CMP Associates Regulation Blog

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

Chart IV-1B of the Bank of Japan provides year-on-year percentage changes of the domestic and services Corporate Goods Price Index (CGPI) of Japan from 1970 to 2014. Percentage changes of inflation of services are not as sharp as for goods. Japan had the same sharp waves of 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/2014/03/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).). Behavior of the CGPI of Japan in the 1970s mirrors the Great Inflation episode in the United States with waves of inflation rising to two digits. Both political pressures and errors abounded in the unhappy stagflation of the 1970s also known as the US Great Inflation (see 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) http://cmpassocregulationblog.blogspot.com/2014/07/financial-irrational-exuberance.html http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html). Inflation also collapsed in the beginning of the 1980s because of tight monetary policy in the US with focus on inflation instead of on the gap of actual relative to potential output. The areas in shade correspond to the dates of cyclical recessions. The salient event is the sharp rise of inflation of the domestic goods CGPI in 2008 during the global recession that was mostly the result of carry trades from fed funds rates collapsing to zero to long positions in commodity futures in an environment of relaxed financial risk appetite. The panic of toxic assets in banks to be withdrawn by the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009) drove unusual risk aversion with unwinding of carry trades of exposures in commodities and other risk financial assets. Carry trades returned once TARP was clarified as providing capital to financial institutions and stress tests verified the soundness of US banks. The return of carry trades explains the rise of CGPI inflation after mid-2009. Inflation of the CGPI fluctuated with zero interest rates in alternating episodes of risk aversion and risk appetite.

Chart IV-1B, Japan, Domestic Corporate Goods Price and Services Index, Year-on-Year Percentage Change, 1970-2014

Notes: Blue: Domestic Corporate Goods Price Index All Commodities; Red: Corporate Price Services Index

Source: Bank of Japan

There is similar behavior of year-on-year percentage changes of the US producer price index from 1970 to 2014 in Chart IV-2B of the US Bureau of Labor Statistics as in Chart IV-1 with the domestic goods CGPI. The behavior of the CGPI of Japan in the 1970s is quite similar to that of the US PPI. The US producer price index increased together with the CGPI driven by the period of one percent fed funds rates from 2003 to 2004 inducing carry trades into commodity futures and other risk financial assets and the slow adjustment in increments of 25 basis points at every FOMC meeting from Jun 2004 to Jun 2006. There is also the same increase in inflation in 2008 during the global recession followed by collapse because of unwinding positions during risk aversion and new rise of inflation during risk appetite.

Chart IV-2B, US, Producer Price Index Finished Goods, Year-on-Year Percentage Change, 1970-2014

Source: US Bureau of Labor Statistics

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

Finer detail is provided by Chart IV-3 of the domestic CGPI from 2008 to 2014. The CGPI rose almost vertically in 2008 as the collapse of fed funds rates toward zero drove exposures in commodities and other risk financial assets because of risk appetite originating in the belief that the financial crisis was restricted to structured financial products and not to contracts negotiated in commodities and other exchanges. The panic with toxic assets in banks to be removed by TARP (Cochrane and Zingales 2009) caused unwinding carry trades in flight to US government obligations that drove down commodity prices and price indexes worldwide. Apparent resolution of the European debt crisis of 2010 drove risk appetite in 2011 with new carry trades from zero fed funds rates into commodity futures and other risk financial assets. Domestic CGPI inflation returned in waves with upward slopes during risk appetite and downward slopes during risk aversion. Yen devaluation promoted by monetary and fiscal policy translates imported inputs in higher domestic prices. The increase in the tax on value added of consumption caused the sharp increase in Apr-Jun 2014. The CGPI declines and stabilizes in Aug-Oct 2014.

Chart IV-3, Japan, Domestic Corporate Goods Price Index, Monthly, 2008-2014

Source: Bank of Japan

There is similar behavior of the US producer price index from 2008 to 2014 in Chart IV-4 as in the domestic CGPI in Chart IV-3. A major difference is the strong long-term trend in the US producer price index with oscillations originating mostly in bouts of risk aversion such as the downward slope in the final segment in Chart IV-4 followed by increasing slope during periods of risk appetite. Carry trades from zero interest rates to commodity futures and other risk financial assets drive the upward trend of the US producer price index while oscillations originate in alternating episodes of risk aversion and risk appetite.

Chart IV-4, US, Producer Price Index Finished Goods, Monthly, 2008-2014

Source: US Bureau of Labor Statistics

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

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 111.0 in Oct 2014 for a gain of 18.1 percent relative to Jan 2012 and 5.8 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

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 97.5 in Oct 2014 or minus 5.4 percent relative to Apr 2012 and fell 0.4 percent to 97.5 in Oct 2014 relative to Jun 2009.

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

Source: Bank of Japan

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 128.2 in Oct 2014 or gain of 13.4 percent relative to Apr 2012 and 37.1 percent relative to Jun 2009.

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

Source: Bank of Japan

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 109.9 in Oct 2014 or minus 8.0 percent relative to Apr 2012 and gain of 27.5 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 decreased 0.4 percent from Jun 2009 to Oct 2014 while the import corporate goods price index increased 27.5 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

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 Oct 2014. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Oct 2014, the export index on the contract currency basis decreased 1.7 percent and decreased 3.9 percent on the yen basis. For the entire period from Jan 2008 to Oct 2014, the import price index increased 9.1 percent on the contract currency basis and increased 7.7 percent on the yen basis. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

Table IV-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	98.1	111.2	111.7	129.6
2014-10	97.5	111.0	109.9	128.2

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

Source: Bank of Japan

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

Source: Bank of Japan

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 3.7 percent in Oct 2014 and increased 2.0 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, decreased 0.1 percent in Oct 2014 and increased 3.0 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income (for analysis of terms of trade and growth see Pelaez (1979, 1976a). There are now inflation effects of the intentional policy of devaluing the yen.

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

Oct 2014	Weight	Month ∆%	12 Month ∆%
Total	1000.0	-0.8	2.9
Food, Beverages, Tobacco, Feedstuffs	137.5	-0.3	3.1
Petroleum & Coal	57.4	-3.7	2.0
Production Machinery	30.8	-0.1	3.9
Electronic Components	31.0	-0.1	-1.1
Electric Power, Gas & Water	52.7	-4.0	6.2
Iron & Steel	56.6	-0.4	3.2
Chemicals	92.1	-0.9	1.8
Transport Equipment	136.4	0.0	2.9

Source: Bank of Japan

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 0.8 percent in Oct 2014, the energy shock is evident in the deduction of 0.28 percentage points by electric power, gas and water and 0.27 percentage points in petroleum and coal products in reversal of carry trades of exposures in commodity futures. The exports CGPI decreased 0.6 percent on the basis of the contract currency with deduction of 0.32 percentage points by metals and related products and 0.13 percentage points by chemicals and related products. The imports CGPI decreased 1.6 percent on the contract currency basis. Petroleum, coal and natural gas products deducted 1.07 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 0.8 percent.

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

Groups Oct 2014	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change: -0.8%
Electric Power, Gas & Water	-0.28
Petroleum & Coal Products	-0.27
Chemicals & Related Products	-0.09
Agriculture, Forestry & Fishery Products	-0.07
Food, Beverages, Tobacco & Feedstuffs	-0.03
Scrap & Waster	-0.03
Iron & Steel	-0.02
B. Export Price Index	Monthly Change: -0.6% contract currency
Metals & Related Products	-0.32
Chemicals & Related Products	-0.13
Other Primary Products & Manufactured Goods	-0.13
General Purpose, Production & Business Oriented Machinery	-0.04
Transportation Equipment	0.05
C. Import Price Index	Monthly Change: -1.6% contract currency basis
Petroleum, Coal & Natural Gas	-1.07
Metals & Related Products	-0.44
Foodstuffs & Feedstuffs	-0.04
Chemicals & Related Products	-0.03
D. Domestic Corporate Goods Price Index Excluding Consumption Tax	Monthly Change: -0.8%
Electric Power, Gas & Water	-0.28
Petroleum & Coal Products	-0.27
Chemicals & Related Products	-0.09
Agriculture, Forestry & Fishery Products	-0.07
Food, Beverages, Tobacco & Feedstuffs	-0.03
Scrap & Waste	-0.03
Iron & Steel	-0.02

Source: Bank of Japan

China is experiencing similar inflation behavior as the advanced economies in several prior months in the form of declining commodity prices but differs in decreasing inflation of producer prices relative to a year earlier. As shown in Table IV-9, inflation of the price indexes for industry in Oct 2014 is minus 0.4 percent; 12-month inflation is minus 2.2 percent in Oct; and cumulative inflation in Jan-Oct 2014 relative to Jan-Oct 2013 is minus 1.7 percent. Inflation of segments in Oct 2013 in China is provided in Table IV-9 in column “Month Oct 2014 ∆%.” There were decreases of prices of mining & quarrying of 1.7 percent in Oct and decrease of 8.9 percent in 12 months. Prices of consumer goods changed 0.0 percent in Oct and changed 0.0 percent in 12 months. Prices of inputs in the purchaser price index decreased 0.6 percent in Oct and declined 2.5 percent in 12 months. Fuel and power decreased 0.8 percent in Oct and declined 3.8 percent in 12 months. An important category of inputs for exports is textile raw materials, decreasing 0.3 percent in Oct and decreasing 1.7 percent in 12 months.

Table IV-9, China, Price Indexes for Industry ∆%

	Month Oct 2014 ∆%	12-Month Oct 2014 ∆%	Jan-Oct 2014/Jan-Oct 2013 ∆%
I Producer Price Indexes	-0.4	-2.2	-1.7
Means of Production	-0.6	-3.0	-2.2
Mining & Quarrying	-1.7	-8.9	-5.4
Raw Materials	-1.0	-3.7	-2.5
Processing	-0.3	-2.0	-1.7
Consumer Goods	0.0	0.0	0.0
Food	0.0	0.2	0.2
Clothing	0.2	0.5	0.7
Daily Use Articles	-0.1	0.3	0.1
Durable Consumer Goods	0.1	-0.7	-0.9
II Purchaser Price Indexes	-0.6	-2.5	-1.9
Fuel and Power	-0.8	-3.8	-2.3
Ferrous Metals	-1.1	-6.9	-4.8
Nonferrous Metals	-1.0	-2.5	-4.1
Chemical Raw Materials	-0.6	-1.4	-1.4
Wood & Pulp	0.0	-0.6	-0.5
Building Materials	0.0	-1.1	0.2
Other Industrial Raw Materials	-0.2	-1.3	-1.1
Agricultural	-0.9	-1.1	-0.3
Textile Raw Materials	-0.3	-1.7	-0.9

Source: National Bureau of Statistics of China

China’s producer price inflation follows waves similar to those around the world but with declining trend since May 2012, as shown in Table IV-10. In the first wave, annual equivalent inflation was 6.4 percent in Jan-Jun 2011, driven by carry trades from zero interest rates to commodity futures. In the second wave, risk aversion unwound carry trades, resulting in annual equivalent inflation of minus 3.1 percent in Jul-Nov 2011. In the third wave, renewed risk aversion resulted in annual equivalent inflation of minus 2.4 percent in Dec 2011-Jan 2012. In the fourth wave, new carry trades resulted in annual equivalent inflation of 2.4 percent in Feb-Apr 2012. In the fifth wave, annual equivalent inflation is minus 5.8 percent in May-Sep 2012. There are declining producer prices in China in Aug-Sep 2012 in contrast with increases worldwide. In a sixth wave, producer prices increased 0.2 percent in Oct 2012, which is equivalent to 2.4 percent in a year. In an eighth wave, annual equivalent inflation was minus 1.2 percent in Nov-Dec 2012. In the ninth wave, annual equivalent inflation in Jan-Feb 2013 is 2.4 percent. In the tenth wave, annual equivalent inflation was minus 4.9 percent in Mar-Jul 2013. In the eleventh wave, annual equivalent inflation was 1.8 percent in Aug-Sep 2013. In the twelfth wave, annual equivalent inflation was minus 2.2 percent in Oct 2013-Oct 2014.

Table IV-10, China, Month and 12-Month Rate of Change of Producer Price Index, ∆%

	12-Month ∆%	Month ∆%
Oct 2014	-2.2	-0.4
Sep	-1.8	-0.4
Aug	-1.2	-0.2
Jul	-0.9	-0.1
Jun	-1.1	-0.2
May	-1.4	-0.1
Apr	-2.0	-0.2
Mar	-2.3	-0.3
Feb	-2.0	-0.2
Jan	-1.6	-0.1
Dec 2013	-1.4	0.0
Nov	-1.4	0.0
Oct	-1.5	0.0
AE ∆% Oct-Oct		-2.2
Sep	-1.3	0.2
Aug	-1.6	0.1
AE ∆% Aug-Sep		1.8
Jul	-2.3	-0.3
Jun	-2.7	-0.6
May	-2.9	-0.6
Apr	-2.6	-0.6
Mar	-1.9	0.0
AE ∆% Mar-Jul		-4.9
Feb	-1.6	0.2
Jan	-1.6	0.2
AE ∆% Jan-Feb		2.4
Dec 2012	-1.9	-0.1
Nov	-2.2	-0.1
AE ∆% Nov-Dec		-1.2
Oct	-2.8	0.2
AE ∆% Oct		2.4
Sep	-3.6	-0.1
Aug	-3.5	-0.5
Jul	-2.9	-0.8
Jun	-2.1	-0.7
May	-1.4	-0.4
AE ∆% May-Sep		-5.8
Apr	-0.7	0.2
Mar	-0.3	0.3
Feb	0.0	0.1
AE ∆% Feb-Apr		2.4
Jan	0.7	-0.1
Dec 2011	1.7	-0.3
AE ∆% Dec-Jan		-2.4
Nov	2.7	-0.7
Oct	5.0	-0.7
Sep	6.5	0.0
Aug	7.3	0.1
Jul	7.5	0.0
AE ∆% Jul-Nov		-3.1
Jun	7.1	0.0
May	6.8	0.3
Apr	6.8	0.5
Mar	7.3	0.6
Feb	7.2	0.8
Jan	6.6	0.9
AE ∆% Jan-Jun		6.4
Dec 2010	5.9	0.7

AE: Annual Equivalent

Source: National Bureau of Statistics of China

Chart IV-9 of the National Bureau of Statistics of China provides monthly and 12-month rates of inflation of the price indexes for the industrial sector. Negative monthly rates in Oct, Nov, Dec 2011, Jan, Mar, Apr, May, Jun, Jul, Aug, Sep, Nov and Dec 2012 pulled down the 12-month rates to 5.0 percent in Oct 2011, 2.7 percent in Nov, 1.7 percent in Dec, 0.7 percent in Jan 2012, 0.0 percent in Feb, minus 0.3 percent in Mar, minus 0.7 percent in Apr, minus 1.4 percent in May, 2.1 in Jun, minus 2.9 percent in Jul, minus 3.5 percent in Aug, minus 3.6 percent in Sep. The increase of 0.2 percent in Oct 2012 pulled up the 12-month rate to minus 2.8 percent and the rate eased to minus 2.2 percent in Nov 2012 and minus 1.9 percent in Dec 2012. Increases of 0.2 percent in Jan and Feb 2013 pulled the 12-month rate to minus 1.6 percent while no change in Mar 2013 brought down the 12-month rate to minus 1.9 percent. Declines of prices of 0.6 percent in Apr, May and Jun 2013 pushed the 12-month rate to minus 2.7 percent. Producer prices fell 2.3 percent in the 12 months ending in Jul 2013 and minus 1.6 percent in Aug 2013 with increase of 0.1 percent in the month of Aug 2013. Producer price inflation was minus 1.3 percent in the 12 months ending in Sep 2013 and minus 1.5 percent in the 12 months ending in Oct 2013. Producer price inflation was minus 1.4 percent in the 12 months ending in Nov 2013 and minus 1.4 percent in the 12 months ending in Dec 2013. Producer price inflation was minus 1.6 percent in the 12 months ending in Jan 2014 and minus 2.0 percent in the 12 months ending in Feb 2014. In Mar 2014, producer price inflation was minus 0.3 percent and minus 2.3 percent in 12 months followed by minus 0.2 percent in Apr 2014 and minus 2.0 percent in 12 months. Producer prices fell 0.1 percent in May 2014 and decreased 1.4 percent in 12 months. The producer price index fell 0.2 percent in Jun 2014 and decreased 1.1 percent in 12 months. The producer price index fell 0.1 percent in Jul 2014 and decreased 0.9 percent in 12 months. The producer price index fell 0.2 percent in Aug 2014 and declined 1.2 percent in 12 months. The producer price index fell 0.4 percent in Sep 2014 and declined 1.8 percent in 12 months. The producer price index fell 0.4 percent in Oct 2014 and declined 2.2 percent in 12 months.

Chart IV-9, China, Producer Prices for the Industrial Sector Month and 12 Months ∆%

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

Chart IV-9, China, Producer Prices for the Industrial Sector Month and 12 Months ∆%

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

Chart IV-10 of the National Bureau of Statistics of China provides monthly and 12-month inflation of the purchaser product indices for the industrial sector. Decreasing monthly inflation with four successive contractions from Oct 2011 to Jan 2012 and May-Aug 2012 pulled down the 12-month rate to minus 4.1 percent in Aug and Sep. Consecutive increases of 0.1 percent in Sep and Oct 2012 raised the 12-month rate to minus 3.3 percent in Oct 2012. The rate eased to minus 2.8 in Nov 2012 with decrease of 0.2 percent in Nov 2012 and minus 2.4 percent in Dec 2012 with monthly decrease of 0.1 percent. Increase of 0.3 percent in Jan 2013 and 0.2 in Feb 2013 pulled the 12-month rate to minus 1.9 percent. Decrease of prices of 0.1 percent in Mar 2013 brought down the 12-month rate to minus 2.0 percent. Declining prices of 0.6 percent in Apr and May 2013 and 0.5 percent in Jun 2013 pushed down the 12-month rate to minus 2.6 percent. The index fell 2.2 percent in the 12 months ending in Jul 2013 and 1.6 percent in the 12 months ending in Aug 2013. The index fell 1.6 percent in the 12 months ending in Sep 2013 and 1.6 percent in the 12 months ending in Oct 2013. Purchaser price inflation was minus 1.5 percent in the 12 months ending in Nov 2013 and minus 1.4 percent in the 12 months ending in Dec 2013. Purchaser price inflation was minus 1.7 percent in the 12 months ending in Jan 2014 and minus 2.1 percent in the 12 months ending in Feb 2014. In Mar 2014, inflation of the purchaser price index was minus 0.5 percent and minus 2.5 percent in 12 months followed by minus 0.4 percent in Apr 2014 and minus 2.3 percent in 12 months. The purchaser price index fell 0.1 percent in May 2014 and decreased 1.8 percent in 12 months. In Jun 2014, the purchaser price index fell 0.1 percent and decreased 1.5 percent in 12 months. The purchaser price index changed 0.0 percent in Jul 2014 and fell 1.1 percent in 12 months. The purchaser price index fell 0.1 percent in Aug 2014 and fell 1.4 percent in 12 months. The purchaser price index fell 0.4 percent in Sep 2014 and declined 1.9 percent in 12 months. The purchaser price index fell 0.6 percent in Oct 2014 and declined 2.5 percent in 12 months.

Chart IV-10, China, Purchaser Product Indices for Industrial Sector, Month and 12 Months ∆%

Source: National Bureau of Statistics of China

China is highly conscious of food price inflation because of its high weight in the basket of consumption of the population. Consumer price inflation in China in Oct 2014 was 0.0 percent and 1.6 percent in 12 months, as shown in Table IV-11. Food prices decreased 0.2 percent in Oct 2014 and increased 2.5 percent in 12 months. Food prices increased 0.8 percent in Sep 2014 and increased 1.6 percent in 12 months. Food prices decreased 0.1 percent in Jul 2013 and increased 3.6 percent in 12 months. Food prices increased 0.2 percent in May 2014 and 4.1 percent in 12 months. Food prices decreased 1.3 percent in Apr 2014, increasing 2.3 percent in 12 months ending in Apr 2014 and 3.2 percent in Jan-Apr 2014 relative to a year earlier. Food prices increased 2.4 percent in Jan 2014, 3.7 percent in 12 months and 3.7 percent in the cumulative Jan 2014 relative to a year earlier. Food prices fell 0.2 percent in Nov 2013, increasing 5.9 percent in 12 months and 4.7 percent in the cumulative to Nov 2013 relative to a year earlier. Food prices decreased 0.4 percent in Oct 2013, increasing 6.5 percent in 12 months in adjustment to sharp increase in Sep 2013. Adjustment from the prior shock had occurred in May with decline of food prices by 1.6 percent and increase of 3.8 percent in 12 months and 3.8 percent in Jan-May 2013 relative to a year earlier. Food prices increased 0.7 percent in Aug 2014 and increased 3.0 percent in 12 months. Another area of concern is housing inflation, which was 0.2 percent in Jan and increased 2.8 percent in 12 months. House inflation was 0.3 percent in Feb 2014 and 2.8 percent in 12 months. House inflation was 0.2 percent in Mar 2014 and 2.5 percent in 12 months. House inflation was 0.1 percent in Apr 2014 and 2.4 percent in 12 months. House inflation was 0.0 percent in May 2014 and 2.3 percent in 12 months. House prices increased 0.1 percent in Jun and gained 2.6 percent in 12 months. House prices changed 0.0 percent in Jul 2014 and increased 2.0 percent in 12 months. House prices increased 0.1 percent in Aug 2014 and 1.9 percent in 12 months. House renting increased 0.2 percent in Aug 2014 and 2.6 percent in 12 months. House prices increased 0.1 percent in Sep 2014 and 1.6 percent in 12 months. House prices increased 0.2 percent in Oct 2014 and 1.6 percent in 12 months. House renting increased 0.3 percent in Sep 2014 and increased 2.6 percent in 12 months. House renting increased 0.3 percent in Oct 2014 and 2.7 percent in 12 months.

Table IV-11, China, Consumer Price Index

2014	Oct 2014 Month ∆%	Oct 2014 12-Month ∆%	Jan-Oct 2014 ∆%/ Jan-Oct 2013
Consumer Prices	0.0	1.6	2.1
Urban	0.1	1.7	2.2
Rural	0.0	1.4	1.9
Food	-0.2	2.5	3.2
Non-food	0.2	1.2	1.5
Consumer Goods	0.0	1.4	1.9
Services	0.1	2.0	2.6
Excluding Food and Energy	0.2	1.4	1.6
Commodity Categories:
Food	-0.2	2.5	3.2
Tobacco, Liquor	0.1	-0.5	-0.6
Clothing	1.0	2.4	2.4
Household	0.2	1.2	1.2
Healthcare & Personal Articles	0.1	1.3	1.2
Transportation & Communication	-0.3	-0.3	0.1
Recreation, Education, Culture & Services	0.0	1.1	2.1
Residence	0.2	1.6	2.2
House Renting	0.3	2.7	3.4

Source: National Bureau of Statistics of China

Month and 12-month rates of change of consumer prices are provided in Table IV-12. There are waves of consumer price inflation in China similar to those around the world (http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html). In the first wave, consumer prices increased at the annual equivalent rate of 8.3 percent in Jan-Mar 2011, driven by commodity price increases resulting from unconventional monetary policy of zero interest rates. In the second wave, risk aversion unwound carry trades with annual equivalent inflation falling to the rate of 2.0 percent in Apr-Jun 2011. In the third wave, inflation returned at 2.9 percent with renewed interest in commodity exposures in Jul-Nov 2011. In the fourth wave, inflation returned at a high 5.8 percent annual equivalent in Dec 2011 to Mar 2012. In the fifth wave, annual equivalent inflation was minus 3.9 percent in Apr to Jun 2012. In the sixth wave, annual equivalent inflation rose to 4.1 percent in Jul-Sep 2012. In the seventh wave, inflation was minus 1.2 percent annual equivalent in Oct 2012 and 0.0 percent in Oct-Nov 2012. In the eighth wave, annual equivalent inflation was 12.2 percent in Dec 2012-Feb 2013 primarily because of winter weather that caused increases in food prices. In the ninth wave, collapse of food prices resulted in annual equivalent inflation of minus 10.3 percent in Mar 2013. In the tenth wave, annual equivalent inflation returned at 2.4 percent in Apr 2013. In the eleventh wave, annual equivalent inflation was minus 3.5 percent in May-Jun 2013. In the twelfth wave, inflation rose at annual equivalent 4.6 percent in Jul-Oct 2013 with sharp increase of food prices in Sep 2013. In the thirteenth wave, annual equivalent inflation was minus 1.2 percent in Nov 2013. In the fourteenth wave, annual equivalent inflation was 7.4 percent in Dec 2013-Feb 2014. In the fifteenth wave, annual inflation was minus 4.7 percent in Mar-Apr 2014. In the sixteenth wave, annual equivalent inflation was 1.2 percent in May 2014. In the seventeenth wave, annual equivalent inflation was minus 1.2 percent in Jun 2014. In the eighteenth wave, annual equivalent inflation was 2.4 percent in Jul-Oct 2014. Inflation volatility originating in unconventional monetary policy clouds investment and consumption decisions by business and households. There is local problem in China with food prices.

Table IV-12, China, Month and 12-Month Rates of Change of Consumer Price Index ∆%

	Month ∆%	12-Month ∆%
Oct 2014	0.0	1.6
Sep	0.5	1.6
Aug	0.2	2.0
Jul	0.1	2.3
AE ∆% Jul-Oct	2.4
Jun	-0.1	2.3
AE ∆% Jun	-1.2
May	0.1	2.5
AE ∆% May	1.2
Apr	-0.3	1.8
Mar	-0.5	2.4
AE ∆% Mar-Apr	-4.7
Feb	0.5	2.0
Jan	1.0	2.5
Dec 2013	0.3	2.5
AE ∆% Dec-Feb	7.4
Nov	-0.1	3.0
AE ∆% Nov	-1.2
Oct	0.1	3.2
Sep	0.8	3.1
Aug	0.5	2.6
Jul	0.1	2.7
AE ∆% Jul-Oct	4.6
Jun	0.0	2.7
May	-0.6	2.1
AE ∆% May-Jun	-3.5
Apr	0.2	2.4
AE ∆% Apr	2.4
Mar 2013	-0.9	2.1
AE ∆% Mar	-10.3
Feb	1.1	3.2
Jan	1.0	2.0
Dec 2012	0.8	2.5
AE ∆% Dec-Feb	12.2
Nov	0.1	2.0
Oct	-0.1	1.7
AE ∆% Oct-Nov	0.0
Sep	0.3	1.9
Aug	0.6	2.0
Jul	0.1	1.8
AE ∆% Jul-Sep	4.1
Jun	-0.6	2.2
May	-0.3	3.0
Apr	-0.1	3.4
AE ∆% Apr to Jun	-3.9
Mar	0.2	3.6
Feb	-0.1	3.2
Jan	1.5	4.5
Dec 2011	0.3	4.1
AE ∆% Dec to Mar	5.8
Nov	-0.2	4.2
Oct	0.1	5.5
Sep	0.5	6.1
Aug	0.3	6.2
Jul	0.5	6.5
AE ∆% Jul to Nov	2.9
Jun	0.3	6.4
May	0.1	5.5
Apr	0.1	5.3
AE ∆% Apr to Jun	2.0
Mar	-0.2	5.4
Feb	1.2	4.9
Jan	1.0	4.9
AE ∆% Jan to Mar	8.3
Dec 2010	0.5	4.6

AE: Annual Equivalent

Source: National Bureau of Statistics of China

Chart IV-11 of the National Bureau of Statistics of China provides monthly and 12-month rates of consumer price inflation. In contrast with producer prices, consumer prices had not moderated at the monthly marginal rates. Consumer prices fell 0.2 percent in Nov 2011 after increasing only 0.1 percent in Oct but increased 0.3 percent in Dec and a high 1.5 percent in Jan 2012, declining 0.1 percent in Feb, rising 0.2 percent in Mar and declining 0.1 percent in Apr, 0.3 percent in May and 0.6 percent in Jun 2012 but increasing 0.1 percent in Jul, 0.6 percent in Aug 2012 and 0.3 percent in Sep 2012. Consumer prices fell 0.1 percent in Oct 2012. The decline of 0.1 percent in Feb 2012 pulled down the 12-month rate to 3.2 percent, which bounced back to 3.6 percent in Mar with the monthly increase of 0.2 percent and fell to 2.2 percent in Jun with increasing pace of monthly decline from Apr to Jun 2012. Even with increase of 0.1 percent in Jul 2012, consumer price inflation in 12 months fell to 1.8 percent in Jul 2012 but bounced back to 2.0 percent with increase of 0.6 percent in Aug. In Sep, increase of 0.3 percent still maintained 12-month inflation at 1.9 percent. The decline of 0.1 percent in Oct 2012 pulled down the 12-month rate to 1.7 percent, which is the lowest in Chart IV-3. Increase of 0.1 percent in Nov 2012 pulled up the 12-month rate to 2.0 percent. Abnormal increase of 0.8 percent in Dec 2012 because of winter weather pulled up the 12-month rate to 2.5 percent. Even with increase of 1.0 percent in Jan 2013 12-month inflation fell to 2.0 percent. Inflation of 1.1 percent in Feb 2013 pulled the 12-month rate to 3.2 percent. Collapse of food prices with decline of consumer prices by 0.9 percent in Mar 2013 brought down the 12-month rate to 2.1 percent. Renewed inflation of 0.2 percent in Apr 2013 raised the 12-month rate to 2.4 percent. Decline of inflation by 0.6 percent in May reduced 12-month inflation to 2.1 percent. Inflation rose to 2.7 percent in the 12 months ending in Jun 2013 with unchanged monthly inflation. Consumer prices increased 0.1 percent in Jul 2013 and 2.7 percent in 12 months. In combination of increases of food prices and other prices, inflation returned with 0.5 percent in Aug 2013 and 2.6 percent in 12 months. Consumer prices increased 0.8 percent in Sept 2013 and 3.1 percent in 12 months with increase in food prices of 1.5 in the month of Sep 2013. Consumer prices increased 0.1 percent in Oct 2013 and 3.2 percent in 12 months. Consumer prices fell 0.1 percent in Nov 2013 and increased 3.0 percent in 12 months. Consumer prices increased 0.3 percent in Dec 2013 and increased 2.5 percent in 12 months. Consumer prices increased 1.0 percent in Jan 2014 and 2.5 percent in 12 months. In Feb 2014, consumer prices increased 0.5 percent and 2.0 percent in 12 months. Consumer prices fell 0.5 percent in Mar 2014 and increased 2.4 percent in 12 months followed by 0.3 percent in Apr 2014 and 1.8 percent in 12 months. Consumer prices increased 0.1 percent in May 2014 and 2.5 percent in 12 months. In Jun 2014, consumer prices fell 0.1 percent and increased 2.3 percent in 12 months. Consumer prices increased 0.1 percent in Jul 2014 and increased 2.3 percent in 12 months. In Aug 2014, consumer prices increased 0.2 percent and rose 2.0 percent in 12 months. CPI inflation was 0.5 percent in Sep 2014 and 1.6 percent in 12 months. Consumer prices changed 0.0 percent in Oct 2014 and increased 1.6 percent in 12 months.

Chart IV-11, China, Consumer Prices ∆% Month and 12 Months

Source: National Bureau of Statistics of China

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

The producer price index of the euro zone increased 0.2 percent in Sep 2014 and decreased 0.2 percent in Aug 2014, as shown in Table IV-13. The producer price index of the euro zone decreased in five consecutive months in 2014: 0.1 percent in May, 0.2 percent in Apr, 0.2 percent in Mar, 0.2 percent in Feb and 0.3 percent in Jan. Energy inflation has oscillated with the shocks of risk aversion, and alternating portfolio reallocations, that cause unwinding of carry trade positions from zero interest rates to commodity futures. Energy prices fell 0.8 percent in Dec 2012 but increased 0.3 percent in Feb 2013 and 0.9 percent in Jan 2013. Energy prices fell 0.8 percent in Dec 2012, 0.5 percent in Nov 2012 and fell 0.4 percent in Oct 2012 after -0.1 percent in Sep 2012, increased 2.4 percent in Aug, and 1.4 percent in Jul 2012 or at the annual equivalent rate of 16.2 percent in the quarter Jul-Sep 2012 and at 25.3 percent in Jul-Aug 2012. Energy prices increased 5.2 percent cumulatively in Jan-Mar 2012 or at the annual equivalent rate of 22.5 percent. Energy prices increased 0.7 percent in Jul 2013, 0.1 percent in Aug 2013 and 0.6 percent in Sep 2013. Energy prices fell 1.3 percent in Oct 2013 and increased 0.1 percent in Nov 2013. Energy prices increased 0.5 percent in Dec 2013 and fell 1.2 percent in Jan 2014. Energy prices fell 0.7 percent in Feb 2014 and decreased 0.9 percent in Mar 2014. Energy prices fell 0.9 percent in Apr 2014 and fell 0.3 percent in May 2014. Energy prices increased 0.6 percent in Jun 2014 and fell 0.9 percent in Jul 2014. Energy prices fell 0.5 percent in Aug 2014 and increased 1.0 percent in Sep 2014. During periods of relaxed risk aversion, carry trades from zero interest rates to commodity exposures drive high inflation waves. Portfolio reallocations created exposures in equities while reversing exposures in commodities. Prices of capital goods have barely moved. Prices of durable consumer goods have been subdued in 2013-2014. Purchasing managers’ indexes worldwide reflect increasing prices of inputs for business while sales prices are stagnant or declining, squeezing economic activity (http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html). Unconventional monetary policy causes uncertainty in business decisions with shocks of declining net revenue margins during worldwide inflation waves (http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html).

Table IV-13, Euro Area, Industrial Producer Prices Month ∆%

	Sep 2014	Aug 2014	Jul 2014	Jun 2013	May 2014	Apr 2014
Industry ex Construction	0.2	-0.2	-0.2	0.2	-0.1	-0.2
Industry ex Construction & Energy	-0.1	0.0	0.0	0.1	0.0	0.1
Intermediate Goods	-0.1	-0.1	0.1	0.0	0.1	0.0
Energy	1.0	-0.5	-0.9	0.6	-0.3	-0.9
Capital Goods	0.1	0.0	0.1	0.1	0.1	0.0
Durable Consumer Goods	0.1	0.0	0.0	0.0	0.1	0.1
Nondurable Consumer Goods	-0.3	0.0	0.0	0.0	0.0	0.1

Source: EUROSTAT

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

Twelve-month percentage changes of industrial prices in the euro zone have moderated significantly, as shown in Table IV-14. The 12-month percentage change of industrial prices excluding construction fell from 4.4 percent in Dec 2011 to minus 0.3 percent in Apr 2013 and minus 0.3 percent in May 2013. The 12-month percentage change of industrial producer prices increased 0.2 percent in Jun 2013 but was flat in Jul 2013 and fell 0.9 percent in Aug 2013. Industrial producer prices in the euro area fell 0.9 percent in the 12 months ending in Sep 2013 and fell 1.3 percent in the 12 months ending in Oct 2013. Industrial producer prices fell 1.2 percent in the 12 months ending in Nov 2013. Industrial producer prices fell 0.7 percent in the 12 months ending in Dec 2013 and fell 1.3 percent in the 12 months ending in Jan 2014. Industrial producer prices in the euro zone fell 1.7 percent in the 12 months ending in Feb 2014 and decreased 1.7 percent in the 12 months ending in Mar 2014. Producer prices in the euro area fell 1.3 percent in the 12 months ending in Apr 2014 and fell 1.1 percent in the 12 months ending in May 2014. Producer prices in the euro area fell 0.9 percent in the 12 months ending in Jun 2014 and declined 1.3 percent in the 12 months ending in Jul 2014. Producer prices in the euro area fell 1.4 percent in the 12 months ending in Aug 2014 and fell 1.4 percent in the 12 months ending in Sep 2014. Energy prices increased 9.7 percent in the 12 months ending in Dec 2011 and Jan 2011 but the rate fell to 4.5 percent in the 12 months ending in Jul 2012, increasing to 7.5 percent in Aug 2012 and 6.4 percent in Sep 2012. Energy prices fell 5.2 percent in the 12 months ending in Oct 2012, 3.9 percent in Nov 2012, 3.6 percent in Dec 2012, 2.2 percent in Jan 2013 and 1.6 percent in Feb 2013. Energy prices fell 0.6 in the 12 months ending in Mar 2013, minus 2.3 percent in Apr 2013, minus 2.2 percent in May 2013 and minus 1.0 percent in Jun 2013. The 12-month percentage change of energy prices was minus 1.5 percent in Jul 2013 and minus 3.7 percent in Aug 2013. Energy prices fell 2.9 percent in the 12 months ending in Sep 2013, 3.6 percent in the 12 months ending in Oct 2013 and 3.1 percent in the 12 months ending in Nov 2013. Energy prices fell 1.8 percent in the 12 months ending in Dec 2013 and fell 3.5 percent in the 12 months ending in Jan 2014. Energy prices fell 4.4 percent in the 12 months ending in Feb 2014 and decreased 4.4 percent in the 12 months ending in Mar 2014. Energy prices fell 3.6 percent in the 12 months ending in Apr 2014 and fell 3.1 percent in the 12 months ending in May 2014. Energy prices fell 2.5 percent in the 12 months ending in Jun 2013 and decreased 4.1 percent in the 12 months ending in Jul 2014. Energy prices decreased 4.7 percent in the 12 months ending in Aug 2014 and fell 4.3 percent in the 12 months ending in Sep 2014. There is major vulnerability in producer price inflation that can return together with long positions in commodity futures with carry trades from zero interest during relaxation of risk aversion. Business net revenue or prices of goods sold less costs of inputs suffer wide oscillation preventing sound calculation of risk/returns and capital budgeting (http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html).

Table IV-14, Euro Area, Industrial Producer Prices 12-Month ∆%

	Sep 2014	Aug 2014	Jul 2014	Jun 2013	May 2014	Apr 2014
Industry ex Construction	-1.4	-1.4	-1.3	-0.9	-1.1	-1.3
Industry ex Construction & Energy	-0.2	-0.2	-0.1	-0.1	-0.2	-0.3
Intermediate Goods	-0.5	-0.6	-0.6	-0.9	-1.2	-1.5
Energy	-4.3	-4.7	-4.1	-2.5	-3.1	-3.6
Capital Goods	0.5	0.4	0.4	0.3	0.3	0.2
Durable Consumer Goods	1.0	1.0	1.0	1.0	0.9	0.8
Nondurable Consumer Goods	-0.5	-0.2	0.1	0.3	0.5	0.7

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

Industrial producer prices in the euro area are following similar inflation waves as in the rest of the world (http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html), as shown in Table IV-15. In the first wave in Jan-Apr 2011, annual equivalent producer price inflation was 11.3 percent driven by carry trades from zero interest rates into commodity futures. In the second wave in May-Jun 2011, annual equivalent inflation of producer prices declined at 0.6 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased at 2.4 percent. In the fourth wave in Oct-Dec 2011, risk aversion originating in the European sovereign debt crisis interrupted commodity carry trades, resulting in annual equivalent inflation of only 0.4 percent. In the fifth wave in Jan-Mar 2012, annual equivalent inflation jumped to 7.9 percent with a high annual equivalent rate of 8.7 percent in Jan-Feb 2012. In the sixth wave, risk aversion from the European sovereign debt event caused reversal of commodity carry trades with equivalent annual inflation of minus 2.4 percent in Apr-Jun 2012. In the seventh wave, annual equivalent inflation jumped to 6.8 percent in Jul-Aug 2012 while energy prices driven by carry trades increased at the annual equivalent rate of 25.3 percent. In the eighth wave, annual equivalent inflation retreated to 0.6 percent in Sep-Oct 2012. In the ninth wave, annual equivalent inflation was minus 2.4 percent in Nov-Dec 2012. In the tenth wave, annual equivalent inflation was 2.4 percent in Jan-Feb 2013. In the eleventh wave, annual equivalent inflation was minus 3.5 percent in Mar-Jun 2013. In the twelfth wave, annual equivalent inflation was 1.6 percent in Jul-Sep 2013. In the thirteenth wave, annual equivalent inflation was minus 3.0 percent in Oct-Nov 2013. In the fourteenth wave, annual equivalent inflation returned at 2.4 percent in Dec 2013. In the fifteenth wave, annual equivalent inflation was minus 2.6 percent in Jan-May 2014.In the sixteenth wave, annual equivalent inflation was 2.4 percent in Jun 2014. In the seventeenth wave, annual equivalent inflation was minus 2.4 percent in Jul-Aug 2014. In the eighteenth wave, annual equivalent inflation was 2.4 percent in Sep 2014. The bottom part of Table IV-15 provides 12-month percentage changes from 1999 to 2013. The final row of Table IV-15 provides the average annual rate of producer-price inflation in the euro area at 2.3 percent in Dec from 1999 to 2013.

Table IV-15, Euro Area, Industrial Producer Prices Excluding Construction, Month and 12-Month ∆%

	Month ∆%	12-Month ∆%
Sep 2014	0.2	-1.4
AE ∆% Sep	2.4
Aug	-0.2	-1.4
Jul	-0.2	-1.3
AE ∆% Jul-Aug	-2.4
Jun	0.2	-0.9
AE ∆% Jun	2.4
May	-0.1	-1.1
Apr	-0.2	-1.3
Mar	-0.2	-1.7
Feb	-0.2	-1.7
Jan	-0.3	-1.3
AE ∆% Jan-May	-2.4
Dec 2013	0.2	-0.7
AE ∆% Dec	2.4
Nov	0.0	-1.2
Oct	-0.5	-1.3
AE ∆% Oct-Nov	-3.0
Sep	0.2	-0.9
Aug	0.0	-0.9
Jul	0.2	0.0
AE ∆% Jul-Sep	1.6
Jun	0.0	0.2
May	-0.3	-0.3
Apr	-0.6	-0.3
Mar	-0.3	0.5
AE ∆% Mar-Jun	-3.5
Feb	0.1	1.3
Jan	0.3	1.7
AE ∆% Jan-Feb	2.4
Dec 2012	-0.2	2.2
Nov	-0.2	2.3
AE ∆% Nov-Dec	-2.4
Oct	0.0	2.6
Sep	0.1	2.8
AE ∆% Sep-Oct	0.6
Aug	0.8	2.9
Jul	0.3	1.9
AE ∆% Jul-Aug	6.8
Jun	-0.5	2.1
May	-0.3	2.7
Apr	0.2	2.9
AE ∆% Apr-Jun	-2.4
Mar	0.5	3.6
Feb	0.6	3.9
Jan	0.8	4.0
AE ∆% Jan-Mar	7.9
Dec 2011	-0.2	4.4
Nov	0.2	5.4
Oct	0.1	5.5
AE ∆% Oct-Dec	0.4
Sep	0.2	5.6
Aug	-0.1	5.7
Jul	0.5	5.8
AE ∆% Jul-Sep	2.4
Jun	0.0	5.5
May	-0.1	5.9
AE ∆% May-Jun	-0.6
Apr	0.9	6.4
Mar	0.8	6.4
Feb	0.7	6.1
Jan	1.2	5.4
AE ∆% Jan-Apr	11.3
Dec 2013		-0.7
Dec 2012		2.2
Dec 2011		4.4
Dec 2010		5.1
Dec 2009		-3.0
Dec 2008		1.5
Dec 2007		4.4
Dec 2006		3.8
Dec 2005		4.5
Dec 2004		3.7
Dec 2003		1.0
Dec 2002		1.5
Dec 2001		-0.5
Dec 2000		4.6
Dec 1999		2.5
Average ∆% 1999-2013		2.3

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 harmonized index of consumer prices of the euro area in Table IV-16 has similar inflation waves as in most countries (http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html). In the first wave, consumer prices in the euro area increased at the annual equivalent rate of 5.2 percent in Jan-Apr 2011. In the second wave, risk aversion caused unwinding of commodity carry trades with inflation decreasing at the annual equivalent rate of minus 2.4 percent in May-Jul 2011. In the third wave, improved risk appetite resulted in annual equivalent inflation in Aug-Nov 2011 at 4.3 percent. In the fourth wave, return of risk aversion caused decline of consumer prices at the annual equivalent rate of minus 3.0 percent in Dec 2011 to Jan 2012. In the fifth wave, improved attitudes toward risk aversion resulted in higher consumer price inflation at the high annual equivalent rate of 9.6 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation fell to minus 2.8 percent in May-Jul 2012. In the seventh wave, increasing risk appetite caused new carry trade exposures that resulted in annual equivalent inflation of 6.8 percent in Aug-Sep 2012 and 5.3 percent in Aug-Oct 2012. In the eighth wave, annual-equivalent inflation was minus 2.4 percent in Nov 2012. In the ninth wave, annual equivalent inflation was 4.9 percent in Dec 2012. In the tenth wave, annual equivalent inflation was minus 11.4 percent in Jan 2013. In the eleventh wave, annual equivalent inflation was 10.0 percent in Feb-Mar 2013. In the twelfth wave, annual equivalent inflation was minus 1.2 percent in Apr 2013. In the thirteenth wave, annual equivalent inflation rose to 1.2 percent in May-Jun 2013. In the fourteenth wave, annual equivalent inflation was minus 5.8 percent in Jul 2013. In the fifteenth wave, annual equivalent inflation was 3.7 percent in Aug-Sep 2013. In the sixteenth wave, annual equivalent inflation was minus 2.4 percent in Oct-Nov 2013. In the eighteenth wave, annual inflation returned at 4.9 percent in Dec 2013. In the nineteenth wave, inflation fell at annual equivalent 12.4 percent in Jan 2014. In the twentieth wave, annual equivalent inflation was at 5.7 percent in Feb-Apr 2014. In the twenty-first wave, annual equivalent inflation was minus 1.2 percent in May 2014. Inflation volatility around the world is confusing the information required in investment and consumption decisions. In the twenty-second wave, annual equivalent inflation was 1.2 percent in Jun 2014. In the twenty-third wave, annual equivalent inflation was at minus 8.1 percent in Jul 2014. In the twenty-fourth wave, annual equivalent inflation was 3.0 percent in Aug-Sep 2014. In the twenty-fifth wave, annual equivalent inflation was minus 1.2 percent in Oct 2014. The bottom part of Table IV-16 provides annual inflation in the euro area from 1999 to 2013. HICP inflation was 3.3 percent in 2008 mostly because of carry trades from interest rates falling to zero into commodity futures. Exposures in commodity futures were reversed in the flight to US government obligations with resulting inflation of 0.3 percent in 2009. Reallocations of portfolios of financial investors according to risk aversion caused high volatility of inflation in 2011, 2012, 2013 and 2014.

Table IV-16, Euro Area Harmonized Index of Consumer Prices Month and 12 Months ∆%

	Month ∆%	12 Months ∆%
Oct 2014	-0.1	0.4
AE ∆% Oct	-1.2
Sep	0.4	0.3
Aug	0.1	0.4
AE ∆% Aug-Sep	3.0
Jul	-0.7	0.4
AE ∆% Jul	-8.1
Jun	0.1	0.5
AE ∆% Jun	1.2
May	-0.1	0.5
AE ∆% May	-1.2
Apr	0.2	0.7
Mar	0.9	0.5
Feb	0.3	0.7
AE ∆% Feb-Apr	5.7
Jan	-1.1	0.8
AE ∆% Jan	-12.4
Dec 2013	0.4	0.8
AE ∆% Dec	4.9
Nov	-0.1	0.8
Oct	-0.1	0.7
AE ∆% Oct-Nov	-2.4
Sep	0.5	1.1
Aug	0.1	1.3
AE ∆% Aug- Sep	3.7
Jul 2013	-0.5	1.6
AE ∆% Jul	-5.8
Jun	0.1	1.6
May	0.1	1.4
AE ∆% May-Jun	1.2
Apr	-0.1	1.2
AE ∆% Apr	-1.2
Mar	1.2	1.7
Feb	0.4	1.8
AE ∆% Feb-Mar	10.0
Jan	-1.0	2.0
AE ∆% Jan	-11.4
Dec 2012	0.4	2.2
AE ∆% Dec	4.9
Nov	-0.2	2.2
AE ∆% Nov	-2.4
Oct	0.2	2.5
Sep	0.7	2.6
Aug	0.4	2.6
AE ∆% Aug-Oct	5.3
Jul 2012	-0.5	2.4
Jun	-0.1	2.4
May	-0.1	2.4
AE ∆% May-Jul	-2.8
Apr	0.5	2.6
Mar	1.3	2.7
Feb	0.5	2.7
AE ∆% Feb-Apr	9.6
Jan	-0.8	2.6
Dec 2011	0.3	2.8
AE ∆% Dec-Jan	-3.0
Nov	0.1	3.0
Oct	0.4	3.0
Sep	0.7	3.0
Aug	0.2	2.6
AE ∆% Aug-Nov	4.3
Jul	-0.6	2.6
Jun	0.0	2.7
May	0.0	2.7
AE ∆% May-Jul	-2.4
Apr	0.6	2.8
Mar	1.4	2.7
Feb	0.4	2.4
Jan	-0.7	2.3
AE ∆% Jan-Apr	5.2
Dec 2010	0.6	2.2
Annual ∆%
2013		1.3
2012		2.5
2011		2.7
2010		1.6
2009		0.3
2008		3.3
2007		2.2
2006		2.2
2005		2.2
2004		2.2
2003		2.1
2002		2.3
2001		2.4
2000		2.2
1999		1.2

AE: annual equivalent Source: EUROSTAT

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

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

Table IV-17 provides weights and inflation of selected components of the HICP of the euro area. Inflation of all items excluding energy increased 0.7 percent in Oct 2014 relative to Oct 2013. Prices of non-energy industrial goods decreased 0.1 percent in Oct 2014 relative to a year earlier. Inflation of services was 1.2 percent in Oct 2014 relative to a year earlier.

Table IV-17, Euro Area, HICP Inflation and Selected Components, ∆%

	Weight % 2014	Oct 2014/ Oct 2013	Sep 2014/Sep 2013	∆% Aug 2014/Aug 2013
All Items	1000.0	0.4	0.3	0.4
All Items ex Energy	891.9	0.7	0.7	0.7
All Items ex Energy, Food, Alcohol & Tobacco	694.4	0.7	0.8	0.9
All Items ex Energy & Unprocessed Food	817.1	0.7	0.8	0.9
All Items ex Energy & Seasonal Food	853.5	0.7	0.8	0.9
All Items ex Tobacco	976.1	0.3	0.3	0.3
Energy	108.1	-2.0	-2.3	-2.0
Food, Alcohol & Tobacco	197.6	0.5	0.3	-0.3
Non-energy Industrial Goods	266.6	-0.1	0.2	0.3
Services	427.8	1.2	1.1	1.3

AE: annual equivalent

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 estimate of consumer price inflation in Germany in Table IV-18 is 0.8 percent in 12 months ending in Oct 2014, minus 0.3 percent NSA (not seasonally adjusted) in Oct 2014 relative to Sep 2014 and 0.0 percent CSA (calendar and seasonally adjusted) in Oct 2014 relative to Sep 2014. There are waves of consumer price inflation in Germany similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html). In the first wave, annual equivalent inflation was 3.0 percent in Feb-Apr 2011 NSA and 2.4 percent CSA during risk appetite in carry trades from zero interest rates to commodity futures. In the second wave, annual equivalent consumer price inflation collapsed to 0.6 percent NSA and 3.0 percent CSA in May-Jun 2011 because of risk aversion caused by the European sovereign debt event. In the third wave, annual equivalent consumer price inflation was 1.7 percent NSA and 1.9 percent CSA in Jul-Nov 2011 because of relaxed risk aversion. In the fourth wave, annual equivalent inflation was 0.6 percent NSA and 1.8 percent CSA in Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation rose to 4.5 percent NSA and 2.4 percent CSA in Feb-Apr 2012 during another energy-commodity carry trade shock. In the sixth wave, annual equivalent inflation in May-Jun 2012 is minus 1.2 percent NSA and 0.6 percent CSA. In the seventh wave, annual equivalent inflation NSA is 4.9 percent in Jul-Aug 2012 and 3.0 percent CSA. In the eighth wave in Sep-Dec 2012, annual equivalent inflation is 1.5 percent NSA and 1.5 percent CSA. In the ninth wave, annual equivalent inflation fell to minus 5.8 percent NSA in Jan 2013 and 1.2 percent CSA. In the eleventh wave, annual equivalent inflation rose to 6.8 percent NSA in Feb-Mar 2013 and 1.2 percent CSA. In the twelfth wave, annual equivalent inflation in Apr fell to minus 5.8 percent NSA and 0.0 percent CSA in reversal of carry trades into commodity futures. In the thirteenth wave, annual equivalent inflation returned at 4.1 percent in May-Jul 2013 NSA and 2.8 percent CSA. In the fourteenth wave, annual equivalent inflation was nil NSA and 0.6 percent CSA in Aug-Sep 2013. In the fifteenth wave, annual equivalent inflation was minus 2.4 percent NSA in Oct 2013 and 0.0 percent CSA. In the sixteenth wave, annual equivalent inflation was 3.7 percent NSA and 1.8 percent CSA in Nov-Dec 2013. In the seventeenth wave, annual equivalent inflation was minus 7.0 percent NSA in Jan 2014 and 0.0 percent CSA. In the eighteenth wave, annual equivalent inflation returned at 4.9 percent in Feb-Mar 2014 and 0.0 percent CSA. In the nineteenth wave, annual equivalent inflation was minus 1.8 percent NSA and 0.6 CSA in Apr-May 2014. In the twentieth wave, annual equivalent inflation was 3.7 percent in Jun-Jul NSA and 1.2 percent CSA. In the twenty-first wave, annual equivalent inflation was minus 1.2 percent NSA and 0.4 percent CSA in Aug-Oct 2014. Under unconventional monetary policy of zero interest rates and quantitative easing, inflation becomes highly volatile during alternative shocks of risk aversion and risk appetite, preventing sound investment and consumption decisions.

Table IV-18, Germany, Consumer Price Index ∆%

	12-Month ∆%	Month ∆% NSA	Month ∆% CSA
Oct 2014	0.8	-0.3	0.0
Sep	0.8	0.0	0.1
Aug	0.8	0.0	0.0
AE ∆% Aug-Oct		-1.2	0.4
Jul	0.8	0.3	0.0
Jun	1.0	0.3	0.2
AE ∆% Jun-Jul		3.7	1.2
May	0.9	-0.1	-0.2
Apr	1.3	-0.2	0.2
AE ∆% Apr-May		-1.8	0.0
Mar	1.0	0.3	0.0
Feb	1.2	0.5	0.0
AE ∆% Feb-Mar		4.9	0.0
Jan	1.3	-0.6	0.0
AE ∆% Jan		-7.0	0.0
Dec 2013	1.4	0.4	0.2
Nov	1.3	0.2	0.1
AE ∆% Nov-Dec		3.7	1.8
Oct	1.2	-0.2	0.0
AE ∆% Oct		-2.4	0.0
Sep	1.4	0.0	0.1
Aug	1.5	0.0	0.0
AE ∆% Aug-Sep		0.0	0.6
Jul	1.9	0.5	0.2
Jun	1.8	0.1	0.2
May	1.5	0.4	0.3
AE ∆% May-Jul		4.1	2.8
Apr	1.2	-0.5	0.0
AE ∆% Apr		-5.8	0.0
Mar	1.4	0.5	0.1
Feb	1.5	0.6	0.1
AE ∆% Feb-Mar		6.8	1.2
Jan	1.7	-0.5	0.1
AE ∆% Jan		-5.8	1.2
Dec 2012	2.0	0.3	0.1
Nov	1.9	0.1	0.1
Oct	2.0	0.0	0.2
Sep	2.0	0.1	0.1
AE ∆% Sep-Dec		1.5	1.5
Aug	2.2	0.4	0.3
Jul	1.9	0.4	0.2
AE ∆% Jul-Aug		4.9	3.0
Jun	1.7	-0.2	0.0
May	2.0	0.0	0.1
AE ∆% May-Jun		-1.2	0.6
Apr	2.0	-0.2	0.2
Mar	2.2	0.6	0.2
Feb	2.2	0.7	0.2
AE ∆% Feb-Apr		4.5	2.4
Jan	2.1	-0.1	0.3
Dec 2011	2.0	0.2	0.0
AE ∆% Dec-Jan		0.6	1.8
Nov	2.4	0.2	0.2
Oct	2.3	0.0	0.1
Sep	2.4	0.2	0.3
Aug	2.1	0.1	0.1
Jul	2.1	0.2	0.1
AE ∆% Jul-Nov		1.7	1.9
Jun	2.1	0.1	0.3
May	2.0	0.0	0.2
AE ∆% May-Jun		0.6	3.0
Apr	1.9	0.0	0.2
Mar	2.0	0.6	0.2
Feb	1.9	0.6	0.2
Jan	1.7	-0.2	0.2
AE ∆% Feb-Apr		3.0	2.4
Dec 2010	1.3	0.6	0.2
Nov	1.5	0.1	0.2
Oct	1.3	0.1	0.2
Sep	1.2	-0.1	0.1
Aug	1.0	0.1	0.1
Annual Average ∆%
2013	1.5
2012	2.0
2011	2.1
2010	1.1
2009	0.4
2008	2.6
Dec 2009	0.8
Dec 2008	1.1
Dec 2007	3.2
Dec 2006	1.4
Dec 2005	1.4
Dec 2004	2.2
Dec 2003	1.1
Dec 2002	1.1
Dec 2001	1.6

AE: Annual Equivalent

Source: Statistisches Bundesamt Deutschland

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

Chart IV-12 of the Statistisches Bundesamt Deutschland, or federal statistical office of Germany, provides the unadjusted consumer price index of Germany from 2006 to 2014. There is evident acceleration in the form of sharper slope in the first months of 2011 and then a flattening in subsequent months with renewed strength in Dec 2011, decline in Jan 2012 and another upward spike from Feb to Apr 2012, new drop in May-Jun 2012 and increases in Jul and Aug 2012 relaxed in Sep-Nov 2012. Inflation returned in Dec 2012 and fell in Jan 2013, rebounding in Feb-Mar 2013. Inflation fell in Apr 2013 and rebounded in May 2013. Reversals of commodity exposures caused the decline in Apr 2013 followed by increases in May-Jul 2013. Inflation stabilized in Aug-Sep 2013 and fell in Oct 2013. Inflation increased in Nov-Dec 2013 and fell in Jan 2014. Consumer prices increased again in Feb-Mar 2014 and fell in Apr-May 2014. If risk aversion declines, new carry trades from zero interest rates to commodity futures could again result in higher inflation. Inflation increased in Jun-Jul 2014 and was unchanged in Aug-Sep 2014, decreasing in Oct 2014.

Chart IV-12, Germany, Consumer Price Index, Unadjusted, 2010=100

Source: Statistisches Bundesamt Deutschland

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

Chart IV-12A provides the consumer price index NSA of the US from 2006 to 2014. The salient similarity is the hump in 2008 caused by commodity carry trades driven by the movement to zero interest rates. Inflation communicated worldwide through carry trade from zero interest rates to exposures in commodity futures, creating instability in financial and economic decisions.

Chart IV-12A, US, Consumer Price Index, All Items, NSA, 2006-2014

Source: Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm4

Chart IV-13, of the Statistisches Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index and trend of Germany from 2010 to 2014. Chart IV-13 captures inflation waves with alternation of periods of positive and negative slopes resulting from zero interest rates with shocks of risk appetite and risk aversion. For example, the negative slope of decline of inflation by 0.2 percent in Jun 2012 and 0.0 percent in May 2012 follows an upward slope of price increases in Feb-Apr 2012 after decline of inflation by 0.1 percent in Jan 2012. The is another positive slope caused by inflation of 0.4 percent in Jul 2012, which is followed by 0.4 percent in Aug 2012 and flattening segment, as inflation remains almost unchanged with 0.1 percent in Sep and 0.0 percent in Oct 2012, increasing 0.1 percent in Nov 2012 and increasing 0.3 percent in Dec 2012. Inflation fell 0.5 percent in Jan 2013 and jumped 0.6 percent in Feb 2013 and 0.5 percent in Mar 2013. Another declining segment indicates the decline of 0.5 percent in Apr 2013 followed by the increases in May-Jul 2013. Inflation was nil in Aug-Sep 2013 and fell in Oct 2013. Inflation increased in Nov-Dec 2013 and fell in Jan 2014. Inflation returned in Feb-Mar 2014 and fell in Apr-May 2014. Inflation returned in Jun-Jul 2014 and prices did not change in Aug-Sep 2014. Prices fell in Oct 2014. The waves occur around an upward trend of prices, disproving the proposition of fear of deflation.

Chart IV-13, Germany, Consumer Price Index, Unadjusted and Trend, 2010=100

Source: Statistisches Bundesamt Deutschland

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

Table IV-19 provides 12-month and monthly consumer price inflation in Germany in Oct 2014. Services decreased 0.2 percent in Oct 2014 and increased 1.7 percent in 12 months. Excluding heating oil and motor fuels, consumer prices decreased 0.1 percent in Oct and increased 1.1 percent in 12 months.

Table IV-19, Germany, Consumer Price Index ∆%

Oct 2014	Weight	12- Month ∆%	Month ∆%
Total	1,000.00	0.8	-0.3
Excluding heating oil and motor fuels	950.52	1.1	-0.1
Excluding household energy	931.81	1.0	-0.2
Excluding Energy	893.44	1.2	-0.1
Total Goods	479.77	-0.1	-0.4
Nondurable Consumer Goods	307.89	0.1	-0.4
Energy	106.56	-2.3	-1.5
Services	520.23	1.7	-0.2
Energy Components
Motor Fuels	38.37	-3.5	-2.4
Household Energy	68.19	-1.6	-1.0
Heating Oil	11.11	-10.8	-5.8
Food	90.52	0.7	0.0

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2014/11/PE14_398_611.html

Table IV-20 provides monthly and 12 months consumer price inflation in France. There are the same waves as in inflation worldwide (http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html). In the first wave, annual equivalent inflation in Jan-Apr 2011 was 4.3 percent driven by the carry trade from zero interest rates to commodity futures positions in an environment of risk appetite. In the second wave, risk aversion caused the reversal of carry trades into commodity futures, resulting in the fall of the annual equivalent inflation rate to minus 1.2 percent in May-Jul 2011. In the third wave, annual equivalent inflation rose to 3.0 percent in Aug-Nov 2011 with alternations of risk aversion and risk appetite. In the fourth wave, risk aversion originating in the European debt crisis caused annual equivalent inflation of 0.0 percent from Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation increased to 5.3 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation was minus 2.4 percent in May-Jul 2012 during another bout of risk aversion causing reversal of carry trades from zero interest rates to commodity price futures exposures. In the seventh wave, annual equivalent inflation jumped to 8.7 percent in Aug 2012, 3.0 percent in Aug-Sep 2012 and 2.8 percent in Aug-Oct 2012. In the eighth wave, annual equivalent inflation was minus 2.4 percent in Nov 2012 and minus 1.6 percent in Nov 2012 to Jan 2013. In the ninth wave, annual equivalent inflation was 6.8 percent in Feb-Mar 2013. In the tenth wave, annual equivalent inflation was minus 1.2 percent in Apr because of reversal of commodity carry trades. In the eleventh wave, annual equivalent inflation was 1.8 percent in May-Jun 2013. In the twelfth wave, annual equivalent inflation was minus 3.5 percent in Jul 2013. In the thirteenth wave, annual equivalent inflation returned at 6.2 percent in Aug 2013. In the fourteenth wave, annual equivalent inflation was minus 1.6 percent in Sep-Nov 2013. In the fifteenth wave, annual equivalent inflation was 3.7 percent in Dec 2013. In the sixteenth wave, annual equivalent inflation was minus 7.0 percent in Jan 2014. In the sixteenth wave, annual equivalent inflation was 6.8 percent in Feb-Mar 2014. In the seventeenth wave, annual equivalent inflation was 0.0 percent in Apr-Jun 2014. In the eighteenth wave, annual equivalent inflation was minus 3.5 percent in Jul 2014. In the nineteenth wave, annual equivalent inflation was 4.9 percent in Aug 2014. In the twentieth wave, annual equivalent inflation was minus 2.4 percent in Sep-Oct 2014.

Table V-20, France, Consumer Price Index, Month and 12-Month ∆%

	Month ∆%	12-Month ∆%
Oct 2014	0.0	0.4
Sep	-0.4	0.3
AE ∆% Sep-Oct	-2.4
Aug	0.4	0.4
AE ∆% Aug	4.9
Jul	-0.3	0.5
AE ∆% Jul	-3.5
Jun	0.0	0.5
May	0.0	0.7
Apr	0.0	0.7
AE ∆% Apr-Jun	0.0
Mar	0.5	0.6
Feb	0.6	0.9
AE ∆% Feb-Mar	6.8
Jan	-0.6	0.7
AE ∆% Jan	-7.0
Dec 2013	0.3	0.7
AE ∆% Dec	3.7
Nov	-0.1	0.7
Oct	-0.1	0.6
Sep	-0.2	0.9
AE ∆% Sep-Nov	-1.6
Aug	0.5	0.9
AE ∆% Aug	6.2
Jul	-0.3	1.1
AE ∆% Jul	-3.5
Jun	0.2	0.9
May	0.1	0.8
AE ∆% May-Jun	1.8
Apr	-0.1	0.7
AE ∆% Apr	-1.2
Mar	0.8	1.0
Feb	0.3	1.0
AE ∆% Feb-Mar	6.8
Jan	-0.5	1.2
Dec 2012	0.3	1.3
Nov	-0.2	1.4
AE ∆% Nov-Jan	-1.6
Oct	0.2	1.9
Sep	-0.2	1.9
Aug	0.7	2.1
AE ∆% Aug-Oct	2.8
Jul	-0.5	1.9
Jun	0.0	1.9
May	-0.1	2.0
AE ∆% May-Jul	-2.4
Apr	0.1	2.1
Mar	0.8	2.3
Feb	0.4	2.3
AE ∆% Feb-Apr	5.3
Jan	-0.4	2.4
Dec 2011	0.4	2.5
AE ∆% Dec-Jan	0.0
Nov	0.3	2.5
Oct	0.3	2.4
Sep	-0.1	2.2
Aug	0.5	2.2
AE ∆% Aug-Nov	3.0
Jul	-0.5	1.9
Jun	0.1	2.1
May	0.1	2.0
AE ∆% May-Jul	-1.2
Apr	0.3	2.1
Mar	0.8	2.0
Feb	0.5	1.6
Jan	-0.2	1.8
AE ∆% Jan-Apr	4.3
Dec 2010	0.4	1.8
Annual
2013		0.9
2012		2.0
2011		2.1
2010		1.5
2009		0.1
2008		2.8
2007		1.5
2006		1.6
2005		1.8
2004		2.1
2003		2.1
2002		1.9
2001		1.7
2000		1.7
1999		0.5
1998		0.7
1997		1.2
1996		2.0
1995		1.8
1994		1.6
1993		2.1
1992		2.4
1991		3.2

AE: Annual Equivalent Metropolitan France

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20141113

Chart IV-14 provides the consumer price index of France. There is the hump caused by speculative carry trades in 2008 from zero interest rates into derivatives of commodities and reversal of exposures during flight to the dollar and obligations of the US government (Cochrane and Zingales 2009). Inflation oscillated in waves along an upward trend and stabilized in current reversal of exposures in commodities in reallocations of portfolios among classes of risk financial assets.

Chart IV-14, France, Consumer Price Index, Jan 1998-Oct 2014, 1998=100

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20141113

Table IV-21 provides consumer price inflation in France and of various items in Oct 2014 and in the 12 months ending in Oct 2014. Inflation of all items was minus 0.0 percent in Oct 2014 and 0.5 percent in 12 months. Energy prices decreased 0.4 percent in Oct 2014 and decreased 1.2 percent in 12 months. Transport and communications decreased 0.4 percent in Oct 2014 and fell 0.5 percent in 12 months. Rentals and dwellings show higher 12-month increase of 1.4 percent. Services increased 0.1 percent in Oct 2014 and increased 1.5 percent in 12 months.

Table IV-21, France, Consumer Price Index, Month and 12-Month Percentage Changes of Index and Components, ∆%

Oct 2014	Weights	Month ∆%	12-Month ∆%
All Items	10000	0.0	0.5
Food	1653	0.4	-0.1
Manufactured Products	2653	-0.2	-0.8
Energy	850	-0.4	-1.2
Petroleum Products	475	-1.7	-3.6
Services	4640	0.1	1.5
Rentals, Dwellings	748	0.7	1.4
Transport and Communications	503	-0.4	-0.5

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20141113

Chart IV-15 of the Institut National de la Statistique et des Études Économiques (INSEE) of France shows headline and core consumer price inflation of France. Inflation rose during the commodity price shock of unconventional monetary policy. Risk aversion in late 2008 and beginning of 2009 caused collapse of valuation of commodity futures with resulting decline in inflation. The current downward trend of inflation originates in concentration of carry trades in equities and high-yield bonds with reversal of exposures in commodities.

Chart IV-15, France, Consumer Price Index (IPC) and Core Consumer Price Index (ISJ) 12 Months Rates of Change

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20141113

The first wave of commodity price increases in the first four months of Jan-Apr 2011 also influenced the surge of consumer price inflation in Italy shown in Table IV-22. Annual equivalent inflation in the first four months of 2011 from Jan to Apr was 4.9 percent. The crisis of confidence or risk aversion resulted in reversal of carry trades on commodity positions. Consumer price inflation in Italy was subdued in the second wave in Jun and May 2011 at 0.1 percent for annual equivalent 1.2 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased to 2.4 percent. In the fourth wave, annual equivalent inflation in Oct-Nov 2011 jumped again at 3.0 percent. Inflation returned in the fifth wave from Dec 2011 to Jan 2012 at annual equivalent 4.3 percent. In the sixth wave, annual equivalent inflation rose to 5.7 percent in Feb-Apr 2012. In the seventh wave, annual equivalent inflation was 1.2 percent in May-Jun 2012. In the eighth wave, annual equivalent inflation increased to 3.0 percent in Jul-Aug 2012. In the ninth wave, inflation collapsed to zero in Sep-Oct 2012 and was minus 0.8 percent in annual equivalent in Sep-Nov 2012. In the tenth wave, annual equivalent inflation in Dec 2012 to Aug 2013 was 2.0 percent. In the twelfth wave, annual equivalent inflation was minus 3.2 percent in Sep-Nov 2013 during reallocations of investment portfolios away from commodity futures. In the thirteenth wave, inflation returned in annual equivalent 2.4 percent in Dec 2013-Jan 2014. In the fourteenth wave, annual equivalent inflation fell at 1.2 percent in Feb 2014. In the fifteenth wave, annual equivalent inflation was 1.8 percent in Mar-Apr 2014. In the sixteen wave, annual inflation was minus 1.2 percent in May 2014. In the seventeenth wave, annual equivalent inflation was 1.2 percent in Jun 2014. In the eighteenth wave, annual equivalent inflation was minus 1.2 percent in Jul 2014. In the nineteenth wave, annual equivalent inflation was 2.4 percent in Aug 2014. In the twentieth wave, annual equivalent inflation was minus 4.7 percent in Sep 2014. In the twenty-first wave, annual equivalent inflation returned at 1.2 percent in Oct 2014. There are worldwide shocks to economies by intermittent waves of inflation originating in combination of zero interest rates and quantitative easing with alternation of risk appetite and risk aversion (http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html).

Table IV-22, Italy, Consumer Price Index

	Month	12 Months
Oct 2014	0.1	0.1
AE ∆% Oct	1.2
Sep	-0.4	-0.2
AE ∆% Sep	-4.7
Aug	0.2	-0.1
AE ∆% Aug	2.4
Jul	-0.1	0.1
AE ∆% Jul	-1.2
Jun	0.1	0.3
AE ∆% Jun	1.2
May	-0.1	0.5
AE ∆% May	-1.2
Apr	0.2	0.6
Mar	0.1	0.4
AE ∆% Mar-Apr	1.8
Feb	-0.1	0.5
AE ∆% Feb	-1.2
Jan	0.2	0.7
Dec 2013	0.2	0.7
AE ∆% Dec 2013-Jan 2014	2.4
Nov	-0.3	0.7
Oct	-0.2	0.8
Sep	-0.3	0.9
AE ∆% Sep-Nov	-3.2
Aug	0.4	1.2
Jul	0.1	1.2
Jun	0.3	1.2
May	0.0	1.1
Apr	0.0	1.1
Mar	0.2	1.6
Feb	0.1	1.9
Jan	0.2	2.2
Dec 2012	0.2	2.3
AE ∆% Dec 2012-Aug 2013	2.0
Nov	-0.2	2.5
Oct	0.0	2.6
Sep	0.0	3.2
AE ∆% Sep-Nov	-0.8
Aug	0.4	3.2
Jul	0.1	3.1
AE ∆% Jul-Aug	3.0
June	0.2	3.3
May	0.0	3.2
AE ∆% May-Jun	1.2
Apr	0.5	3.3
Mar	0.5	3.3
Feb	0.4	3.3
AE ∆% Feb-Apr	5.7
Jan	0.3	3.2
Dec 2011	0.4	3.3
AE ∆% Dec-Jan	4.3
Nov	-0.1	3.3
Oct	0.6	3.4
AE ∆% Oct-Nov	3.0
Sep	0.0	3.0
Aug	0.3	2.8
Jul	0.3	2.7
AE ∆% Jul-Sep	2.4
Jun	0.1	2.7
May	0.1	2.6
AE ∆% May-Jun	1.2
Apr	0.5	2.6
Mar	0.4	2.5
Feb	0.3	2.4
Jan	0.4	2.1
AE ∆% Jan-Apr	4.9
Dec 2010	0.4	1.9
Annual
2013		1.2
2012		3.0
2011		2.8
2010		1.5
2009		0.8
2008		3.3
2007		1.8
2006		2.1

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/138384

Chart IV-16 of the Istituto Nazionale di Statistica shows moderation in 12-month percentage changes of the consumer price index of Italy with marginal increase followed by decline to 2.5 percent in Nov 2012, 2.3 percent in Dec 2012, 2.2 percent in Jan 2013, 1.9 percent in Feb 2013 and 1.6 percent in Mar 2013. Consumer prices increased 1.1 percent in the 12 months ending in Apr-May 2013 and 1.2 percent in Jun-Jul 2013. In Aug 2013, consumer prices increased 1.2 percent in 12 months. Consumer prices increased 0.9 percent in the 12 months ending in Sep 2013 and 0.8 percent in the 12 months ending in Oct 2013. Consumer price inflation increased 0.7 percent in the 12 months ending in Nov 2013 and 0.7 percent in the 12 months ending in Dec 2013. Consumer prices increased 0.7 percent in the 12 months ending in Jan 2014 and 0.5 percent in the 12 months ending in Feb 2014. Consumer prices increased 0.4 percent in the 12 months ending in Mar 2014 and 0.6 percent in the 12 months ending in Apr 2014. Consumer prices increased 0.5 percent in the 12 months ending in May 2014 and 0.3 percent in the 12 months ending in Jun 2014. Consumer prices increased 0.1 percent in the 12 months ending in Jul 2014 and fell 0.1 percent in the 12 months ending in Aug 2014. Consumer prices fell 0.2 percent in the 12 months ending in Sep 2014 and increased 0.1 percent in the 12 months ending in Oct 2014.

Chart IV-15, Italy, Consumer Price Index 12-Month Percentage Changes

Source: Istituto Nazionale di Statistica

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

Consumer price inflation in Italy by segments in the estimate by ISTAT for Oct 2014 is provided in Table IV-20. Total consumer price inflation in Sep 2014 was 0.1 percent and 0.1 percent in 12 months. Inflation of goods was 0.3 percent in Oct 2014 and minus 0.3 percent in 12 months. Prices of durable goods changed 0.0 percent in Oct and decreased 0.3 percent in 12 months, as typical in most countries. Prices of energy increased 0.9 percent in Oct and decreased 2.5 percent in 12 months. Food prices changed 0.0 percent in Oct and increased 0.2 percent in 12 months. Prices of services decreased 0.1 percent in Oct and rose 0.7 percent in 12 months. Transport prices, also influenced by commodity prices, decreased 0.7 percent in Oct and increased 0.4 percent in 12 months. Carry trades from zero interest rates to positions in commodity futures cause increases in commodity prices. Waves of inflation originate in periods when there is no risk aversion and commodity prices decline during periods of risk aversion and portfolio reallocations (http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html).

Table IV-23, Italy, Consumer Price Index and Segments, Month and 12-Month ∆%

Oct 2014	Weights	Month ∆%	12-Month ∆%
General Index All Items	1,000,000	0.1	0.1
I Goods	546,724	0.3	-0.3
Food	173,611	0.0	0.2
Energy	85,796	0.9	-2.5
Durable	80,901	0.0	-0.3
Nondurable	74,391	0.2	0.3
II Services	453,276	-0.1	0.7
Housing	77,009	0.0	1.5
Communications	18,206	0.3	-1.0
Transport	81,924	-0.7	0.4

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/138384

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

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

The employment report for Japan in Sep 2014 is in Table VB-2. The number unemployed reached 2.33 million in Sep 2014, declining 250 thousand from a year earlier or 9.7 percent. The rate of unemployment not seasonally adjusted reached 3.5 percent, decreasing 0.4 percentage points from a year earlier. Population decreased 0.1 percent from a year earlier. The labor force increased 0.3 percentage points from a year earlier and the labor participation rate stood at 59.9, increasing 0.1 percentage points from a year earlier. The employment rate increased to 57.4 percent, which is higher by 0.2 percentage points relative to a year earlier.

Table VB-1, Japan, Employment Report Sep 2014

Sep 2014 Unemployed	2.33 million
Change since last year	-250 thousand; ∆% –9.7
Unemployment rate	SA 3.6%, 0.1 from earlier month; NSA 3.5%, -0.4 from earlier year
Population ≥ 15 years	110.84 million
Change since last year	∆% -0.1
Labor Force	66.35 million
Change since last year	∆% 0.3
Employed	64.02 million
Change since last year	∆% 0.7
Labor force participation rate	59.9
Change since last year	0.2
Employment rate	57.8%
Change since last year	0.5

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

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

Table VB-2A provides the rate of unemployment of Japan seasonally adjusted that decreased to 3.6 percent in Sep 2014 from 3.8 percent in Jul 2014. The rate of unemployment SA fell 0.4 percentage points from 4.0 percent in Sep 2013 to 3.6 percent in Sep 2014.

Table VB-2, Japan, Unemployment Rate, SA

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

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

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

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

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

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

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

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

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

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

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

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

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 53.8 in Oct 2014. The index of new orders increased from 52.2 in Jan 2012 to 54.3 in Dec 2012 but fell to 50.1 in May 2013, barely above the neutral frontier of 50.0. The index of new orders stabilized at 51.0 in Nov-Dec 2013, easing to 50.9 in Jan 2014. The index of new orders increased to 51.0 in Oct 2014.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Oct 2014	53.8	51.0	52.0	48.8	59.9
Sep	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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. The index fell from 56.3 in Oct 2013 to 53.8 in Oct 2014.

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

Source: National Bureau of Statistics of China

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr 2012, falling to 49.2 in Aug 2012, rebounding to 50.6 in Dec 2012. The index fell to 50.1 in Jun 2013, barely above the neutral frontier at 50.0, recovering to 51.4 in Nov 2013 but falling to 51.0 in Dec 2013. The index fell to 50.5 in Jan 2014 and 50.8 in Oct 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 51.6 in Oct 2014.

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

	IPM	PI	NOI	INV	EMP	SDEL
Oct 2014	50.8	53.1	51.6	48.4	48.4	50.1
Sep	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

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 50.8 in Oct 2014.

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

Source: National Bureau of Statistics of China