jun 2013. Retail sales changed 0.0 percent in Jun 2014 and decreased 2.6 percent in 12 months.

Table VG-7, Italy, Retail Sales Month and 12-Month ∆%

	Month ∆% SA	12-Month ∆% NSA
Jun 2014	0.0	-2.6
May	-0.6	-0.4
Apr	0.3	2.7
Mar	-0.2	-3.5
Feb	0.0	-1.0
Jan	0.0	-0.9
Dec 2013	-0.3	-2.6
Nov	0.0	0.2
Oct	0.0	-1.6
Sep	-0.3	-2.8
Aug	0.0	0.2
Jul	-0.2	-0.8
Jun	-0.1	-3.0
May	0.6	-1.2
Apr	-0.3	-2.9
Mar	-0.3	-3.2
Feb	0.0	-4.8
Jan	-0.6	-2.8
Dec 2012	0.2	-3.4
Nov	-0.2	-2.4
Oct	-0.7	-3.4
Sep	-0.1	-1.0
Aug	0.0	-0.4
Jul	-0.2	-3.1
Jun	-0.1	0.2
May	0.0	-1.1
Apr	-1.4	-6.3
Mar	0.4	2.3
Feb	-0.5	0.7
Jan	1.1	-0.9
Dec 2011	-0.9	-3.2
Nov	-0.5	-1.5
Oct	0.7	-0.9
Sep	-0.3	-1.1
Aug	-0.4	0.1
July	0.0	-1.7
Jun	-0.4	-0.6
May	-0.5	-0.3
Apr	0.9	3.3
Mar	-0.2	-1.9
Feb	-0.3	0.1
Jan	-0.2	-0.5
Dec 2010	0.5	0.6
2013		-2.1
2012		-1.7
2011		-0.8

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/130370

Italy’s index of business confidence in manufacturing and construction is provided in Table VG-8. There has been improvement of manufacturing confidence below the historical average of 100 from 99.6 in Apr 2014 to 99.7 in May 2014 with decline to 95.7 in Aug 2014. Order books stabilized from minus 21 in Apr 2014 to minus 21 in Jun 2014 with deterioration to minus 24 in Aug 2014. There is improvement in construction with the index moving from 75.1 in Apr 2014 to 77.0 in Aug 2014.

Table VG-8, Italy, Index of Business Confidence in Manufacturing and Construction 2005=100

	Aug      2014	Jul  2014	Jun      2014	May    2014	Apr     2014
Mfg Confidence	95.7	99.1	99.4	99.7	99.6
Order Books	-24	-23	-21	-21	-21
Stocks Finished Products	3	0	0	-3	-1
Production Expectation	1	7	5	4	5
Construction Confidence	77.0	83.0	81.3	73.6	75.1
Order Books	-48	-45	-44	-54	-50
Employment	-22	-14	-22	-23	-24

Mfg: manufacturing

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/130387

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:

8/24/14 http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html

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

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