Financial Oscillations, World Inflation Waves, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Commercial Banks, United States Housing Collapse, World Cyclical Slow Growth and Global Recession Risk: Part VI

 

Financial Oscillations, World Inflation Waves, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Commercial Banks, 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 World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IB1 Theory

IB2 Policy

IB3 Evidence

IB4 Unwinding Strategy

IC United States Inflation

IC Long-term US Inflation

ID Current US Inflation

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

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

IIA United States Commercial Banks Assets and Liabilities

IA Transmission of Monetary Policy

IB Functions of Banking

Appendix on Monetary Policy

IA1 Theory

IA2 Policy

IA3 Evidence

IA4 Unwinding Strategy

IC United States Commercial Banks Assets and Liabilities

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

IIB 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 3.3 percent in 2013 but accelerating to 3.3 percent in 2014, 3.8 percent in 2015 and 4.0 percent in 2016. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $34,523 billion of world output of $72,688 billion, or 47.5 percent, but are projected to grow at much lower rates than world output, 1.9 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 8.0 percent would add $5.8 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 $27,512 billion, or 37.8 percent of world output. The EMDEs would grow cumulatively 20.7 percent or at the average yearly rate of 4.8 percent, contributing $5.7 trillion from 2013 to 2016 or the equivalent of somewhat less than the GDP of $8,387 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 $14,511 billion, or 19.9 percent of world output, which is equivalent to 42.0 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	72,688	3.3	3.3	3.8	4.0
G7	34,523	1.5	1.7	2.3	2.3
Canada	1,709	2.0	2.3	2.4	2.4
France	2,688	0.3	0.4	1.0	1.6
DE	3,428	0.5	1.4	1.5	1.8
Italy	2,014	-1.9	-0.2	0.9	1.3
Japan	5,938	1.5	0.9	0.8	0.8
UK	2,471	1.7	3.2	2.7	2.4
US	16,163	2.2	2.2	3.1	3.0
Euro Area	12,220	-0.4	0.8	1.3	1.7
DE	3,428	0.5	1.4	1.5	1.8
France	2,688	0.3	0.4	1.0	1.6
Italy	2,014	-1.9	-0.2	0.9	1.3
POT	212	-1.4	1.0	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	1.3	1.7	1.8
EMDE	27,512	4.7	4.4	5.0	5.2
Brazil	2,248	2.5	0.3	1.4	2.2
Russia	2,017	1.3	0.2	0.5	1.5
India	1,859	5.0	5.6	6.4	6.5
China	8,387	7.7	7.4	7.1	6.8

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 I-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: 16.2 percent for Portugal (POT), 13.0 percent for Ireland, 27.3 percent for Greece, 26.1 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	6.5	6.3	6.1
Canada	7.3	7.1	7.0	6.9	6.8
France	9.8	10.3	10.0	10.0	9.9
DE	5.5	5.3	5.3	5.3	5.3
Italy	10.7	12.2	12.6	12.0	11.3
Japan	4.3	4.0	3.7	3.8	3.8
UK	8.0	7.6	6.3	5.8	5.5
US	8.1	7.4	6.3	5.9	5.8
Euro Area	11.3	11.9	11.6	11.2	10.7
DE	5.5	5.3	5.3	5.3	5.3
France	9.8	10.3	10.0	10.0	9.9
Italy	10.7	12.2	12.6	12.0	11.3
POT	15.5	16.2	14.2	13.5	13.0
Ireland	14.7	13.0	11.2	10.5	10.1
Greece	24.2	27.3	25.8	23.8	20.9
Spain	24.8	26.1	24.6	23.5	22.4
EMDE	NA	NA	NA	NA	NA
Brazil	5.5	5.4	5.5	6.1	5.9
Russia	5.5	5.5	5.6	6.5	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 2.7 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 0.5 percent and decreased 0.3 percent relative to a year earlier. Japan grew 1.2 percent in IQ2013 at the SAAR of 5.1 percent and increased 0.1 percent relative to a year earlier. Japan’s GDP increased 0.8 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 1.8 percent and increased 2.3 percent relative to a year earlier. In IVQ2013, Japan’s GDP decreased 0.1 percent at the SAAR of minus 0.5 percent, increasing 2.5 percent relative to a year earlier. Japan’s GDP increased 1.5 percent in IQ2014 at the SAAR of 6.0 percent and increased 3.0 percent relative to a year earlier. In IIQ2014, Japan’s GDP fell 1.8 percent at the SAAR of minus 7.1 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. China’s GDP grew 1.9 percent in IIIQ2014, which is equivalent to 7.8 percent in a year, and 7.3 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 increased 0.1 percent and increased 0.3 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 0.3 percent relative to a year earlier. In IQ2013, Germany’s GDP decreased 0.4 percent and fell 1.8 percent relative to a year earlier. In IIQ2013, Germany’s GDP increased 0.8 percent and 0.5 percent relative to a year earlier. The GDP of Germany increased 0.3 percent in IIIQ2013 and 0.8 percent relative to a year earlier. In IVQ2013, Germany’s GDP increased 0.4 percent and 1.0 percent relative to a year earlier. The GDP of Germany increased 0.7 percent in IQ2014 and 2.5 percent relative to a year earlier. In IIQ2014, Germany’s GDP contracted 0.2 percent and increased 0.8 percent relative to a year earlier.
• United States. Growth of US GDP in IQ2012 was 0.6 percent, at SAAR of 2.3 percent and higher by 2.6 percent relative to IQ2011. US GDP increased 0.4 percent in IIQ2012, 1.6 percent at SAAR and 2.3 percent relative to a year earlier. In IIIQ2012, US GDP grew 0.6 percent, 2.5 percent at SAAR and 2.7 percent relative to IIIQ2011. In IVQ2012, US GDP grew 0.0 percent, 0.1 percent at SAAR and 1.6 percent relative to IVQ2011. In IQ2013, US GDP grew at 2.7 percent SAAR, 0.7 percent relative to the prior quarter and 1.7 percent relative to the same quarter in 2013. In IIQ2013, US GDP grew at 1.8 percent in SAAR, 0.4 percent relative to the prior quarter and 1.8 percent relative to IIQ2012. US GDP grew at 4.5 percent in SAAR in IIIQ2013, 1.1 percent relative to the prior quarter and 2.3 percent relative to the same quarter a year earlier (http://cmpassocregulationblog.blogspot.com/2014/09/geopolitical-and-financial-risks.html and earlier http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html) with weak hiring (http://cmpassocregulationblog.blogspot.com/2014/09/geopolitics-monetary-policy-and.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 1.1 percent at 4.6 percent SAAR and increased 2.6 percent relative to a year earlier.
• United Kingdom. In IQ2012, UK GDP increased 0.1 percent, increasing 1.0 percent relative to a year earlier. UK GDP fell 0.2 percent in IIQ2012 and increased 0.6 percent relative to a year earlier. UK GDP increased 0.8 percent in IIIQ2012 and increased 0.7 percent relative to a year earlier. UK GDP fell 0.3 percent in IVQ2012 relative to IIIQ2012 and increased 0.4 percent relative to a year earlier. UK GDP increased 0.5 percent in IQ2013 and 0.8 percent relative to a year earlier. UK GDP increased 0.7 percent in IIQ2013 and 1.7 percent relative to a year earlier. In IIIQ2013, UK GDP increased 0.9 percent and 1.7 percent relative to a year earlier. UK GDP increased 0.6 percent in IVQ2013 and 2.7 percent relative to a year earlier. In IQ2014, UK GDP increased 0.7 percent and 3.0 percent relative to a year earlier. UK GDP increased 0.9 percent in IIQ2014 and 3.2 percent relative to a year earlier. In IIIQ2014, UK GDP increased 0.9 percent and increased 3.0 percent relative to a year earlier.
• Italy. Italy has experienced decline of GDP in nine consecutive quarters from IIIQ2011 to IIIQ2013 and in IIQ2014. Italy’s GDP fell 0.9 percent in IQ2012 and declined 1.9 percent relative to IQ2011. Italy’s GDP fell 0.4 percent in IIQ2012 and declined 2.4 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.4 percent and declined 2.5 percent relative to a year earlier. The GDP of Italy contracted 0.8 percent in IVQ2012 and fell 2.5 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.8 percent and fell 2.4 percent relative to a year earlier. Italy’s GDP fell 0.2 percent in IIQ2013 and 2.2 percent relative to a year earlier. The GDP of Italy changed 0.0 percent in IIIQ2013 and declined 1.9 percent relative to a year earlier. Italy’s GDP decreased 0.1 percent in IVQ2013 and decreased 1.1 percent relative to a year earlier. In IQ2014, Italy’s GDP changed 0.0 percent and fell 0.3 percent relative to a year earlier. The GDP of Italy fell 0.2 percent in IIQ2014 and declined 0.3 percent relative to a year earlier.
• France. France’s GDP increased 0.2 percent in IQ2012 and increased 0.6 percent relative to a year earlier. France’s GDP decreased 0.2 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	-0.9	-1.9
United Kingdom	0.1	1.0
	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	-0.2	0.4
Italy	-0.4	-2.4
United Kingdom	-0.2	0.6
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.6  SAAR: 2.5	2.7
Japan	QOQ: –0.7 SAAR: –2.7	-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	-2.5
United Kingdom	0.8	0.7
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: 0.1	1.6
Japan	QOQ: -0.1 SAAR: -0.5	-0.3
China	1.9	7.9
Euro Area	-0.5	-1.0
Germany	-0.4	-0.3
France	-0.3	0.0
Italy	-0.8	-2.5
United Kingdom	-0.3	0.4
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.7 SAAR: 2.7	1.7
Japan	QOQ: 1.2 SAAR: 5.1	0.1
China	1.6	7.7
Euro Area	-0.2	-1.1
Germany	-0.4	-1.8
France	0.0	-0.2
Italy	-0.8	-2.4
UK	0.5	0.8
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.4 SAAR: 1.8	1.8
Japan	QOQ: 0.8 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	-0.2	-2.2
UK	0.7	1.7
	IIIQ2013/IIQ2013	III/Q2013/  IIIQ2012
USA	QOQ: 1.1 SAAR: 4.5	2.3
Japan	QOQ: 0.4 SAAR: 1.8	2.3
China	2.3	7.8
Euro Area	0.1	-0.3
Germany	0.3	0.8
France	-0.1	0.3
Italy	0.0	-1.9
UK	0.9	1.7
	IVQ2013/IIIQ2013	IVQ2013/IVQ2012
USA	QOQ: 0.9 SAAR: 3.5	3.1
Japan	QOQ: -0.1 SAAR: -0.5	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	-1.1
UK	0.6	2.7
	IQ2014/IVQ2013	IQ2014/IQ2013
USA	QOQ -0.5 SAAR -2.1	1.9
Japan	QOQ: 1.5 SAAR: 6.0	3.0
China	1.5	7.4
Euro Area	0.2	1.0
Germany	0.7	2.5
France	0.0	0.8
Italy	0.0	-0.3
UK	0.7	3.0
	IIQ2014/IQ2014	IIQ2014/IIQ2013
USA	QOQ 1.1 SAAR 4.6	2.6
Japan	QOQ: -1.8 SAAR: -7.1	-0.1
China	2.0	7.5
Euro Area	0.0	0.7
Germany	-0.2	0.8
France	0.0	0.1
Italy	-0.2	-0.3
UK	0.9	3.2
	IIIQ2014/IIQ2014	IIIQ2014/IIIQ2013
China	1.9	7.3
UK	0.7	3.0

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

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

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

• Japan. Japan provides the most worrisome data (Section VB and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier 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 Sep 2014, Japan’s exports increased 6.9 percent in 12 months while imports increased 6.2 percent. The second part of Table V-4 shows that net trade deducted 1.4 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 4.3 percentage points to GDP growth in IIQ2014.

• China. In Sep 2014, China exports increased 15.3 percent relative to a year earlier and imports increased 7.0 percent.
• Germany. Germany’s exports decreased 5.8 percent in the month of Aug 2014 and decreased 1.0 percent in the 12 months ending in Aug 2014. Germany’s imports decreased 1.3 percent in the month of Aug and decreased 2.4 percent in the 12 months ending in Aug. 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 deducted 0.2 percentage points from GDP growth in IQ2014. Net trade deducted 0.2 percentage points from GDP growth in IIQ2014.
• United Kingdom. Net trade contributed 0.7 percentage points in IIQ2013. In IIIQ2013, net trade deducted 2.0 percentage points from UK growth. Net trade contributed 0.5 percentage points to UK value added in IVQ2013. Net trade contributed 0.6 percentage points to UK value added in IQ2014 and 0.0 percentage points in IIQ2014.
• France. France’s exports decreased 1.3 percent in Aug 2014 while imports decreased 0.6 percent. France’s imports decreased 1.2 percent in the 12 months ending in Aug 2014 and imports increased 0.1 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 0.2 percent in Aug 2014 and goods exports increased 3.3 percent in Jan-Aug 2014 relative to a year earlier. Imports decreased 0.1 percent in Aug 2014 and goods imports increased 3.1 percent in Jan-Aug 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 0.34 percentage points in IIQ2014. Industrial production increased 1.0 percent in Sep 2014 and decreased 0.2 percent in Aug 2014 after increasing 0.2 percent in Jul 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 1.0 percent in September and advanced at an annual rate of 3.2 percent in the third quarter of 2014, roughly its average quarterly increase since the end of 2010. In September, manufacturing output moved up 0.5 percent, while the indexes for mining and for utilities climbed 1.8 percent and 3.9 percent, respectively. For the third quarter as a whole, manufacturing production rose at an annual rate of 3.5 percent and mining output increased at an annual rate of 8.7 percent. The output of utilities fell at an annual rate of 8.5 percent for a second consecutive quarterly decline. At 105.1 percent of its 2007 average, total industrial production in September was 4.3 percent above its level of a year earlier. The capacity utilization rate for total industry moved up 0.6 percentage point in September to 79.3 percent, a rate that is 1.0 percentage point above its level of 12 months earlier but 0.8 percentage point below its long-run (1972–2013) average.”

In the six months ending in Sep 2014, United States national industrial production accumulated increase of 1.9 percent at the annual equivalent rate of 3.9 percent, which is lower than growth of 4.3 percent in the 12 months ending in Sep 2014. Excluding growth of 1.0 percent in Sep 2014, growth in the remaining five months from Apr to Aug 2014 accumulated to 0.9 percent or 2.2 percent annual equivalent. Industrial production declined in one of the past six months. Industrial production expanded at annual equivalent 4.1 percent in the most recent quarter from Jul to Sep 2014 and at 3.7 percent in the prior quarter Apr-Jun 2014. Business equipment accumulated growth of 2.2 percent in the six months from Apr to Sep 2014 at the annual equivalent rate of 4.5 percent, which is close growth of 4.6 percent in the 12 months ending in Sep 2014. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “The capacity utilization rate for total industry moved up 0.6 percentage point in September to 79.3 percent, a rate that is 1.0 percentage point above its level of 12 months earlier but 0.8 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 by 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 26.8 percent from the trough in Apr 2009 to Sep 2014. Manufacturing output in Sep 2014 is 1.0 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 $2,294.6 billion than actual $16,010.4 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.5 million unemployed or underemployed equivalent to actual unemployment of 16.1 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/competitive-monetary-policy-and.html). US GDP in IIQ2014 is 12.5 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,010.4 billion in IIQ2014 or 6.8 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 Sep 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 123.5550 in Sep 2014. The actual index NSA in Sep 2014 is 102.0228, which is 17.4 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.7028 in Sep 2014. The output of manufacturing at 102.0228 in Sep 2014 is 11.8 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	0.2 Aug	3.3 Jan-Aug	-0.1 Aug	3.1 Jan-Aug
Japan		Sep 6.9 Aug -1.3 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		Sep 6.2 Aug -1.5 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 15.3 Sep 9.4 Aug 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 7.0 Aug -2.4 Aug -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	-2.8 12-M Aug	0.8 Jan-Aug	-4.4 12-M Aug	-0.2 Jan-Aug
Germany	-5.8 Aug CSA	-1.0 Aug	-1.3 Aug CSA	-2.4 Aug
France Aug	-1.3	-1.2	-0.6	0.1
Italy Aug	1.1	-2.7	-0.4	-7.0
UK	-1.7 Aug	-7.4 Jun-Aug 14 /Jun-Aug 13	-4.2 Aug	-6.9 Jun-Aug 14 /Jun-Aug 13
Net Trade % Points GDP Growth	% Points
USA	IIQ2014 -0.34 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 -1.4 IIQ2012 -1.9 IIIQ2012 -0.5 IVQ2012 1.7 IQ2013 0.2 IIQ2013 -1.6 IIIQ2013 -2.4 IVQ2013 -0.8 IQ2014 4.3 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 -0.2 IIQ2014 -0.2
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 IIQ2013 -2.0 IIIQ2013 0.5 IVQ2013 0.6 IQ2014 0.0 IIQ2014

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 V-4 for Sep 2014. The share of Asia in Japan’s trade is close to one-half for 53.9 percent of exports and 46.9 percent of imports. Within Asia, exports to China are 18.1 percent of total exports and imports from China 24.8 percent of total imports. While exports to China increased 8.8 percent in the 12 months ending in Sep 2014, imports from China increased 8.3 percent. The second largest export market for Japan in Sep 2014 is the US with share of 18.1 percent of total exports, which is close to that of China, and share of imports from the US of 6.9 percent in total imports. Japan’s exports to the US increased 4.4 percent in the 12 months ending in Sep 2014 and imports from the US increased 6.9 percent. Western Europe has share of 10.2 percent in Japan’s exports and of 10.3 percent in imports. Rates of growth of exports of Japan in Sep 2014 are 4.4 percent for exports to the US, minus 21.5 percent for exports to Brazil and minus 0.4 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 Sep 2014 are mixed. Imports from Asia increased 8.8 percent in the 12 months ending in Sep 2014 while imports from China increased 8.3 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-4, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Sep 2014	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,383,162	6.9	7,341,492	6.2
Asia	3,441,027 % Total 53.9	8.1	3,441,070 % Total 46.9	8.8
China	1,154,445 % Total 18.1	8.8	1,824,016 % Total 24.8	8.3
USA	1,158,206 % Total 18.1	4.4	617,472 % Total 8.4	6.9
Canada	75,055	10.1	101,056	13.1
Brazil	38,759	-21.5	73,205	-8.7
Mexico	103,144	25.3	35,352	5.7
Western Europe	650,126 % Total 10.2	0.0	753,291 % Total 10.3	4.5
Germany	171,414	-0.4	217,282	-1.2
France	51,484	-6.5	105,308	-1.6
UK	109,680	19.5	58,053	2.8
Middle East	279,502	27.4	1,301,728	3.4
Australia	113,516	-8.7	419,660	-1.1

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-5. There is increasing growth of the volume of world trade of goods and services from 3.0 percent in 2013 to 5.0 percent in 2015 and 5.6 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-5, 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	3.8	5.0	5.6
Exports Goods & Services	3.2	3.7	5.0	5.5
Imports Goods & Services	2.8	3.9	5.0	5.6
World Trade Value of Exports Goods & Services USD Billion	23,114	23,928	24,948	Average ∆% 2006-2015 20,259
Value of Exports of Goods USD Billion	18,671	19,299	20,107	Average ∆% 2006-2015 16,312
Average Oil Price USD/Barrel	104.07	102.76	99.36	Average ∆% 2006-2015 88.85
Average Annual ∆% Export Unit Value of Manufactures	-1.1	-0.2	-0.5	Average ∆% 2006-2015 -0.6
Exports of Goods & Services	2013	2014	2015	Average ∆% 2016-2019
Euro Area	1.8	3.5	4.3	4.7
EMDE	4.4	3.9	5.8	6.1
G7	1.8	2.9	4.2	4.9
Imports Goods & Services
Euro Area	0.5	3.4	3.9	4.7
EMDE	5.3	4.4	6.1	6.3
G7	1.2	3.6	4.1	4.9
Terms of Trade of Goods & Services
Euro Area	0.8	-0.4	-0.3	-0.1
EMDE	-0.2	-0.02	-0.6	-0.4
G7	0.8	0.7	-0.2	0.0
Terms of Trade of Goods
Euro Area	1.2	0.03	-0.02	-0.2
EMDE	-0.2	0.2	-0.4	-0.3
G7	0.9	0.3	-0.1	-0.1

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, decreased to 54.9 in Sep from 55.1 in Aug, indicating expansion at slightly slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9fa304d4f7948649dec41faf0ffe0e5). This index has remained above the contraction territory of 50.0 during 62 consecutive months. The employment index increased from 51.4 in Aug to 51.8 in Sep with input prices rising at slower rate, new orders increasing at faster rate and output increasing at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9fa304d4f7948649dec41faf0ffe0e5). David Hensley, Director of Global Economic Coordination at JP Morgan, finds moderately slower growth of world economic output at the highest pace since IIQ2010 (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9fa304d4f7948649dec41faf0ffe0e5). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, decreased to 52.2 in Sep from 52.5 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/fd40c528859a43fb9da53bfb0a8df860). New export orders expanded for the fifteenth consecutive month (http://www.markiteconomics.com/Survey/PressRelease.mvc/fd40c528859a43fb9da53bfb0a8df860). David Hensley, Director of Global Economics Coordination at JP Morgan Chase, finds continuing impulse in global manufacturing. The HSBC Brazil Composite Output Index, compiled by Markit, increased from 49.6 in Aug to 50.6 in Sep, indicating moderate expansion in activity of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/1a09dff57d044bb0b23abb59d47ab45a). The HSBC Brazil Services Business Activity index, compiled by Markit, increased from 49.2 in Aug to 50.6 in Sep, indicating marginally expanding services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/1a09dff57d044bb0b23abb59d47ab45a). André Loes, Chief Economist, Brazil, at HSBC, finds continuing modest growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/1a09dff57d044bb0b23abb59d47ab45a). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) decreased marginally from 50.2 in Aug to 49.3 in Sep, indicating moderate deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/846d98ec34dc4ea3b1745ea5717b3226). André Loes, Chief Economist, Brazil at HSBC, finds deteriorating industrial activity in Brazil (http://www.markiteconomics.com/Survey/PressRelease.mvc/846d98ec34dc4ea3b1745ea5717b3226).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted decreased to 56.2 in from 57.5 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/58fc109c6f304420bc4a7c7cab00b6b8). New export orders increased at a slower rate of expansion. Chris Williamson, Chief Economist at Markit, finds that manufacturing activity is expanding at slower but strong rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/58fc109c6f304420bc4a7c7cab00b6b8). The Markit Flash US Services PMI™ Business Activity Index decreased from 59.5 in Aug to 58.5 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/a9f73e6ab8304506b6d2bd8efc9bd462). Chris Williamson, Chief Economist at Markit, finds that the surveys are consistent with sustained strong growth of GDP in IIIQ2014 at an annual rate around 3.5 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/a9f73e6ab8304506b6d2bd8efc9bd462). The Markit US Composite PMI™ Output Index of Manufacturing and Services decreased to 59.0 in Sep from 59.7 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/e1666adac16845408a507a50ff53ea4b). The Markit US Services PMI™ Business Activity Index decreased from 59.5 in Aug to 58.9 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/e1666adac16845408a507a50ff53ea4b). Chris Williamson, Chief Economist at Markit, finds the indexes consistent with US growth at around 3 percent in IIIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/e1666adac16845408a507a50ff53ea4b). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) decreased to 57.5 in Sep from 57.9 in Aug, which indicates expansion at marginally slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/8f8d0489d39e4d60a8409cabd0e030d4). Growth of export orders continued. Chris Williamson, Chief Economist at Markit, finds that the index suggests output growth of GDP at around 3 percent in IIIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/8f8d0489d39e4d60a8409cabd0e030d4). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® decreased 2.4 percentage points from 59.0 in Aug to 56.6 in Sep, which indicates growth at slower rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders decreased 6.6 percentage points from 66.7 in Aug to 60.0 in Sep. The index of new export orders decreased 1.5 percentage point from 55.0 in Aug to 53.5 in Sep, growing at a slower rate. The Non-Manufacturing ISM Report on Business^® PMI increased 0.9 percentage points from 58.7 in Jul to 59.6 in Aug, indicating growth of business activity/production during 61 consecutive months, while the index of new orders decreased 1.1 percentage points from 64.9 in Jul to 63.8 in Aug (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	Sep 12 months NSA ∆%: 1.7; ex food and energy ∆%: 1.7 Sep month SA ∆%: 0.1; ex food and energy ∆%: 0.1 Blog 10/26/14
Producer Price Index	Finished Goods Sep 12-month NSA ∆%: 2.1; ex food and energy ∆% 2.1 Sep month SA ∆% = -0.2; ex food and energy ∆%: 0.2 Final Demand Sep 12-month NSA ∆%: 1.6; ex food and energy ∆% 1.6 Sep month SA ∆% = -0.1; ex food and energy ∆%: 0.0 Blog 10/19/14 10/26/14
PCE Inflation	Aug 12-month NSA ∆%: headline 1.5; ex food and energy ∆% 1.5 Blog 10/5/14
Employment Situation	Household Survey: Sep Unemployment Rate SA 5.9% Blog calculation People in Job Stress Sep: 26.5 million NSA, 16.1% of Labor Force Establishment Survey: Sep Nonfarm Jobs +248,000; Private +236,000 jobs created  Aug 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.5 Blog 10/5/14
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 Aug 2014 4.592 million lower by 0.783 million than 5.375 million in Aug 2006 Blog 10/12/14
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 2.6 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 4.6 Blog 9/28/14
Real Private Fixed Investment	SAAR IIQ2014 9.5 ∆% IVQ2007 to IIQ2014: 0.0% Blog 9/28/14
Corporate Profits	IIQ2014 SAAR: Corporate Profits 8.4; Undistributed Profits 24.9 Blog 9/28/14
Personal Income and Consumption	Aug month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.3 Real Personal Consumption Expenditures (RPCE): 0.5 12-month Aug NSA ∆%: RDPI: 2.7; RPCE ∆%: 2.6 Blog 10/5/14
Quarterly Services Report	IIQ14/IIQ13 NSA ∆%: Information 5.6 Financial & Insurance 4.8 Blog 9/14/14
Employment Cost Index	Compensation Private IIQ2014 SA ∆%: 0.7 Jun 12 months ∆%: 2.0 Blog 8/3/14
Industrial Production	Sep month SA ∆%: 1.0 Sep 12 months SA ∆%: 4.3 Manufacturing Sep SA 0.5 ∆% Sep 12 months SA ∆% 3.7, NSA 3.6 Capacity Utilization: 79.3 Blog 10/19/14
Productivity and Costs	Nonfarm Business Productivity IIQ2014∆% SAAE 2.3; IIQ2014/IIQ2013 ∆% 1.1; Unit Labor Costs SAAE IIQ2014 ∆% -0.1; IIQ2014/IIQ2013 ∆%: 1.7 Blog 9/7/14
New York Fed Manufacturing Index	General Business Conditions From Sep 27.54 to Oct 6.17 New Orders: From Sep 16.86 to Oct -1.73 Blog 10/19/14
Philadelphia Fed Business Outlook Index	General Index from Sep 22.5 to Oct 20.7 New Orders from Sep 15.5 to Oct 17.3 Blog 10/19/14
Manufacturing Shipments and Orders	New Orders SA Jul ∆% 10.5 Ex Transport -0.8 Jan-Jul NSA New Orders ∆% 4.5 Ex transport 2.5 Blog 9/7/14
Durable Goods	Sep New Orders SA ∆%: -10.1; ex transport ∆%: -0.1 Jan-Sep 14/Jan-Aug 13 New Orders NSA ∆%: 4.3; ex transport ∆% 2.5 Blog 10/5/14
Sales of New Motor Vehicles	Jan-Sep 2014 12,431,305; Jan-Sep 2013 11,786,536. Sep 14 SAAR 16.43 million, Aug 14 SAAR 17.53 million, Sep 2013 SAAR 15.42 million Blog 10/5/14
Sales of Merchant Wholesalers	Jan-Aug 2014/Jan-Aug 2013 NSA ∆%: Total 5.6; Durable Goods: 5.1; Nondurable Goods: 5.9 Blog 10/12/14
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Aug 14 12-M NSA ∆%: Sales Total Business 2.5; Manufacturers 1.9 Retailers 2.9; Merchant Wholesalers 2.9 Blog 10/19/14
Sales for Retail and Food Services	Jan-Sep 2014/Jan-Sep 2013 ∆%: Retail and Food Services 3.9; Retail ∆% 3.8 Blog 10/19/14
Value of Construction Put in Place	Aug SAAR month SA ∆%: -0.8 Aug 12-month NSA: 2.7 Blog 10/5/14
Case-Shiller Home Prices	Jul 2014/Jul 2013 ∆% NSA: 10 Cities 6.7; 20 Cities: 6.7 ∆% Jul SA: 10 Cities -0.5 ; 20 Cities: -0.5 Blog 10/5/14
FHFA House Price Index Purchases Only	Aug SA ∆% 0.5; 12 month NSA ∆%: 4.8 Blog 9/28/14
New House Sales	Sep 2014 month SAAR ∆%: 0.2 Jan-Sep 2014/Jan-Sep 2013 NSA ∆%: 2.4 Blog 10/26/14
Housing Starts and Permits	Sep Starts month SA ∆% 6.3; Permits ∆%: 1.5 Jan-Sep 2014/Jan-Sep 2013 NSA ∆% Starts 9.5; Permits  ∆% 3.4 Blog 10/19/14
Trade Balance	Balance Aug SA -$40,109 million versus Jul -$40,321 million Exports Aug SA ∆%: 0.2 Imports Aug SA ∆%: -0.1 Goods Exports Jan-Aug 2014/Jan-Aug 2013 NSA ∆%: 3.3 Goods Imports Jan-Aug 2014/Jan-Aug 2012 NSA ∆%: 3.1 Blog 10/12/14
Export and Import Prices	Sep 12-month NSA ∆%: Imports -0.9; Exports 0.2 Blog 10/12/14
Consumer Credit	Aug ∆% annual rate: Total 5.0; Revolving -0.3; Nonrevolving 7.0 Blog 10/12/14
Net Foreign Purchases of Long-term Treasury Securities	Aug Net Foreign Purchases of Long-term US Securities: minus $52.1 billion Major Holders of Treasury Securities: China $1270 billion; Japan $1230 billion; Total Foreign US Treasury Holdings Aug $6067 billion Blog 10/19/14
Treasury Budget	Fiscal Year 2014/2013 ∆% Sep: Receipts 8.9; Outlays 1.4; Individual Income Taxes 5.9 Deficit Fiscal Year 2011 $1,300 billion Deficit Fiscal Year 2012 $1,087 billion Deficit Fiscal Year 2013 $680 billion Blog 10/19/2014
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 $11,983 B 72.0% GDP 2024 Deficit $960B, 3.6% GDP Debt $20,554B 77.2% GDP 2039: Long-term Debt/GDP 106% Blog 8/26/12 11/18/12 2/10/13 9/22/13 2/16/14 8/24/14 9/14/14
Commercial Banks Assets and Liabilities	Sep 2014 SAAR ∆%: Securities 9.6 Loans 3.1 Cash Assets 16.8 Deposits 11.5 Blog 10/26/14
Flow of Funds	IIQ2014 ∆ since 2007 Assets +$14,244.2 BN Nonfinancial $224.1 BN Real estate -$419.6 BN Financial +14,020.1 BN Net Worth +$14,690.1 BN Blog 9/28/14
Current Account Balance of Payments	IIQ2014 -190,161 MM % GDP 2.3 Blog 9/21/14
Collapse of United States Dynamism of Income Growth and Employment Creation	Blog 10/26/14

Links to blog comments in Table USA:

10/19/14 http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html

10/12/14 http://cmpassocregulationblog.blogspot.com/2014/10/global-financial-volatility-recovery.html

10/5/14 http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html

9/28/14 http://cmpassocregulationblog.blogspot.com/2014/09/financial-volatility-mediocre-cyclical.html

9/21/14 http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html

9/14/14 http://cmpassocregulationblog.blogspot.com/2014/09/geopolitics-monetary-policy-and.html

9/7/14 http://cmpassocregulationblog.blogspot.com/2014/09/competitive-monetary-policy-and.html

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

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

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™ with the Flash Japan Manufacturing PMI™ increased from 51.7 in Sep to 52.8 in Oct and the Flash Japan Manufacturing Output Index™ decreased from 53.4 in Sep to 52.3 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/af097095e0d94913b14b765754298dd0). 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/af097095e0d94913b14b765754298dd0). Private-sector activity in Japan improved marginally with the Markit Composite Output PMI Index increasing from 50.8 in Aug to 52.8 in Sep, indicating modest improvement (http://www.markiteconomics.com/Survey/PressRelease.mvc/2e1dfffdc45c4e49be57a12b42bfc8d1). The Markit Business Activity Index of Services increased to 52.5 in Sep from 49.9 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/2e1dfffdc45c4e49be57a12b42bfc8d1). Amy Brownbill, Ecoomist at Markit and author of the report, finds the reading consistent with growth in IIIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/2e1dfffdc45c4e49be57a12b42bfc8d1). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 52.5 in Aug to 51.7 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/ace36b2b67724577bcba4aff0291b168). New orders, output and foreign orders increased. Amy Brownbill, Economist at Markit and author of the report, finds higher growth of output (http://www.markiteconomics.com/Survey/PressRelease.mvc/ace36b2b67724577bcba4aff0291b168).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	Sep ∆% -0.1 12 months ∆% 3.5 Blog 10/19/14
Consumer Price Index	Aug NSA ∆% 0.2; Aug 12 months NSA ∆% 3.3 Blog 9/28/14
Real GDP Growth	IIQ2014 ∆%: -1.8 on IQ2014;  IIQ2014 SAAR -7.1; ∆% 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 9/14/14
Employment Report	Aug Unemployed 2.31 million Change in unemployed since last year: minus 400 thousand Unemployment rate: 3.5 % Blog 10/5/14
All Industry Indices	Aug month SA ∆% -0.1 12-month NSA ∆% -2.5 Blog 10/26/14
Industrial Production	Aug SA month ∆%: -1.5 12-month NSA ∆% -2.9 Blog 10/5/14
Machine Orders	Total Aug ∆% -2.2 Private ∆%: -12.4 Aug ∆% Excluding Volatile Orders 4.7 Blog 10/12/14
Tertiary Index	Aug month SA ∆% -0.1 Aug 12 months NSA ∆% minus 2.7 Blog 10/12/14
Wholesale and Retail Sales	Aug 12 months: Total ∆%: -1.6 Wholesale ∆%: -2.8 Retail ∆%: 1.2 Blog 10/5/14
Family Income and Expenditure Survey	Aug 12-month ∆% total nominal consumption -0.9, real -4.7 Blog 10/5/14
Trade Balance	Exports Sep 12 months ∆%: 6.9 Imports Sep 12 months ∆% 6.2 Blog 10/26/14

Links to blog comments in Table JPY:

10/19/14 http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html

10/12/14 http://cmpassocregulationblog.blogspot.com/2014/10/global-financial-volatility-recovery.html

10/5/14 http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html

9/28/14 http://cmpassocregulationblog.blogspot.com/2014/09/financial-volatility-mediocre-cyclical.html

9/14/14 http://cmpassocregulationblog.blogspot.com/2014/09/geopolitics-monetary-policy-and.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

The indices of all industry activity of Japan, which approximates GDP or economic activity, fell to levels close to the worst point of the recession, showing the brutal impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Table VB-1 with the latest revisions shows the quarterly index, which permits comparison with the movement of real GDP. The first row provides weights of the various components of the index: AG (agriculture) 1.4 percent (not shown), CON (construction) 5.7 percent, IND (industrial production) 18.3 percent, TERT (services) 63.2 percent, and GOVT (government) 11.4 percent. GDP decreased 1.8 percent in IIQ2014 (Table VB-1 at http://cmpassocregulationblog.blogspot.com/2014/09/geopolitics-monetary-policy-and.html), industry decreased 3.8 percent, the tertiary sector decreased 3.8 percent, government increased 0.5 percent and construction decreased 4.6 percent. The report shows that the all industry index decreased 3.4 percent in IIQ2014. Industry deducted 0.69 percentage points to growth of the all industry index and the tertiary index deducted 2.51 percentage points. Anticipation of purchases to avoid the increase in the sales tax in Apr 2014 explains unusually high activity in the economy of Japan in IQ2014 and subsequent decline in IIQ2014. Japan had already experienced a very weak quarter in IVQ2010, with decline of GDP of 0.5 percent (Table VB-1 at http://cmpassocregulationblog.blogspot.com/2014/09/geopolitics-monetary-policy-and.html) when it was unexpectedly hit by the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP fell 1.8 percent in IQ2011 and 0.7 percent in IIQ2011. GDP changed 0.0 percent in IQ2011 relative to a year earlier and fell 1.5 percent in IIQ2011 relative to a year earlier (Table VB-1 and Table VB-4 at http://cmpassocregulationblog.blogspot.com/2014/09/geopolitics-monetary-policy-and.html). The all industry activity index fell in all quarters of 2012 with exception of growth of 0.1 percent in IQ2012. Weakness in industry was the driver of decline.

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

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
2014
IIQ2014	-4.6	-3.8	-3.8	0.5	-3.4	-1.8
Cont to IIQ % Change	-0.23	-0.69	-2.51	0.06
IQ2014	-2.7	3.0	1.8	-0.5	1.6	1.5
2013
IVQ	2.8	1.8	-0.2	0.4	0.3	-0.1
IIIQ	4.3	1.8	0.1	-0.2	0.5	0.4
IIQ	3.6	1.6	0.3	0.0	0.6	0.8
IQ	0.9	0.4	0.5	-0.3	0.4	1.2
2012
IVQ2012	3.0	-1.8	0.3	0.1	-0.1	-0.1
IIIQ	1.6	-3.3	0.0	0.0	-0.4	-0.7
IIQ	1.3	-2.1	0.0	0.0	-0.2	-0.5
IQ	2.0	1.6	0.0	0.2	0.1	1.0

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

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

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

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

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

There are more details in Table VB-2. In Aug 2014, the all industry activity index decreased 0.1 percent with industry decreasing 1.9 percent and services decreasing 0.1 percent while construction increased 1.5 percent and government changed 0.0 percent. Industry deducted 0.33 percentage points and services subtracted 0.07 percentage points while construction added 0.07 percentage points and government contributed 0.00 percentage points. The all industry activity index is stronger in 2013 with growth of 0.5 percent in Dec 2012, 0.4 percent in Feb 2013, 0.1 percent in Mar 2013, 0.1 percent in Apr 2013 and 0.6 percent in May 2013. After decline of 0.3 percent in Jun 2013, the all industry index rose 0.3 percent in Jul 2013, 0.2 percent in Aug 2013 and 0.3 percent in Sep 2013. The index fell 0.1 percent in Oct 2013 but increased 0.2 percent in Nov 2013. The index changed 0.0 percent in Dec 2013 and increased 1.7 percent in Jan 2014, decreasing 1.1 percent in Feb 2014. The index increased 1.7 percent in Mar 2014 in the rush of expenditures in anticipation of the sales tax increase in Apr 2014 and fell 4.4 percent in Apr 2014 because of the impact of the sales tax. The all industry index rebounded 0.5 percent in May 2014 and fell 0.3 percent in Jun 2014, decreasing 0.4 percent in Jul 2014. Industry is recovering with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.3 percent in Mar 2013, 0.6 percent in Apr 2013 and 2.1 percent in May 2013. After decline of 2.7 percent in Jun 2003, industry grew 2.7 percent in Jul 2013 and declined 0.4 percent in Aug 2013. Industry rebounded with 1.5 percent in Sep 2013 and 0.5 percent in Oct 2013. Industry rose 0.3 percent in Nov 2013 and increased 0.5 percent in Dec 2013. Industry grew 3.9 percent in Jan 2014 and fell 2.3 percent in Feb 2014. Industry increased 0.7 percent in Mar 2014 and fell 2.9 percent in Apr 2014. Industry increased 0.7 percent in May 2014 and decreased 3.4 percent in Jun 2014. Industry increased 0.4 percent in Jul 2014. The highest risk to Japan is if weakening world growth would affect Japanese exports.

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

	CON	IND	TERT	GOVT	ALL IND
Aug 2014	1.5	-1.9	-0.1	0.0	-0.1
Cont to Aug % Change	0.07	-0.33	-0.07	0.00
Jul	-1.2	0.4	-0.3	0.3	-0.4
Jun	0.1	-3.4	0.0	0.0	-0.3
May	-0.2	0.7	0.9	-0.6	0.5
Apr	-3.2	-2.9	-5.7	1.2	-4.4
Mar	-1.5	0.7	2.6	-0.7	1.7
Feb	-1.3	-2.3	-0.9	0.5	-1.1
Jan	-1.7	3.9	1.5	-0.5	1.7
Dec 2013	-0.2	0.5	-0.1	0.1	0.0
Nov	1.5	0.3	0.3	-0.6	0.2
Oct	1.0	0.5	-0.5	0.8	-0.1
Sep	1.0	1.5	0.1	-0.1	0.3
Aug	0.3	-0.4	0.2	0.1	0.2
Jul	1.1	2.7	-0.1	-0.3	0.3
Jun	2.5	-2.7	-0.3	0.1	-0.3
May	3.0	2.1	0.5	0.2	0.6
Apr	0.8	0.6	-0.1	0.0	0.1
Mar	0.0	0.3	0.1	-0.3	0.1
Feb	0.1	0.9	0.5	-0.1	0.4
Jan	-0.7	-0.8	0.0	0.0	-0.2
Dec 2012	0.9	1.4	0.2	-0.3	0.5
Nov	3.0	-0.9	-0.1	0.3	-0.2
Oct	-0.1	0.3	0.2	0.2	0.2
Sep	1.2	-2.2	0.0	-0.3	-0.4
Aug	0.1	-1.4	0.2	0.1	0.0
Jul	-1.0	-0.5	-0.3	-0.1	-0.3
Jun	1.7	-0.9	0.0	0.1	0.1
May	3.0	-1.8	0.5	0.0	-0.1
Apr	-1.1	-0.4	-0.2	0.0	-0.1
Mar	-0.5	-0.2	-0.3	0.1	-0.2
Feb	0.7	-0.2	0.2	-0.2	0.1
Jan	2.6	0.8	-0.8	0.4	-0.7

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

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

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

Percentage changes from a year earlier in calendar years and relative to the same quarter a year earlier of the all industry activity indices are provided in Table VB-3. The first row shows that services contribute 63.2 percent of the total index and industry contributes 18.3 percent for joint contribution of 81.5 percent. The all industry activity index decreased 0.9 percent in IIQ2014 relative to a year earlier and GDP decreased 0.1 percent relative to a year earlier (Table VB-4 at http://cmpassocregulationblog.blogspot.com/2014/09/geopolitics-monetary-policy-and.html). Industry increased 2.6 percent relative to a year earlier while the tertiary sector decreased 2.2 percent, deducting combined 1.03 percentage points to growth of the all industry activity index of minus 0.9 percent while construction deducted 0.02 percentage points and government added 0.02 percentage points. The fall of industrial production in 2009 was by a catastrophic 21.9 percent. Japan emerged from the crisis with industrial growth of 16.4 percent in 2010. Quarterly data show that industry is the most dynamic sector of the Japanese economy. The all-industry index increased 0.8 percent in 2013 and real GDP increased 1.5 percent. Industry decreased 0.8 percent, deducting 0.13 percentage points, while the tertiary sector increased 0.7 percent, adding 0.46 percentage points. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 201, declining world trade and revaluation of the yen in fear of world financial risks interrupted the recovery of the Japanese economy from the global recession.

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

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
Calendar Year
2013	10.4	-0.8	0.7	-0.1	0.7	1.5
Cont to 2013 % Change	0.47	-0.13	0.46	-0.01
2012	3.2	0.1	1.4	0.3	1.2	1.5
2011	-2.0	-2.3	0.1	-0.2	-0.5	-0.5
2010	-7.0	16.4	1.3	-0.7	3.1	4.7
2009	-5.6	-21.9	-5.2	0.1	-7.7	-5.5
2008	-7.6	-3.4	-1.0	-1.4	-1.9	-1.0
2014
IIQ	-0.5	2.6	-2.2	0.2	-0.9	-0.1
Cont to IQ % Change	-0.02	0.45	-1.48	0.02
IQ	8.1	8.3	2.1	-0.3	3.2	3.0
2013
IVQ	13.4	5.7	0.5	0.0	1.9	2.5
IIIQ	13.0	2.2	1.2	-0.5	1.8	2.3
IIQ	8.8	-3.1	1.3	-0.2	0.6	1.2
IQ2013	5.4	-7.8	-0.1	0.3	-1.2	0.1
2012
IVQ	6.7	-5.9	0.7	-0.1	-0.3	-0.3
IIIQ	3.1	-4.2	0.5	0.4	-0.2	-0.2
IIQ	4.9	5.5	2.1	0.6	2.6	3.2
IQ	-1.1	6.2	2.4	0.3	2.6	3.3

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

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

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

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

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

Percentage changes of a month relative to the same month a year earlier for the indices of all industry activity of Japan are shown in Table VB-4. The all industry activity index decreased 2.5 percent in Aug 2014 relative to Aug 2013. Industry decreased 3.2 percent in Aug 2014 relative to a year earlier, deducting 0.54 percentage points to growth of the all industry activity index. The tertiary sector decreased 2.7 percent, subtracting 1.80 percentage points. Construction deducted 0.22 percentage points from the index and government added 0.11 percentage points.

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

	CON	IND	TERT	GOVT	ALL IND
Aug	-4.2	-3.2	-2.7	0.9	-2.5
Cont to Aug % Change	-0.22	-0.54	-1.80	0.11
Jul	-5.2	-0.7	-2.2	0.5	-1.7
Jun	-2.8	3.1	-1.4	-0.6	-0.5
May	-0.7	0.9	-2.5	0.6	-1.5
Apr	2.0	3.8	-2.6	-0.7	-0.9
Mar	6.3	7.3	3.2	-0.4	3.8
Feb	8.2	7.0	0.9	0.0	2.2
Jan	9.9	10.6	2.0	-0.5	3.5
Dec 2013	11.8	7.2	0.8	-0.4	2.2
Nov	14.2	4.8	0.5	-0.2	1.9
Oct	14.4	5.3	0.1	0.6	1.8
Sep	12.8	5.2	1.4	-0.6	2.4
Aug	13.0	-0.7	0.8	0.1	1.0
Jul	13.2	1.9	1.5	-1.0	1.7
Jun	11.2	-4.7	0.6	0.5	0.0
May	8.9	-0.9	1.8	-0.2	1.3
Apr	6.3	-3.2	1.5	-1.1	0.6
Mar	5.4	-6.9	0.7	0.0	-0.6
Feb	4.3	-9.9	-1.5	1.5	-2.4
Jan	6.8	-6.4	0.3	-0.6	-0.7
Dec 2012	8.7	-7.5	-0.1	0.6	-0.9
Nov	7.6	-5.7	1.0	0.3	0.0
Oct	3.5	-4.7	1.3	-1.1	0.1
Sep	2.9	-7.7	0.1	0.7	-1.2
Aug	2.6	-4.4	0.6	0.9	-0.1
Jul	3.8	-0.2	0.8	-0.3	0.6
Jun	6.7	-1.5	0.8	0.9	0.6
May	5.3	6.1	3.1	-0.4	3.3
Apr	2.6	13.6	2.4	1.3	4.1
Mar	3.0	16.2	4.2	0.5	5.8
Feb	-2.5	2.8	2.4	-0.7	1.8
Jan	-3.4	-1.6	0.4	0.4	-0.1

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

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

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

The structure of exports and imports of Japan is in Table VB-5. Japan imports all types of raw materials and fuels at rapidly increasing prices caused by the carry trade from zero interest rates to commodities, oscillating under shocks of risk aversion. Mineral fuels account for 29.9 percent of Japan’s imports and increased 3.2 percent in the 12 months ending in Sep 2014 because of alternating carry trades into commodity futures in accordance with risk aversion together with yen devaluation. Weakness of world demand depresses prices of industrial goods. Manufactured products contribute 12.6 percent of Japan’s exports with increase of 7.8 percent in the 12 months ending in Sep 2014. Machinery contributes 18.5 percent of Japan’s exports with increase of 6.5 percent in the 12 months ending in Sep 2014. Electrical machinery contributes 17.6 percent of Japan’s exports with increase of 4.3 percent in the 12 months ending in Sep 2014. Exports of transport equipment with share of 24/5 percent in total exports increased 9.1 percent in the 12 months ending in Sep 2014 but had been increasing at high rates because of the low level after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. The breakdown of transport equipment in Table VB-5 shows increase of the major categories of motor vehicles of 7.0 percent: cars increased 6.8 percent with increase of 15.2 percent in the minor category of buses and trucks, increase of 1.5 percent for parts of motor vehicles, increase of 17.5 percent for motorcycles and increase of 39.5 percent for ships. The result of rising commodity prices and stable or declining prices of industrial products is pressure on Japan’s terms of trade with oscillations when risk aversion causes reversal of carry trades from zero interest rates to commodity prices. Data in Table VB-5 are in millions of yen that have been affected by recent depreciation of the yen relative to the USD with invoicing of many products in dollars in world trade.

Table VB-5, Japan, Structure and Growth of Exports and Imports % and ∆% Millions Yens

Sep 2014	Value JPY Millions	% of Total	12 Months ∆%	Contribution Degree %
Exports	6,383,162	100.0	6.9	6.9
Foodstuffs	37,765	0.6	5.0	0.0
Raw Materials	95,014	1.5	3.7	0.1
Mineral Fuels	153,335	2.4	-13.8	-0.4
Chemicals	633,261	9.9	3.9	0.4
Manufactured Goods	802,245	12.6	7.8	1.0
Machinery	1,180,672	18.5	6.5	1.2
Electrical Machinery	1,120,892	17.6	4.3	0.8
Transport Equipment	1,566,941	24.5	9.1	2.2
Motor Vehicles	1,023,825	16.0	7.0	1.1
Cars	874,322	13.7	6.8	0.9
Buses & Trucks	141,990	2.2	15.2	0.3
Parts of Motor Vehicles	301,083	4.7	1.5	0.1
Motorcycles	24,645	0.4	17.5	0.1
Ships	149,494	2.3	39.5	0.7
Other	793,038	12.4	14.6	1.7
Imports	7,341,492	100.0	6.2	6.2
Foodstuffs	561,971	7.7	12.6	0.9
Raw Materials	456,363	6.2	0.3	0.0
Mineral Fuels	2,196,815	29.9	3.2	1.0
Chemicals	583,137	7.9	5.8	0.5
Manufactured Goods	603,732	8.2	12.7	1.0
Machinery	542,807	7.4	6.6	0.5
Electrical Machinery	1,124,970	15.3	8.7	1.3
Transport Equipment	254,137	3.5	2.2	0.1
Other	1,017,560	13.9	6.8	0.9

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

Table VB-6 provides Japan’s exports, imports and trade balance in five-year intervals from 1950 to 1975 and then yearly from 1979 to 2013. Exports grew at the average yearly rate of 3.4 percent while imports grew at 3.6 percent per year in the years from 1979 to 2013. Abstracting from the global recession and the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011, exports grew at the average annual rate of 4.8 percent between 1979 and 2007 and imports at 4.0 percent. The global recession had a brutal impact on Japan’s trade. Exports fell 35.5 percent from 2007 to 2009 while imports fell 29.6 percent. Japan had the first trade deficit in 2011 since 1980 and the highest deficits in 2012 and 2013.

Table VB-6, Japan, Exports and Imports Calendar Year 1950-2013 Billion Yen

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

Source: Japan, Ministry of Finance

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table VB-7 for Sep 2014. The share of Asia in Japan’s trade is close to one-half for 53.9 percent of exports and 46.9 percent of imports. Within Asia, exports to China are 18.1 percent of total exports and imports from China 24.8 percent of total imports. While exports to China increased 8.8 percent in the 12 months ending in Sep 2014, imports from China increased 8.3 percent. The second largest export market for Japan in Sep 2014 is the US with share of 18.1 percent of total exports, which is close to that of China, and share of imports from the US of 6.9 percent in total imports. Japan’s exports to the US increased 4.4 percent in the 12 months ending in Sep 2014 and imports from the US increased 6.9 percent. Western Europe has share of 10.2 percent in Japan’s exports and of 10.3 percent in imports. Rates of growth of exports of Japan in Sep 2014 are 4.4 percent for exports to the US, minus 21.5 percent for exports to Brazil and minus 0.4 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 Sep 2014 are mixed. Imports from Asia increased 8.8 percent in the 12 months ending in Sep 2014 while imports from China increased 8.3 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

Table VB-7, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Sep 2014	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,383,162	6.9	7,341,492	6.2
Asia	3,441,027 % Total 53.9	8.1	3,441,070 % Total 46.9	8.8
China	1,154,445 % Total 18.1	8.8	1,824,016 % Total 24.8	8.3
USA	1,158,206 % Total 18.1	4.4	617,472 % Total 8.4	6.9
Canada	75,055	10.1	101,056	13.1
Brazil	38,759	-21.5	73,205	-8.7
Mexico	103,144	25.3	35,352	5.7
Western Europe	650,126 % Total 10.2	0.0	753,291 % Total 10.3	4.5
Germany	171,414	-0.4	217,282	-1.2
France	51,484	-6.5	105,308	-1.6
UK	109,680	19.5	58,053	2.8
Middle East	279,502	27.4	1,301,728	3.4
Australia	113,516	-8.7	419,660	-1.1

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

Table VB-8 provides the trade balance of Japan by countries and regions in Sep 2014. The significantly large deficits of JPY 1,022,226 million with the Middle East, JPY 669,571 million with China, JPY 284,144 million with Australia and JPY 45,468 million with Western Europe exceed surpluses of JPY 540,734 million with the US, JPY 67,792 million with Mexico and JPY 51,627 million with the UK.

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

Sep 2014	Millions of Yen
Total	-958,330
Asia	-43
China	-669,571
USA	540,734
Canada	-26,001
Brazil	-34,446
Mexico	67,792
Western Europe	-103,165
Germany	-45,868
France	-53,824
UK	51,627
Middle East	-1,022,226
Australia	-284,144

Source: Japan, Ministry of Finance

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

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 IQ2012. The only strong contribution of net trade was 3.9 percent in IIIQ2011. Net trade added 1.7 percentage points to GDP growth in IQ2013 and 0.2 percentage points in IIQ2013 but deducted 1.6 percentage points in IIIQ2013 and deducted 2.4 percentage points in IVQ2013. Net trade deducted 0.8 percentage points from GDP growth in IQ2014. Net trade added 4.3 percentage points to GDP growth in IIQ2014. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

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

	Net Trade	Exports	Imports
2014
I	-0.8	4.2	-5.0
II	4.3	-0.3	4.7
2013
I	1.7	2.4	-0.8
II	0.2	1.8	-1.5
III	-1.6	-0.4	-1.2
IV	-2.4	0.2	-2.5
2012
I	0.4	1.7	-1.3
II	-1.4	-0.3	-1.2
III	-1.9	-2.5	0.5
IV	-0.5	-1.9	1.3
2011
I	-1.2	-0.4	-0.7
II	-4.5	-4.6	0.2
III	3.9	5.7	-1.9
IV	-3.0	-1.9	-1.0
2010
I	2.2	3.5	-1.3
II	0.0	2.6	-2.7
III	0.5	1.4	-0.9
IV	-0.3	0.1	-0.4
2009
I	-4.4	-16.4	12.0
II	7.3	4.7	2.7
III	2.2	5.3	-3.1
IV	2.8	4.1	-1.3
2008
I	1.2	2.1	-0.9
II	0.4	-1.6	2.0
III	0.0	0.2	-0.2
IV	-11.4	-10.2	-1.2
2007
I	1.2	1.7	-0.5
II	0.7	1.6	-0.9
III	2.0	1.5	0.6
IV	1.4	2.1	-0.6

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 104.9 in Jun 2009 to 94.0 in Jan 2012 or minus 10.4 percent and increased to 111.1 in Sep 2014 for a gain of 18.2 percent relative to Jan 2012 and 5.9 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials.

Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2014

Source: Bank of Japan

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

Chart IV-5A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 98.0 in Sep 2014 or minus 4.9 percent relative to Apr 2012 and gained 0.1 percent to 98.0 in Sep 2014 relative to Jun 2009.

Chart IV-5A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2014

Source: Bank of Japan

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

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-6 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan (for the relation of terms of trade and growth see Pelaez 1979, 1976a). The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 113.1 in Apr 2012 or 21.0 percent and to 129.5 in Sep 2014 or gain of 14.5 percent relative to Apr 2012 and 38.5 percent relative to Jun 2009.

Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2014

Source: Bank of Japan

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

Chart IV-6A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 111.6 in Sep 2014 or minus 6.6 percent relative to Apr 2012 and gain of 29.5 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency increased 0.1 percent from Jun 2009 to Sep 2014 while the import corporate goods price index increased 29.5 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

Chart IV-6A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2014

Source: Bank of Japan

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

Table IV-6B provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Sep 2014. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Sep 2014, the export index on the contract currency basis decreased 1.2 percent and decreased 3.8 percent on the yen basis. For the entire period from Jan 2008 to Sep 2014, the import price index increased 10.8 percent on the contract currency basis and increased 8.8 percent on the yen basis. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

Table IV-6B, Japan, Exports and Imports Corporate Goods Price Index, Contract Currency Basis and Yen Basis

	X-CC	X-Y	M-CC	M-Y
2008/01	99.2	115.5	100.7	119.0
2008/02	99.8	116.1	102.4	120.6
2008/03	100.5	112.6	104.5	117.4
2008/04	101.6	115.3	110.1	125.2
2008/05	102.4	117.4	113.4	130.4
2008/06	103.5	120.7	119.5	140.3
2008/07	104.7	122.1	122.6	143.9
2008/08	103.7	122.1	123.1	147.0
2008/09	102.7	118.3	117.1	137.1
2008/10	100.2	109.6	109.1	121.5
2008/11	98.6	104.5	97.8	105.8
2008/12	97.9	100.6	89.3	93.0
2009/01	98.0	99.5	85.6	88.4
2009/02	97.5	100.1	85.7	89.7
2009/03	97.3	104.2	85.2	93.0
2009/04	97.6	105.6	84.4	93.0
2009/05	97.5	103.8	84.0	90.8
2009/06	97.9	104.9	86.2	93.5
2009/07	97.5	103.1	89.2	95.0
2009/08	98.3	104.4	89.6	95.8
2009/09	98.3	102.1	91.0	94.7
2009/10	98.0	101.2	91.0	94.0
2009/11	98.4	100.8	92.8	94.8
2009/12	98.3	100.7	95.4	97.5
2010/01	99.4	102.2	97.0	100.0
2010/02	99.7	101.6	97.6	99.8
2010/03	99.7	101.8	97.0	99.2
2010/04	100.5	104.6	99.9	104.6
2010/05	100.7	102.9	101.7	104.9
2010/06	100.1	101.6	100.0	102.3
2010/07	99.4	99.0	99.9	99.8
2010/08	99.1	97.3	99.5	97.5
2010/09	99.4	97.0	100.0	97.2
2010/10	100.1	96.4	100.5	95.8
2010/11	100.7	97.4	102.6	98.2
2010/12	101.2	98.3	104.4	100.6
2011/01	102.1	98.6	107.2	102.6
2011/02	102.9	99.5	109.0	104.3
2011/03	103.5	99.6	111.8	106.3
2011/04	104.1	101.7	115.9	111.9
2011/05	103.9	99.9	118.8	112.4
2011/06	103.8	99.3	117.5	110.5
2011/07	103.6	98.3	118.3	110.2
2011/08	103.6	96.6	118.6	108.1
2011/09	103.7	96.1	117.0	106.2
2011/10	103.0	95.2	116.6	105.6
2011/11	101.9	94.8	115.4	105.4
2011/12	101.5	94.5	116.1	106.2
2012/01	101.8	94.0	115.0	104.2
2012/02	102.4	95.8	115.8	106.4
2012/03	102.9	99.2	118.3	112.9
2012/04	103.1	98.7	119.5	113.1
2012/05	102.3	96.3	118.1	109.8
2012/06	101.4	95.0	115.2	106.7
2012/07	100.6	94.0	112.0	103.5
2012/08	100.9	94.1	112.4	103.6
2012/09	101.0	94.1	114.7	105.2
2012/10	101.1	94.7	113.8	105.2
2012/11	100.9	95.9	113.2	106.5
2012/12	100.7	98.0	113.4	109.5
2013/01	101.0	102.4	113.8	115.4
2013/02	101.5	105.9	114.8	120.2
2013/03	101.3	106.6	115.1	122.0
2013/04	100.2	107.5	114.1	123.8
2013/05	99.6	109.1	112.6	125.3
2013/06	99.2	106.1	112.0	121.2
2013/07	99.1	107.5	111.6	122.8
2013/08	99.0	106.1	111.8	121.3
2013/09	99.0	107.2	113.0	124.0
2013/10	99.2	106.7	113.1	122.9
2013/11	99.1	108.0	113.1	124.9
2013-12	99.1	110.4	113.8	129.0
2014-01	99.2	110.7	114.5	130.2
2014-02	98.9	109.2	113.9	127.8
2014-03	98.6	109.1	113.5	127.5
2014-04	98.5	109.2	112.8	127.0
2014-05	98.3	108.5	112.5	126.0
2014-06	98.1	108.3	112.6	126.3
2014-07	98.2	108.2	112.6	126.0
2014-08	98.3	109.0	112.4	126.8
2014-09	98.0	111.1	111.6	129.5

Note: X-CC: Exports Contract Currency; X-Y: Exports Yen; M-CC: Imports Contract; M-Y: Imports Yen

Source: Bank of Japan

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

Chart IV-7 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2014. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from policy interest rates rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Chart IV-5 and associated table at http://cmpassocregulationblog.blogspot.com/2014/09/financial-volatility-mediocre-cyclical.html http://cmpassocregulationblog.blogspot.com/2014/09/geopolitical-and-financial-risks_71.html http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states_49.html http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical_6089.html http://cmpassocregulationblog.blogspot.com/2014/06/financial-instability-mediocre-cyclical_4827.html http://cmpassocregulationblog.blogspot.com/2014/03/financial-uncertainty-mediocre-cyclical_8145.html http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world_1.html and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or_561.html and at http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk_1.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).

Chart IV-7, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2014

Source: Bank of Japan

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

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

Chart IV-8, US, Producer Price Index Finished Goods, Monthly, 1970-2014

Source: US Bureau of Labor Statistics

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

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-7. The increase in the tax on value added of consumption caused sharp increases in prices across all segments. Petroleum and coal with weight of 5.7 percent decreased 1.3 percent in Sep 2014 and increased 6.7 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, increased 0.5 percent in Sep 2014 and increased 3.5 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income (for analysis of terms of trade and growth see Pelaez (1979, 1976a). There are now inflation effects of the intentional policy of devaluing the yen.

Table IV-7, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Sep 2014	Weight	Month ∆%	12 Month ∆%
Total	1000.0	-0.1	3.5
Food, Beverages, Tobacco, Feedstuffs	137.5	0.1	3.3
Petroleum & Coal	57.4	-1.3	6.7
Production Machinery	30.8	0.5	3.5
Electronic Components	31.0	-0.2	-1.0
Electric Power, Gas & Water	52.7	-0.4	6.7
Iron & Steel	56.6	-0.1	4.4
Chemicals	92.1	-0.2	3.0
Transport Equipment	136.4	0.1	2.9

Source: Bank of Japan

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

Percentage point contributions to change of the corporate goods price index (CGPI) in Jul 2014 are provided in Table IV-8 divided into domestic, export and import segments. The final block provides change in the corporate goods price without the effects of the increase in the tax on value added of consumption. In the domestic CGPI, decreasing 0.1 percent in Sep 2014, the energy shock is evident in the deduction of 0.03 percentage points by electric power, gas and water and 0.10 percentage points in petroleum and coal products in reversal of carry trades of exposures in commodity futures. The exports CGPI decreased 0.3 percent on the basis of the contract currency with deduction of 0.03 percentage points by electric and electronic products and 0.06 percentage points by metals and related products. The imports CGPI decreased 0.7 percent on the contract currency basis. Petroleum, coal and natural gas products deducted 0.74 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide. The final block D shows that the change in the domestic corporate goods price index without the effects of the consumption tax is minus 0.1 percent.

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

Groups Sep 2014	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change:  -0.1%
Petroleum & Coal Products	-0.10
Electric Power, Gas & Water	-0.03
Chemicals & Related Products	-0.02
Agriculture, Forestry & Fishery Products	0.03
Nonferrous Metals	0.02
B. Export Price Index	Monthly Change:    -0.3% contract currency
Chemicals & Related Products	-0.09
Other Primary Products & Manufactured Goods	-0.09
Metals & Related Products	-0.06
Electric & Electronic Products	-0.03
Transportation Equipment	-0.03
General Purpose, Production & Business Oriented Machinery	-0.02
C. Import Price Index	Monthly Change: -0.7% contract currency basis
Petroleum, Coal & Natural Gas	-0.74
Metals & Related Products	-0.04
Other Primary Products & Manufactured Goods	-0.02
Textiles	0.04
Electric & Electronic Products	0.03
Foodstuffs & Feedstuffs	0.02
D. Domestic Corporate Goods Price Index Excluding Consumption Tax	Monthly Change: -0.1%
Petroleum & Coal Products	-0.10
Electric Power, Gas & Water	-0.03
Chemicals & Related Products	-0.02

Source: Bank of Japan

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

There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Jan 2011 to Oct 2014. The index of current prices paid or costs of inputs increased from 16.13 in Dec 2012 to 11.36 in Oct 2014 while the index of current prices received or sales prices increased from 1.08 in Dec 2012 to 6.82 in Oct 2014. The farther the index is from the area of no change at zero, the faster the rate of change. Prices paid or of inputs at 11.36 in Oct 2014 are expanding at faster pace than prices received or of sales of products at 6.82. The index of future prices paid or expectations of costs of inputs in the next six months fell from 51.61 in Dec 2012 to 42.05 in Oct 2014 while the index of future prices received or expectation of sales prices in the next six months increased from 25.81 in Dec 2012 to 26.14 in Oct 2014. Priced paid or of inputs are expected to increase at a faster pace in the next six months than prices received or prices of sales products. Prices of sales of finished products are less dynamic than prices of costs of inputs during waves of increases. Prices of costs of costs of inputs fall less rapidly than prices of sales of finished products during waves of price decreases. As a result, margins of prices of sales less costs of inputs oscillate with typical deterioration against producers, forcing companies to manage tightly costs and labor inputs. Instability of sales/costs margins discourages investment and hiring.

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

	Current Prices Paid	Current Prices Received	Six Months Prices Paid	Six Months Prices Received
Oct 2014	11.36	6.82	42.05	26.14
Sep	23.91	17.39	43.48	32.61
Aug	27.27	7.95	42.05	21.59
Jul	25.00	6.82	37.50	18.18
Jun	17.20	4.30	36.56	16.13
May	19.78	6.59	31.87	14.29
Apr	22.45	10.20	33.67	14.29
Mar	21.18	2.35	43.53	25.88
Feb	25.00	15.00	40.00	23.75
Jan	36.59	13.41	45.12	23.17
Dec 2013	15.66	3.61	48.19	27.71
Nov	17.11	-3.95	42.11	17.11
Oct	21.69	2.41	45.78	25.30
Sep	21.51	8.60	39.78	24.73
Aug	20.48	3.61	40.96	19.28
Jul	17.39	1.09	28.26	11.96
Jun	20.97	11.29	45.16	17.74
May	20.45	4.55	29.55	14.77
Apr	28.41	5.68	44.32	14.77
Mar	25.81	2.15	50.54	23.66
Feb	26.26	8.08	44.44	13.13
Jan	22.58	10.75	38.71	21.51
Dec 2012	16.13	1.08	51.61	25.81
Nov	14.61	5.62	39.33	15.73
Oct	17.20	4.30	44.09	24.73
Sep	19.15	5.32	40.43	23.40
Aug	16.47	2.35	31.76	14.12
Jul	7.41	3.70	35.80	16.05
Jun	19.59	1.03	34.02	17.53
May	37.35	12.05	57.83	22.89
Apr	45.78	19.28	50.60	22.89
Mar	50.62	13.58	66.67	32.10
Feb	25.88	15.29	62.35	34.12
Jan	26.37	23.08	53.85	30.77
Dec 2011	24.42	3.49	56.98	36.05
Nov	18.29	6.10	36.59	25.61
Oct	22.47	4.49	40.45	17.98
Sep	32.61	8.70	53.26	22.83
Aug	28.26	2.17	42.39	15.22
Jul	43.33	5.56	51.11	30.00
Jun	56.12	11.22	55.10	19.39
May	69.89	27.96	68.82	35.48
Apr	57.69	26.92	56.41	38.46
Mar	53.25	20.78	71.43	36.36
Feb	45.78	16.87	55.42	27.71
Jan 2011	35.79	15.79	60.00	42.11

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

Price indexes of the Federal Reserve Bank of Philadelphia Outlook Survey are in Table IV-6. As inflation waves throughout the world (http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html), indexes of both current and expectations of future prices paid and received were quite high until May 2011. Prices paid, or inputs, were more dynamic, reflecting carry trades from zero interest rates to commodity futures. All indexes softened after May 2011 with even decline of prices received in Aug 2011 during the first round of risk aversion. Current and future price indexes have increased again but not back to the intensity in the beginning of 2011 because of risk aversion frustrating carry trades even induced by zero interest rates. The index of prices paid or prices of inputs increased from 20.6 in Dec 2012 to 27.6 in Oct 2014. The index of current prices received was minus 7.2 in Apr 2013, indicating decrease of prices received. The index of current prices received increased from 10.9 in Dec 2012 to 20.8 in Oct 2014. The farther the index is from the area of no change at zero, the faster the rate of change. The index of current prices paid or costs of inputs at 27.6 in Oct 2014 indicates faster increase than the index of current prices received or sales prices of production at 20.8. The index of future prices paid decreased to 32.9 in Oct 2014 from 41.9 in Dec 2012 while the index of future prices received decreased from 27.3 in Dec 2012 to 22.5 in Oct 2014. Expectations are incorporating faster increases in prices of inputs or costs of production, 32.9 in Oct 2014, than of sales prices of produced goods, 22.5 in Oct 2014, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages investment and hiring.

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

	Current Prices Paid	Current Prices Received	Future Prices Paid	Future Prices Received
10-Dec	42.6	6.0	56.8	25.7
11-Jan	47.9	12.1	58.7	34.1
11-Feb	61.1	13.2	62.6	30.7
11-Mar	57.6	17	62.1	32.4
11-Apr	50.9	20.8	55.3	33.7
11-May	49.3	20.5	54.6	28.5
11-Jun	38.9	7.7	41.6	6.8
11-Jul	35.6	6.3	48.3	16.7
11-Aug	24.6	-4	45.2	23.4
11-Sep	32	7.1	40.9	22.2
11-Oct	24.3	2.8	42.9	27.8
11-Nov	22.8	6.3	35.4	28.3
11-Dec	25	7	43.1	24.7
12-Jan	25.3	8	47.5	20.8
12-Feb	31.9	9.4	43.4	24.8
12-Mar	14.1	5.3	37.8	22.6
12-Apr	18.1	6.2	35.2	20.2
12-May	7.7	0.7	39.5	9.7
12-Jun	5.5	-3.7	34.8	16.9
12-Jul	10.8	4.9	27.9	20.3
12-Aug	18	5.6	39.5	25
12-Sep	15.8	3.5	42.2	27.5
12-Oct	19.9	7.1	45.8	15.3
12-Nov	23.6	6.5	47.6	12.8
12-Dec	20.6	10.9	41.9	27.3
13-Jan	11.8	-1.6	33.9	20
13-Feb	10.6	-1.3	25.4	20.6
13-Mar	7.6	-1.3	32.4	16.8
13-Apr	5	-7.2	28.9	9.9
13-May	9.7	0.2	33.5	19.9
13-Jun	23.7	14.6	33.3	24.3
13-Jul	22.7	8	41	25.6
13-Aug	20.4	11.1	40.7	24.5
13-Sep	25.9	12.5	43	31.6
13-Oct	21	12.8	43.1	34.6
13-Nov	25.4	9	43.5	38.1
13-Dec	16.4	10.8	39.1	34.8
14-Jan	18.7	5.1	35.3	11.8
14-Feb	14.2	7.6	18.2	16.3
14-Mar	13.9	4.3	29.4	15.9
14-Apr	11.3	4.3	35.1	13
14-May	23	17	36.1	29.5
14-Jun	35	14.1	44.5	30
14-Jul	34.7	16.8	38.2	23.5
14-Aug	24.9	4.2	50.3	29.5
14-Sep	27	8.8	46.2	31.3
14-Oct	27.6	20.8	32.9	22.5

Source: Federal Reserve Bank of Philadelphia

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

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

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

Source: Federal Reserve Bank of Philadelphia

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

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

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

Source: Federal Reserve Bank of Philadelphia

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

VC China. China estimates an index of nonmanufacturing purchasing managers based on a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. The total index increased from 55.7 in Jan 2011 to 58.0 in Mar 2012, decreasing to 53.9 in Aug 2013. The index decreased from 56.0 in Nov 2013 to 54.6 in Dec 2013, easing to 53.4 in Jan 2014. The index moved to 54.0 in Sep 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 49.5 in Sep 2014.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Sep 2014	54.0	49.5	49.8	47.3	60.9
Aug	54.4	50.0	52.2	48.3	61.2
Jul	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 54.0 in Sep 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 51.1 in Aug-Sep 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 increased to 52.2 in Sep 2014.

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

	IPM	PI	NOI	INV	EMP	SDEL
Sep 2014	51.1	53.6	52.2	48.8	48.2	50.1
Aug	51.1	53.2	52.5	48.6	48.2	50.0
Jul	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 moved to 51.1 in Aug-Sep 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 IIIQ2014 relative to the same period in 2013 was 7.4 percent, as shown in Table VC-GDP. Secondary industry accounts for 44.2 percent of cumulative GDP in IIIQ2014. In cumulative IIIQ2014, industry alone accounts for 37.4 percent of GDP and construction with the remaining 6.8 percent. Tertiary industry accounts for 46.7 percent of cumulative GDP in IIIQ2014 and primary industry for 9.0 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 7.3 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. Annual equivalent growth slowed to 7.8 percent in IIIQ2014.

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

Cumulative GDP IIIQ2014	Value Current CNY Billion	2014 Year-on-Year Constant Prices ∆%
GDP	41,990.8	7.4
Primary Industry	3799.6	4.2
Farming	3799.6	4.2
Secondary Industry	18,578.7	7.4
Industry	15,705.7	7.1
Construction	2873.0	9.0
Tertiary Industry	19,612.5	7.9
Transport, Storage, Post	2337.0	7.0
Wholesale, Retail Trades	3893.0	9.7
Hotel & Catering Services	847.6	6.2
Financial Intermediation	2965.5	9.1
Real Estate	2641.4	2.3
Other	6928.0	9.0
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2014
IIIQ2014	1.9	7.8
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 IIIQ2014 relative to the same period in 2013 was 7.3 percent, as shown in Table VC-GDPA. Secondary industry accounts for 44.2 percent of GDP of which industry alone for 37.4 percent in cumulative IIIQ2014 and construction with the remaining 6.8 percent. Tertiary industry accounts for 46.7 percent of GDP in cumulative IIQ2014 and primary industry for 9.0 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. In IIIQ2014, GDP grew 7.3 percent relative to a year earlier and 1.9 percent relative to the prior quarter, which is 7.8 percent in annual equivalent.

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	IIIQ 2014
GDP	7.7	7.5	7.8	7.7	7.4	7.5	7.3
Primary Industry	3.4	3.0	3.4	4.0	3.5	3.9	4.2
Secondary Industry	7.8	7.6	7.8	7.8	7.3	7.4	7.4
Tertiary Industry	8.3	8.3	8.4	8.3	7.1	8.0	7.9
GDP ∆% Relative to a Prior Quarter	1.6	1.8	2.3	1.7	1.5	2.0	1.9
	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/6bd34263066f4ea29f01687f726c91d1) is mixed. The overall Flash HSBC China Manufacturing PMI^™ increased from 50.2 in Sep to 50.4 in Aug, while the Flash HSBC China Manufacturing Output Index decreased from 51.3 in Sep to 50.7 in Oct, indicating moderate expansion. 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/fiscal stimulus (http://www.markiteconomics.com/Survey/PressRelease.mvc/6bd34263066f4ea29f01687f726c91d1). 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 52.8 in Aug to 52.3 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/8614cb018b204bbd995dd9dff5830c43). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds need of easing policies in consolidating growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/8614cb018b204bbd995dd9dff5830c43). The HSBC China Services Business Activity index decreased from 54.1 in Aug to 53.5 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/8614cb018b204bbd995dd9dff5830c43). Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds that the services PMI shows sustained activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/8614cb018b204bbd995dd9dff5830c43). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, did not change to 50.2 in Sep from 50.2 in Aug, indicating near neutral manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/d578e13981d44eb69ce706c58ff2e6e5). New export orders strengthened. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds weakening demand in China with possible need of monetary and fiscal policy enhancement (http://www.markiteconomics.com/Survey/PressRelease.mvc/d578e13981d44eb69ce706c58ff2e6e5). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Sep 12-month ∆%: minus 1.8 Aug month ∆%: -0.4 Blog 10/19/14
Consumer Price Index	Sep month ∆%: 0.5 Sep 12 months ∆%: 1.6 Blog 10/19/14
Value Added of Industry	Sep month ∆%: 0.91 Jan-Sep 2014/Jan-Sep 2013 ∆%: 8.5 Blog 10/26/14
GDP Growth Rate	Year IIIQ2014 ∆%: 7.5 First Three Quarters 2014 ∆%: 7.3 Quarter IIQ2014 AE ∆%: 7.8 Blog 10/26/14
Investment in Fixed Assets	Total Jan-Sep 2014 ∆%: 16.1 Real estate development: 12.5 Blog 10/26/14
Retail Sales	Sep month ∆%: 0.85 Sep 12 month ∆%: 11.6 Jan-Sep ∆%: 12.0 Blog 10/26/14
Trade Balance	Sep balance $31.0 billion Exports 12M ∆% 15.3 Imports 12M ∆% -7.0 Cumulative Jan-Sep: $200.0 billion Blog 10/19/14

Links to blog comments in Table CNY:

10/19/14 http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html

Cumulative growth of China’s GDP in IIIQ2014 relative to the same period in 2013 was 7.4 percent, as shown in Table VC-A. Secondary industry accounts for 44.2 percent of cumulative GDP in IIIQ2014. In cumulative IIIQ2014, industry alone accounts for 37.4 percent of GDP and construction with the remaining 6.8 percent. Tertiary industry accounts for 46.7 percent of cumulative GDP in IIIQ2014 and primary industry for 9.0 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-A 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 7.3 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. Annual equivalent growth slowed to 7.8 percent in IIIQ2014.

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

Cumulative GDP IIIQ2014	Value Current CNY Billion	2014 Year-on-Year Constant Prices ∆%
GDP	41,990.8	7.4
Primary Industry	3799.6	4.2
Farming	3799.6	4.2
Secondary Industry	18,578.7	7.4
Industry	15,705.7	7.1
Construction	2873.0	9.0
Tertiary Industry	19,612.5	7.9
Transport, Storage, Post	2337.0	7.0
Wholesale, Retail Trades	3893.0	9.7
Hotel & Catering Services	847.6	6.2
Financial Intermediation	2965.5	9.1
Real Estate	2641.4	2.3
Other	6928.0	9.0
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2014
IIIQ2014	1.9	7.8
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 IIIQ2014 relative to the same period in 2013 was 7.3 percent, as shown in Table VC-B. Secondary industry accounts for 44.2 percent of GDP of which industry alone for 37.4 percent in cumulative IIIQ2014 and construction with the remaining 6.8 percent. Tertiary industry accounts for 46.7 percent of GDP in cumulative IIQ2014 and primary industry for 9.0 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. In IIIQ2014, GDP grew 7.3 percent relative to a year earlier and 1.9 percent relative to the prior quarter, which is 7.8 percent in annual equivalent.

Table VC-B, 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	IIIQ 2014
GDP	7.7	7.5	7.8	7.7	7.4	7.5	7.3
Primary Industry	3.4	3.0	3.4	4.0	3.5	3.9	4.2
Secondary Industry	7.8	7.6	7.8	7.8	7.3	7.4	7.4
Tertiary Industry	8.3	8.3	8.4	8.3	7.1	8.0	7.9
GDP ∆% Relative to a Prior Quarter	1.6	1.8	2.3	1.7	1.5	2.0	1.9
	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/

Cumulative and 12-months rates of value added of industry in China are provided in Table VC-1. Industry’s value added grew 8.5 percent in Jan-Sep 2014 relative to a year earlier and 8.0 percent in the 12 months ending in Sep 2014. Value added of industry increased 8.5 percent in Jan-Sep 2014 relative to a year earlier and 6.9 percent in the 12 months ending in Aug 2014. Value added of industry grew 8.8 percent in Jan-Jul 2014 relative to a year earlier and 9.0 percent in the 12 months ending in Jun 2014. Value added of industry grew 8.8 percent in Jan-Jun 2014 relative to a year earlier and 9.2 percent in 12 months. Manufacturing grew 9.7 percent in Jan-Aug 2014 relative to a year earlier and 8.0 percent in 12 months. Mining and quarrying grew 4.9 percent in Jan-Aug 2014 relative to a year earlier and 4.2 percent in 12 months. Growth of total industry decelerated from cumulative 14.4 percent in Jan-Mar 2011 to 9.7 percent in Jan-Dec 2013 and 8.5 percent in Jan-Sep 2014.

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

	Industry	Mining & Quarrying	Manufac-turing	State Owned	Joint-Stock
2014
Jan-Sep	8.5	4.8	9.6	5.2	9.9
12M Sep	8.0	3.9	9.1	4.8	9.3
Jan-Aug	8.5	4.9	9.7	5.3	10.0
12M Aug	6.9	4.2	8.0	4.0	9.7
Jan-Jul	8.8	5.0	9.9	5.5	3.4
12M Jul	9.0	6.2	10.0	5.8	4.4
Jan-Jun	8.8	4.6	9.9	5.5	10.2
12M Jun	9.2	7.9	9.8	7.3	10.8
Jan-May	8.7	3.8	9.9	5.1	10.1
12M May	8.8	4.3	9.9	6.1	10.3
Jan-Apr	8.7	3.6	9.9	4.8	10.1
12M Apr	8.7	4.5	9.8	5.7	10.3
Jan-Mar	8.7	3.3	9.9	4.5	10.0
12 M Mar	8.8	2.9	9.9	4.6	10.1
Jan-Feb	8.6	3.5	9.8	4.4	9.9
2013
Jan-Dec	9.7	6.4	10.5	6.9	11.0
12M Dec	9.7	5.4	10.7	8.3	10.8
Jan-Nov	9.7	6.4	10.5	6.8	4.4
12M Nov	10.0	5.6	11.0	9.1	2.4
Jan-Oct	9.7	6.5	10.4	6.5	11.0
12M Oct	10.3	4.3	11.4	8.4	11.1
Jan-Sep	9.6	6.7	10.3	6.3	11.0
12M Sep	10.2	4.9	11.1	7.8	11.1
Jan-Aug	9.5	6.9	10.2	6.1	11.0
12M Aug	10.4	5.8	10.9	9.5	11.7
Jan-Jul	9.4	7.1	10.1	5.6	10.9
12M Jun	9.7	5.5	10.5	8.1	11.1
Jan-Jun	9.3	7.3	10.0	5.2	10.9
12M Jun	8.9	5.8	9.6	6.3	10.5
Jan-May	9.4	8.5	9.7	4.9	11.0
12M May	9.2	8.0	9.8	4.4	10.7
Jan-Apr	9.4	8.6	9.7	4.9	11.1
12 M Apr	9.3	8.5	9.6	4.3	10.9
Jan-Mar	9.5	8.7	9.8	5.2	11.3
12 M Mar	8.9	8.2	9.1	4.3	11.0
Jan-Feb	9.9	9.1	10.2	5.8	11.4
2012
Jan-Dec 2012	10.0	10.1	9.9	6.4	11.8
12 M Dec	10.3	9.6	10.6	8.0	12.1
Jan-Nov	10.0	10.2	9.8	6.3	11.8
12 M Nov	10.1	9.2	10.5	7.2	11.8
Jan-Oct	10.0	10.3	9.7	6.4	11.8
12 M Oct	9.6	9.1	9.7	7.0	11.7
Jan-Sep	10.0	10.4	9.7	6.3	11.8
12 M  Sep	9.2	9.0	9.3	6.3	11.0
Jan-Aug	10.1	10.5	9.8	6.3	15.4
12 M Aug	8.9	8.6	9.0	5.3	14.3
Jan-Jul	10.3	10.8	9.9	6.6	12.1
12 M Jul	9.2	10.1	8.8	4.8	10.9
Jan-Jun	10.5	11.1	10.1	7.0	12.4
12 M Jun	9.5	9.0	9.6	6.5	11.5
Jan-May	10.7	11.5	10.3	6.7	12.4
12 M May	9.6	9.1	9.8	6.6	11.0
Jan-Apr	11.0	12.3	10.5	6.6	12.9
12 M Apr	9.3	10.3	8.9	4.3	10.7
Jan-Mar	11.6	13.2	11.0	7.2	13.8
12 M Mar	11.9	13.9	11.2	8.0	13.7
Jan-Feb	11.4	12.7	10.9	7.3	13.9
2011
Jan-Dec	13.9	13.0	14.3	9.9	15.8
12 M Dec	12.8	12.6	13.0	9.2	14.7
Jan-Nov	14.0	13.0	14.4	9.9	16.0
12 M Nov	12.4	12.4	12.4	7.8	14.4
Jan-Oct	14.1	13.0	14.5	10.1	9.1
12 M Oct	13.2	12.1	13.7	8.9	15.1
Jan-Sep	14.2	13.1	14.6	10.4	16.1
12 M Sep	13.8	12.8	14.3	9.9	16.0
Jan-Aug	14.2	13.1	14.6	10.4	16.1
12 M Aug	13.5	13.4	13.5	9.4	15.5
Jan-Jul	14.3
12 M Jul	14.0	12.8	14.5	9.5
Jan-Jun	14.3	13.1	14.7	10.7	19.7
12 M Jun	15.1	13.9	15.6	10.7	20.8
Jan-May	14.0	12.9	14.4	10.7	19.3
12 M May	13.3	12.9	13.5	8.9	18.7
Jan-Apr	14.2	12.9	14.7	11.2	19.5
12 M Apr	13.4	11.9	14.0	10.4	18.0
Jan-Mar	14.4	13.1	14.9	11.4	19.8
12 M Mar	14.8	12.8	15.6	12.9	19.2
12 M Feb	14.9	13.1	15.6	10.5	21.7
Jan-Feb	14.1	13.3	14.4	10.6	20.3

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

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

Chart VC-1 provides 12-month percentage changes of value added of industry in China. The yearly rate of industry fell from 10.2 percent in Sep 2013 to 8.0 percent in Sep 2014.

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

Source: National Bureau of Statistics of China

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

Yearly rates of growth for the past 12 months and cumulative relative to the earlier year of various segments of industrial production in China are provided in Table VC-2. There is deceleration to 4.4 percent of electricity output in Jan-Sep 2014 relative to a year earlier and contraction of 2.2 percent in the 12 months ending in Aug 2014. There are weaker readings in most segments with exception of 9.3 percent for autos. Rates from Jan to Dec 2011 relative to the same period a year earlier fluctuated but remained mostly above 10 percent with the exception of motor vehicles and crude oil. There is deceleration in Jan-Dec 2012 of percentage change with no segment showing growth exceeding 10 percent with exception of 12-month growth of 13.5 percent for pig iron and 16.7 percent for nonferrous metals. In Jan-Sep 2013, many segments grew at rates exceeding or around 10 percent with exception of electricity at 6.8 percent, crude oil at 4.2 percent and pig iron at 6.9 percent. Electricity fell from growth of 16.2 percent in the 12 months ending in Jun 2011 to 0.0 percent in the 12 months ending in Jun 2012, rebounding to 4.8 percent in Aug 2012 but declining to 1.5 percent in Sep 2012, increasing to 3.9 percent in Oct 2012, 7.9 percent in Nov 2012 and 7.6 percent in Dec 2012. Electricity grew 6.8 percent in Jan-Jul 2013 relative to a year earlier and increased 8.2 percent in the 12 months ending in Sep 2013. Electricity output increased 7.6 percent in Jan-Dec 2013 relative to a year earlier and 8.3 percent in 12 months ending in Dec 2013. Auto production jumped to 18.4 percent in Jan-Dec 2013 relative to a year earlier and 22.8 percent in 12 months ending in Dec 2013.

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

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

M: month

Source: National Bureau of Statistics of China

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

Monthly growth rates of industrial production in China are provided in Table VC-3. Monthly rates have fluctuated around 1 percent. Jan and Feb 2012 are somewhat weaker but there was improvement to 1.25 percent in Mar 2012. The rate of 0.33 percent in Apr 2012 is the lowest in the monthly series from Feb 2011 to Jul 2014. Monthly sales growth remained below 1 percent in all months from Jan 2012 to Dec 2013 with the exception of Mar 2012. Value added of industry increased 0.22 percent in Aug 2014 and 0.91 percent in Sep 2014.

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

2011	Month ∆%
Feb	0.93
Mar	0.99
Apr	1.32
May	0.79
Jun	1.30
Jul	0.82
Aug	0.85
Sep	0.95
Oct	0.71
Nov	0.68
Dec	0.94
Jan 2012	0.50
Feb	0.61
Mar	1.25
Apr	0.33
May	0.89
Jun	0.83
Jul	0.59
Aug	0.61
Sep	0.89
Oct	0.76
Nov	0.86
Dec	0.90
Jan 2013	0.61
Feb	0.78
Mar	0.72
Apr	0.80
May	0.74
Jun	0.62
Jul	0.90
Aug	1.09
Sep	0.54
Oct	0.81
Nov	0.67
Dec	0.65
Jan 2014	0.55
Feb	0.56
Mar	0.82
Apr	0.64
May	0.65
Jun	0.72
Jul	0.65
Aug	0.22
Sep	0.91

Source: National Bureau of Statistics of China

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

Table VC-4 provides cumulative growth of investment in fixed assets in China in Jan-Dec 2011, Jan-Dec 2012, Jan-Dec 2013 and Jan-Sep 2014 relative to a year earlier. Total fixed investment had grown at a high rate fluctuating around 25 percent and fixed investment in real estate development has grown at rates in excess of 30 percent but rates have declined significantly to still quite high percentages. In Jan-Sep 2014, investment in fixed assets in China grew 16.1 percent relative to a year earlier and 12.5 percent in real estate development. There was slight deceleration in the final two months of 2011 that continued into Jan-Dec 2013 and Jan-Sep 2014.

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

	Total	State	Real Estate Development
Jan-Sep 2014	16.1	14.1	12.5
Jan-Aug	16.5	14.2	13.2
Jan-Jul	17.0	14.7	13.7
Jan-Jun	17.3	14.8	14.1
Jan-May	17.2	15.1	14.7
Jan-Apr	17.3	14.4	16.4
Jan-Mar	17.6	14.5	16.8
Jan-Feb	17.9	NA	19.3
Jan-Dec 2013	19.6	16.3	19.8
Jan-Nov	19.9	16.8	19.5
Jan-Oct	20.1	17.1	19.2
Jan-Sep	20.2	17.6	19.7
Jan-Aug	20.3	NA	19.3
Jan-Jul	20.1	17.5	20.5
Jan-Jun	20.1	17.5	20.3
Jan-May	20.4	17.7	20.6
Jan-Apr	20.6	18.1	21.1
Jan-Mar	20.9	18.7	20.2
Jan-Feb	21.2	16.9	22.8
Jan-Dec 2012	20.6	14.7	16.2
Jan-Nov	20.7	14.5	16.7
Jan-Oct	20.7	14.2	15.4
Jan-Sep	20.5	13.6	15.4
Jan-Aug	20.2	12.9	15.6
Jan-Jul	20.4	12.6	15.4
Jan-Jun	20.4	13.8	16.6
Jan-May	20.1	10.0	18.5
Jan-Apr	20.2	9.5	18.7
Jan-Mar	20.9	9.0	23.5
Jan-Feb	21.5	8.8	27.8
Jan-Dec 2011	23.8	11.1	27.9
Jan-Nov	24.5	11.7	29.9
Jan-Oct	24.9	12.4	31.1
Jan-Sep	24.9	12.7	32.0
Jan-Aug	25.0	12.1	33.2
Jan-Jul	25.4	13.6	33.6
Jan-Jun	25.6	14.6	32.9
Jan-May	25.8	14.9	34.6
Jan-Apr	25.4	16.6	34.3
Jan-Mar	25.0	17.0	34.1
Jan-Feb	24.9	15.6	35.2

Source: National Bureau of Statistics of China

Chart VC-2 provides percentage changes of cumulative fixed asset investment in China relative to a year earlier from 2013 to 2014. Growth fell from 20.9 percent in Jan-Mar 2013 to 16.1 percent in Jan-Sep 2014.

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

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

Source: National Bureau of Statistics of China

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

China has used restriction of reserves of banks to moderate real estate investment. These policies have been reversed because of lower inflation and weakening economic growth. Chart VC-3 shows decline of fluctuating cumulative growth rates of investment in real estate development relative to a year earlier from 21.1 percent in Jan-Apr 2013 to 12.5 percent in Jan-Sep 2014.

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

Source: National Bureau of Statistics of China

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

Growth rates of China’s retail sales in 12 months and cumulative relative to a year earlier are in Table VC-5. There is decline of growth rates to cumulative 12.0 percent in Jan-Sep 2014 relative to a year earlier from 19.9 percent in Jan 2011 and 17.1 percent in Dec 2011.

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

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

Source: National Bureau of Statistics of China

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

Chart VC-4 of the National Bureau of Statistics of China provides 12-month rates of growth of retail sales from 2013 to 2014. There is again a drop into 2013 with the lowest percentages in Chart VC-4 followed by moderate increases. The growth rate of retail sales fell to 11.6 percent in Jan-Sep 2014 relative to a year earlier.

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

Source: National Bureau of Statistics of China

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

Table VC-6 provides monthly percentage changes of retail sales in China. Although the rate of 0.19 percent in Jan 2012 is the lowest in Table VC-6, the rate of 1.32 percent in Sep 2012 is relatively high and 1.23 percent in Dec 2012 is closer to rates in 2011. Sales are lower in Jan-Feb 2013 because of the Lunar New Year celebrations, rebounding in Mar-Dec 2013. There is weakness in Jan-Feb 2014 also partly under influence of the celebration of the Lunar New Year followed with 1.22 percent in Mar 2014. Retail sales increased 0.85 percent in Sep 2014.

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

2011	Month ∆%
Feb	1.35
Mar	1.26
Apr	1.30
May	1.39
Jun	1.49
Jul	1.57
Aug	1.50
Sep	1.33
Oct	1.36
Nov	1.26
Dec	1.41
2012
Jan	0.19
Feb	0.99
Mar	1.21
Apr	0.93
May	1.11
Jun	1.12
Jul	1.03
Aug	1.11
Sep	1.32
Oct	1.18
Nov	1.21
Dec	1.23
Jan 2013	0.14
Feb	0.87
Mar	1.50
Apr	0.99
May	0.95
Jun	1.09
Jul	1.08
Aug	0.92
Sep	1.02
Oct	0.98
Nov	0.99
Dec	0.98
2014
Jan	0.84
Feb	0.61
Mar	1.22
Apr	0.82
May	1.11
Jun	0.91
Jul	0.86
Aug	0.89
Sep	0.85

Source: National Bureau of Statistics of China

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

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, increased from 52.0 in Sep to 52.2 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/a5c261d7858a41d591de69935243b5e3). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the index is consistent with risks of weaker economic activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/a5c261d7858a41d591de69935243b5e3). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP decreased from 52.5 in Aug to 52.0 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/01d8b102223d449881e2878c1544c892). Chris Williamson, Chief Economist at Markit, finds slowing growth of GDP at 0.2 to 0.3 percent in IIIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/01d8b102223d449881e2878c1544c892). The Markit Eurozone Services Business Activity Index decreased from 53.1 in Aug to 52.4 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/01d8b102223d449881e2878c1544c892). The Markit Eurozone Manufacturing PMI^® decreased to 50.3 in Sep from 50.5 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/81a993f313ab4bdfbbd1bff81aa7dcea). New export orders increased for the fifteenth consecutive month. Chris Williamson, Chief Economist at Markit, finds slowing industrial growth in the euro area (http://www.markiteconomics.com/Survey/PressRelease.mvc/81a993f313ab4bdfbbd1bff81aa7dcea). 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 9/7/14
Unemployment	Aug 2014: 11.5 % unemployment rate; Aug 2014: 18.326 million unemployed Blog 10/5/14
HICP	Sep month ∆%: 0.4 12 months Sep ∆%: 0.3 Blog 10/19/14
Producer Prices	Euro Zone industrial producer prices Aug ∆%: -0.1 Aug 12-month ∆%: -1.4 Blog 10/5/14
Industrial Production	Aug month ∆%: -1.8; Aug 12 months ∆%: -1.9 Blog 10/19/14
Retail Sales	Aug month ∆%: 1.2 Aug 12 months ∆%: 1.9 Blog 10/12/14
Confidence and Economic Sentiment Indicator	Sentiment 99.9 Sep 2014 Consumer minus 11.4 Sep 2014 Blog 10/5/14
Trade	Jan-Aug 2014/Jan-Aug 2013 Exports ∆%: 0.8 Imports ∆%: -0.2 Aug 2014 12-month Exports ∆% -2.8 Imports ∆% -4.4 Blog 10/19/14

Links to blog comments in Table EUR:

10/19/14 http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html

10/12/14 http://cmpassocregulationblog.blogspot.com/2014/10/global-financial-volatility-recovery.html

10/5/14 http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html

9/7/14 http://cmpassocregulationblog.blogspot.com/2014/09/competitive-monetary-policy-and.html

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1971 to 2013, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.6 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 4.1 percent in 2010, 3.6 percent in 2011 and 0.4 percent in 2012. Growth decelerated to 0.1 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-4 provides annual growth rates of the German economy from 1970 to 2013, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.6 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 4.1 percent in 2010, 3.6 percent in 2011 and 0.4 percent in 2012. Growth in 2013 was 0.1 percent.

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/NationalAccounts.html

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

https://www.destatis.de/EN/PressServices/Press/pr/2014/09/PE14_306_811.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, increased from 54.1 in Sep to 54.3 in Oct. The index of manufacturing output reached 53.3 in Oct, increasing from 51.0 in Sep, while the index of services decreased to 54.8 in Sep from 55.7 in Sep. The overall Flash Germany Manufacturing PMI^® increased from 49.9 in Sep to 51.8 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/6b7dae3dfc414307b594d25155dfdd9d). New orders in manufacturing contracted. Oliver Kolodseike, Economist at Markit, finds continuing expansion of Germany’s private with weakness in new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/6b7dae3dfc414307b594d25155dfdd9d). 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 53.7 in Aug to 54.1 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/b19f96225be143568e50e16a95142f66). Oliver Kolodseike, Senior Economist at Markit and author of the report, finds growth of GDP in IIIQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/b19f96225be143568e50e16a95142f66). The Germany Services Business Activity Index increased from 54.9 in Aug to 55.7 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/b19f96225be143568e50e16a95142f66). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, decreased from 51.4 in Aug to 49.9 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/500b6b4240084dd085c344857edb3549). New export orders increased for the fourteenth consecutive month. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds slowing output and new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/500b6b4240084dd085c344857edb3549).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 9/7/14
Consumer Price Index	Sep month NSA ∆%: 0.0 Sep 12-month NSA ∆%: 0.8 Blog 10/19/14
Producer Price Index	Sep month ∆%: 0.0 NSA, minus 0.2 CSA 12-month NSA ∆%: -1.0 Blog 10/26/14
Industrial Production	MFG Aug month CSA ∆%: minus 4.7 12-month NSA: -5.3 Blog 10/12/14
Machine Orders	MFG Aug month ∆%: -5.7 Aug 12-month ∆%: -4.1 Blog 10/12/14
Retail Sales	Aug Month ∆% 0.71 12-Month ∆% 2.5 Blog 10/5/14
Employment Report	Unemployment Rate SA Aug 4.9% Blog 10/5/14
Trade Balance	Exports Aug 12-month NSA ∆%: -1.0 Imports Aug 12 months NSA ∆%: -2.4 Exports Aug month CSA ∆%: -5.8; Imports Aug month CSA minus -1.3 Blog 10/12/14

Links to blog comments in Table DE:

10/19/14 http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html

10/12/14 http://cmpassocregulationblog.blogspot.com/2014/10/global-financial-volatility-recovery.html

10/5/14 http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html

9/7/14 http://cmpassocregulationblog.blogspot.com/2014/09/competitive-monetary-policy-and.html

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

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

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

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

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

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

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

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

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

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

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

Table VF-FR, France, Average Growth Rates of GDP Fourth Quarter, 1949-2013

Period	Average ∆%
1949-2013	3.2
2007-2013	0.3
2000-2013	1.1
2000-2012	1.1
2000-2007	1.8
1990-1999	2.1
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=28&date=20140923

The Markit Flash France Composite Output Index decreased from 48.4 in Sep to 48.0 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/9da049a2521c4bb493e65b5b58b15879). Jack Kennedy, Senior Economist at Markit and author of the report, finds continuing weak performance (http://www.markiteconomics.com/Survey/PressRelease.mvc/9da049a2521c4bb493e65b5b58b15879). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, decreased from 49.5 in Aug to 48.4 in Sep, indicating marginal contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/82be3cedbcdc4a839163e81d615900f9). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds stagnating GDP growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/82be3cedbcdc4a839163e81d615900f9). The Markit France Services Activity index decreased from 50.3 in Aug to 48.4 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/82be3cedbcdc4a839163e81d615900f9). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 48.8 in Sep from 46.9 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/8bd5e41300354c52ac62bba016c38fa5). 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/8bd5e41300354c52ac62bba016c38fa5). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Sep month ∆% -0.4 12 months ∆%: 0.3 10/19/14
PPI	Aug month ∆%: -0.3 Aug 12 months ∆%: -1.4 Blog 10/5/14
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 9/28/14
Industrial Production	Aug ∆%: Manufacturing -0.2 12-Month ∆%: Manufacturing -0.6 Blog 10/12/14
Consumer Spending	Manufactured Goods Aug ∆%: 0.8 Aug 12-Month Manufactured Goods ∆%: 1.4 Blog 10/5/14
Employment	Unemployment Rate: IIQ2014 9.7% Blog 9/7/14
Trade Balance	Aug Exports ∆%: month -1.3, 12 months -1.2 Aug Imports ∆%: month -0.6, 12 months 0.1 Blog 10/12/14
Confidence Indicators	Historical average 100 Oct Mfg Business Climate 97.0 Blog 10/26/14

Links to blog comments in Table FR:

10/19/14 http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html

10/12/14 http://cmpassocregulationblog.blogspot.com/2014/10/global-financial-volatility-recovery.html

10/5/14 http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html

9/28/14 http://cmpassocregulationblog.blogspot.com/2014/09/financial-volatility-mediocre-cyclical.html

9/7/14 http://cmpassocregulationblog.blogspot.com/2014/09/competitive-monetary-policy-and.html

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

6/29/14 http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.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 97 in Jul 2014 close to the average 100, easing to 96 in Aug-Sep 2014 and increased to 97 in Oct 2014. General production expectations deteriorated to minus 19 in Jul 2014. Deterioration continued to minus 20 in Aug 2014, improving to minus 18 in Sep 2014 and deteriorating to minus 22 in Oct 2014.

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

Mfg 2014	Average since 1976	Oct 14	Sep 14	Aug 14	Jul 14
Composite Indicator	100	97	96	96	97
Past Activity	4	-2	-5	0	4
Finished- Goods Inventory Level	13	12	11	13	12
Global Order Books	-18	-24	-24	-23	-23
Export Order Books	-14	-22	-20	-16	-21
Personal Production Expectations	5	8	2	-4	0
General Production Expectations	-9	-22	-18	-20	-19

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20141023

Chart VF-1 of the Institut National de la Statistique et des Études Économiques (INSEE) provides the history of the manufacturing business climate indicator of INSEE since 1992. The index fell during the contractions of 1991, 2001 and 2008. After rapid recovery beginning in 2009 the synthetic index shows declining trend in 2011 with upward reversal in 2012 interrupted in Apr through Jul 2012 and a marginal upward move in Aug-Sep 2012 but new decline in Oct 2012. The manufacturing composite indicator marginally reversed in Nov 2012 with stability in Dec 2012 and decline in Jan 2013 but improvement in Feb 2013 and stability in Mar 2013, deteriorating in Apr 2013 and recovering in May-Aug 2013. The composite indicator of manufacturing eased slightly in Sep 2013 and improved marginally in Oct-Nov 2013, close to the long-term average of 100. The index reached 100 in Dec 2013 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=20141023

Chart VF-2 of the Institut National de la Statistique et des Études Économiques (INSEE) shows strong drops of the turning point indicator in the recessions of 1991, 2001 and 2008. There have been other drops of this index. The turning point indicator has fallen to levels in the direction of past contractions and after rebounding in Oct and Nov 2011 is showing declining trend in Jan 2012 with slight reversal in Feb followed by significant improvement in Mar and deterioration in Apr through Jul 2012. There is new improvement in Aug 2012 followed by decline in Sep-Oct 2012 followed by rebound in Nov 2012 and stability in Dec 2012 to Jan-Mar 2013, deteriorating in Apr-May 2013. The index improved in Jun-Sep 2013 and stabilized in Oct 2013, declining in Nov 2013. The index increased in Dec 2013 and in Jan 2014, declining in Feb 2014 and stabilizing in Mar 2014. The index stabilized in Apr-May 2014 and fell in Jun 2014 with partial recovery in Jul-Aug 2014. The index stabilized in Sep-Oct 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=20141023

Chart VF-3 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-Oct 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=20141023

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 0.8 percent in IVQ2011 to minus 2.5 percent in IVQ2012, minus 2.4 percent in IQ2013, minus 2.2 percent in IIQ2013 and minus 1.9 percent in IIIQ2013. GDP fell 1.1 percent in IVQ2013 relative to a year earlier. GDP fell 0.3 percent in IQ2014 relative to a year earlier and decreased 0.3 percent in IIQ2014 relative to a year earlier. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates. The rates of decline of GDP, consumption and GFCF were somewhat milder in IIIQ2013 and IVQ2013 than in IQ2013 and the final three quarters of 2012. Consumption fell 0.3 percent in IQ2014 and GFCF fell 1.7 percent. In IIQ2014, consumption increased 0.2 percent relative to a year earlier and GFCF fell 2.5 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	-0.3	2.5	0.2	-2.5	2.4
IQ	-0.3	0.8	-0.3	-1.7	1.7
2013
IVQ	-1.1	0.5	-1.1	-3.4	1.6
IIIQ	-1.9	-1.8	-2.2	-4.3	0.4
IIQ	-2.2	-4.1	-2.7	-6.1	0.3
IQ	-2.4	-4.9	-2.9	-7.7	1.2
2012
IVQ	-2.5	-7.4	-3.5	-7.7	1.3
IIIQ	-2.5	-8.0	-3.7	-8.1	2.5
IIQ	-2.4	-8.7	-3.6	-7.7	1.2
IQ	-1.9	-8.5	-3.0	-6.6	1.5
2011
IVQ	-0.8	-7.0	-2.1	-3.8	2.4
IIIQ	0.5	0.4	-0.8	-2.7	4.6
IIQ	1.3	3.7	0.4	-1.1	7.7
IQ	1.9	8.4	0.7	0.7	10.3
2010
IVQ	2.3	14.6	1.3	0.5	13.0
IIIQ	1.8	12.9	1.1	0.7	12.4
IIQ	1.9	14.2	1.0	-0.3	13.2
IQ	0.7	6.7	0.9	-3.3	6.8
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/134394

The Markit/ADACI Business Activity Index decreased from 49.8 in Aug to 48.8 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/d3dda091545c4391a5fa4b32b0a94302). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds weakening demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/d3dda091545c4391a5fa4b32b0a94302). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 49.8 in Aug to 50.7 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/02e47b393b13457a98a844fc7f00961e). Growth of new export orders was strong at faster rate. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds fragile conditions in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/02e47b393b13457a98a844fc7f00961e. Table VG-1 provides the country data for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Sep month ∆%: -0.4 Sep 12-month ∆%: -0.2 Blog 10/19/14
Producer Price Index	Aug month ∆%: 0.0 Aug 12-month ∆%: -2.0 Blog 10/5/14
GDP Growth	IIQ2014/IQ2014 SA ∆%: minus 0.2 IIQ2014/IIQ2013 NSA ∆%: minus 0.3 Blog 3/17/13 6/16/13 8/11/13 9/15/13 11/17/13 12/15/13 2/16/14 3/16/14 5/18/14 6/15/14 8/10/14 8/31/14 10/19/14
Labor Report	Aug 2014 Participation rate 63.6% Employment ratio 55.7% Unemployment rate 12.3% Youth Unemployment 44.2% Blog 10/5/14
Industrial Production	Aug month ∆%: 0.3 12 months CA ∆%: -0.7 Blog 10/12/14
Retail Sales	Aug month ∆%: -0.1 Aug 12-month ∆%: -3.1 Blog 10/26/14
Business Confidence	Mfg Sep 95.1, May 99.6 Construction Sep 75.4, May 73.5 Blog 9/28/14
Trade Balance	Balance Aug SA €3532 million versus Jul €3059 Exports Aug month SA ∆%: 1.1; Imports Aug month ∆%: -0.4 Exports 12 months Aug NSA ∆%: -2.7 Imports 12 months NSA ∆%: -7.0 Blog 10/19/14

Links to blog comments in Table IT:

10/19/14 http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html

10/12/14 http://cmpassocregulationblog.blogspot.com/2014/10/global-financial-volatility-recovery.html

10/5/14 http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html

9/28/14 http://cmpassocregulationblog.blogspot.com/2014/09/financial-volatility-mediocre-cyclical.html

8/31/14 http://cmpassocregulationblog.blogspot.com/2014/09/geopolitical-and-financial-risks.html

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

Italy is competitive in various economic activities. Current restraints consist of low economic growth with high debt/GDP ratio and need for structural changes. Table VG-1 provides growth of retail sales for Italy. Retail sales decreased 0.1 percent in Aug 2014 relative to Jul 2014, decreased 0.6 percent in Jun-Aug 2014 relative to Mar-May 2014, decreased 3.1 percent in Aug 2014 relative to Aug 2013 and decreased 1.3 percent cumulatively in Jan-Aug 2014 relative to Jan-Aug 2013. Non-food retail sales outperform food retail sales.

Table VG-1, Italy, Retail Sales ∆%

	Aug 2014/  Jul 2014 SA	Jun-Aug 14/   Mar-May SA	Aug 2014/ Aug 2013 NSA	Jan-Aug 2014/ Jan-Aug 2013
Food	-0.1	-0.9	-3.7	-1.3
Non-food	-0.2	-0.4	-2.5	-1.2
Total	-0.1	-0.6	-3.1	-1.3

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/136284

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. There is marginal improvement in Jul 2014 followed by deterioration in Aug 2014.

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

Source: Istituto Nazionale di Statistica

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

A longer perspective of retail sales in Italy is provided by monthly and 12-month percentage changes in 2011, Jan-Dec 2012, Jan-Dec 2013, Jan-Aug 2014 and annual rates for 2011, 2012 and 2013 in Table VG-2. Retail sales did not decline very sharply during the global recession but fell 0.8 percent in 2011, 1.7 percent in 2012 and 2.1 percent in 2013. There is an evident declining trend in 2011 with few monthly increases and similar weakness in 2012 with multiple monthly declines. Negative percentage changes in 12 months increased to more than 3 percent with decrease of 3.2 percent in the 12 months ending in Mar 2013 and decrease of 3.0 percent in the 12 months ending in Jun 2013. Retail sales decreased 0.1 percent in Aug 2014 and decreased 3.1 percent in 12 months.

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

	Month ∆% SA	12-Month ∆% NSA
Aug 2014	-0.1	-3.1
Jul	-0.1	-1.7
Jun	-0.2	-2.7
May	-0.6	-0.4
Apr	0.3	2.7
Mar	-0.1	-3.5
Feb	-0.1	-1.0
Jan	0.0	-0.9
Dec 2013	-0.3	-2.6
Nov	0.0	0.2
Oct	0.0	-1.6
Sep	-0.4	-2.8
Aug	0.1	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	-0.5	-2.8
Dec 2012	0.1	-3.4
Nov	-0.1	-2.4
Oct	-0.8	-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/136284

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 4.3 percent in 2009 after dropping 0.3 percent in 2008. Recovery of 1.9 percent in 2010 is relatively low in comparison with annual growth rates in 2007 and earlier years. Growth was only 1.6 percent in 2011 and 0.7 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 2.9 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 higher by 1.2 percent relative to 2007.

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

	∆% on Prior Year
1998	3.5
1999	3.2
2000	3.8
2001	2.7
2002	2.5
2003	4.3
2004	2.5
2005	2.8
2006	3.0
2007	2.6
2008	-0.3
2009	-4.3
2010	1.9
2011	1.6
2012	0.7
2013	1.7
Average Growth Rates ∆% per Year
1948-2013	2.6
1950-1959	3.1
1960-1969	3.1
1970-1979	2.6
1980-1989	3.1
1990-1999	2.2
2000-2007	2.9
2007-2012*	-0.6
2007-2013*	1.2
2000-2013	1.6

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

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2014/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased from 60.5 in Aug to 58.7 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/fa89cdb774d24249b9a5888431b53851). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at around 0.8 percent in IIIQ2014 if activity continues at current rates (http://www.markiteconomics.com/Survey/PressRelease.mvc/fa89cdb774d24249b9a5888431b53851). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) decreased to 51.6 in Sep from 52.2 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/389ebd83e6dc44cdaf5be34cf37da690). New export orders increased for the eighteenth consecutive month from North America, Germany, Scandinavia and the Middle East. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing conditions are slowing (http://www.markiteconomics.com/Survey/PressRelease.mvc/389ebd83e6dc44cdaf5be34cf37da690). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Sep month ∆%: 0.0 Sep 12-month ∆%: 1.2 Blog 10/19/14
Output/Input Prices	Output Prices: Sep 12-month NSA ∆%: -0.4; excluding food, petroleum ∆%: 0.8 Input Prices: Sep 12-month NSA ∆%: -7.4 Excluding ∆%: -3.0 Blog 10/19/14
GDP Growth	IIIQ2014 prior quarter ∆% 0.7; year earlier same quarter ∆%: 3.0 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 10/5/14 10/26/14
Industrial Production	Aug 2014/Aug 2013 ∆%: Production Industries 2.5; Manufacturing 3.9 Blog 10/12/14
Retail Sales	Aug month ∆%: 0.4 Aug 12-month ∆%: 3.9 Blog 9/21/14
Labor Market	Jun-Aug Unemployment Rate: 6.0%; Claimant Count 2.8%; Earnings Growth 0.7% Blog 10/19/14 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 Aug minus ₤1917 million Exports Aug ∆%: -1.7; Jun-Aug ∆%: -7.4 Imports Aug ∆%: -4.2 Jun-Aug ∆%: -6.9 Blog 10/12/14

Links to blog comments in Table UK:

10/19/14 http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html

10/12/14 http://cmpassocregulationblog.blogspot.com/2014/10/global-financial-volatility-recovery.html

10/5/14 http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html

9/21/14 http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html

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

Table VH-1 provides quarter on quarter chained value measures of GDP since 1998 in the first estimate for IIIQ2014 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2014/index.htm). The UK Office for National Statistics provides revision of the national accounts in accordance with the European System of Accounts 2010 (ESA 2010) (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2014/index.html). GDP grew 0.7 percent in IIIQ2014 relative to IIQ2014. Growth of 0.8 percent in IIIQ2012 interrupted three consecutive quarters of weakness in GDP growth. Most advanced economies are underperforming relative to the period before the global recession. The UK Office for National Statistics analyzes that the decline in the impulse of growth in the UK originated in weakness in markets in the UK and worldwide. The UK Office for National Statistics estimates that GDP in IIIQ2014 is higher by 3.4 percent relative to the peak in IQ2008 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2014/stb-gdp-preliminary-estimate--q3-2014.html). The UK Office for National Statistics estimates the contraction of 6.0 percent from peak to trough (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2014/stb-gdp-preliminary-estimate--q3-2014.html), which is roughly equal at 6.1 percent to compounding the quarterly rates in Table VH-1 from IIQ2008 to IIQ2009.

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

	IQ	IIQ	IIIQ	IV
2014	0.7	0.9	0.7
2013	0.5	0.7	0.9	0.6
2012	0.1	-0.2	0.8	-0.3
2011	0.5	0.2	0.7	0.0
2010	0.5	1.0	0.6	0.0
2009	-1.8	-0.3	0.2	0.4
2008	0.3	-0.2	-1.7	-2.2
2007	0.8	0.6	0.8	0.5
2006	0.6	0.5	0.2	0.8
2005	0.7	1.0	1.0	1.3
2004	0.3	0.3	0.1	0.4
2003	1.0	1.4	1.3	1.0
2002	0.5	0.8	0.9	0.9
2001	1.1	0.8	0.5	0.3
2000	1.0	0.7	0.4	0.3
1999	0.5	0.2	1.6	1.3
1998	0.6	0.8	0.7	1.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2014/index.html

There are four periods in growth of GDP in a quarter relative to the same quarter a year earlier in the UK in the years from 2000 to the present as shown in Table VH-2. (1) Growth rates were quite high from 2000 to 2007. (2) There were six consecutive quarters of contraction of GDP from IIIQ2008 to IVQ2009. Contractions relative to the quarter a year earlier were quite sharp with the highest of 3.8 percent in IVQ2008, 5.8 percent in IQ2009, 5.8 percent in IIQ2009 and 4.0 percent in IIIQ2009. (3) The economy bounced strongly with 2.1 percent in IIQ2010, 2.5 percent in IIIQ2010 and 2.2 percent in IVQ2010. (4) Recovery in 2011 did not continue at rates comparable to those in 2000 to 2007 and even relative to those in the final three quarters of 2010. Growth relative to the same quarter a year earlier fell from 2.2 percent in IVQ2010 to 1.4 percent in IIQ2011, 1.5 percent in IIIQ2011, 1.5 percent in IVQ2011 but only 1.0 percent in IQ2012, increase of 0.6 percent in IIQ2012 relative to IIQ2011, increase of 0.7 percent in IIIQ2012 and 0.4 percent in IVQ2012. In IQ2012, GDP increased 0.1 percent and increased 1.0 percent relative to a year earlier. In IIQ2012, GDP fell 0.2 percent relative to IQ2012 and increased 0.6 percent relative to a year earlier. In IIIQ2012, GDP increased 0.8 percent and increased 0.7 percent relative to the same quarter a year earlier. In IVQ2012, GDP fell 0.3 percent and increased 0.4 percent relative to a year earlier. Fiscal consolidation in an environment of weakening economic growth is much more challenging. Growth increased to 0.8 percent in IQ2013 relative to a year earlier and 0.5 percent in IQ2013 relative to IVQ2012. In IIQ2013, GDP increased 0.7 percent and 1.7 percent relative to a year earlier. GDP increased 0.9 percent in IIIQ2013 and 1.7 percent relative to a year earlier. GDP increased 0.6 percent in IVQ2013 and 2.7 percent relative to a year earlier. In IQ2014, GDP increased 0.7 percent and 2.9 percent relative to a year earlier. GDP increased 0.9 percent in IQ2014 and 3.2 percent relative to a year earlier. GDP increased 0.7 percent in IIIQ2013 and 3.0 percent relative to a year earlier.

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

	IQ	IIQ	IIIQ	IV
2014	2.9	3.2	3.0
2013	0.8	1.7	1.7	2.7
2012	1.0	0.6	0.7	0.4
2011	2.2	1.4	1.5	1.5
2010	0.8	2.1	2.5	2.2
2009	-5.8	-5.8	-4.0	-1.5
2008	2.2	1.4	-1.1	-3.8
2007	2.2	2.3	3.0	2.7
2006	4.0	3.5	2.6	2.0
2005	1.6	2.3	3.2	4.2
2004	4.0	2.9	1.8	1.2
2003	3.6	4.2	4.6	4.7
2002	2.1	2.1	2.5	3.1
2001	2.5	2.6	2.8	2.8
2000	4.3	4.8	3.5	2.5
1999	3.0	2.5	3.4	3.7
1998	3.9	3.5	3.5	3.2

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2014/index.html

Table VH-3 provides annual percentage changes of gross value added and key components. Production fell 8.8 percent in 2009 and its most important component manufacturing fell 9.4 percent. Services fell 2.9 percent in 2009. Services grew in all years from 2010 to 2013 while manufacturing fell 1.3 percent in 2012 and 0.1 percent in 2013.

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

	TP	MFG	CONS	SERV	GDP Market Prices	GVA EX
2011 Weights	146	101	64	784	1000	981
2009	-8.8	-9.4	-13.2	-2.9	-4.3	-4.4
2010	3.1	4.7	8.5	1.4	1.9	2.3
2011	-0.8	1.8	2.2	2.1	1.6	2.2
2012	-2.7	-1.3	-7.5	2.0	0.7	1.0
2013	-0.1	-0.1	1.5	1.8	1.7	1.8

TP: Total Production; MFG: Manufacturing; CONS: Construction; SERV: Services; GVA EX: GVA Excluding Oil and Gas

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2014/index.html

Percentage changes of gross value added and components in a quarter relative to prior quarter are in Table VH-4B. Gross value added increased 0.7 percent in IIIQ2014 relative to IIQ2014. Services increased 0.7 percent in IIIQ2014. Production increased 0.5 percent with manufacturing increasing 0.4 percent.

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

		TP	MFG	CONS	SERV	GDP  Market Prices	GVA EX
2011 Weights		146	101	64	784	1000	981
2011	Q1	-0.8	0.2	2.0	0.5	0.5	0.6
	Q2	-1.2	0.2	0.4	0.5	0.2	0.5
	Q3	-0.4	-0.4	-0.3	1.1	0.7	0.8
	Q4	-0.5	-0.4	-1.4	0.2	-	-
2012	Q1	-0.8	0.1	-3.5	0.6	0.1	0.2
	Q2	-0.9	-1.2	-3.5	0.1	-0.2	-0.2
	Q3	0.1	0.5	-1.1	1.0	0.8	0.8
	Q4	-2.0	-1.4	0.3	-0.2	-0.3	-0.3
2013	Q1	0.4	-0.1	-0.7	0.6	0.5	0.5
	Q2	0.8	0.8	2.5	0.5	0.7	0.7
	Q3	0.7	0.6	3.4	0.7	0.9	0.8
	Q4	0.6	1.0	-0.3	0.7	0.6	0.7
2014	Q1	0.9	1.5	1.8	0.8	0.7	0.7
	Q2	0.2	0.5	0.7	1.1	0.9	0.9
	Q3	0.5	0.4	0.8	0.7	0.7	0.7

TP: Total Production; MFG: Manufacturing; CONS: Construction; SERV: Services; GVA EX: GVA Excluding Oil and Gas

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2014/index.html

 

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