Global Financial and Economic Risk, Recovery without Hiring, Loss of Ten Million Full-time Jobs, Youth and Middle Age Unemployment, United States International Trade, United States Services, World Cyclical Slow Growth and Global Recession Risk: Part V

 

Global Financial and Economic Risk, Recovery without Hiring, Loss of Ten Million Full-time Jobs, Youth and Middle Age Unemployment, United States International Trade, United States Services, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

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

I Recovery without Hiring

IA1 Hiring Collapse

IA2 Labor Underutilization

ICA3 Ten Million Fewer Full-time Jobs

IA4 Theory and Reality of Cyclical Slow Growth Not Secular Stagnation: Youth and Middle-Age Unemployment

IIA United States International Trade

IIA1 Import and Export Prices

II United States Services

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/ns/cs.aspx?id=28) to show GDP in dollars in 2012 and the growth rate of real GDP of the world and selected regional countries from 2013 to 2016. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has changed its forecast of the world economy to 3.3 percent in 2013 but accelerating to 3.3 percent in 2014, 3.8 percent in 2015 and 4.0 percent in 2016. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $34,523 billion of world output of $72,688 billion, or 47.5 percent, but are projected to grow at much lower rates than world output, 1.9 percent on average from 2013 to 2016 in contrast with 3.6 percent for the world as a whole. While the world would grow 15.2 percent in the four years from 2013 to 2016, the G7 as a whole would grow 8.5 percent. The difference in dollars of 2012 is rather high: growing by 15.2 percent would add around $11.0 trillion of output to the world economy, or roughly, two times the output of the economy of Japan of $5,938 billion but growing by 8.0 percent would add $5.8 trillion of output to the world, or about the output of Japan in 2012. The “two speed” concept is in reference to the growth of the 150 countries labeled as emerging and developing economies (EMDE) with joint output in 2012 of $27,512 billion, or 37.8 percent of world output. The EMDEs would grow cumulatively 20.7 percent or at the average yearly rate of 4.8 percent, contributing $5.7 trillion from 2013 to 2016 or the equivalent of somewhat less than the GDP of $8,387 billion of China in 2012. The final four countries in Table V-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output in 2012 adds to $14,511 billion, or 19.9 percent of world output, which is equivalent to 42.0 percent of the combined output of the major advanced economies of the G7.

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

	GDP USD 2012	Real GDP ∆% 2013	Real GDP ∆% 2014	Real GDP ∆% 2015	Real GDP ∆% 2016
World	72,688	3.3	3.3	3.8	4.0
G7	34,523	1.5	1.7	2.3	2.3
Canada	1,709	2.0	2.3	2.4	2.4
France	2,688	0.3	0.4	1.0	1.6
DE	3,428	0.5	1.4	1.5	1.8
Italy	2,014	-1.9	-0.2	0.9	1.3
Japan	5,938	1.5	0.9	0.8	0.8
UK	2,471	1.7	3.2	2.7	2.4
US	16,163	2.2	2.2	3.1	3.0
Euro Area	12,220	-0.4	0.8	1.3	1.7
DE	3,428	0.5	1.4	1.5	1.8
France	2,688	0.3	0.4	1.0	1.6
Italy	2,014	-1.9	-0.2	0.9	1.3
POT	212	-1.4	1.0	1.5	1.7
Ireland	211	-0.3	1.7	2.5	2.5
Greece	249	-3.9	0.6	2.9	3.7
Spain	1,323	-1.2	1.3	1.7	1.8
EMDE	27,512	4.7	4.4	5.0	5.2
Brazil	2,248	2.5	0.3	1.4	2.2
Russia	2,017	1.3	0.2	0.5	1.5
India	1,859	5.0	5.6	6.4	6.5
China	8,387	7.7	7.4	7.1	6.8

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

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

Continuing high rates of unemployment in advanced economies constitute another characteristic of the database of the WEO (http://www.imf.org/external/ns/cs.aspx?id=28). Table V-2 is constructed with the WEO database to provide rates of unemployment from 2012 to 2016 for major countries and regions. In fact, unemployment rates for 2013 in Table I-2 are high for all countries: unusually high for countries with high rates most of the time and unusually high for countries with low rates most of the time. The rates of unemployment are particularly high in 2013 for the countries with sovereign debt difficulties in Europe: 16.2 percent for Portugal (POT), 13.0 percent for Ireland, 27.3 percent for Greece, 26.1 percent for Spain and 12.2 percent for Italy, which is lower but still high. The G7 rate of unemployment is 7.1 percent. Unemployment rates are not likely to decrease substantially if slow growth persists in advanced economies.

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

	% Labor Force 2012	% Labor Force 2013	% Labor Force 2014	% Labor Force 2015	% Labor Force 2016
World	NA	NA	NA	NA	NA
G7	7.4	7.1	6.5	6.3	6.1
Canada	7.3	7.1	7.0	6.9	6.8
France	9.8	10.3	10.0	10.0	9.9
DE	5.5	5.3	5.3	5.3	5.3
Italy	10.7	12.2	12.6	12.0	11.3
Japan	4.3	4.0	3.7	3.8	3.8
UK	8.0	7.6	6.3	5.8	5.5
US	8.1	7.4	6.3	5.9	5.8
Euro Area	11.3	11.9	11.6	11.2	10.7
DE	5.5	5.3	5.3	5.3	5.3
France	9.8	10.3	10.0	10.0	9.9
Italy	10.7	12.2	12.6	12.0	11.3
POT	15.5	16.2	14.2	13.5	13.0
Ireland	14.7	13.0	11.2	10.5	10.1
Greece	24.2	27.3	25.8	23.8	20.9
Spain	24.8	26.1	24.6	23.5	22.4
EMDE	NA	NA	NA	NA	NA
Brazil	5.5	5.4	5.5	6.1	5.9
Russia	5.5	5.5	5.6	6.5	6.0
India	NA	NA	NA	NA	NA
China	4.1	4.1	4.1	4.1	4.1

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

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

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog from IQ2012 to IIIQ2014 available now for all countries. There are preliminary estimates for all countries for IIIQ2014. Growth is weak throughout most of the world.

• Japan. The GDP of Japan increased 1.1 percent in IQ2012, 4.6 percent at SAAR (seasonally adjusted annual rate) and 3.5 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP fell 0.4 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 1.7 percent, which is much lower than 4.6 percent in IQ2012. Growth of 3.5 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan’s GDP contracted 0.5 percent in IIIQ2012 at the SAAR of minus 2.0 percent and increased 0.2 percent relative to a year earlier. Japan’s GDP decreased 0.2 percent in IVQ2012 at the SAAR of minus 0.9 percent and changed 0.0 percent relative to a year earlier. Japan grew 1.5 percent in IQ2013 at the SAAR of 6.0 percent and increased 0.5 percent relative to a year earlier. Japan’s GDP increased 0.7 percent in IIQ2013 at the SAAR of 3.0 percent and increased 1.4 percent relative to a year earlier. Japan’s GDP grew 0.4 percent in IIIQ2013 at the SAAR of 1.6 percent and increased 2.2 percent relative to a year earlier. In IVQ2013, Japan’s GDP decreased 0.4 percent at the SAAR of minus 1.5 percent, increasing 2.3 percent relative to a year earlier. Japan’s GDP increased 1.4 percent in IQ2014 at the SAAR of 5.8 percent and increased 2.5 percent relative to a year earlier. In IIQ2014, Japan’s GDP fell 1.7 percent at the SAAR of minus 6.7 percent and fell 0.3 percent relative to a year earlier. Japan’s GDP contracted 0.5 percent in IIIQ2014 at the SAAR of minus 1.9 percent and fell 1.3 percent relative to a year earlier.
• China. China’s GDP grew 1.4 percent in IQ2012, annualizing to 5.7 percent, and 8.1 percent relative to a year earlier. The GDP of China grew at 2.1 percent in IIQ2012, which annualizes to 8.7 percent and 7.6 percent relative to a year earlier. China grew at 2.0 percent in IIIQ2012, which annualizes at 8.2 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 1.9 percent, which annualizes at 7.8 percent, and 7.9 percent in IVQ2012 relative to IVQ2011. In IQ2013, China grew at 1.6 percent, which annualizes at 6.6 percent and 7.7 percent relative to a year earlier. In IIQ2013, China grew at 1.8 percent, which annualizes at 7.4 percent and 7.5 percent relative to a year earlier. China grew at 2.3 percent in IIIQ2013, which annualizes at 9.5 percent and 7.8 percent relative to a year earlier. China grew at 1.7 percent in IVQ2013, which annualized to 7.0 percent and 7.7 percent relative to a year earlier. China’s GDP grew 1.5 percent in IQ2014, which annualizes to 6.1 percent, and 7.4 percent relative to a year earlier. China’s GDP grew 2.0 percent in IIQ2014, which annualizes at 8.2 percent, and 7.5 percent relative to a year earlier. China’s GDP grew 1.9 percent in IIIQ2014, which is equivalent to 7.8 percent in a year, and 7.3 percent relative to a year earlier. There is decennial change in leadership in China (http://www.xinhuanet.com/english/special/18cpcnc/index.htm). Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2014.
• Euro Area. GDP fell 0.1 percent in the euro area in IQ2012 and decreased 0.3 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.3 percent IIQ2012 and fell 0.6 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.1 percent and declined 0.8 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.4 percent relative to the prior quarter and fell 0.9 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.4 percent and decreased 1.2 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IIQ2013 and fell 0.6 percent relative to a year earlier. In IIIQ2013, euro area GDP increased 0.2 percent and fell 0.3 percent relative to a year earlier. The GDP of the euro area increased 0.2 percent in IVQ2013 and increased 0.4 percent relative to a year earlier. In IQ2014, the GDP of the euro area increased 0.3 percent and 1.1 percent relative to a year earlier. The GDP of the euro area increased 0.1 percent in IIQ2014 and increased 0.8 percent relative to a year earlier. The euro area’s GDP increased 0.2 percent in IIIQ2014 and increased 0.8 percent relative to a year earlier.
• Germany. The GDP of Germany increased 0.3 percent in IQ2012 and 1.5 percent relative to a year earlier. In IIQ2012, Germany’s GDP increased 0.1 percent and increased 0.3 percent relative to a year earlier but 0.8 percent relative to a year earlier when adjusted for calendar (CA) effects. In IIIQ2012, Germany’s GDP increased 0.1 percent and 0.1 percent relative to a year earlier. Germany’s GDP contracted 0.4 percent in IVQ2012 and decreased 0.3 percent relative to a year earlier. In IQ2013, Germany’s GDP decreased 0.4 percent and fell 1.8 percent relative to a year earlier. In IIQ2013, Germany’s GDP increased 0.8 percent and 0.5 percent relative to a year earlier. The GDP of Germany increased 0.3 percent in IIIQ2013 and 0.8 percent relative to a year earlier. In IVQ2013, Germany’s GDP increased 0.4 percent and 1.0 percent relative to a year earlier. The GDP of Germany increased 0.8 percent in IQ2014 and 2.6 percent relative to a year earlier. In IIQ2014, Germany’s GDP contracted 0.1 percent and increased 1.0 percent relative to a year earlier. The GDP of Germany increased 0.1 percent in IIIQ2014 and increased 1.2 percent relative to a year earlier.
• United States. Growth of US GDP in IQ2012 was 0.6 percent, at SAAR of 2.3 percent and higher by 2.6 percent relative to IQ2011. US GDP increased 0.4 percent in IIQ2012, 1.6 percent at SAAR and 2.3 percent relative to a year earlier. In IIIQ2012, US GDP grew 0.6 percent, 2.5 percent at SAAR and 2.7 percent relative to IIIQ2011. In IVQ2012, US GDP grew 0.0 percent, 0.1 percent at SAAR and 1.6 percent relative to IVQ2011. In IQ2013, US GDP grew at 2.7 percent SAAR, 0.7 percent relative to the prior quarter and 1.7 percent relative to the same quarter in 2013. In IIQ2013, US GDP grew at 1.8 percent in SAAR, 0.4 percent relative to the prior quarter and 1.8 percent relative to IIQ2012. US GDP grew at 4.5 percent in SAAR in IIIQ2013, 1.1 percent relative to the prior quarter and 2.3 percent relative to the same quarter a year earlier (http://cmpassocregulationblog.blogspot.com/2014/11/valuations-of-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2014/11/growth-uncertainties-mediocre-cyclical.html) with weak hiring (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/11/fluctuating-financial-variables.html). In IVQ2013, US GDP grew 0.9 percent at 3.5 percent SAAR and 3.1 percent relative to a year earlier. In IQ2014, US GDP decreased 0.5 percent, increased 1.9 percent relative to a year earlier and fell 2.1 percent at SAAR. In IIQ2014, US GDP increased 1.1 percent at 4.6 percent SAAR and increased 2.6 percent relative to a year earlier. US GDP increased 1.0 percent in IIIQ2014 at 3.9 percent SAAR and increased 2.4 percent relative to a year earlier.
• United Kingdom. In IQ2012, UK GDP increased 0.1 percent, increasing 1.0 percent relative to a year earlier. UK GDP fell 0.2 percent in IIQ2012 and increased 0.6 percent relative to a year earlier. UK GDP increased 0.8 percent in IIIQ2012 and increased 0.7 percent relative to a year earlier. UK GDP fell 0.3 percent in IVQ2012 relative to IIIQ2012 and increased 0.4 percent relative to a year earlier. UK GDP increased 0.5 percent in IQ2013 and 0.8 percent relative to a year earlier. UK GDP increased 0.7 percent in IIQ2013 and 1.7 percent relative to a year earlier. In IIIQ2013, UK GDP increased 0.9 percent and 1.7 percent relative to a year earlier. UK GDP increased 0.6 percent in IVQ2013 and 2.7 percent relative to a year earlier. In IQ2014, UK GDP increased 0.7 percent and 2.9 percent relative to a year earlier. UK GDP increased 0.9 percent in IIQ2014 and 3.2 percent relative to a year earlier. In IIIQ2014, UK GDP increased 0.7 percent and increased 3.0 percent relative to a year earlier.
• Italy. Italy has experienced decline of GDP in nine consecutive quarters from IIIQ2011 to IIIQ2013 and in IIQ2014 and IIIQ2014. Italy’s GDP fell 0.9 percent in IQ2012 and declined 1.9 percent relative to IQ2011. Italy’s GDP fell 0.4 percent in IIQ2012 and declined 2.4 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.4 percent and declined 2.5 percent relative to a year earlier. The GDP of Italy contracted 0.8 percent in IVQ2012 and fell 2.5 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.9 percent and fell 2.5 percent relative to a year earlier. Italy’s GDP fell 0.2 percent in IIQ2013 and 2.2 percent relative to a year earlier. The GDP of Italy changed 0.0 percent in IIIQ2013 and declined 1.8 percent relative to a year earlier. Italy’s GDP decreased 0.1 percent in IVQ2013 and decreased 1.2 percent relative to a year earlier. In IQ2014, Italy’s GDP changed 0.0 percent and fell 0.3 percent relative to a year earlier. The GDP of Italy fell 0.2 percent in IIQ2014 and declined 0.4 percent relative to a year earlier. In IIIQ2014, Italy’s GDP contracted 0.1 percent and fell 0.5 percent relative to a year earlier.
• France. France’s GDP increased 0.2 percent in IQ2012 and increased 0.6 percent relative to a year earlier. France’s GDP decreased 0.2 percent in IIQ2012 and increased 0.4 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.2 percent and increased 0.4 percent relative to a year earlier. France’s GDP fell 0.3 percent in IVQ2012 and changed 0.0 percent relative to a year earlier. In IQ2013, France GDP changed 0.0 percent and declined 0.2 percent relative to a year earlier. The GDP of France increased 0.7 percent in IIQ2013 and 0.7 percent relative to a year earlier. France’s GDP decreased 0.1 percent in IIIQ2013 and increased 0.3 percent relative to a year earlier. The GDP of France increased 0.2 percent in IVQ2013 and 0.8 percent relative to a year earlier. In IQ2014, France’s GDP changed 0.0 percent and increased 0.8 percent relative to a year earlier. In IIQ2014, France’s GDP contracted 0.1 percent and changed 0.0 percent relative to a year earlier. France’s GDP increased 0.3 percent in IIIQ2014 and increased 0.4 percent relative to a year earlier.

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

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.6        SAAR: 2.3	2.6
Japan	QOQ: 1.1 SAAR: 4.6	3.5
China	1.4	8.1
Euro Area	-0.1	-0.3
Germany	0.3	1.5
France	0.2	0.6
Italy	-0.9	-1.9
United Kingdom	0.1	1.0
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.4         SAAR: 1.6	2.3
Japan	QOQ: -0.4 SAAR: -1.7	3.5
China	2.1	7.6
Euro Area	-0.3	-0.6
Germany	0.1	0.3 0.8 CA
France	-0.2	0.4
Italy	-0.4	-2.4
United Kingdom	-0.2	0.6
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.6  SAAR: 2.5	2.7
Japan	QOQ: –0.5 SAAR: –2.0	0.2
China	2.0	7.4
Euro Area	-0.1	-0.8
Germany	0.1	0.1
France	0.2	0.4
Italy	-0.4	-2.5
United Kingdom	0.8	0.7
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: 0.1	1.6
Japan	QOQ: -0.2 SAAR: -0.9	0.0
China	1.9	7.9
Euro Area	-0.4	-0.9
Germany	-0.4	-0.3
France	-0.3	0.0
Italy	-0.8	-2.5
United Kingdom	-0.3	0.4
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.7 SAAR: 2.7	1.7
Japan	QOQ: 1.5 SAAR: 6.0	0.5
China	1.6	7.7
Euro Area	-0.4	-1.2
Germany	-0.4	-1.8
France	0.0	-0.2
Italy	-0.9	-2.5
UK	0.5	0.8
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.4 SAAR: 1.8	1.8
Japan	QOQ: 0.7 SAAR: 3.0	1.4
China	1.8	7.5
Euro Area	0.3	-0.6
Germany	0.8	0.5
France	0.7	0.7
Italy	-0.2	-2.2
UK	0.7	1.7
	IIIQ2013/IIQ2013	III/Q2013/  IIIQ2012
USA	QOQ: 1.1 SAAR: 4.5	2.3
Japan	QOQ: 0.4 SAAR: 1.6	2.2
China	2.3	7.8
Euro Area	0.2	-0.3
Germany	0.3	0.8
France	-0.1	0.3
Italy	0.0	-1.8
UK	0.9	1.7
	IVQ2013/IIIQ2013	IVQ2013/IVQ2012
USA	QOQ: 0.9 SAAR: 3.5	3.1
Japan	QOQ: -0.4 SAAR: -1.5	2.3
China	1.7	7.7
Euro Area	0.2	0.4
Germany	0.4	1.0
France	0.2	0.8
Italy	-0.1	-1.2
UK	0.6	2.7
	IQ2014/IVQ2013	IQ2014/IQ2013
USA	QOQ -0.5 SAAR -2.1	1.9
Japan	QOQ: 1.4 SAAR: 5.8	2.5
China	1.5	7.4
Euro Area	0.3	1.1
Germany	0.8	2.6
France	0.0	0.8
Italy	0.0	-0.3
UK	0.7	2.9
	IIQ2014/IQ2014	IIQ2014/IIQ2013
USA	QOQ 1.1 SAAR 4.6	2.6
Japan	QOQ: -1.7 SAAR: -6.7	-0.3
China	2.0	7.5
Euro Area	0.1	0.8
Germany	-0.1	1.0
France	-0.1	0.0
Italy	-0.2	-0.4
UK	0.9	3.2
	IIIQ2014/IIQ2014	IIIQ2014/IIIQ2013
USA	QOQ: 1.0 SAAR: 3.9	2.4
Japan	QOQ: -0.5 SAAR: -1.9	-1.3
China	1.9	7.3
Euro Area	0.2	0.8
Germany	0.1	1.2
France	0.3	0.4
Italy	-0.1	-0.5
UK	0.7	3.0

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

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

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

• Japan. Japan provides the most worrisome data (http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/interest-rate-risks-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html and earlier http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html and earlier http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-zero-interest-rates-world.html http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations_8763.html http://cmpass ocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html and earlier http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and_4699.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and for GDP http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html and earlier http://cmpassocreulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html). In Oct 2014, Japan’s exports increased 9.6 percent in 12 months while imports increased 2.7 percent. The second part of Table V-4 shows that net trade deducted 1.5 percentage points from Japan’s growth of GDP in IIQ2012, deducted 1.9 percentage points from GDP growth in IIIQ2012 and deducted 0.5 percentage points from GDP growth in IVQ2012. Net trade added 0.4 percentage points to GDP growth in IQ2012, 1.7 percentage points in IQ2013 and 0.2 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.6 percentage points from GDP growth in Japan. Net trade ducted 2.4 percentage points from GDP growth in Japan in IVQ2013. Net trade deducted 0.8 percentage point from GDP growth of Japan in IQ2014. Net trade added 4.2 percentage points to GDP growth in IIQ2014. Net trade added 0.3 percentage points to GDP growth in IIIQ2014.

• China. In Nov 2014, China exports increased 4.7 percent relative to a year earlier and imports decreased 6.7 percent.
• Germany. Germany’s exports decreased 0.5 percent in the month of Oct 2014 and increased 4.9 percent in the 12 months ending in Oct 2014. Germany’s imports decreased 3.1 percent in the month of Oct 2014 and increased 0.9 percent in the 12 months ending in Aug. Net trade contributed 0.8 percentage points to growth of GDP in IQ2012, contributed 0.4 percentage points in IIQ2012, contributed 0.3 percentage points in IIIQ2012, deducted 0.5 percentage points in IVQ2012, deducted 0.3 percentage points in IQ2013 and added 0.1 percentage points in IIQ2013. Net traded deducted 0.5 percentage points from Germany’s GDP growth in IIIQ2013 and added 0.5 percentage points to GDP growth in IVQ2013. Net trade deducted 0.1 percentage points from GDP growth in IQ2014. Net trade added 0.1 percentage points to GDP growth in IIQ2014 and added 0.2 percentage points in IIIQ2014.
• United Kingdom. Net trade contributed 0.7 percentage points in IIQ2013. In IIIQ2013, net trade deducted 2.0 percentage points from UK growth. Net trade contributed 0.5 percentage points to UK value added in IVQ2013. Net trade contributed 0.6 percentage points to UK value added in IQ2014 and 0.0 percentage points in IIQ2014. Net trade deducted 0.5 percentage points to GDP growth in IIIQ2014.
• France. France’s exports increased 0.5 percent in Oct 2014 while imports increased 0.1 percent. France’s imports increased 1.8 percent in the 12 months ending in Oct 2014 and imports increased 0.6 percent relative to a year earlier. Net traded added 0.1 percentage points to France’s GDP in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.1 percentage points from France’s GDP growth in IQ2013 and added 0.3 percentage points in IIQ2013, deducting 0.4 percentage points in IIIQ2013. Net trade added 0.3 percentage points to France’s GDP in IVQ2013 and deducted 0.0 percentage points in IQ2014. Net trade deducted 0.1 percentage points from France’s GDP growth in IIQ2014.
• United States. US exports increased 1.2 percent in Oct 2014 and goods exports increased 3.2 percent in Jan-Oct 2014 relative to a year earlier. Imports increased 0.9 percent in Oct 2014 and goods imports increased 3.3 percent in Jan-Oct 2014 relative to a year earlier. Net trade deducted 0.04 percentage points from GDP growth in IIQ2012 and added 0.39 percentage points in IIIQ2012 and 0.79 percentage points in IVQ2012. Net trade deducted 0.08 percentage points from US GDP growth in IQ2013 and deducted 0.54 percentage points in IIQ2013. Net traded added 0.59 percentage points to US GDP growth in IIIQ2013. Net trade added 1.08 percentage points to US GDP growth in IVQ2013. Net trade deducted 1.66 percentage points from US GDP growth in IQ2014 and deducted 0.34 percentage points in IIQ2014. Net trade added 0.78 percentage points to IIIQ2014. The Federal Reserve completed its annual revision of industrial production and capacity utilization on Mar 28, 2014 (http://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm). The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production edged down 0.1 percent in October after having advanced 0.8 percent in September. In October, manufacturing output increased 0.2 percent for the second consecutive month. The index for mining declined 0.9 percent and the output of utilities moved down 0.7 percent. At 104.9 percent of its 2007 average, total industrial production in October was 4.0 percent above its level of a year earlier. Capacity utilization for the industrial sector decreased 0.3 percentage point in October to 78.9 percent, a rate that is 1.2 percentage points below its long-run (1972–2013) average.”

In the six months ending in Oct 2014, United States national industrial production accumulated increase of 1.6 percent at the annual equivalent rate of 3.2 percent, which is lower than growth of 4.0 percent in the 12 months ending in Oct 2014. Excluding growth of 0.8 percent in Sep 2014, growth in the remaining five months from May to Oct 2014 accumulated to 0.8 percent or 1.9 percent annual equivalent. Industrial production declined in two of the past six months. Industrial production expanded at annual equivalent 2.0 percent in the most recent quarter from Aug to Oct 2014 and at 4.5 percent in the prior quarter May-Jul 2014. Business equipment accumulated growth of 1.6 percent in the six months from May to Oct 2014 at the annual equivalent rate of 3.2 percent, which is lower than growth of 4.6 percent in the 12 months ending in Oct 2014. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for the industrial sector decreased 0.3 percentage point in October to 78.9 percent, a rate that is 1.2 percentage points below its long-run (1972–2013) average.” United States industry apparently decelerated to a lower growth rate followed by possible acceleration and weaker growth in past months.

Manufacturing decreased by 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased by 19.9 percent from the trough in Apr 2009 to Dec 2013. Manufacturing grew 26.2 percent from the trough in Apr 2009 to Oct 2014. Manufacturing output in Oct 2014 is 1.4 percent below the peak in Jun 2007. Growth at trend in the entire cycle from IVQ2007 to IIIQ2014 would have accumulated to 23.0 percent. GDP in IIIQ2014 would be $18,438.0 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,273.9 billion than actual $16,164.1 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.0 million unemployed or underemployed equivalent to actual unemployment of 15.8 percent of the effective labor force (Section I and earlier (http://cmpassocregulationblog.blogspot.com/2014/11/rules-discretionary-authorities-and.html and earlier http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html). US GDP in IIIQ2014 is 12.3 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,164.1 billion in IIIQ2014 or 7.8 percent at the average annual equivalent rate of 1.1 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Oct 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 123.8884 in Oct 2014. The actual index NSA in Oct 2014 is 101.5613, which is 18.0 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.9214 in Oct 2014. The output of manufacturing at 101.5613 in Oct 2014 is 12.4 percent below trend under this alternative calculation.

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

	Exports M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	1.2 Sep	3.2 Jan-Oct	0.9 Sep	3.3 Jan-Oct
Japan		Oct 9.6 Sep 6.9 Aug -1.3 Jul 3.9 Jun -2.0 May 2014 -2.7 Apr 2014 5.1 Mar 2014 1.8 Feb 2014 9.5 Jan 2014 9.5 Dec 2013 15.3 Nov 2013 18.4 Oct 2013 18.6 Sep 2013 11.5 Aug 2013 14.7 Jul 2013 12.2 Jun 2013 7.4 May 2013 10.1 Apr 2013 3.8 Mar 2013 1.1 Feb 2013 -2.9 Jan 2013 6.4 Dec -5.8 Nov -4.1 Oct -6.5 Sep -10.3 Aug -5.8 Jul -8.1		Oct 2.7 Sep 6.2 Aug -1.5 Jul 2.3 Jun 8.4 May 2014 -3.6 Apr 2013 3.4 Mar 2014 18.1 Feb 2014 9.0 Jan 2014 25.0 Dec 2013 24.7 Nov 2013 21.1 Oct 2013 26.1 Sep 2013 16.5 Aug 2013 16.0 Jul 2013 19.6 Jun 2013 11.8 May 2013 10.0 Apr 2013 9.4 Mar 2013 5.5 Feb 2013 7.3 Jan 2013 7.3 Dec 1.9 Nov 0.8 Oct -1.6 Sep 4.1 Aug -5.4 Jul 2.1
China		2014 4.7 Nov 11.6 Oct 15.3 Sep 9.4 Aug 14.5 Jul 7.2 Jun 7.0 May 0.9 Apr -6.6 Mar -18.1 Feb 10.6 Jan 2013 4.3 Dec 12.7 Nov 5.6 Oct -0.3 Sep 7.2 Aug 5.1 Jul -3.1 Jun 1.0 May 14.7 Apr 10.0 Mar 21.8 Feb 25.0 Jan		2014 -6.7 Nov 4.6 Oct 7.0 Sep -2.4 Aug -1.6 Jul 5.5 Jun -1.6 May -0.8 Apr -11.3 Mar 10.1 Feb 10.0 Jan 2013 8.3 Dec 5.3 Nov 7.6 Oct 7.4 Sep 7.0 Aug 10.9 Jul -0.7 Jun -0.3 May 16.8 Apr 14.1 Mar -15.2 Feb 28.8 Jan
Euro Area	-2.8 12-M Aug	0.8 Jan-Aug	-4.4 12-M Aug	-0.2 Jan-Aug
Germany	-0.5 Oct CSA	4.9 Oct	-3.1 Oct CSA	0.9 Oct
France Oct	0.5	1.8	0.1	0.6
Italy Aug	1.1	-2.7	-0.4	-7.0
UK	0.5 Oct	-2.4 Aug-Oct 14 /Aug-Oct 13	-1.3 Oct	-5.6 Aug-Oct 14 /Aug-Oct 13
Net Trade % Points GDP Growth	% Points
USA	IIIQ2014 0.78 IIQ2014 -0.34 IQ2014 -1.66 IVQ2013 1.08 IIIQ2013 0.59 IIQ2013 -0.54 IQ2013 -0.08 IVQ2012 +0.79 IIIQ2012 0.39 IIQ2012 -0.04 IQ2012 -0.11
Japan	0.4 IQ2012 -1.5 IIQ2012 -1.9 IIIQ2012 -0.5 IVQ2012 1.7 IQ2013 0.2 IIQ2013 -1.5 IIIQ2013 -2.3 IVQ2013 -0.8 IQ2014 4.2 IIQ2014 0.3 IIIQ2014
Germany	IQ2012 0.8 IIQ2012 0.4 IIIQ2012 0.3 IVQ2012 -0.5 IQ2013 -0.3 IIQ2013 0.1 IIIQ2013 -0.5 IVQ2013 0.5 IQ2014 -0.1 IIQ2014 0.1 IIIQ2014 0.2
France	0.1 IIIQ2012 0.1 IVQ2012 -0.1 IQ2013 0.3 IIQ2013 -0.4 IIIQ2013 0.3 IVQ2013 0.0 IQ2014 -0.1 IIQ2014
UK	0.7 IIQ2013 -2.0 IIIQ2013 0.5 IVQ2013 0.6 IQ2014 0.0 IIQ2014 -0.5 IIIQ2014

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table VB-7 for Oct 2014. The share of Asia in Japan’s trade is close to one-half for 53.8 percent of exports and 46.8 percent of imports. Within Asia, exports to China are 18.4 percent of total exports and imports from China 24.6 percent of total imports. While exports to China increased 7.2 percent in the 12 months ending in Oct 2014, imports from China increased 9.6 percent. The second largest export market for Japan in Oct 2014 is the US with share of 19.0 percent of total exports, which is close to that of China, and share of imports from the US of 8.8 percent in total imports. Japan’s exports to the US increased 8.9 percent in the 12 months ending in Oct 2014 and imports from the US increased 11.0 percent. Western Europe has share of 10.4 percent in Japan’s exports and of 10.4 percent in imports. Rates of growth of exports of Japan in Oct 2014 are 8.9 percent for exports to the US, minus 13.3 percent for exports to Brazil and 7.7 percent for exports to Germany. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity. Growth rates of imports in the 12 months ending in Oct 2014 are mixed. Imports from Asia increased 4.2 percent in the 12 months ending in Oct 2014 while imports from China increased 9.6 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

Table V-4, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Oct 2014	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,688,484	9.6	7,398,479	2.7
Asia	3,600,282 % Total 53.8	10.5	3,461,895 % Total 46.8	4.2
China	1,229,609 % Total 18.4	7.2	1,816,360 % Total 24.6	9.6
USA	1,268,270 % Total 19.0	8.9	653,784 % Total 8.8	11.0
Canada	77,993	1.9	113,549	5.8
Brazil	40,866	-13.3	94,573	-4.0
Mexico	112,108	28.2	34,682	-1.9
Western Europe	693,867 % Total 10.4	6.0	766,070 % Total 10.4	5.7
Germany	179,360	7.7	229,959	6.2
France	57,975	-1.5	103,055	13.3
UK	107,378	16.2	57,263	7.0
Middle East	278,805	29.5	1,297,145	-1.9
Australia	120,260	-14.5	407,604	-0.6

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

World trade projections of the IMF are in Table V-5. There is increasing growth of the volume of world trade of goods and services from 3.0 percent in 2013 to 5.0 percent in 2015 and 5.6 percent on average from 2016 to 2019. World trade would be slower for advanced economies while emerging and developing economies (EMDE) experience faster growth. World economic slowdown would be more challenging with lower growth of world trade.

Table V-5, IMF, Projections of World Trade, USD Billions, USD/Barrel and Annual ∆%

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

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

Source: International Monetary Fund World Economic Outlook databank

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

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, decreased to 53.2 in Nov from 53.5 in Oct, indicating expansion at slightly slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/3e88d53d5f9343c695bc7ef65fa7e9d0). This index has remained above the contraction territory of 50.0 during 64 consecutive months. The employment index increased from 51.4 in Oct to 51.9 in Nov with input prices rising at slower rate, new orders increasing at slower rate and output increasing at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/3e88d53d5f9343c695bc7ef65fa7e9d0). David Hensley, Director of Global Economic Coordination at JP Morgan, finds moderately slower growth of world economic output (http://www.markiteconomics.com/Survey/PressRelease.mvc/3e88d53d5f9343c695bc7ef65fa7e9d0). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, decreased to 51.8 in Nov from 52.2 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/c7d1ceba22234f4eafdc53a0c7c7a7e9). New export orders expanded for the sixteenth consecutive month David Hensley, Director of Global Economics Coordination at JP Morgan Chase, finds continuing impulse in global manufacturing at around annual 3.3 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/c7d1ceba22234f4eafdc53a0c7c7a7e9). The HSBC Brazil Composite Output Index, compiled by Markit, decreased from 48.4 in Oct to 48.1 in Nov, indicating moderate contraction in activity of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/20803a784bcd4bdba08993ea343540fe). The HSBC Brazil Services Business Activity index, compiled by Markit, increased from 48.2 in Oct to 48.5 in Nov, indicating marginally contracting services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/20803a784bcd4bdba08993ea343540fe). André Loes, Chief Economist, Brazil, at HSBC, finds lack of impulse of the economy in IVQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/2f6044990d2945f98595a949cc75369c). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) decreased marginally from 49.1 in Oct to 48.7 in Nov, indicating moderate deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/2f6044990d2945f98595a949cc75369c). André Loes, Chief Economist, Brazil at HSBC, finds increasing output and input prices perhaps because of exchange rate depreciation (http://www.markiteconomics.com/Survey/PressRelease.mvc/2f6044990d2945f98595a949cc75369c).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted decreased to 54.6 in Nov from 55.9 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/e87b70d50cb344aa8c88f8a936b4ac81). New export orders decreased at the highest rate of decline in 17 months. Chris Williamson, Chief Economist at Markit, finds that manufacturing and service data suggest GDP slowing to 2.5 percent in IVQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/e87b70d50cb344aa8c88f8a936b4ac81). The Markit Flash US Services PMI™ Business Activity Index decreased from 57.1 in Oct to 56.3 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/9d1dd1f5f7ac4cf99dfcad0c92b222c0). Chris Williamson, Chief Economist at Markit, finds that the surveys are consistent with sustained strong growth of GDP at an annual rate around 2.5 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/9d1dd1f5f7ac4cf99dfcad0c92b222c0). The Markit US Composite PMI™ Output Index of Manufacturing and Services decreased to 56.1 in Nov from 57.4 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/34b835438d714f8e91f99173d2cadcb3). The Markit US Services PMI™ Business Activity Index decreased from 57.1 in Oct to 56.2 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/34b835438d714f8e91f99173d2cadcb3). Chris Williamson, Chief Economist at Markit, finds the indexes consistent with US growth at around 2.5 percent annual in IVQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/34b835438d714f8e91f99173d2cadcb3). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) decreased to 54.7 in Nov from 55.9 in Oct, which indicates expansion at marginally slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/6634713cadae418b8e303f5a60729c3c). New foreign orders contracted at the fastest rate since Jun 2013. Chris Williamson, Chief Economist at Markit, finds that the index suggests slowing but strong manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/6634713cadae418b8e303f5a60729c3c). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® decreased 0.3 percentage points from 59.0 in Oct to 58.7 in Nov, which indicates growth at moderately slower rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 0.2 percentage points from 65.8 in Oct to 66.0 in Nov. The index of new export orders increased 3.5 percentage point from 51.5 in Oct to 55.0 in Nov, growing at faster rate. The Non-Manufacturing ISM Report on Business^® PMI increased 2.2 percentage points from 57.1 in Oct to 59.3 in Nov, indicating growth of business activity/production during 64 consecutive months, while the index of new orders increased 2.3 percentage points from 59.1 in Oct to 61.4 in Nov (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Oct 12 months NSA ∆%: 1.7; ex food and energy ∆%: 1.8 Oct month SA ∆%: 0.0; ex food and energy ∆%: 0.2 Blog 11/23/14
Producer Price Index	Finished Goods Oct 12-month NSA ∆%: 1.7; ex food and energy ∆% 2.1 Oct month SA ∆% = -0.3; ex food and energy ∆%: 0.1 Final Demand Oct 12-month NSA ∆%: 1.5; ex food and energy ∆% 1.8 Oct month SA ∆% = 0.2; ex food and energy ∆%: 0.4 Blog 11/23/14
PCE Inflation	Oct 12-month NSA ∆%: headline 1.4; ex food and energy ∆% 1.6 Blog 11/30/14
Employment Situation	Household Survey: Nov Unemployment Rate SA 5.8% Blog calculation People in Job Stress Nov: 26.0 million NSA, 15.6% of Labor Force Establishment Survey: Nov Nonfarm Jobs +321,000; Private +314,000 jobs created  Oct 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.3 Blog 12/7/14
Nonfarm Hiring	Nonfarm Hiring fell from 63.3 million in 2006 to 54.2 million in 2013 or by 9.1 million Private-Sector Hiring Oct 2014 5.349 million lower by 0.182 million than 5.531 million in Oct 2007 Blog 12/14/14
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.6 IIQ2012/IIQ2011 2.3 IIIQ2012/IIIQ2011 2.7 IVQ2012/IVQ2011 1.6 IQ2013/IQ2012 1.7 IIQ2013/IIQ2012 1.8 IIIQ2013/IIIQ2012 2.3 IVQ2013/IVQ2012 3.1 IQ2014/IQ2013 1.9 IIQ2014/IIQ2013 2.6 IIIQ2014/IIIQ2013 2.4 IQ2012 SAAR 2.3 IIQ2012 SAAR 1.6 IIIQ2012 SAAR 2.5 IVQ2012 SAAR 0.1 IQ2013 SAAR 2.7 IIQ2013 SAAR 1.8 IIIQ2013 SAAR 4.5 IVQ2013 SAAR 3.5 IQ2014 SAAR -2.1 IIQ2014 SAAR 4.6 IIIQ2014 SAAR 3.9 Blog 11/30/14
Real Private Fixed Investment	SAAR IIIQ2014 6.2 ∆% IVQ2007 to IIIQ2014: 1.8% Blog 11/30/14
Corporate Profits	IIIQ2014 SAAR: Corporate Profits 2.1; Undistributed Profits 8.8 Blog 11/30/14
Personal Income and Consumption	Oct month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.1 Real Personal Consumption Expenditures (RPCE): 0.2 12-month Sep NSA ∆%: RDPI: 2.5; RPCE ∆%: 2.2 Blog 11/30/14
Quarterly Services Report	IIIQ14/IIIQ13 NSA ∆%: Information 6.6 Financial & Insurance 4.8 Blog 12/14/14
Employment Cost Index	Compensation Private IIQ2014 SA ∆%: 0.7 Jun 12 months ∆%: 2.0 Blog 8/3/14
Industrial Production	Oct month SA ∆%: -0.1 Oct 12 months SA ∆%: 4.0 Manufacturing Oct SA 0.2 ∆% Oct 12 months SA ∆% 3.4, NSA 3.3 Capacity Utilization: 78.9 Blog 11/23/14
Productivity and Costs	Nonfarm Business Productivity IIIQ2014∆% SAAE 2.3; IIIQ2014/IIQ2013 ∆% 1.0; Unit Labor Costs SAAE IIIQ2014 ∆% -1.0; IIIQ2014/IIIQ2013 ∆%: 1.2 Blog 12/7/14
New York Fed Manufacturing Index	General Business Conditions From Oct 6.17 to Nov 10.16 New Orders: From Oct -1.73 to Nov 9,14 Blog 11/23/14
Philadelphia Fed Business Outlook Index	General Index from Oct 20.7 to Nov 40.8 New Orders from Oct 17.3 to Nov 35.7 Blog 11/23/14
Manufacturing Shipments and Orders	New Orders SA Oct ∆% -0.7 Ex Transport -1.4 Jan-Oct NSA New Orders ∆% 4.0 Ex transport 2.6 Blog 12/14/14
Durable Goods	Oct New Orders SA ∆%: 0.4; ex transport ∆%: -0.9 Jan-Oct 14/Jan-Oct 13 New Orders NSA ∆%: 7.5; ex transport ∆% 5.6 Blog 11/30/14
Sales of New Motor Vehicles	Jan-Nov 2014 15,014,620; Jan-Nov 2013 14,239,897. Nov 14 SAAR 17.20 million, Oct 14 SAAR 16.46 million, Nov 2013 SAAR 16.29 million Blog 12/7/14
Sales of Merchant Wholesalers	Jan-Oct 2014/Jan-Oct 2013 NSA ∆%: Total 5.7; Durable Goods: 5.6; Nondurable Goods: 5.8 Blog 12/14/14
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Oct 14 12-M NSA ∆%: Sales Total Business 3.5; Manufacturers 2.2 Retailers 4.4; Merchant Wholesalers 4.2 Blog 12/14/14
Sales for Retail and Food Services	Jan-Nov 2014/Jan-Nov 2013 ∆%: Retail and Food Services 4.0; Retail ∆% 3.8 Blog 12/14/14
Value of Construction Put in Place	Oct SAAR month SA ∆%: 1.1 Oct 12-month NSA: 2.8 Blog 12/7/14
Case-Shiller Home Prices	Sep 2014/Sep 2013 ∆% NSA: 10 Cities 4.8; 20 Cities: 4.9 ∆% Sep SA: 10 Cities 0.3 ; 20 Cities: 0.3 Blog 11/30/14
FHFA House Price Index Purchases Only	Sep SA ∆% 0.0; 12 month NSA ∆%: 4.3 Blog 11/30/14
New House Sales	Oct 2014 month SAAR ∆%: 0.7 Jan-Oct 2014/Jan-Oct 2013 NSA ∆%: 1.9 Blog 11/30/14
Housing Starts and Permits	Sep Starts month SA ∆% 6.3; Permits ∆%: 1.5 Jan-Sep 2014/Jan-Sep 2013 NSA ∆% Starts 9.5; Permits  ∆% 3.4 Blog 10/19/14
Trade Balance	Balance Oct SA -$43,432 million versus Sep -$43,603 million Exports Oct SA ∆%: 1.2 Imports Oct SA ∆%: 0.9 Goods Exports Jan-Oct 2014/Jan-Oct 2013 NSA ∆%: 3.2 Goods Imports Jan-Oct 2014/Jan-Oct 2012 NSA ∆%: 3.3 Blog 12/14/14
Export and Import Prices	Nov 12-month NSA ∆%: Imports -2.3; Exports -1.9 Blog 12/14/14
Consumer Credit	Oct ∆% annual rate: Total 4.9; Revolving 1.3; Nonrevolving 6.2 Blog 12/14/14
Net Foreign Purchases of Long-term Treasury Securities	Aug Net Foreign Purchases of Long-term US Securities: minus $52.1 billion Major Holders of Treasury Securities: China $1270 billion; Japan $1230 billion; Total Foreign US Treasury Holdings Aug $6067 billion Blog 10/19/14
Treasury Budget	Fiscal Year 2015/2013 ∆% Nov: Receipts 6.0; Outlays minus 4.0; Individual Income Taxes 5.9 Deficit Fiscal Year 2011 $1,300 billion Deficit Fiscal Year 2012 $1,087 billion Deficit Fiscal Year 2013 $680 billion Deficit Fiscal Year 2014 $483 billion Blog 12/14/2014
CBO Budget and Economic Outlook	2012 Deficit $1087 B 6.8% GDP Debt $11,281 B 70.1% GDP 2013 Deficit $680 B, 4.1% GDP Debt $11,983 B 72.0% GDP 2024 Deficit $960B, 3.6% GDP Debt $20,554B 77.2% GDP 2039: Long-term Debt/GDP 106% Blog 8/26/12 11/18/12 2/10/13 9/22/13 2/16/14 8/24/14 9/14/14
Commercial Banks Assets and Liabilities	Sep 2014 SAAR ∆%: Securities 9.6 Loans 3.1 Cash Assets 16.8 Deposits 11.5 Blog 10/26/14
Flow of Funds	IIQ2014 ∆ since 2007 Assets +$14,244.2 BN Nonfinancial $224.1 BN Real estate -$419.6 BN Financial +14,020.1 BN Net Worth +$14,690.1 BN Blog 9/28/14
Current Account Balance of Payments	IIQ2014 -190,161 MM % GDP 2.3 Blog 9/21/14
Collapse of United States Dynamism of Income Growth and Employment Creation	Blog 10/26/14

Links to blog comments in Table USA:

12/7/14 http://cmpassocregulationblog.blogspot.com/2014/12/financial-risks-twenty-six-million.html

11/30/14 http://cmpassocregulationblog.blogspot.com/2014/11/valuations-of-risk-financial-assets.html

11/23/14 http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.html

10/26/14 http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html

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

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

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

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

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

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

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

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

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

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

Sales of manufacturers decreased 0.9 percent in Oct 2014 after increasing 0.1 percent in Sep and increased 2.2 percent in the 12 months ending in Oct, as shown in Table VA-1. Retailers’ sales increased 0.4 percent in Oct 2014 after decreasing 0.2 percent in Sep and increased 4.4 percent in 12 months ending in Oct 2014. Sales of merchant wholesalers increased 0.2 percent in Oct, changed 0.0 percent in Sep and increased 4.2 percent in 12 months ending in Oct. Sales of total business decreased 0.1 percent in Oct after changing 0.0 percent in Sep and increased 3.5 percent in 12 months.

Table VA-1, US, Percentage Changes for Sales of Manufacturers, Retailers and Merchant Wholesalers

	Oct 14/Sep 14 ∆% SA	Oct 2014 Millions of Dollars NSA	Sep 14/ Aug 14  ∆% SA	Oct 14/ Oct 13 ∆% NSA
Total Business	-0.1	1,391,175	0.0	3.5
Manufacturers	-0.8	516,611	0.1	2.2
Retailers	0.4	392,257	-0.2	4.4
Merchant Wholesalers	0.2	482,307	0.0	4.2

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

Chart VA-1 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers seasonally adjusted (SA) in millions of dollars. Seasonal adjustment softens adjacent changes for purposes of comparing short-term variations free of seasonal factors. There was sharp drop in the global recession followed by sharp recovery with decline and recovery in the final segment above the peak before the global recession. Data are not adjusted for price changes.

Chart VA-1, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Oct 2014

US Census Bureau

http://www.census.gov/mtis/

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

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

US Census Bureau

http://www.census.gov/mtis/

Businesses added cautiously to inventories to replenish stocks. Retailers’ inventories increased 0.2 percent in Oct 2014 and added 0.2 percent in Sep with growth of 4.2 percent in 12 months, as shown in Table VA-2. Total business increased inventories by 0.2 percent in Oct, 0.3 percent in Sep and 4.6 percent in 12 months. Inventories sales/ratios of total business continued at a level close to 1.30 under careful management to avoid costs and risks. Inventory/sales ratios of manufacturers and retailers are higher than for merchant wholesalers. There is stability in inventory/sales ratios in individual months and relative to a year earlier.

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

Inventory Change	Oct 14 Millions of Dollars NSA	Oct 14/ Sep 14 ∆% SA	Sep 14/  Aug 14 ∆% SA	Oct 14/ Oct 13 ∆% NSA
Total Business	1,793,278	0.2	0.3	4.6
Manufacturers	658,176	0.1	0.2	3.4
Retailers	588,136	0.2	0.2	4.2
Merchant Wholesalers	546,966	0.4	0.4	6.7
Inventory/ Sales Ratio	Oct 14 Millions of Dollars NSA	Oct 2014 SA	Sep 2014 SA	Oct 2013 SA
Total Business	1,793,278	1.30	1.30	1.29
Manufacturers	658,176	1.31	1.30	1.30
Retailers	588,136	1.42	1.42	1.41
Merchant Wholesalers	546,966	1.19	1.19	1.16

US Census Bureau

http://www.census.gov/mtis/

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

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

US Census Bureau

http://www.census.gov/mtis/

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

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

US Census Bureau

http://www.census.gov/mtis/

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

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

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

This is the pure inventory cycle.

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

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

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

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

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

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

Source: US Census Bureau

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

Manufacturers’ shipments decreased 0.8 percent in Oct 2014 and increased 0.1 percent in Sep 2014 after decreasing 1.1 percent in Jun 2014. New orders decreased 0.7 percent in Oct 2014, after decreasing 0.5 percent in Sep 2014 and decreasing 10.0 percent in Aug 2014, as shown in Table VA-3. These data are very volatile. Volatility is illustrated by increase of 2642.2 percent of new orders of nondefense aircraft in Sep 2012 following decline by 97.2 percent in Aug 2012. New orders excluding transportation equipment decreased 1.4 percent in Oct 2014 after changing 0.0 percent in Sep 2014 and changing 0.0 percent in Aug 2014. Capital goods new orders, indicating investment, increased 0.7 percent in Oct 2014 after decreasing 3.7 percent in Sep 2014 and decreasing 34.1 percent in Aug 2014. New orders of nondefense capital goods decreased 0.4 percent in Oct 2014 after decreasing 4.8 percent in Sep 2014 and decreasing 36.4 percent in Aug 2014. Excluding more volatile aircraft, capital goods orders decreased 1.6 percent in Oct 2014 after decreasing 1.1 percent in Sep 2014 and increasing 0.4 percent in Aug 2014.

Table VA-3, US, Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%

	Oct 2014  ∆%	Sep 2014 ∆%	Aug 2014  ∆%
Total
S	-0.8	0.1	-1.1
NO	-0.7	-0.5	-10.0
Excluding Transport
S	-1.0	0.0	-0.3
NO	-1.4	0.0	0.0
Excluding Defense
S	-0.8	0.1	-1.1
NO	-1.2	-0.6	-10.3
Durable Goods
S	0.1	0.3	-1.7
NO	0.3	-0.7	-18.3
Machinery
S	-0.3	0.4	0.2
NO	-1.4	-3.0	1.2
Computers & Electronic Products
S	0.1	-2.2	-1.2
NO	-0.1	-2.0	1.7
Computers
S	-1.7	-12.5	-12.9
NO	-12.7	2.7	-18.8
Transport Equipment
S	0.8	0.4	-5.4
NO	3.4	-3.1	-42.2
Automobiles
S	2.1	0.7	0.0
Motor Vehicles
S	1.2	1.0	-6.0
NO	0.6	0.1	-5.0
Nondefense Aircraft
S	-1.9	1.7	-1.5
NO	-0.1	-16.0	-74.0
Capital Goods
S	-0.8	1.0	0.5
NO	0.7	-3.7	-34.1
Nondefense Capital Goods
S	-1.0	1.3	0.3
NO	-0.4	-4.8	-36.4
Capital Goods ex Aircraft
S	-0.7	0.7	0.2
NO	-1.6	-1.1	0.4
Nondurable Goods
S	-1.5	-0.2	-0.4
NO	-0.8	0.4	-0.4

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

Source: US Census Bureau

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

Chart VA-6 of the US Census Bureau provides new orders of manufacturers from Nov 2013 to Oct 2014. There is significant volatility that prevents discerning clear trends.

Chart VA-6, US, Manufacturers’ New Orders 2013-2014 Seasonally Adjusted, Month ∆%

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr022.html

Chart VA-7 of the US Census Bureau provides total value of manufacturers’ new orders, seasonally adjusted, from 1992 to 2014. Seasonal adjustment reduces sharp oscillations. The series dropped nearly vertically during the global recession but rose along a path even steeper than in the high-growth period before the recession. The final segment suggests deceleration but similar segments occurred in earlier periods followed with continuing growth and stability currently.

Chart VA-7, US, Value of Total Manufacturers’ New Orders, Seasonally Adjusted, 1992-2014

Source: US Census Bureau

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

Additional perspective on manufacturers’ shipments and new orders is provided by Table VA-4. Values are cumulative millions of dollars in Jan-Oct 2014 not seasonally adjusted (NSA). Shipments of all manufacturing industries in Jan-Oct 2014 total $5018.6 billion and new orders total $5040.3 billion, growing respectively by 2.9 percent and 4.0 percent relative to the same period in 2013. Excluding transportation equipment, shipments grew 2.7 percent and new orders increased 2.6 percent. Excluding defense, shipments grew 3.1 percent and new orders grew 3.9 percent. Durable goods shipments reached $2425.8 billion in Jan-Oct 2014, or 48.3 percent of the total, growing by 5.2 percent, and new orders $2447.6 billion, or 48.6 percent of the total, growing by 7.5 percent. Important information in Table VA-3 is the large share of nondurable goods with shipments of $2592.7 billion or 51.7 percent of the total, growing by 0.8 percent. Capital goods have relatively high value of $869.2 billion for shipments, growing 5.0 percent, and new orders $947.7 billion, increasing 9.7 percent, which could be an indicator of future investment. Excluding aircraft, capital goods shipments reached $689.6 billion, growing 5.3 percent, and new orders $711.7 billion, increasing 5.5 percent. There is no suggestion in these data that the US economy is close to recession but manufacturing accounts for 11.3 percent of US national income in IIQ2014. These data are not adjusted for inflation.

Table VA-4, US, Value of Manufacturers’ Shipments and New Orders, NSA, Millions of Dollars 

Jan-Oct 2014	Shipments	∆% 2014/ 2013	New Orders	∆% 2014/ 2013
Total	5,018,565	2.9	5,040,337	4.0
Excluding Transport	4,305,248	2.7	4,256,683	2.6
Excluding Defense	4,902,574	3.1	4,927,086	3.9
Durable Goods	2,425,831	5.2	2,447,603	7.5
Machinery	363,920	6.2	374,990	7.7
Computers & Electronic Products	287,566	5.0	218,956	4.3
Computers	4,129	-18.6	4,876	-6.3
Transport Equipment	713,317	4.4	783,654	11.9
Automobiles	95,901	-10.2
Motor Vehicles	215,107	9.2	215,406	9.9
Nondefense Aircraft	121,141	10.7	192,243	34.2
Capital Goods	869,240	5.0	947,730	9.7
Nondefense Capital Goods	774,464	6.0	865,537	9.7
Capital Goods ex Aircraft	689,554	5.3	711,670	5.5
Nondurable Goods	2,592,734	0.8	2,592,734	0.8
Food Products	656,885	6.2
Petroleum Refineries	675,272	-2.6
Chemical Products	635,434	-1.3

Note: Transport: transportation Source: US Census Bureau

Source: US Census Bureau

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

Chart VA-8 of the US Census Bureau provides value of manufacturer’s new orders not seasonally adjusted from Jan 1992 to Oct 2014. Fluctuations are evident, which are smoothed by seasonal adjustment in the above Chart VA-7. The series drops nearly vertically during the global contraction and then resumes growth in a steep upward trend, flattening recently.

Chart VA-8, US, Value of Total Manufacturers’ New Orders, Not Seasonally Adjusted, 1992-2014

Source: US Census Bureau

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

Sales and inventories of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-5 for Jan-Oct 2014 NSA and percentage changes from the prior month SA and for Jan-Oct 2014 relative to Jan-Oct 2013. These data are volatile, aggregating diverse categories of durable and nondurable goods without adjustment for price changes. Total sales for the US rose 5.7 percent in Jan-Oct 2014 relative to Jan-Oct 2013 and increased 0.4 percent in Oct 2014 relative to Sep 2014. The value of total sales is quite high at $4511.1 billion, approaching five trillion dollars in a year. Value in the breakdown is useful in identifying relative importance of individual categories. Sales of durable goods in Jan-Oct 2014 reached $2081.4 billion, over two trillion dollars for a year, increasing 0.8 percent in Oct 2014 relative to Sep 2014 and increasing 5.6 percent in Jan-Oct 2014 relative to Jan-Oct 2013. Sales of automotive products reached $342.9 billion in Jan-Oct 2014, decreasing 1.1 percent in the month and increasing 4.8 percent relative to a year earlier. There is strong performance of 11.5 percent in machinery but lower of 3.9 percent in electrical products. Sales of nondurable goods rose 5.8 percent over a year earlier. The influence of commodity prices returned as suggested by increase of 8.0 percent in Oct 2014 and decrease of 1.9 percent in Jan-Oct 2014 relative to a year earlier in farm products with decrease of 5.8 percent in petroleum products in Oct 2014 and increase of 6.5 percent relative to a year earlier. The final three columns in Table VA-5 provide the value of inventories and percentage changes from the prior month and relative to the same month a year earlier. US total inventories of wholesalers increased 0.4 percent in Oct 2014 and increased 6.7 percent relative to a year earlier. Inventories of durable goods of $337.8 billion are 61.8 percent of total inventories of $547.0 billion and rose 8.3 percent relative to a year earlier. Automotive inventories increased 7.8 percent relative to a year earlier. Machinery inventories of $98.1 billion rose 10.1 percent relative to a year earlier. Inventories of nondurable goods of $209.2 billion are 38.2 percent of the total and increased 4.2 percent relative to a year earlier. Inventories of farm products increased 3.6 percent in Oct relative to Sep and decreased 6.5 percent relative to a year earlier. Inventories of petroleum products decreased 1.9 percent in Oct and decreased 16.8 percent relative to a year earlier.

Table VA-5, US, Sales and Inventories of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, Month ∆%

2014	Sales $ Billions Jan-Oct 2014 NSA	Sales Oct ∆% SA	Sales∆% Jan-Oct 2014 from Jan-Oct 2013  NSA	INV $ Billions Sep 2014 NSA	INV Oct ∆% SA	INV  ∆% Oct 2014 from Oct 2013 NSA
US Total	4511.1	0.2	5.7	547.0	0.4	6.7
Durable	2081.4	0.8	5.6	337.8	0.0	8.3
Automotive	342.9	-1.1	4.8	55.6	-1.4	7.8
Prof. Equip.	390.2	1.5	4.5	43.2	-0.7	9.9
Computer Equipment	220.6	1.5	3.7	19.0	-3.6	13.7
Electrical	360.4	1.9	3.9	39.0	0.8	7.2
Machinery	394.0	1.1	11.5	98.1	0.4	10.1
Not Durable	2429.8	-0.3	5.8	209.2	1.2	4.2
Drugs	405.8	-0.3	11.9	46.4	3.2	20.1
Apparel	130.0	0.2	9.6	25.9	0.4	10.5
Groceries	525.3	2.0	6.9	35.9	1.1	4.2
Farm Products	201.2	8.0	-1.9	23.0	3.6	-6.5
Petroleum	657.5	-5.8	6.5	18.0	-1.9	-16.8

Note: INV: inventories

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Chart VA-9 of the US Census Bureau provides sales of wholesale trade NSA from Jan 1992 to Oct 2014. The jagged curve of wholesale trade sales without adjustment shows strong seasonal variations. There is a strong long-term trend interrupted by sharp drop during the global recession. Growth resumed along a stronger upward trend and the level surpasses the peak before the global recession with stability in the final segment.

Chart VA-9, US, Wholesale Trade Sales, Monthly, NSA, Jan 1992-Oct 2014, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Chart VA-10 of the US Census Bureau provides US wholesale trade sales with seasonal adjustment from Jan 1992 to Oct 2014. The elimination of seasonality permits enhanced comparison of adjacent sales. The final segment identifies another drop followed by increase to a higher level with stability.

Chart VA-10, US, Wholesale Trade Sales, Monthly, SA, Jan 1992-Oct 2014, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Inventory/sales ratios of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-6. The total for the US has remained almost without change at 1.19 in Oct 2014, 1.19 in Sep 2014 and 1.16 in Oct 2013. Inventory/sales ratios are higher in durable goods industries but remain relatively stable with 1.57 in Oct 2014, 1.58 in Sep 2014 and 1.54 in Oct 2013. Computer equipment operates with low inventory/sales ratios of 0.81 in Oct 2014, 0.86 in Sep 2014 and 0.73 in Oct 2013 because of the capacity to fill orders on demand. As expected because of perishable nature, nondurable inventory/sales ratios are quite low with 0.86 in Oct 2014 and 0.84 in Sep 2014, which are close to 0.84 in Oct 2013. There are exceptions such as1.90 in Oct 2014 in apparel that is close to 1.90 in Sep 2014 and close to 1.98 in Oct 2013.

Table VA-6, Inventory/Sales Ratios of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, % SA

	Oct 2014	Sep 2014	Oct 2013
US Total	1.19	1.19	1.16
Durable	1.57	1.58	1.54
Automotive	1.57	1.58	1.53
Prof. Equip.	1.05	1.08	1.02
Comp. Equip.	0.81	0.86	0.73
Electrical	1.02	1.03	0.99
Machinery	2.43	2.45	2.37
Not Durable	0.86	0.84	0.84
Drugs	1.09	1.05	1.04
Apparel	1.90	1.90	1.98
Groceries	0.64	0.64	0.65
Farm Products	1.00	1.05	1.07
Petroleum	0.32	0.31	0.35

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Inventories of merchant wholesalers except manufacturers’ sales branches in millions of dollars NSA are provided in Chart VA-11 of the US Census Bureau. There is evident acceleration in inventory building in the final segment at a sharper slope than before the global recession with recent downward turn followed by increase/stability.

Chart VA-11, US, Inventories of Merchant Wholesalers, Millions of Dollars, NSA, Jan 1992-Oct 2014

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Inventories of merchant wholesalers except manufacturers’ sales branches in millions of dollars SA are provided in Chart VA-12 of the US Census Bureau. There is evident acceleration in inventory building in the final segment at a sharper slope than before the global recession with recent downward turn followed by increase.

Chart VA-12, US, Inventories of Merchant Wholesalers, Millions of Dollars, SA, Jan 1992-Oct 2014

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Chart VA-13 provides the chart of the US Census Bureau with inventories/sales ratios of merchant wholesalers from 2004 to 2014 seasonally adjusted. Inventory/sales ratios rise during contractions as merchants are caught with increasing inventories because of weak sales and fall during expansions as merchants attempt to fill sales with existing stocks. There is an increase in the inventory/sales ratio in 2012 but not yet significantly higher with declining trend in the final segment followed by an increase and new decline/stability.

Chart VA-13, US, Monthly Inventories/Sales Ratios of Merchant Wholesalers, SA, 2005-2014

Source: US Census Bureau

http://www2.census.gov/wholesale/img/mwtsbrf.jpg

Sales of retail and food services increased 0.7 percent in Nov 2014 after increasing 0.5 percent in Oct 2014 seasonally adjusted (SA), growing 4.9 percent in Jan-Nov 2014 relative to Jan-Nov 2013 not seasonally adjusted (NSA), as shown in Table VA-7. Excluding motor vehicles and parts, retail sales increased 0.5 percent in Nov 2014, increasing 0.4 percent in Oct 2014 SA and increasing 3.0 percent NSA in Jan-Nov 2014 relative to a year earlier. Sales of motor vehicles and parts increased 1.7 percent in Nov 2014 after increasing 0.8 percent in Oct 2014 SA and increasing 7.8 percent NSA in Jan-Nov 2014 relative to a year earlier. Gasoline station sales decreased 0.8 percent SA in Nov 2014 after decreasing 1.3 percent in Oct 2014 in oscillating prices of gasoline that are moderating, decreasing 1.6 percent in Jan-Nov 2014 relative to a year earlier.

Table VA-7, US, Percentage Change in Monthly Sales for Retail and Food Services, ∆%

	Nov/Oct ∆% SA	Oct/Sep ∆% SA	Jan-Nov 2014 Million Dollars NSA	Jan-Nov 2014 from Jan-Nov 2013 ∆% NSA
Retail and Food Services	0.7	0.5	4,767,152	4.0
Excluding Motor Vehicles and Parts	0.5	0.4	3,799,147	3.0
Motor Vehicles & Parts Dealers	1.7	0.8	968,005	7.8
Retail	0.7	0.4	4,245,993	3.8
Building Materials	1.4	0.4	302,929	4.7
Food and Beverage	0.3	0.2	607,653	2.9
Grocery	0.3	0.3	542,208	2.5
Health & Personal Care Stores	0.8	0.2	269,781	5.9
Clothing & Clothing Accessories Stores	1.2	0.6	219,956	1.7
Gasoline Stations	-0.8	-1.3	497,744	-1.6
General Merchandise Stores	0.5	0.1	588,807	1.8
Food Services & Drinking Places	0.7	1.4	521,159	5.6

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

Chart VA-14 provides monthly percentage changes of sales of retail and food services. There is significant monthly volatility that prevents identification of clear trends.

Chart VA-14, US, Monthly Percentage Change of Retail and Food Services Sales, Jan 1992-Nov 2014

Source: US Census Bureau

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

Chart VA-15 of the US Census Bureau provides total sales of retail trade and food services seasonally adjusted (SA) from Jan 1992 to Nov 2014 in millions of dollars. The impact on sales of the shallow recession of 2001 was much milder than the sharp contraction in the global recession from IVQ2007 to IIQ2009. There is flattening in the final segment of the series followed by another increase. Data are not adjusted for price changes.

Chart VA-15, US, Total Sales of Retail Trade and Food Services, SA, Jan 1992-Nov 2014, Millions of Dollars

Source: US Census Bureau

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

Chart VA-16 of the US Census Bureau provides total sales of retail trade and food services not seasonally adjusted (NSA) in millions of dollars from Jan 1992 to Nov 2014. Data are not adjusted for seasonality, which explains sharp jagged behavior, or price changes. There was contraction during the global recession from IVQ2007 to IIQ2009 with strong rebound to a higher level and stability followed by strong increase in the final segment.

Chart VA-16, US, Total Sales of Retail Trade and Food Services, NSA, Jan 1992-Nov 2014, Millions of Dollars

Source: US Census Bureau

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

The report of consumer credit outstanding of the Board of Governors of the Federal Reserve System is provided in Table VA-8. The data are in seasonally adjusted annual rates both percentage changes and billions of dollars. The estimate of consumer credit “covers most short- and intermediate-term credit extended to individuals, excluding loans secured by real estate (http://www.federalreserve.gov/releases/g19/current/default.htm). Consumer credit is divided into two categories. (1) Revolving consumer credit (REV in Table VA-8) consists mainly of unsecured credit cards. (2) Non-revolving consumer credit (NREV in Table VA-8) “includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers or vacations” (http://www.federalreserve.gov/releases/g19/current/default.htm). In Oct 2014, revolving credit was $883 billion, or 26.9 percent of total consumer credit of $3279 billion, and non-revolving credit was $2396 billion, or 73.1 percent of total consumer credit outstanding. Consumer credit grew at relatively high rates before the recession beginning in IVQ2007 (Dec) and extending to IIQ2009 (Jun) as dated by the National Bureau of Economic Research or NBER (http://www.nber.org/cycles/cyclesmain.html). Percentage changes of consumer credit outstanding fell already in 2009. Rates were still negative in 2010 with decline of 1.0 percent in annual data and sharp decline of 7.6 percent in revolving credit. In IVQ 2013, total consumer credit grew at 5.4 percent with increase of revolving credit at 2.0 percent and increase of non-revolving credit at 6.7 percent. Growth continued in Oct 2014 with total credit at 4.9 percent, revolving at 1.3 percent and non-revolving at 6.2 percent.

Table VA-8, US, Consumer Credit Outstanding, SA, Annual Rate and Billions of Dollars

	Total ∆%	REV ∆%	NRV ∆%	Total $B	REV $B	NREV $B
2014
Oct	4.9	1.3	6.2	3279	883	2396
Sep	5.7	1.9	7.1	3266	882	2384
Aug	5.0	-0.3	7.0	3250	880	2370
IIIQ	6.4	3.0	7.7	3266	882	2384
IIQ	8.2	6.3	9.0	3214	875	2339
IQ	6.6	1.8	8.5	3149	861	2288
2013
IVQ	5.4	2.0	6.7	3097	857	2240
IIIQ	6.3	0.9	8.5	3056	853	2203
2013	6.0	1.3	7.9	3097	857	2240
2012	6.2	0.6	8.6	2924	847	2077
2011	4.1	0.2	5.9	2756	842	1914
2010	-1.0	-7.6	2.7	2647	840	1807
2009	-3.9	-8.8	-1.0	2553	917	1636
2008	1.3	0.2	2.0	2651	1005	1646
2007	5.9	8.5	4.3	2529	1008	1521

Note: REV: Revolving; NREV: Non-revolving; ∆%: simple annual rate from unrounded data; Total may not add exactly because of rounding

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g19/current/default.htm

Chart VA-17 of the Board of Governors of the Federal Reserve System total consumer credit outstanding in millions of dollars measured in the right axis and the finance rate on 24-month personal loans at commercial banks, not seasonally adjusted, measured on the left axis. There was sharp decline of total consumer loans outstanding during the global recession followed by strong recovery. There is long-term decline of the financing rate.

Chart VA-17, US, Total Consumer Credit Owned and Securitized NSA and Financing Rate on 24-month Personal Loans at Commercial Banks NSA, Millions of Dollars and Percent, Feb 1972-Oct 2014

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g19/current/default.htm

Chart VA-18 of the Board of Governors of the Federal Reserve System provides percentage changes of total consumer credit outstanding in the US and the financing rate on 24-month personal consumer loans at commercial banks, since 1972. The shaded bars are the cyclical contraction dates of the National Bureau of Economic Research (http://www.nber.org/cycles/cyclesmain.html). Consumer credit is cyclical, declining during contractions as shown by negative percentage changes during economic contractions. There is clear upward trend in 2012-2013 but with significant fluctuations and vacillation in the final segment.

Chart VA-18, US, Percent Change of Total Consumer Credit, Seasonally Adjusted at an Annual Rate and Finance Rate on 24-month Personal Loans at Commercial Banks NSA, Feb 1972-Oct 2014

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g19/current/default.htm

Table VA-9 provides additional information required for understanding the deficit/debt situation of the United States. The table is divided into four parts: Treasury budget in the 2015 fiscal year beginning on Oct 1, 2014 and ending on Sep 30, 2015; federal fiscal data for the years from 2009 to 2014; federal fiscal data for the years from 2005 to 2008; and Treasury debt held by the public from 2005 to 2013. Receipts increased 6.0 percent in the cumulative fiscal year 2015 ending in Nov 2015 relative to the cumulative in fiscal year 2014. Individual income taxes increased 5.9 percent relative to the same fiscal period a year earlier. Outlays decreased 4.0 percent relative to a year earlier. There are also receipts, outlays, deficit and debt for fiscal years 2013 and 2014. Total revenues of the US from 2009 to 2012 accumulate to $9021 billion, or $9.0 trillion, while expenditures or outlays accumulate to $14,109 billion, or $14.1 trillion, with the deficit accumulating to $5090 billion, or $5.1 trillion. Revenues decreased 6.5 percent from $9653 billion in the four years from 2005 to 2008 to $9021 billion in the years from 2009 to 2012. Decreasing revenues were caused by the global recession from IVQ2007 (Dec) to IIQ2009 (Jun) and also by growth of only 2.3 percent on average in the cyclical expansion from IIIQ2009 to IIIQ2014. In contrast, the expansion from IQ1983 to IQ1988 was at the average annual growth rate of 4.9 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2014/11/valuations-of-risk-financial-assets.html). Because of mediocre GDP growth, there are 26.0 million unemployed or underemployed in the United States for an effective unemployment rate of 15.8 percent (http://cmpassocregulationblog.blogspot.com/2014/12/financial-risks-twenty-six-million.html). Weakness of growth and employment creation is analyzed in II Collapse of United States Dynamism of Income Growth and Employment Creation (http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html). In contrast with the decline of revenue, outlays or expenditures increased 30.2 percent from $10,839 billion, or $10.8 trillion, in the four years from 2005 to 2008, to $14,109 billion, or $14.1 trillion, in the four years from 2009 to 2012. Increase in expenditures by 30.2 percent while revenue declined by 6.5 percent caused the increase in the federal deficit from $1186 billion in 2005-2008 to $5090 billion in 2009-2012. Federal revenue was 14.9 percent of GDP on average in the years from 2009 to 2012, which is well below 17.4 percent of GDP on average from 1973 to 2012. Federal outlays were 23.3 percent of GDP on average from 2009 to 2012, which is well above 20.4 percent of GDP on average from 1973 to 2012. The lower part of Table VA-9 shows that debt held by the public swelled from $5803 billion in 2008 to $11,982 billion in 2013, by $5478 billion or 106.5 percent. Debt held by the public as percent of GDP or economic activity jumped from 39.3 percent in 2008 to 72.1 percent in 2013, which is well above the average of 38.0 percent from 1973 to 2012. The United States faces tough adjustment because growth is unlikely to recover, creating limits on what can be obtained by increasing revenues, while continuing stress of social programs restricts what can be obtained by reducing expenditures.

Table VA-9, US, Treasury Budget in Fiscal Year to Date Million Dollars

Nov 2014	Fiscal Year 2015	Fiscal Year 2014	∆%
Receipts	404,155	381,380	6.0
Outlays	582,686	607,190	-4.0
Deficit	-178,531	-255,810
Individual Income Tax	192,619	181,818	5.9
Corporation Income Tax	12,810	6,973	83.7
Social Insurance	108,522	103,852	4.5
	Receipts	Outlays	Deficit (-), Surplus (+)
$ Billions
Fiscal Year 2014	3,021	3,504	-483
% GDP	17.5	20.3	2.8
Fiscal Year 2013	2,775	3,455	-680
% GDP	16.7	20.8	-4.1
Fiscal Year 2012	2,450	3,537	-1,087
% GDP	15.2	22.0	-6.8
Fiscal Year 2011	2,304	3,603	-1,300
% GDP	15.0	23.4	-8.4
Fiscal Year 2010	2,163	3,457	-1,294
% GDP	14.6	23.4	-8.8
Fiscal Year 2009	2,105	3,518	-1,413
% GDP	14.6	24.4	-9.8
Total 2009-2012	9,021	14,109	-5,090
Average % GDP 2009-2012	14.9	23.3	-8.4
Fiscal Year 2008	2,524	2,983	-459
% GDP	17.1	20.2	-3.1
Fiscal Year 2007	2,568	2,729	-161
% GDP	17.9	19.0	-1.1
Fiscal Year 2006	2,407	2,655	-248
% GDP	17.6	19.4	-1.8
Fiscal Year 2005	2,154	2,472	-318
% GDP	16.7	19.2	-2.5
Total 2005-2008	9,653	10,839	-1,186
Average % GDP 2005-2008	17.3	19.5	-2.1
Debt Held by the Public	Billions of Dollars	Percent of GDP
2005	4,592	35.6
2006	4,829	35.3
2007	5,035	35.1
2008	5,803	39.3
2009	7,545	52.3
2010	9,019	61.0
2011	10,128	65.8
2012	11,281	70.1
2013	11,982	72.0

Source: http://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/mthTreasStmt_home.htm CBO (2012NovMBR). CBO (2011AugBEO); Office of Management and Budget 2011. Historical Tables. Budget of the US Government Fiscal Year 2011. Washington, DC: OMB; CBO. 2011JanBEO. Budget and Economic Outlook. Washington, DC, Jan. CBO. 2012AugBEO. Budget and Economic Outlook. Washington, DC, Aug 22. CBO. 2012Jan31. Historical budget data. Washington, DC, Jan 31. CBO. 2012NovCDR. Choices for deficit reduction. Washington, DC. Nov. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO (2013Aug12). 2013AugHBD. Historical budget data—August 2013. Washington, DC, Congressional Budget Office, Aug. CBO, Historical Budget Data—February 2014, Washington, DC, Congressional Budget Office, Feb. CBO, Historical budget data—April 2014 release. Washington, DC, Congressional Budget Office, Apr. Congressional Budget Office, August 2014 baseline: an update to the budget and economic outlook: 2014 to 2024. Washington, DC, CBO, Aug 27, 2014. CBO, Monthly budget review: summary of fiscal year 2014. Washington, DC, Congressional Budget Office, Nov 10, 2014.

VB Japan. The GDP of Japan grew at 1.0 percent per year on average from 1991 to 2002, with the GDP implicit deflator falling at 0.8 percent per year on average. The average growth rate of Japan’s GDP was 4 percent per year on average from the middle of the 1970s to 1992 (Ito 2004). Low growth in Japan in the 1990s is commonly labeled as “the lost decade” (see Pelaez and Pelaez, The Global Recession Risk (2007), 81-115). Table VB-GDP provides yearly growth rates of Japan’s GDP from 1995 to 2013. Growth weakened from 2.7 per cent in 1995 and 1996 to contractions of 1.5 percent in 1999 and 0.4 percent in 2001 and growth rates below 2 percent with exception of 2.3 percent in 2003. Japan’s GDP contracted sharply by 3.7 percent in 2006 and 2.0 percent in 2009. As in most advanced economies, growth was robust at 3.4 percent in 2010 but mediocre at 0.3 percent in 2011 and 0.7 percent in 2013. Japan’s GDP grew 2.3 percent in 2013.

Table VB-GDP, Japan, Yearly Percentage Change of GDP  ∆%

Calendar Year	∆%
1995	2.7
1996	2.7
1997	0.1
1998	-1.5
1999	0.5
2000	2.0
2001	-0.4
2002	1.1
2003	2.3
2004	1.5
2005	1.9
2006	1.8
2007	1.8
2008	-3.7
2009	-2.0
2010	3.4
2011	0.3
2012	0.7
2013	2.3

Source: Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (https://www.boj.or.jp/en/mopo/outlook/gor1404b.pdf) with changes on Jul 14, 2014 (https://www.boj.or.jp/en/announcements/release_2014/k140715a.pdf). For fiscal 2013, the forecast is of growth of GDP between 2.2 and 2.3 percent, with the all items CPI less fresh food of 0.8 percent (https://www.boj.or.jp/en/mopo/outlook/gor1404b.pdf). The critical difference is forecast of the CPI excluding fresh food of 3.2 to 3.5 percent in 2014, 1.9 to 2.8 percent in 2015 and 2.0 to 3.0 in 2016 (https://www.boj.or.jp/en/announcements/release_2014/k140715a.pdf). Consumer price inflation in Japan excluding fresh food was 0.4 percent in Apr 2014 and 3.4 percent in 12 months (http://www.stat.go.jp/english/data/cpi/1581.htm), significantly because of the increase of the tax on value added of consumption in Apr 2014. The new monetary policy of the Bank of Japan aims to increase inflation to 2 percent. These forecasts are biannual in Apr and Oct. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:

“The Bank of Japan conducts monetary policy based on the principle that the policy shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy, and is responsible for maintaining financial system stability. The Bank aims to achieve price stability on a sustainable basis, given that there are various factors that affect prices in the short run.

The Bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan's economy make progress. Based on this recognition, the Bank sets the price stability target at 2 percent in terms of the year-on-year rate of change in the consumer price index.

Under the price stability target specified above, the Bank will pursue monetary easing and aim to achieve this target at the earliest possible time. Taking into consideration that it will take considerable time before the effects of monetary policy permeate the economy, the Bank will ascertain whether there is any significant risk to the sustainability of economic growth, including from the accumulation of financial imbalances.”

The Bank of Japan also provided explicit analysis of its view on price stability in a “Background note regarding the Bank’s thinking on price stability” (http://www.boj.or.jp/en/announcements/release_2013/data/rel130123a1.pdf http://www.boj.or.jp/en/announcements/release_2013/rel130123a.htm/). The Bank of Japan also amended “Principal terms and conditions for the Asset Purchase Program” (http://www.boj.or.jp/en/announcements/release_2013/rel130122a.pdf): “Asset purchases and loan provision shall be conducted up to the maximum outstanding amounts by the end of 2013. From January 2014, the Bank shall purchase financial assets and provide loans every month, the amount of which shall be determined pursuant to the relevant rules of the Bank.”

Financial markets in Japan and worldwide were shocked by new bold measures of “quantitative and qualitative monetary easing” by the Bank of Japan (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The objective of policy is to “achieve the price stability target of 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) at the earliest possible time, with a time horizon of about two years” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The main elements of the new policy are as follows:

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

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

Fiscal Year Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2013
Apr 2014	+2.2 to +2.3 [+2.2]	+0.8
Jan 2014	+2.5 to +2.9 [+2.7]	+0.7 to +0.9 [+0.7]
Oct 2013	+2.6 to +3.0 [+2.7]	+0.6 to +1.0 [+0.7]
Jul 2013	+2.5 to +3.0 [+2.8]	+0.5 to +0.8 [+0.6]
2014
Jul 2014	+0.6 to +1.3 [+1.0]	+3.2 to +3.5 [+3.3]	+1.2 to +1.5 [+1.3]
Apr 2014	+0.8 to +1.3 [+1.1]	+3.0 to +3.5 [+3.3]	+1.0 to +1.5 [+1.3]
Jan 2014	+0.9 to 1.5 [+1.4]	+2.9 to +3.6 [+3.3]	+0.9 to +1.6 [+1.3]
Oct 2013	+0.9 to +1.5 [+1.5]	+2.8 to +3.6 [+3.3]	+0.8 to +1.6 [+1.3]
Jul 2013	+0.8 to +1.5 [+1.3]	+2.7 to +3.6 [+3.3]	+0.7 to +1.6 [+1.3]
2015
Jul 2014	+1.2 to +1.6 [+1.5]	+1.9 to +2.8 [+2.6]	+1.2 to +2.1 [+1.9]
Apr 2014	+1.2 to +1.5 [+1.5]	+1.9 to +2.8 [+2.6]	+1.2 to +2.1 [+1.9]
Jan 2014	+1.2 to +1.8 [+1.5]	+1.7 to +2.9 [+2.6]	+1.0 to +2.2 [+1.9]
Oct 2013	+1.3 to +1.8 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
Jul 2013	+1.3 to +1.9 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
2016
Jul 2014	+1.0 to +1.5 [+1.3]	+2.0 to +3.0 [+2.8]	+1.3 to +2.3 [+2.1]
Apr 2014	+1.0 to +1.5 [+1.3]	+2.0 to +3.0 [+2.8]	+1.3 to +2.3 [+2.1]

Figures in brackets are the median of forecasts of Policy Board members

Source: Policy Board, Bank of Japan

https://www.boj.or.jp/en/announcements/release_2014/k140715a.pdf

The Markit/JMMA Flash Japan Manufacturing PMI Index™ with the Flash Japan Manufacturing PMI™ decreased from 52.4 in Oct to 52.1 in Nov and the Flash Japan Manufacturing Output Index™ increased from 51.3 in Oct to 53.5 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/b111ccb969f04f6d9a9ff3a283807bfa). New export orders increased at a slower pace. Amy Brownbill, Economist at Markit, finds improving Japan’s manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/b111ccb969f04f6d9a9ff3a283807bfa). Private-sector activity in Japan improved marginally with the Markit Composite Output PMI Index increasing from 49.5 in Oct to 51.2 in Nov, indicating modest improvement (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d4d9e4343014b418f3d900d3445d46a). The Markit Business Activity Index of Services increased to 50.6 in Nov from 48.7 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d4d9e4343014b418f3d900d3445d46a). Amy Brownbill, Ecoomist at Markit and author of the report, finds the reading consistent with growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d4d9e4343014b418f3d900d3445d46a). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 52.4 in Oct to 52.0 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/8d624f6683ba4e119b6a525e6e8b56fb). New orders, output and foreign orders increased. Philip Leake, Economist at Markit, finds higher manufacturing improvement (http://www.markiteconomics.com/Survey/PressRelease.mvc/8d624f6683ba4e119b6a525e6e8b56fb).Table JPY provides the country data table for Japan.

Table JPY, Japan, Economic Indicators

Historical GDP and CPI	1981-2010 Real GDP Growth and CPI Inflation 1981-2010 Blog 8/9/11 Table 26
Corporate Goods Prices	Nov ∆% -0.2 12 months ∆% 2.7 Blog 12/14/14
Consumer Price Index	Oct NSA ∆% -0.3; Oct 12 months NSA ∆% 2.9 Blog 12/7/14
Real GDP Growth	IIIQ2014 ∆%: -0.5 on IIQ2014;  IIIQ2014 SAAR -1.9; ∆% from quarter a year earlier: -1.3 % Blog 6/16/13 8/18/13 9/15/13 11/17/13 12/15/13 2/23/14 3/16/14 5/18/14 6/15/14 8/17/14 9/14/14 11/23/14 12/14/14
Employment Report	Oct Unemployed 2.33 million Change in unemployed since last year: minus 300 thousand Unemployment rate: 3.5 % Blog 12/7/14
All Industry Indices	Aug month SA ∆% -0.1 12-month NSA ∆% -2.5 Blog 10/26/14
Industrial Production	Oct SA month ∆%: 0.2 12-month NSA ∆% -1.0 Blog 11/30/14
Machine Orders	Total Oct ∆% -2.9 Private ∆%: -7.9 Oct ∆% Excluding Volatile Orders minus 6.4 Blog 12/14/14
Tertiary Index	Oct month SA ∆% -0.2 Oct 12 months NSA ∆% minus 0.9 Blog 12/14/14
Wholesale and Retail Sales	Sep 12 months: Total ∆%: 0.3 Wholesale ∆%: -0.1 Retail ∆%: 1.4 Blog 11/30/14
Family Income and Expenditure Survey	Oct 12-month ∆% total nominal consumption -0.7, real -4.0 Blog 12/7/14
Trade Balance	Exports Oct 12 months ∆%: 9.6 Imports Oct 12 months ∆% 2.7 Blog 11/23/14

Links to blog comments in Table JPY:

12/7/14 http://cmpassocregulationblog.blogspot.com/2014/12/financial-risks-twenty-six-million.html

11/30/14 http://cmpassocregulationblog.blogspot.com/2014/11/valuations-of-risk-financial-assets.html

11/23/14 http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.htm

10/26/14 http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html

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

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

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

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

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

2/23/14 http://cmpassocregulationblog.blogspot.com/2014/02/squeeze-of-economic-activity-by-carry.html

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

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

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

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

Japan’s economy grew 1.4 percent in IQ2014, seasonally adjusted, partly because of anticipation of purchases to avoid the increase in the tax on value added of consumption in Apr 2014, contracting 1.7 percent in IIQ2014, as shown in Table VB-1, incorporating the latest estimates and revisions. Japan’s GDP contracted 0.5 percent in IIIQ2014. The economy of Japan contracted 0.4 percent in IVQ2013 after growing 0.4 percent in IIIQ2013, 0.7 percent in IIQ2013 and 1.5 percent in IQ2013. Japan’s GDP decreased 0.3 percent in IVQ2012 relative to IIIQ2012. IQ2012 GDP growth was revised to 1.1 percent; IIQGDP growth was revised to -0.4 percent; and IIIQ2012 growth was revised to -0.5 percent. The economy of Japan had already weakened in IVQ2010 when GDP fell revised 0.6 percent. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell 1.8 percent in IQ2011 and fell again 0.6 percent in IIQ2011 because of the disruption of the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Recovery was robust in the first two quarters of 2010 but GDP grew at 1.5 percent in IIIQ2010 and fell 0.6 percent in IVQ2010. The deepest quarterly contractions in the global recession were 3.3 percent in IVQ2008 and 4.0 percent in IQ2009.

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

	IQ	IIQ	IIIQ	IVQ
2014	1.4	-1.7	-0.5
2013	1.5	0.7	0.4	-0.4
2012	1.1	-0.4	-0.5	-0.2
2011	-1.8	-0.6	2.6	0.1
2010	1.5	1.1	1.5	-0.6
2009	-4.0	1.7	0.1	1.7
2008	0.7	-1.2	-1.1	-3.3
2007	1.0	0.1	-0.4	0.9
2006	0.4	0.4	-0.1	1.3
2005	0.2	1.3	0.3	0.2
2004	0.9	0.1	0.1	-0.3
2003	-0.6	1.3	0.4	1.0
2002	-0.2	1.1	0.6	0.4
2001	0.6	-0.2	-1.1	-0.1
2000	1.6	0.2	-0.3	0.7
1999	-0.9	0.4	-0.2	0.5
1998	-1.9	-0.5	0.3	0.6
1997	0.8	-1.0	0.4	-0.1

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Table VB-2 provides contributions to real GDP at seasonally adjusted annual rates (SAAR). GDP contracted at 1.9 percent in IIIQ2014 with contribution of 0.9 percent by personal consumption expenditures, 0.3 percent by net trade and 0.2 percent by government consumption expenditures. Gross fixed capital formation deducted 0.8 percent and private inventory divestment 2.5 percent. Japan contracted at 6.7 percent in IIQ2014 with deduction of 12.4 percentage points of personal consumption expenditures and deduction of 3.9 percentage points of gross fixed capital formation. Trade added 4.2 percentage to GDP growth in IIQ2014; private inventory investment added 5.1 percentage points; and government expenditures added 0.2 percentage points. The GDP of Japan expanded at 5.8 percent in IQ2014 with contributions of 5.3 percent by personal consumption and 3.2 percent of gross fixed capital formation. There were deductions of 0.8 percent by trade, 1.8 percent by inventory divestment and 0.3 percent by government expenditures. The GDP of Japan contracted at 1.5 percent annual equivalent in IVQ2013 with contraction of personal consumption expenditures of 0.2 percent and growth of GFCF at 1.1 percent. Trade deducted 2.3 percentage points. Japan grew at 1.6 percent in IIIQ 2013 with contribution of 0.7 percentage points by personal consumption and 1.7 percentage points by GFCF. Trade deducted 1.5 percentage points. Japan grew at 3.0 percent SAAR in IIQ2013 driven by contributions of 1.9 percent of personal consumption (PC), 0.2 percent of net trade and gross fixed capital formation (GFCF) at 2.1 percent. In IQ2013, Japan’s GDP increased at the SAAR of 6.0 percent in large part because of 3.1 percent in personal consumption and 1.7 percent in trade. The SAAR of GDP in IVQ2012 was minus 0.9 percent: 0.3 percentage points from growth of personal consumption expenditures (PC) less 0.5 percentage points of net trade (exports less imports) less 0.9 percentage points of private inventory investment (PINV) plus 0.5 percentage points of government consumption and minus 0.3 percentage points of gross fixed capital formation (GFCF). The SAAR of GDP in IIIQ2011 was revised to a high 11.0 percent. Net trade deducted from GDP growth in three quarters of 2011 and provided the growth impulse of 3.9 percentage points in IIIQ2011. Growth in 2011 and IQ2012 was driven by personal consumption expenditures that deducted 0.9 percentage points from GDP growth in IIIQ2012 but added 0.3 percentage points to GDP growth in IVQ2012.

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

	GDP	PC	GFCF	Trade	PINV	GOVC
2014
I	5.8	5.3	3.2	-0.8	-1.8	-0.3
II	-6.7	-12.4	-3.9	4.2	5.1	0.2
III	-1.9	0.9	-0.8	0.3	-2.5	0.2
2013
I	6.0	3.1	0.4	1.7	0.1	0.7
II	3.0	1.9	2.1	0.2	-2.0	0.5
III	1.6	0.7	1.7	-1.5	0.8	-0.1
IV	-1.5	-0.2	1.1	-2.3	-0.2	0.1
2012
I	4.6	1.4	-0.4	0.4	2.2	1.0
II	-1.7	1.6	0.6	-1.5	-2.1	-0.3
III	-2.0	-0.9	-1.0	-1.9	1.3	0.4
IV	-0.9	0.3	-0.3	-0.5	-0.9	0.5
2011
I	-7.1	-4.0	-0.2	-1.2	-1.7	-0.1
II	-2.4	2.6	0.3	-4.5	-1.3	0.4
III	11.0	3.9	1.3	3.9	1.7	0.1
IV	0.5	1.1	3.1	-3.0	-0.9	0.2
2010
I	6.0	1.8	0.2	2.1	2.4	-0.5
II	4.5	0.2	1.2	0.0	2.0	1.2
III	6.0	3.1	0.9	0.5	1.2	0.3
IV	-2.3	-1.1	-1.2	-0.3	0.0	0.3
2009
I	-15.0	-1.9	-2.0	-4.4	-7.4	0.7
II	7.1	4.2	-3.0	7.3	-2.2	0.7
III	0.3	-0.1	-1.4	2.2	-1.4	1.0
IV	6.9	3.4	0.0	2.8	0.5	0.3
2008
I	2.8	1.5	0.4	1.2	-0.3	-0.1
II	-4.6	-3.1	-2.2	0.4	1.0	-0.8
III	-4.2	-0.6	-1.0	0.0	-2.6	0.0
IV	-12.6	-2.8	-4.6	-11.4	5.7	0.3
2007
I	4.1	0.9	0.5	1.2	1.3	0.3
II	0.6	0.6	-1.5	0.7	0.0	0.5
III	-1.5	-1.1	-1.7	2.0	-0.6	-0.2
IV	3.5	0.3	0.2	1.4	0.9	0.6

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

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 IQ2012. The only strong contribution of net trade was 3.9 percent in IIIQ2011. Net trade added 1.7 percentage points to GDP growth in IQ2013 and 0.2 percentage points in IIQ2013 but deducted 1.5 percentage points in IIIQ2013 and deducted 2.3 percentage points in IVQ2013. Net trade deducted 0.8 percentage points from GDP growth in IQ2014. Net trade added 4.2 percentage points to GDP growth in IIQ2014 and 0.3 percentage points in IIIQ2014. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

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

	Net Trade	Exports	Imports
2014
I	-0.8	4.1	-4.9
II	4.2	-0.3	4.5
III	0.3	0.9	-0.6
2013
I	1.7	2.4	-0.7
II	0.2	1.7	-1.5
III	-1.5	-0.4	-1.2
IV	-2.3	0.1	-2.5
2012
I	0.4	1.7	-1.3
II	-1.5	-0.3	-1.2
III	-1.9	-2.4	0.5
IV	-0.5	-1.9	1.4
2011
I	-1.2	-0.4	-0.7
II	-4.5	-4.6	0.2
III	3.9	5.8	-1.9
IV	-3.0	-1.9	-1.0
2010
I	2.1	3.5	-1.3
II	0.0	2.6	-2.6
III	0.5	1.4	-0.9
IV	-0.3	0.1	-0.4
2009
I	-4.4	-16.4	12.0
II	7.3	4.7	2.7
III	2.2	5.3	-3.1
IV	2.8	4.1	-1.3
2008
I	1.2	2.1	-0.9
II	0.4	-1.6	2.0
III	0.0	0.2	-0.2
IV	-11.4	-10.2	-1.2
2007
I	1.2	1.7	-0.5
II	0.7	1.6	-0.9
III	2.0	1.5	0.6
IV	1.4	2.1	-0.6

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Japan’s percentage growth of GDP not seasonally adjusted in a quarter relative to the same quarter a year earlier is shown in Table VB-4. Contraction of GDP in a quarter relative to the same quarter a year earlier extended over seven quarters from IIQ2008 through IVQ2009. Contraction was sharpest in IQ2009 with output declining 9.4 percent relative to a year earlier. Yearly quarterly rates of growth of Japan were relatively high for a mature economy through the decade with the exception of the contractions from IVQ2001 to IIQ2002 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused flat GDP in IQ2011 at 0.0 percent relative to the same quarter a year earlier and decline of 1.5 percent in IIQ2011. GDP fell 0.5 percent in IIIQ2011 relative to a year earlier and increased 0.1 percent in IVQ2011 relative to a year earlier. Growth resumed with 3.5 percent in IQ2012 relative to a year earlier. Growth of 3.5 percent in IIQ2012 is largely caused by the low level in IIQ2011 resulting from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP increased 0.2 percent in IIIQ2012 relative to a year earlier and changed 0.0 percent in IVQ2012 relative to a year earlier. GDP increased 0.5 percent in IQ2013 relative to a year earlier and 1.4 percent in IIQ2013. Growth of 2.2 percent in IIIQ2013 relative to a year earlier is partly due to the decline of 0.5 percent in GDP in IIIQ2012. GDP increased 2.3 percent in IVQ2013 relative to a year earlier. The GDP of Japan increased 2.5 percent in IQ2014 relative to a year earlier. Japan’s GDP contracted 0.3 percent in IIQ2014 relative to a year earlier. GDP contracted 1.3 percent in IIIQ2014 relative to a year earlier. Japan faces the challenge of recovery from the devastation of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in an environment of declining world trade and bouts of risk aversion that cause appreciation of the Japanese yen, eroding the country’s competitiveness in world markets.

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

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

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Japan’s total machinery orders seasonally adjusted in Table VB-5 decreased 2.9 percent seasonally adjusted in Oct 2014. Private sector orders decreased 7.9 percent and decreased 6.4 percent excluding volatile orders. Orders from overseas decreased 4.6 percent and manufacturing orders decreased 5.5 percent. Government orders increased 4.8 percent.

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

2014	Oct 14	Sep 14	Aug 14	Jul 14
Total	-2.9	8.0	-2.2	-13.5
Private Sector	-7.9	19.2	-12.4	16.4
Excluding Volatile Orders	-6.4	2.9	4.7	3.5
Manufacturing	-5.5	12.0	-10.8	20.3
Non-Manufacturing ex Volatile	-7.5	1.7	10.7	-4.3
Government	4.8	21.0	-29.9	9.3
From Overseas	-4.6	-9.4	29.1	-42.6
Through Agencies	6.1	2.5	-3.6	2.3

Note: Mfg: manufacturing

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Chart VB-1, Japan, Machinery Orders

Source: Japan Economic and Social Research Institute, Cabinet Office

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

Table VB-6 provides values and percentage changes from a year earlier of Japan’s machinery orders without seasonal adjustment. Total orders of JPY 1,902.609 million in Oct 2014 are divided between JPY 791,798 million overseas orders, or 41.6 percent of the total, and domestic orders of JPY 999,091 million, or 52.5 percent of the total, with orders through agencies of JPY 111,809 million, or 5.9 percent of the total. Orders through agencies are not in Table VB-2 because of the minor value and appear only in the note to the table. Twelve-month percentages changes in Oct 2014 were mixed with decreases of 5.1 percent for domestic orders and 4.9 percent for private excluding volatile components with decrease of 1.4 percent for total orders. Overseas orders increased 2.6 percent in 12 months.

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

	Total	Overseas	Domestic	Private ex Volatile
Value Oct  2014	1,902,698	791,798	999,091	698,114
% Total	100.0	41.6	52.5	36.7
Value Oct 2013	1,929,486	772,053	1,052,984	734,202
% Total	100.0	40.0	54.6	38.1
12-month ∆%	-1.4	2.6	-5.1	-4.9
Oct 2014	-1.4	2.6	-5.1	-4.9
Sep 2014	-2.4	-4.7	-1.6	7.3
Aug 2014	0.4	14.9	-11.1	-3.3
Jul 2014	6.1	4.4	6.8	1.1
Jun 2014	30.3	87.5	-2.9	-3.0
May 2014	-2.6	-0.2	-5.5	-14.3
Apr 2014	53.6	101.7	21.5	17.6
Mar 2014	-0.3	-4.3	4.1	16.1
Feb 2014	20.0	31.9	12.4	10.8
Jan 2014	28.8	29.8	29.0	23.6
Dec 2013	15.1	25.0	8.3	6.7
Nov 2013	8.9	1.3	14.4	16.6
Oct 2013	24.6	29.7	21.4	17.8
Sep 2013	30.3	57.4	18.4	11.4
Aug 2013	25.9	41.8	17.1	10.3
Jul 2013	5.3	4.4	6.9	6.5
Jun 2013	2.7	0.1	4.1	4.9
May 2013	18.1	17.1	20.8	16.5
Apr 2013	-4.3	6.7	-9.9	-1.1
Mar 2013	11.5	27.5	3.3	2.4
Feb 2013	-14.8	-21.0	-10.7	-11.3
Jan 2013	-24.8	-36.7	-11.8	-9.7
Dec 2012	-12.5	-24.1	-3.3	-3.4
Nov 2012	-8.6	-9.6	-8.5	0.3
Oct 2012	-6.9	-12.8	-2.6	1.2
Sep 2012	-7.8	-18.4	-1.8	-7.8
Aug 2012	-18.6	-31.1	-10.2	-6.1
Jul 2012	2.6	-1.9	3.2	1.7
Jun 2012	-10.9	-11.3	-12.4	-9.9
May 2012	-6.8	-7.0	-8.6	1.0
Apr 2012	7.5	-9.6	23.0	6.6
Mar 2012	8.1	-10.0	19.0	-1.1
Feb 2012	-9.3	-8.9	-11.2	8.9
Jan 2012	9.8	18.3	0.5	5.7
Dec 2011	0.8	12.6	-8.5	6.3
Nov 2011	11.0	8.0	13.5	12.5
Oct 2011	-6.8	-15.6	-1.0	1.5
Dec 2010	9.4	3.5	14.1	-0.6
Dec 2009	1.8	0.4	3.6	-1.9
Dec 2008	-23.3	-29.4	-17.4	-24.7
Dec 2007	1.3	9.8	-4.3	-6.4
Dec 2006	0.8	0.9	-0.1	0.1

Note: Total machinery orders = overseas + domestic demand + orders through agencies. Orders through agencies in Oct 2014 were JPY 111,809 million or 5.9 percent of the total and JPY 104,449 or 5.4 percent of the total in Oct 2013, and are not shown in the table. The data are the original numbers without any adjustments and differ from the seasonally adjusted data.

Source: Japan Economic and Social Research Institute, Cabinet Office

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

The tertiary activity index of Japan decreased 0.2 percent SA in Oct 2014 and decreased 0.9 percent NSA in the 12 months ending in Oct 2014, as shown in Table VB-7. There are effects of the increase in the tax on value added of consumption in Apr 2014. The index is showing significant volatility with increases of 0.5 percent in Feb 2013 and 0.5 percent in May 2013 but decreases in multiple months. The indexed increased 2.6 percent in Mar 2014 largely because of anticipation of expenditures to avoid the increase in the tax on consumption in Apr 2014. The index fell 5.7 percent in Apr 2014 because of the increases in the tax on consumption. The tertiary activity index fell 5.2 percent in 2009, growing 1.3 percent in 2010, 0.1 percent in 2011 and 1.4 percent in 2012. The tertiary activity index increased 0.7 percent in 2013.

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

	Month ∆% SA	12 Months ∆% NSA
Oct 2014	-0.2	-0.9
Sep	1.3	-0.8
Aug	-0.1	-2.7
Jul	-0.3	-2.2
Jun	0.0	-1.4
May	0.9	-2.5
Apr	-5.7	-2.6
Mar	2.6	3.2
Feb	-0.9	0.9
Jan	1.5	2.0
Dec 2013	-0.1	0.8
Nov	0.3	0.5
Oct	-0.5	0.1
Sep	0.1	1.4
Aug	0.2	0.8
Jul	-0.1	1.5
Jun	-0.3	0.6
May	0.5	1.8
Apr	-0.1	1.5
Mar	0.1	0.7
Feb	0.5	-1.5
Jan	0.0	0.3
Dec 2012	0.2	-0.1
Nov	-0.1	1.0
Oct	0.2	1.3
Sep	0.0	0.1
Aug	0.2	0.6
Jul	-0.3	0.8
Jun	0.0	0.8
May	0.5	3.1
Apr	-0.2	2.4
Mar	-0.3	4.2
Feb	0.2	2.4
Jan	-0.8	0.3
Calendar Year
2013		0.7
2012		1.4
2011		0.1
2010		1.3
2009		-5.2
2008		-1.0
2007		1.0
2006		1.8
2005		1.9
2004		1.8

Source: Japan, Ministry of Economy, Trade and Industry

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

Month and 12-month rates of growth of the tertiary activity index of Japan and components in Oct 2014 are provided in Table VB-8. Electricity, gas, heat supply and water decreased 4.6 percent in Oct 2014 and decreased 2.8 percent in the 12 months ending in Oct 2014. Wholesale and retail trade decreased 0.6 percent in Oct 2014, rebounding from decline of 14.4 percent in the month of Apr because of the increase in the tax on value added of consumption. The index of wholesale and retail trade decreased 3.2 percent in 12 months ending in Oct 2014. Information and communications increased 1.2 percent in Oct and decreased 0.9 percent in 12 months.

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

Oct 2014	Weight	Month ∆% SA	12 Months ∆% NSA
Tertiary Index	10,000.0	-0.2	-0.9
Electricity, Gas, Heat Supply & Water	372.9	-4.6	-2.8
Information & Communications	951.2	1.2	0.9
Wholesale & Retail Trade	2,641.2	-0.6	-3.2
Finance & Insurance	971.1	1.9	2.1
Real Estate & Goods Rental & Leasing	903.4	-0.5	-0.9
Scientific Research, Professional & Technical Services	551.3	-1.1	-6.4
Accommodations, Eating, Drinking	496.0	-1.3	-0.6
Living-Related, Personal, Amusement Services	552.7	-2.4	-3.4
Learning Support	116.9	-0.2	-0.5
Medical, Health Care, Welfare	921.1	0.3	2.4
Miscellaneous ex Government	626.7	-3.0	0.1

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

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

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