Competitive Currency Conflicts, World Inflation Waves, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Commercial Banks Assets and Liabilities, World Cyclical Slow Growth and Global Recession Risk: Part V

 

Competitive Currency Conflicts, World Inflation Waves, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Commercial Banks Assets and Liabilities, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IB1 Theory

IB2 Policy

IB3 Evidence

IB4 Unwinding Strategy

IC United States Inflation

IC Long-term US Inflation

ID Current US Inflation

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

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

II United States Commercial Banks Assets and Liabilities

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 1.7 percent, which annualizes at 7.0 percent and 7.8 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 7.9 percent relative to a year earlier. China grew at 1.8 percent in IVQ2013, which annualized to 7.4 percent and 7.6 percent relative to a year earlier. China’s GDP grew 1.6 percent in IQ2014, which annualizes to 6.6 percent, and 7.4 percent relative to a year earlier. China’s GDP grew 1.9 percent in IIQ2014, which annualizes at 7.8 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. The GDP of China grew 1.5 percent in IVQ2014, which annualizes at 6.1 percent, 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 (http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk.html 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 1.2 percent in IIIQ2014 at 5.0 percent SAAR and increased 2.7 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 0.6 percent in IQ2013 and 0.9 percent relative to a year earlier. UK GDP increased 0.6 percent in IIQ2013 and 1.7 percent relative to a year earlier. In IIIQ2013, UK GDP increased 0.7 percent and 1.6 percent relative to a year earlier. UK GDP increased 0.4 percent in IVQ2013 and 2.4 percent relative to a year earlier. In IQ2014, UK GDP increased 0.6 percent and 2.4 percent relative to a year earlier. UK GDP increased 0.8 percent in IIQ2014 and 2.6 percent relative to a year earlier. In IIIQ2014, UK GDP increased 0.7 percent and increased 2.6 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 0.2 percent in IVQ2012 and changed 0.0 percent relative to a year earlier. In IQ2013, France’s GDP changed 0.0 percent and declined 0.3 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	-0.2	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	1.7	7.8
Euro Area	-0.4	-1.2
Germany	-0.4	-1.8
France	0.0	-0.3
Italy	-0.9	-2.5
UK	0.6	0.9
	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	0.6	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	7.9
Euro Area	0.2	-0.3
Germany	0.3	0.8
France	-0.1	0.3
Italy	0.0	-1.8
UK	0.7	1.6
	IVQ2013/IIIQ2013	IVQ2013/IVQ2012
USA	QOQ: 0.9 SAAR: 3.5	3.1
Japan	QOQ: -0.4 SAAR: -1.5	2.3
China	1.8	7.6
Euro Area	0.2	0.4
Germany	0.4	1.0
France	0.2	0.8
Italy	-0.1	-1.2
UK	0.4	2.4
	IQ2014/IVQ2013	IQ2014/IQ2013
USA	QOQ -0.5 SAAR -2.1	1.9
Japan	QOQ: 1.4 SAAR: 5.8	2.5
China	1.6	7.4
Euro Area	0.3	1.1
Germany	0.8	2.6
France	0.0	0.8
Italy	0.0	-0.3
UK	0.6	2.4
	IIQ2014/IQ2014	IIQ2014/IIQ2013
USA	QOQ 1.1 SAAR 4.6	2.6
Japan	QOQ: -1.7 SAAR: -6.7	-0.3
China	1.9	7.5
Euro Area	0.1	0.8
Germany	-0.1	1.0
France	-0.1	0.0
Italy	-0.2	-0.4
UK	0.8	2.6
	IIIQ2014/IIQ2014	IIIQ2014/IIIQ2013
USA	QOQ: 1.2 SAAR: 5.0	2.7
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	2.6
	IVQ2014/IIIQ2014	IVQ2014/IVQ2013
China	1.5	7.3

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/2014/12/patience-on-interest-rate-increases.html and earlier (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 Nov 2014, Japan’s exports increased 4.9 percent in 12 months while imports decreased 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 Dec 2014, China exports increased 9.7 percent relative to a year earlier and imports decreased 2.4 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 1.7 percentage points from UK growth. Net trade contributed 0.1 percentage points to UK value added in IVQ2013. Net trade contributed 0.6 percentage points to UK value added in IQ2014 and 0.3 percentage points in IIQ2014. Net trade deducted 0.2 percentage points to GDP growth in IIIQ2014.
• France. France’s exports increased 0.6 percent in Nov 2014 while imports decreased 1.9 percent. France’s exports increased 4.4 percent in the 12 months ending in Nov 2014 and imports decreased 2.4 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 1.7 percentage points in IIIQ2013. Net trade added 0.1 percentage points to France’s GDP in IVQ2013 and deducted 0.0 percentage points in IQ2014. Net trade added 0.3 percentage points from France’s GDP growth in IIQ2014 and deducted 0.2 percentage points in IIIQ2014.
• United States. US exports decreased 1.0 percent in Nov 2014 and goods exports increased 2.9 percent in Jan-Nov 2014 relative to a year earlier. Imports decreased 2.2 percent in Nov 2014 and goods imports increased 3.0 percent in Jan-Nov 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. Industrial production decreased 0.1 percent in Dec 2014 and increased 1.3 percent in Nov 2014 after changing 0.0 percent in Oct 2014, with all data seasonally adjusted. The Federal Reserve completed its annual revision of industrial production and capacity utilization on Mar 28, 2014 (http://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm). The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production decreased 0.1 percent in December after rising 1.3 percent in November. The decrease in December reflected a sharp drop in the output of utilities, as warmer-than-usual temperatures reduced demand for heating; excluding utilities, industrial production rose 0.7 percent. Manufacturing posted a gain of 0.3 percent for its fourth consecutive monthly increase. The index for mining increased 2.2 percent after falling in the previous two months. At 106.5 percent of its 2007 average, total industrial production in December was 4.9 percent above its level of a year earlier. For the fourth quarter of 2014 as a whole, industrial production advanced at an annual rate of 5.6 percent, with widespread gains among the major market and industry groups. Capacity utilization for the industrial sector decreased 0.3 percentage point in December to 79.7 percent, a rate that is 0.4 percentage point below its long-run (1972–2013) average.”

In the six months ending in Dec 2014, United States national industrial production accumulated increase of 2.3 percent at the annual equivalent rate of 4.7 percent, which is lower than growth of 4.9 percent in the 12 months ending in Dec 2014. Excluding growth of 1.3 percent in Nov 2014, growth in the remaining five months from Jul to Dec 2014 accumulated to 1.0 percent or 2.4 percent annual equivalent. Industrial production declined in two of the past six months. Industrial production expanded at annual equivalent 4.9 percent in the most recent quarter from Oct to Dec 2014 and at 4.5 percent in the prior quarter Jul to Sep 2014. Business equipment accumulated growth of 3.3 percent in the six months from Jul to Dec 2014 at the annual equivalent rate of 6.8 percent, which is lower than growth of 7.5 percent in the 12 months ending in Dec 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 December to 79.7 percent, a rate that is 0.4 percentage point below its long-run (1972–2013) average.” United States industry apparently decelerated to a lower growth rate followed by possible acceleration and stronger growth in past months.

Manufacturing fell 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased by 25.9 percent from the trough in Apr 2009 to Dec 2014. Manufacturing grew 25.9 percent from the trough in Apr 2009 to Dec 2014. Manufacturing output in Dec 2014 is 1.7 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 $2,232.4 billion than actual $16,205.6 billion. There are about two trillion dollars of GDP less than at trend, explaining the 25.9 million unemployed or underemployed equivalent to actual unemployment of 15.7 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2015/01/fluctuating-valuations-of-risk.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/12/financial-risks-twenty-six-million.html). US GDP in IIIQ2014 is 12.1 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,205.1 billion in IIIQ2014 or 8.1 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 Dec 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 124.5620 in Dec 2014. The actual index NSA in Dec 2014 is 101.2840, which is 18.7 percent below trend. Manufacturing output grew at average 2.4 percent between Dec 1986 and Dec 2014, raising the index at trend to 117.1610 in Dec 2014. The output of manufacturing at 101.2840 in Dec 2014 is 13.6 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	-1.0 Nov	2.9 Jan-Nov	-2.2 Nov	3.0 Jan-Nov
Japan		Nov 4.9 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		Nov -1.7 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 9.7 Dec 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 -2.4 Dec -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	0.6 12-M Nov	1.8 Jan-Nov	-1.8 12-M Nov	0.0 Jan-Nov
Germany	-2.1 Nov CSA	1.4 Nov	-1.5 Nov CSA	1.7 Nov
France Nov	0.6	4.4	-1.9	-2.4
Italy Nov	-1.1	1.7	-0.1	0.0
UK	-0.4 Oct	-0.4 Sep-Nov 14 /Sep-Nov 13	-2.3 Oct	-4.7 Sep-Nov 14 /Sep-Nov 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 -1.7 IIIQ2013 0.1 IVQ2013 0.0 IQ2014 0.3 IIQ2014 -0.2 IIIQ2014
UK	0.7 IIQ2013 -1.7 IIIQ2013 0.1 IVQ2013 0.6 IQ2014 0.3 IIQ2014 -0.2 IIIQ2014

Sources: Country Statistical Agencies http://www.census.gov/foreign-trade/

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table VB-5 for Nov 2014. The share of Asia in Japan’s trade is close to one-half for 55.4 percent of exports and 47.8 percent of imports. Within Asia, exports to China are 18.6 percent of total exports and imports from China 24.7 percent of total imports. While exports to China increased 0.9 percent in the 12 months ending in Nov 2014, imports from China increased 3.9 percent. The largest export market for Japan in Nov 2014 is the US with share of 19.5 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 6.8 percent in the 12 months ending in Nov 2014 and imports from the US decreased 3.3 percent. Western Europe has share of 9.7 percent in Japan’s exports and of 10.4 percent in imports. Rates of growth of exports of Japan in Nov 2014 are 6.8 percent for exports to the US, minus 20.9 percent for exports to Brazil and minus 6.9 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 Nov 2014 are mixed. Imports from Asia increased 3.4 percent in the 12 months ending in Nov 2014 while imports from China increased 3.9 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

Table VB-5, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Nov 2014	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,188,859	4.9	7,080,718	-1.7
Asia	3,430,449 % Total 55.4	5.8	3,384,220 % Total 47.8	3.4
China	1,151,617 % Total 18.6	0.9	1,748,448 % Total 24.7	3.9
USA	1,208,277 % Total 19.5	6.8	626,218 % Total 8.8	-3.3
Canada	69,581	1.3	95,029	-2.1
Brazil	34,799	-20.9	88,775	-8.1
Mexico	91,375	22.6	32,443	-7.4
Western Europe	598,248 % Total 9.7	-0.5	735,291 % Total 10.4	0.9
Germany	154,146	-6.9	211,548	4.8
France	52,160	8.3	133,363	30.5
UK	94,155	10.9	49,963	-9.5
Middle East	268,253	17.5	1,130,462	-18.1
Australia	130,042	1.6	380,456	-1.8

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

World trade projections of the IMF are in Table V-6. There is increasing growth of the volume of world trade of goods and services from 3.0 percent in 2013 to 5.0 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-6, IMF, Projections of World Trade, USD Billions, USD/Barrel and Annual ∆%

	2013	2014	2015	Average ∆% 2016-2019
World Trade Volume (Goods and Services)	3.0	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 52.3 in Dec from 53.1 in Nov, indicating expansion at slightly slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/a0012184072a45c19d6ba4077f7c173d). This index has remained above the contraction territory of 50.0 during 65 consecutive months. The employment index decreased from 51.9 in Nov to 51.2 in Dec with input prices rising at unchanged rate, new orders increasing at slower rate and output increasing at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/a0012184072a45c19d6ba4077f7c173d). David Hensley, Director of Global Economic Coordination at JP Morgan, finds moderately slower world economic growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/a0012184072a45c19d6ba4077f7c173d). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, decreased to 51.6 in Dec from 51.8 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/4a2151bd3b014c39b499ef9eb7314369). New export orders expanded for the seventeenth consecutive month David Hensley, Director of Global Economics Coordination at JP Morgan Chase, finds continuing growth in global manufacturing with favorable effects from declining oil prices (http://www.markiteconomics.com/Survey/PressRelease.mvc/4a2151bd3b014c39b499ef9eb7314369). The HSBC Brazil Composite Output Index, compiled by Markit, increased from 48.1 in Nov to 49.1 in Dec, indicating moderate contraction in activity of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/590e511bf4584ef28ffaf9a87a368b6c). The HSBC Brazil Services Business Activity index, compiled by Markit, increased from 48.5 in Nov to 49.1 in Dec, indicating marginally contracting services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/590e511bf4584ef28ffaf9a87a368b6c). André Loes, Chief Economist, Brazil, at HSBC, finds slower pace of contraction at modest rate with acceleration of prices of output and inputs (http://www.markiteconomics.com/Survey/PressRelease.mvc/590e511bf4584ef28ffaf9a87a368b6c). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased from 48.7 in Nov to 50.2 in Dec, indicating moderate improvement in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/11700e354c5a457495e07143c55f59c6). André Loes, Chief Economist, Brazil at HSBC, finds increasing new orders and moderate decrease in output (http://www.markiteconomics.com/Survey/PressRelease.mvc/11700e354c5a457495e07143c55f59c6).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted decreased to 53.7 in Jan from 53.9 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/80042dee6d574c69b28052f0ba16d999). New export orders increased moderately. Chris Williamson, Chief Economist at Markit, finds that manufacturing is growing with weakness in new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/80042dee6d574c69b28052f0ba16d999). The Markit Flash US Services PMI™ Business Activity Index decreased from 56.2 in Nov to 53.6 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/201ab60916734bff84245deb22eb39eb). The Markit Flash US Composite PMI™ Output Index fell from 56.1 in Nov to 53.8 in Dec. Chris Williamson, Chief Economist at Markit, finds that the surveys are consistent with growth of GDP below 2 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/201ab60916734bff84245deb22eb39eb). The Markit US Composite PMI™ Output Index of Manufacturing and Services decreased to 53.5 in Dec from 56.1 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/225a20ae961a4762bb0d6dcd169d53a8). The Markit US Services PMI™ Business Activity Index decreased from 56.2 in Nov to 53.3 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/225a20ae961a4762bb0d6dcd169d53a8). Chris Williamson, Chief Economist at Markit, finds the indexes consistent with US growth at around 2.0 percent annual in IVQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/225a20ae961a4762bb0d6dcd169d53a8). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) decreased to 53.9 in Dec from 54.8 in Nov, which indicates expansion at marginally slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/43b8d6957aaf432682fb3f14db8d29d0). New foreign orders expanded at moderate rate. Chris Williamson, Chief Economist at Markit, finds that the index suggests slowing but strong manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/43b8d6957aaf432682fb3f14db8d29d0). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® decreased 3.2 percentage points from 58.7 in Nov to 55.5 in Dec, which indicates growth at slower rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=24581). The index of new orders decreased 8.7 percentage points from 66.0 in Nov to 57.3 in Dec. The index of new export orders decreased 3.0 percentage point from 55.0 in Nov to 52.0 in Dec, growing at slower rate. The Non-Manufacturing ISM Report on Business^® PMI decreased 3.1 percentage points from 59.3 in Nov to 56.2 in Dec, indicating growth of business activity/production during 65 consecutive months, while the index of new orders decreased 2.5 percentage points from 61.4 in Nov to 58.9 in Dec (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=24582). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Dec 12 months NSA ∆%: 0.8; ex food and energy ∆%: 1.6 Dec month SA ∆%: -0.4; ex food and energy ∆%: 0.0 Blog 1/25/15
Producer Price Index	Finished Goods Dec 12-month NSA ∆%: -0.5; ex food and energy ∆% 1.8 Dec month SA ∆% = -1.3; ex food and energy ∆%: 0.3 Final Demand Dec 12-month NSA ∆%: 1.1; ex food and energy ∆% 2.1 Dec month SA ∆% = -0.3; ex food and energy ∆%: 0.3 Blog 1/18/15 1/25/15
PCE Inflation	Nov 12-month NSA ∆%: headline 1.2; ex food and energy ∆% 1.4 Blog 12/28/14
Employment Situation	Household Survey: Dec Unemployment Rate SA 5.6% Blog calculation People in Job Stress Dec: 25.9 million NSA, 15.7% of Labor Force Establishment Survey: Dec Nonfarm Jobs +252,000; Private +240,000 jobs created  Nov 12-month Average Hourly Earnings Inflation Adjusted ∆%: 1.4 Blog 1/11/15
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 Nov 2014 4.342 million lower by 0.280 million than 4.622 million in Nov 2006 Blog 1/18/15
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 2.7 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 5.0 Blog 12/28/14
Real Private Fixed Investment	SAAR IIIQ2014 7.7 ∆% IVQ2007 to IIIQ2014: 2.2% Blog 12/28/14
Corporate Profits	IIIQ2014 SAAR: Corporate Profits 3.1; Undistributed Profits 12.4 Blog 12/28/14
Personal Income and Consumption	Nov month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.5 Real Personal Consumption Expenditures (RPCE): 0.7 12-month Nov NSA ∆%: RDPI: 2.9; RPCE ∆%: 2.8 Blog 12/28/14
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	Dec month SA ∆%: -0.1 Dec 12 months SA ∆%: 4.9 Manufacturing Dec SA 0.3 ∆% Dec 12 months SA ∆% 4.9, NSA 5.0 Capacity Utilization: 79.7 Blog 1/18/15
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 Dec-1.23 to Jan 9.95 New Orders: From Dec 0.39 to Jan 6.09 Blog 1/18/15
Philadelphia Fed Business Outlook Index	General Index from Dec 24.3 to Jan 6.3 New Orders from Dec 13.6 to Jan 8.5 Blog 1/18/15
Manufacturing Shipments and Orders	New Orders SA Nov ∆% -0.7 Ex Transport -0.6 Jan-Nov NSA New Orders ∆% 3.4 Ex transport 2.3 Blog 1/11/15
Durable Goods	Nov New Orders SA ∆%: minus 0.7; ex transport ∆%: minus 0.4 Jan-Nov 14/Jan-Nov 13 New Orders NSA ∆%: 6.7; ex transport ∆% 5.4 Blog 12/28/14
Sales of New Motor Vehicles	Jan-Dec 2014 16,522,000; Jan-Dec 2013 15,600,199. Dec 14 SAAR 16.92 million, Nov 14 SAAR 17.20 million, Dec 2013 SAAR 15.52 million Blog 1/11/15
Sales of Merchant Wholesalers	Jan-Nov 2014/Jan-Nov 2013 NSA ∆%: Total 5.1; Durable Goods: 5.4; Nondurable Goods: 5.0 Blog 1/18/15
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Nov 14 12-M NSA ∆%: Sales Total Business 0.2; Manufacturers -1.2 Retailers 2.8; Merchant Wholesalers -0.6 Blog 1/18/15
Sales for Retail and Food Services	Jan-Dec 2014/Jan-Nov 2013 ∆%: Retail and Food Services 4.0; Retail ∆% 3.0 Blog 1/18/15
Value of Construction Put in Place	Nov SAAR month SA ∆%: minus 0.3 Nov 12-month NSA: 2.8 Blog 1/4/15
Case-Shiller Home Prices	Oct 2014/Oct 2013 ∆% NSA: 10 Cities 4.4; 20 Cities: 4.5; National: 4.6 ∆% Oct SA: 10 Cities 0.7 ; 20 Cities: 0.8 Blog 1/4/15
FHFA House Price Index Purchases Only	Nov SA ∆% 0.8; 12 month NSA ∆%: 5.3 Blog 1/25/15
New House Sales	Nov 2014 month SAAR ∆%: minus 1.6 Jan-Nov 2014/Jan-Nov 2013 NSA ∆%: 1.0 Blog 12/28/14
Housing Starts and Permits	Dec Starts month SA ∆% 4.4; Permits ∆%: -1.9 Jan-Dec 2014/Jan-Dec 2013 NSA ∆% Starts 4.2; Permits  ∆% 3.0 Blog 1/25/15
Trade Balance	Balance Nov SA -$39,001 million versus Oct -$42,249 million Exports Nov SA ∆%: -1.0 Imports Nov SA ∆%: -2.2 Goods Exports Jan-Nov 2014/Jan-Nov 2013 NSA ∆%: 2.9 Goods Imports Jan-Nov 2014/Jan-Nov 2012 NSA ∆%: 3.0 Blog 1/11/15
Export and Import Prices	Dec 12-month NSA ∆%: Imports -5.5; Exports -3.2 Blog 1/18/15
Consumer Credit	Nov ∆% annual rate: Total 5.1; Revolving -1.3; Nonrevolving 7.5 Blog 1/11/15
Net Foreign Purchases of Long-term Treasury Securities	Nov Net Foreign Purchases of Long-term US Securities: $33.5 billion Major Holders of Treasury Securities: China $1250 billion; Japan $1242 billion; Total Foreign US Treasury Holdings Nov $6112 billion Blog 1/25/15
Treasury Budget	Fiscal Year 2015/2013 ∆% Dec: Receipts 11.0; Outlays 9.2; Individual Income Taxes 10.2 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 1/18/2015
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	Dec 2014 SAAR ∆%: Securities 24.2 Loans 7.1 Cash Assets -52.4 Deposits 7.6 Blog 1/25/15
Flow of Funds Net Worth of Families and Nonprofits	IIIQ2014 ∆ since 2007 Assets +$14,260.8 BN Nonfinancial $477.8 BN Real estate -$1,215.2 BN Financial +13,783.0 BN Net Worth +$14,595.3 BN Blog 12/28/14
Current Account Balance of Payments	IIIQ2014 -202,280 MM % GDP 2.3 Blog 12/21/14
Collapse of United States Dynamism of Income Growth and Employment Creation	Blog 1/25/15

Links to blog comments in Table USA:

1/18/15 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html

1/11/15 http://cmpassocregulationblog.blogspot.com/2015/01/fluctuating-valuations-of-risk.html

1/4/15 http://cmpassocregulationblog.blogspot.com/2015/01/peaking-valuations-of-risk-financial.html

12/28/14 http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html

12/21/14 http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html

12/14/14 http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk.html

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

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

Seasonally adjusted annual rates (SAAR) of housing starts and permits are shown in Table VA-1. Housing starts increased 4.4 percent in Dec 2014 after wide oscillations that included increases of 20.8 percent in Jul, 11.9 percent in Apr, 2.4 percent in Mar, 3.5 percent in Feb, decreases of 4.5 percent in Nov, 12.3 percent in Aug, 7.6 percent in Jun, 7.4 percent in May and 13.2 percent in Jan. There were increases of 18.1 percent in Nov 2013 and declines of 14.7 percent in Apr 2013 and 9.2 percent in Jun 2013. Housing starts decreased 5.3 percent from the SAAR of 1034 in Dec 2013 to the SAAR of 1089 in Dec 2014. Housing permits, indicating future activity, decreased 1.9 percent in Dec 2014 and decreased 3.7 percent in Nov 2014, 5.1 percent in Aug 2014 and 3.2 percent in Jun 2014. There were significant oscillations with increase of 8.6 percent in Jul 2014. Housing permits increased 1.0 percent from 1022 SSAR in Dec 2013 to SSAR of 1032 in Dec 2014. While single unit houses starts increased 7.2 percent in Dec 2014, seasonally adjusted, structures with five units or more decreased 4.2 percent. Multifamily residential construction is increasing at a faster rate than single-family construction with wide monthly oscillations. Monthly rates in starts and permits fluctuate significantly as shown in Table VA-1.

Table VA-1, US, Housing Starts and Permits SSAR Month ∆%

	Housing  Starts SAAR	Month ∆%	Housing Permits SAAR	Month ∆%
Dec 2014	1089	4.4	1032	-1.9
Nov	1043	-4.5	1052	-3.7
Oct	1092	6.2	1092	5.9
Sep	1028	6.7	1031	2.8
Aug	963	-12.3	1003	-5.1
Jul	1098	20.8	1057	8.6
Jun	909	-7.6	973	-3.2
May	984	-7.4	1005	-5.1
Apr	1063	11.9	1059	5.9
Mar	950	2.4	1000	-1.1
Feb	928	3.5	1011	7.7
Jan	897	-13.2	939	-8.1
Dec 2013	1034	-6.4	1022	-1.4
Nov	1105	18.1	1037	-2.8
Oct	936	8.5	1067	7.5
Sep	863	-2.5	993	4.7
Aug	885	-1.4	948	-3.0
Jul	898	8.1	977	4.2
Jun	831	-9.2	938	-7.1
May	915	7.9	1010	-2.9
Apr	848	-14.7	1040	12.3
Mar	994	4.5	926	-5.1
Feb	951	6.1	976	3.1
Jan	896	-8.2	947	1.0
Dec 2012	976	17.2	938	0.9
Nov	833	-9.0	930	3.9
Oct	915	8.0	895	-2.8
Sep	847	12.3	921	10.7
Aug	754	1.9	832	-1.0
Jul	740	-2.2	840	6.3
Jun	757	6.9	790	-2.1
May	708	-6.0	807	8.0
Apr	753	8.3	747	-6.3
Mar	695	-1.3	797	8.7
Feb	704	-2.6	733	2.5
Jan	723	4.2	715	2.6
Dec 2011	694	-2.4	697	-1.3
Nov	711	16.6	706	5.2
Oct	610	-6.2	671	10.0
Sep	650	11.1	610	-5.7
Aug	585	-6.1	647	4.2
Jul	623	2.5	621	-2.4
Jun	608	8.4	636	2.9
May	561	1.3	618	6.4
Apr	554	-7.7	581	-0.3
Mar	600	16.1	583	7.6
Feb	517	-17.9	542	-5.9
Jan	630	16.9	576	-8.9
Dec 2010	539	-1.1	632	12.9
Nov	545	0.4	560	0.4
Oct	543	-8.6	558	-0.9
Sep	594	-0.8	563	-2.9

SAAR: Seasonally Adjusted Annual Rate

Source: US Census Bureau http://www.census.gov/construction/nrc/

Housing starts and permits in Jan-Sep not-seasonally adjusted are in Table VA-2. Housing starts increased 8.7 percent in Jan-Dec 2014 relative to Jan-Dec 2013 and new permits increased 4.2 percent. Construction of new houses in the US remains at very depressed levels. Housing starts fell 44.2 percent in Jan-Dec 2014 relative to Jan-Dec 2006 and fell 51.5 percent relative to Jan-Dec 2005. Housing permits fell 43.8 percent in Jan-Dec 2014 relative to Jan-Dec 2006 and fell 52.1 percent relative to Jan-Dec 2005.

Table VA-2, US, Housing Starts and New Permits, Thousands of Units, NSA, and %

	Housing Starts	New Permits
Jan-Dec 2014	1005.8	1032.9
Jan-Dec 2013	924.9	990.9
∆% Jan-Dec 2014/Jan-Dec 2013	8.7	4.2
Jan-Dec 2006	1800.9	1838.9
∆% Jan-Dec 2014/Jan-Dec 2006	-44.2	-43.8
Jan-Dec 2005	2068.1	2155.2
∆% Jan-Dec 2014/Jan-Dec 2005	-51.4	-52.1

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-1 of the US Census Bureau shows the sharp increase in construction of new houses from 2000 to 2006. Housing construction fell sharply through the recession, recovering from the trough around IIQ2009. The right-hand side of Chart VA-1 shows a mild downward trend or stagnation from mid-2010 to the present in single-family houses with a recent mild upward trend in recent months in the category of two or more units but marginal decline in some recent months. While single unit houses starts increased 4.9 percent in Jan-Dec 2014 relative to a year earlier, not seasonally adjusted, structures with two to four units increased 2.1 percent and with five units or more increased 17.1 percent. Single unit houses were 64.4 percent of total housing starts in 2014, increasing 4.9 percent relative to 2013, while construction of five units of more were 34.2 percent, increasing 17.1 percent, and construction of two to four units were 1.4 percent of the total, increasing 2.1 percent.

Chart VA-1, US, Total and Single-Family New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate)

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr020.html

Table VA-3 provides new housing units that started in the US at seasonally adjusted annual rates (SAAR) from May to Dec of the years from 2000 to 2014. SAARs have dropped from high levels around 2 million in 2005-2006 to the range of 848,000 in Apr 2013 to 1,034,000 in Dec 2013 and 1,098,000 in Jul 2014, which is an improvement over the range of 517,000 in Feb 2011 to 711,000 in Nov 2011. Improvement continued with 1,034,000 in Dec 2013 relative to 976,000 in Dec 2012. The rate of housing starts moved to 1,089,000 in Dec 2014 relative to 1,034,000 in Dec 2013.

Table VA-3, US, New Housing United Started at Seasonally Adjusted Rates, Thousand Units

Year	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2000	1,575	1,559	1,463	1,541	1,507	1,549	1,551	1,532
2001	1,605	1,636	1,670	1,567	1,562	1,540	1,602	1,568
2002	1,764	1,717	1,655	1,633	1,804	1,648	1,753	1,788
2003	1,751	1,867	1,897	1,833	1,939	1,967	2,083	2,057
2004	1,981	1,828	2,002	2,024	1,905	2,072	1,782	2,042
2005	2,025	2,068	2,054	2,095	2,151	2,065	2,147	1,994
2006	1,942	1,802	1,737	1,650	1,720	1,491	1,570	1,649
2007	1,415	1,448	1,354	1,330	1,183	1,264	1,197	1,037
2008	973	1,046	923	844	820	777	652	560
2009	540	585	594	586	585	534	588	581
2010	583	536	546	599	594	543	545	539
2011	561	608	623	585	650	610	711	694
2012	708	757	740	754	847	915	833	976
2013	915	831	898	885	863	936	1,105	1,034
2014	984	909	1,098	963	1,028	1,092	1,043	1,089

Source: US Census Bureau

http://www.census.gov/construction/nrc/

Table VA-4 provides new housing united starts NSA from Apr to Dec in the years from 2000 to 2014. The number of units started NSA decreased 49.2 percent from 144.2 thousand in Dec 2003 to 73.3 thousand in Dec 2014. The number of units started increased 8.4 percent from 67.6 thousand in Dec 2013 to 73.3 thousand in Dec 2014.

Table VA-4, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units

Year	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2000	149.5	152.9	146.3	135.0	141.4	128.9	139.7	117.1	100.7
2001	151.3	154.0	155.2	154.6	141.5	133.1	139.8	121.0	104.6
2002	148.8	165.5	160.3	155.9	147.0	155.6	146.8	133.0	123.1
2003	151.2	165.0	174.5	175.8	163.8	171.3	173.5	153.7	144.2
2004	179.5	187.6	172.3	182.0	185.9	164.0	181.3	138.1	140.2
2005	184.6	197.9	192.8	187.6	192.0	187.9	180.4	160.7	136.0
2006	160.5	190.2	170.2	160.9	146.8	150.1	130.6	115.2	112.4
2007	135.6	136.5	137.8	127.9	121.2	101.5	115.0	88.8	68.9
2008	89.5	91.7	102.5	86.7	76.4	73.9	68.2	47.5	37.7
2009	42.5	52.2	59.1	56.8	52.9	52.6	44.5	42.3	36.6
2010	62.0	56.2	53.8	51.5	56.3	53.0	45.4	40.6	33.8
2011	49.0	54.0	60.5	57.6	54.5	58.8	53.2	53.0	42.7
2012	66.8	67.8	74.7	69.2	69.0	75.8	77.0	62.2	63.2
2013	76.3	87.2	80.7	84.0	80.4	78.4	78.4	83.8	67.6
2014	94.9	92.5	87.3	101.0	86.2	94.2	92.0	78.4	73.3

Source: US Census Bureau

http://www.census.gov/construction/nrc/

Chart VA-2 of the US Census Bureau provides construction of new housing units started in the US at seasonally adjusted annual rate (SAAR) from Jan 1959 to Dec 2014 that helps to analyze in historical perspective the debacle of US new house construction. There are three periods in the series. (1) There is stationary behavior with wide fluctuations from 1959 to the beginning of the decade of the 1970s. (2) There is sharp upward trend from the 1990s to 2006 propelled by the US housing subsidy, politics of Fannie Mae and Freddie Mac and unconventional monetary policy of near zero interest rates from Jun 2003 to Jun 2004 and suspension of the auction of 30-year Treasury bonds intended to lower mortgage rates. The financial crisis and global recession were caused by interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html. (3) There is insufficient recovery during the weak expansion after IIIQ2009.

Chart VA-2, US, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units, Jan 1959-Dec 2014

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-3 of the US Census Bureau provides single-family houses started without seasonal adjustment. There was sharp increase from 1992 to 2007 followed by sharp decline. The recovery is sluggish.

Chart VA-3, US, Single-family Houses Started, Thousands of Units, Jan-1959-Dec 2014, NSA

Source: US Census Bureau http://www.census.gov/construction/nrc

Chart VA-4 of the US Census Bureau provides housing units started with five units or more. Construction was stagnant before the drop in the global recession. Recovery is stronger than in the case of single-family units.

Chart VA-4, US, Housing Units Stated in Buildings with Five Units or More, Thousands of Units, Jan-1959-Nov 2014, NSA

Source: US Census Bureau http://www.census.gov/construction/nrc/

A longer perspective on residential construction in the US is provided by Table VA-5 with annual data from 1960 to 2014. Housing starts fell 51.4 percent from 2005 to 2014, 41.0 percent from 2000 to 2014 and 29.6 percent relative to the average from 1959 to 1963. Housing permits fell 51.4 percent from 2005 to 2014, 35.1 percent from 2000 to 2014 and 10.8 percent from the average of 1969-1963 to 2013. Housing starts rose 31.8 from 2000 to 2005 while housing permits grew 35.4 percent. From 1990 to 2000, housing starts increased 31.5 percent while permits increased 43.3 percent.

Table VA-5, US, Annual New Privately Owned Housing Units Authorized by Building Permits in Permit-Issuing Places and New Privately Owned Housing Units Started, Thousands

	Starts	Permits
2014	1005.8	1032.9
2013	924.9	990.8
2012	780.6	829.7
∆% 2014/2013	8.7	4.2
∆% 2014/2012	28.8	24.5
∆% 2014/2011	65.2	65.5
∆% 2014/2010	71.4	70.8
∆% 2014/2006	-44.2	-43.8
∆% 2014/2005	-51.4	-52.1
∆% 2014/2000	-41.0	-35.1
∆% 2014/Av 1959-1963	-29.6	-10.8
2011	608.8	624.1
∆% 2012/2005	-62.3	-61.5
∆% 2012/2000	-50.2	-47.9
∆% 2012/Av 1959-1963	-45.4	-28.4
2011	608.8	624.1
2010	586.9	604.6
2009	554.0	583.0
2008	905.5	905.4
2007	1,355,0	1,398.4
2006	1,800.9	1,838.9
2005	2,068.3	2,155.3
∆% 2005/2000	31.8	35.4
2004	1,955.8	2,070.1
2003	1,847.7	1,889.2
2002	1,704.9	1,747.7
2001	1,602.7	1,636.7
2000	1,568.7	1,592.3
∆% 2000/1990	31.5	43.3
1990	1,192,7	1,110.8
1980	1,292.2	1,190.6
1970	1,433.6	1,351.5
Average 1959-63	1,429.7	1,158.2

Source: US Census Bureau

http://www.census.gov/construction/nrc/

The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, provides the FHFA House Price Index (HPI) that “is calculated using home sales price information from Fannie Mae and Freddie Mac-acquired mortgages” (http://fhfa.gov/webfiles/24216/q22012hpi.pdf 1). Table IIA2-1 provides the FHFA HPI for purchases only, which shows behavior similar to that of the Case-Shiller index but with lower magnitudes. House prices catapulted from 2000 to 2003, 2005 and 2006. From IIIQ2000 to IIIQ2006, the index for the US as a whole rose 57.4 percent, with 68.3 percent for New England, 75.4 percent for Middle Atlantic, 72.2 percent for South Atlantic but only by 32.4 percent for East South Central. Prices fell relative to 2014 for the US and all regions from 2006 with exception of increase of 3.0 percent for East South Central. Prices for the US increased 4.6 percent in IIIQ2014 relative to IIIQ2013 and 13.2 percent from IIIQ2012 to IIIQ2014. From IIIQ2000 to IIIQ2014, prices rose for the US and the four regions in Table IIA2-1.

Table IIA2-1, US, FHFA House Price Index Purchases Only NSA ∆%

	United States	New England	Middle Atlantic	South Atlantic	East South Central
IIIQ2000 to IIIQ2003	23.5	40.4	35.3	25.1	10.7
IIIQ2000 to IIIQ2005	50.2	69.4	68.5	60.9	23.6
IIIQ2000 to IIIQ2006	57.4	68.3	75.4	72.2	32.4
IIIQ2005 to IIIQ2014	-0.1	-7.8	-0.8	-5.5	10.3
IIIQ2006 to IIIQ2014	-4.6	-7.2	-4.6	-11.7	3.0
IIIQ2007 to IIIQ2014	-4.4	-5.6	-5.4	-11.5	-0.2
IIIQ2011 to IIIQ2014	17.7	7.7	5.2	18.7	10.4
IIIQ2012 to IIIQ2014	13.2	7.7	5.5	13.6	8.2
IIIQ2013 to IIIQ2014	4.6	2.5	1.7	4.7	3.1
IIIQ2000 to IIIQ2014	50.1	56.2	67.2	52.1	36.4

Source: Federal Housing Finance Agency

http://www.fhfa.gov/KeyTopics/Pages/House-Price-Index.aspx

Data of the FHFA HPI for the remaining US regions are in Table IIA2-2. Behavior is not very different from that in Table IIA2-1 with the exception of East North Central. House prices in the Pacific region doubled between 2000 and 2006. Although prices of houses declined sharply from 2005 and 2006 to 2014 with exception of West South Central and West North Central, there was still appreciation relative to 2000.

Table IIA2-2, US, FHFA House Price Index Purchases Only NSA ∆%

	West South Central	West North Central	East North Central	Mountain	Pacific
IIIQ2000 to IIIQ2003	11.6	18.3	14.4	18.3	42.6
IIIQ2000 to IIIQ2005	22.8	31.3	24.3	55.2	109.8
IIIQ2000 to IIIQ2006	31.3	35.7	25.8	69.1	118.2
IIIQ2005 to IIIQ2014	28.1	5.6	-4.6	-0.2	-13.8
IIIQ2006 to IIIQ2014	19.8	2.2	-5.7	-8.4	-17.1
IIIQ2007 to IIIQ2014	14.4	1.2	-3.8	-9.5	-12.3
IIIQ2011 to IIIQ2014	17.8	12.6	13.5	30.6	35.5
IIIQ2012 to IIIQ2014	12.0	9.1	10.5	18.8	27.4
IIIQ2013 to IIIQ2014	5.8	3.3	4.1	5.9	7.4
IIIQ2000 to IIIQ2014	57.3	38.6	18.6	54.9	80.9

Source: Federal Housing Finance Agency

http://www.fhfa.gov/KeyTopics/Pages/House-Price-Index.aspx

Monthly and 12-month percentage changes of the FHFA House Price Index are in Table IIA2-3. Percentage monthly increases of the FHFA index were positive from Apr to Jul 2011 with exception of declines in May and Aug 2011 while 12 months percentage changes improved steadily from around minus 6 percent in Mar to May 2011 to minus 4.3 percent in Jun 2011. The FHFA house price index fell 0.5 percent in Oct 2011 and fell 3.0 percent in the 12 months ending in Oct 2011. There was significant recovery in Nov 2012 with increase in the house price index of 0.4 percent and reduction of the 12-month rate of decline to 2.2 percent. The house price index rose 0.4 percent in Dec 2011 and the 12-month percentage change improved to minus 1.2 percent. There was further improvement with revised decline of 0.1 percent in Jan 2012 and decline of the 12-month percentage change to minus 1.0 percent. The index improved to positive change of 0.2 percent in Feb 2012 and increase of 0.3 percent in the 12 months ending in Feb 2012. There was strong improvement in Mar 2012 with gain in prices of 1.0 percent and 2.3 percent in 12 months. The house price index of FHFA increased 0.5 percent in Apr 2012 and 2.8 percent in 12 months and improvement continued with increase of 0.7 percent in May 2012 and 3.7 percent in the 12 months ending in May 2012. Improvement consolidated with increase of 0.3 percent in Jun 2012 and 3.7 percent in 12 months. In Jul 2012, the house price index increased 0.2 percent and 3.7 percent in 12 months. Strong increase of 0.5 percent in Aug 2012 pulled the 12-month change to 4.3 percent. There was another increase of 0.6 percent in Oct and 5.3 percent in 12 months followed by increase of 0.5 percent in Nov 2012 and 5.4 percent in 12 months. The FHFA house price index increased 0.7 percent in Jan 2013 and 6.4 percent in 12 months. Improvement continued with increase of 0.4 percent in Apr 2013 and 7.3 percent in 12 months. In May 2013, the house price indexed increased 0.9 percent and 7.5 percent in 12 months. The FHFA house price index increased 0.6 percent in Jun 2013 and 7.8 percent in 12 months. In Jul 2013, the FHFA house price index increased 0.7 percent and 8.4 percent in 12 months. Improvement continued with increase of 0.4 percent in Aug 2013 and 8.3 percent in 12 months. In Sep 2013, the house price index increased 0.5 percent and 8.3 percent in 12 months. The house price index increased 0.5 percent in Oct 2013 and 8.1 percent in 12 months. In Nov 2013, the house price index decreased 0.1 percent and increased 7.4 percent in 12 months. The house price index rose 0.8 percent in Dec 2013 and 7.7 percent in 12 months. Improvement continued with increase of 0.4 percent in Jan 2014 and 7.4 percent in 12 months. In Feb 2014, the house price index increased 0.6 percent and 7.1 percent in 12 months. The house price index increased 0.6 percent in Mar 2014 and 6.5 percent in 12 months. In Apr 2014, the house price index changed 0.0 percent and increased 6.1 percent in 12 months. The house price index increased 0.4 percent in May 2014 and 5.6 percent in 12 months. In Jun 2014, the house price index increased 0.4 percent and 5.4 percent in 12 months. The house price index increased 0.2 percent in Jul 2014 and 4.9 percent in 12 months. In Sep 2014, the house price index increased 0.1 percent and increased 4.5 percent in 12 months. The house price index increased 0.4 percent in Oct 2014 and 4.4 percent in 12 months. In Nov 2014, the house price index increased 0.8 percent and 5.3 percent in 12 months.

Table IIA2-3, US, FHFA House Price Index Purchases Only SA. Month and NSA 12-Month ∆%

	Month ∆% SA	12 Month ∆% NSA
Nov 2014	0.8	5.3
Oct	0.4	4.4
Sep	0.1	4.5
Aug	0.5	5.0
Jul	0.2	4.9
Jun	0.4	5.4
May	0.4	5.6
Apr	0.0	6.1
Mar	0.6	6.5
Feb	0.6	7.1
Jan	0.4	7.4
Dec 2013	0.8	7.7
Nov	-0.1	7.4
Oct	0.5	8.1
Sep	0.5	8.3
Aug	0.4	8.3
Jul	0.7	8.4
Jun	0.6	7.8
May	0.9	7.5
Apr	0.4	7.3
Mar	1.3	7.5
Feb	0.9	7.0
Jan	0.7	6.4
Dec 2012	0.6	5.6
Nov	0.5	5.4
Oct	0.6	5.3
Sep	0.5	4.2
Aug	0.5	4.3
Jul	0.2	3.7
Jun	0.3	3.7
May	0.7	3.7
Apr	0.5	2.8
Mar	1.0	2.3
Feb	0.2	0.3
Jan	-0.1	-1.0
Dec 2011	0.4	-1.2
Nov	0.4	-2.2
Oct	-0.5	-3.0
Sep	0.5	-2.4
Aug	-0.2	-3.7
Jul	0.2	-3.5
Jun	0.4	-4.3
May	-0.1	-5.9
Apr	0.1	-5.8
Mar	-1.0	-6.0
Feb	-1.1	-5.0
Jan	-0.5	-4.6
Dec 2010		-3.8
Dec 2009		-2.0
Dec 2008		-10.2
Dec 2007		-3.2
Dec 2006		2.5
Dec 2005		9.8
Dec 2004		10.2
Dec 2003		8.0
Dec 2002		7.8
Dec 2001		6.7
Dec 2000		7.2
Dec 1999		6.2
Dec 1998		5.9
Dec 1997		3.4
Dec 1996		2.8
Dec 1995		2.9
Dec 1994		2.6
Dec 1993		3.1
Dec 1992		2.4

Source: Federal Housing Finance Agency

http://www.fhfa.gov/DataTools

The bottom part of Table IIA2-3 provides 12-month percentage changes of the FHFA house price index since 1992 when data become available for 1991. Table IIA2-4 provides percentage changes and average rates of percent change per year for various periods. Between 1992 and 2013, the FHFA house price index increased 98.0 percent at the yearly average rate of 3.3 percent. In the period 1992-2000, the FHFA house price index increased 39.4 percent at the average yearly rate of 4.2 percent. The average yearly rate of price increase accelerated to 7.5 percent in the period 2000-2003, 8.5 percent in 2000-2005 and 7.5 percent in 2000-2006. At the margin, the average rate jumped to 10.0 percent in 2003-2005 and 7.5 percent in 2003-2006. House prices measured by the FHFA house price index declined 7.9 percent between 2006 and 2013 and 5.6 percent between 2005 and 2013.

Table IIA2-4, US, FHFA House Price Index, Percentage Change and Average Rate of Percentage Change per Year, Selected Dates 1992-2013

Dec	∆%	Average ∆% per Year
1992-2013	98.0	3.3
1992-2000	39.4	4.2
2000-2003	24.2	7.5
2000-2005	50.4	8.5
2003-2005	21.1	10.0
2005-2013	-5.6	NA
2000-2006	54.2	7.5
2003-2006	24.1	7.5
2006-2013	-7.9	NA

Source: Federal Housing Finance Agency

http://www.fhfa.gov/DataTools

Risk aversion channels funds toward US long-term and short-term securities that finance the US balance of payments and fiscal deficits benefitting from risk flight to US dollar denominated assets. There are now temporary interruptions because of fear of rising interest rates that erode prices of US government securities because of mixed signals on monetary policy and exit from the Fed balance sheet of four trillion dollars of securities held outright. Net foreign purchases of US long-term securities (row C in Table VA-6) increased from minus $1.4 billion in Oct 2014 to $33.5 billion in Nov 2014. Foreign (residents) purchases minus sales of US long-term securities (row A in Table VA-6) in Sep 2014 of minus $15.0 billion increased to minus $59.2 billion in Nov 2014. Net US (residents) purchases of long-term foreign securities (row B in Table VA-6) decreased from $13.6 billion in Oct 2014 to minus $25.7 billion in Nov 2014. In Nov 2014,

C = A + B = $59.2 billion - $25.7 billion = $33.5 billion

There are minor rounding errors. There is strengthening demand in Table VA-6 in Jun in A1 private purchases by residents overseas of US long-term securities of $53.0 billion of which deterioration in A11 Treasury securities of $2.7 billion, improvement in A12 of $18.2 billion in agency securities, improvement of $25.5 billion of corporate bonds and improvement of $6.0 billion in equities. Worldwide risk aversion causes flight into US Treasury obligations with significant oscillations. Official purchases of securities in row A2 increased $6.2 billion with decrease of Treasury securities of $7.5 billion in Nov 2014. Official purchases of agency securities increased $14.6 billion in Nov. Row D shows increase in Nov 2014 of $4.0 billion in purchases of short-term dollar denominated obligations. Foreign private holdings of US Treasury bills increased $2.7 billion (row D11) with foreign official holdings increasing $6.1 billion while the category “other” decreased $4.8 billion. Foreign private holdings of US Treasury bills increased $2.7 billion in what could be arbitrage of duration exposures. Risk aversion of default losses in foreign securities dominates decisions to accept zero interest rates in Treasury securities with no perception of principal losses. In the case of long-term securities, investors prefer to sacrifice inflation and possible duration risk to avoid principal losses with significant oscillations in risk perceptions.

Table VA-6, Net Cross-Borders Flows of US Long-Term Securities, Billion Dollars, NSA

	Nov 2013 12 Months	Nov 2014 12 Months	Oct 2014	Nov 2014
A Foreign Purchases less Sales of US LT Securities	173.8	233.7	-15.0	59.2
A1 Private	68.9	152.4	-15.4	53.0
A11 Treasury	42.3	147.8	3.1	2.7
A12 Agency	23.9	29.2	2.2	18.7
A13 Corporate Bonds	3.1	5.3	6.3	25.5
A14 Equities	-0.4	-29.9	-27.1	6.0
A2 Official	104.9	81.3	0.5	6.2
A21 Treasury	11.7	50.2	-2.5	-7.5
A22 Agency	79.5	30.3	1.6	14.6
A23 Corporate Bonds	16.6	6.6	1.6	-0.5
A24 Equities	-3.0	-5.8	-0.2	-0.3
B Net US Purchases of LT Foreign Securities	-202.6	-42.1	13.6	-25.7
B1 Foreign Bonds	-42.8	87.2	27.6	3.6
B2 Foreign Equities	-159.8	-129.3	-14.0	-29.3
C Net Foreign Purchases of US LT Securities	-28.9	191.6	-1.4	33.5
D Increase in Foreign Holdings of Dollar Denominated Short-term	-35.3	9.9	25.8	4.0
D1 US Treasury Bills	-25.3	-4.4	24.0	8.8
D11 Private	-26.0	36.5	12.3	2.7
D12 Official	0.7	-40.9	11.7	6.1
D2 Other	-10.0	14.3	1.8	-4.8

C = A + B;

A = A1 + A2

A1 = A11 + A12 + A13 + A14

A2 = A21 + A22 + A23 + A24

B = B1 + B2

D = D1 + D2

Sources: United States Treasury

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

http://www.treasury.gov/press-center/press-releases/Pages/jl2609.aspx

Table VA-7 provides major foreign holders of US Treasury securities. China is the largest holder with $1250.4 billion in Nov 2014, decreasing 5.0 percent from $1316.7 billion in Nov 2013 while decreasing $2.3 billion from Oct 2014 or 0.2 percent. The United States Treasury estimates US government debt held by private investors at $9829 billion in Sep 2014. China’s holding of US Treasury securities represent 12.7 percent of US government marketable interest-bearing debt held by private investors (http://www.fms.treas.gov/bulletin/index.html). Min Zeng, writing on “China plays a big role as US Treasury yields fall,” on Jul 16, 2004, published in the Wall Street Journal (http://online.wsj.com/articles/china-plays-a-big-role-as-u-s-treasury-yields-fall-1405545034?tesla=y&mg=reno64-wsj), finds that acceleration in purchases of US Treasury securities by China has been an important factor in the decline of Treasury yields in 2014. Japan increased its holdings from $1186.4 billion in Nov 2013 to $1241.5 billion in Nov 2014 or 4.6 percent. The combined holdings of China and Japan in Nov 2014 add to $2492 billion, which is equivalent to 25.4 percent of US government marketable interest-bearing securities held by investors of $9829 billion in Sep 2014 (http://www.fms.treas.gov/bulletin/index.html). Total foreign holdings of Treasury securities rose from $5716.8 billion in Nov 2013 to $6112.4 billion in Nov 2014, or 6.9 percent. The US continues to finance its fiscal and balance of payments deficits with foreign savings (see Pelaez and Pelaez, The Global Recession Risk (2007)). A point of saturation of holdings of US Treasury debt may be reached as foreign holders evaluate the threat of reduction of principal by dollar devaluation and reduction of prices by increases in yield, including possibly risk premium. Shultz et al (2012) find that the Fed financed three-quarters of the US deficit in fiscal year 2011, with foreign governments financing significant part of the remainder of the US deficit while the Fed owns one in six dollars of US national debt. Concentrations of debt in few holders are perilous because of sudden exodus in fear of devaluation and yield increases and the limit of refinancing old debt and placing new debt. In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):

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

Table VA-7, US, Major Foreign Holders of Treasury Securities $ Billions at End of Period

	Nov 2014	Oct 2014	Nov 2013
Total	6112.4	6058.9	5716.8
China	1250.4	1252.7	1316.7
Japan	1241.5	1222.4	1186.4
Belgium	335.7	348.1	200.6
Caribbean Banking Centers	331.5	324.9	290.9
Oil Exporters	278.9	281.8	236.2
Brazil	264.2	261.7	246.9
Switzerland	183.8	184.3	176.6
United Kingdom	174.5	171.3	161.5
Taiwan	170.6	172.9	183.7
Luxembourg	167.3	162.5	130.4
Hong Kong	165.6	161.0	141.7
Ireland	127.4	123.9	116.9
Singapore	110.1	108.0	87.2
Foreign Official Holdings	4134.7	4124.1	4074.2
A. Treasury Bills	343.2	337.1	384.2
B. Treasury Bonds and Notes	3791.5	3787.0	3690.1

Source: United States Treasury

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: Policy Board, Bank of Japan

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

The Markit/JMMA Flash Japan Manufacturing PMI Index™ with the Flash Japan Manufacturing PMI™ increased from 52.0 in Dec to 52.1 in Jan and the Flash Japan Manufacturing Output Index™ decreased from 52.5 in Dec to 53.3 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/a1eee3ad3cbf4ce5a4d7e8d578b33118). New export orders increased at a faster pace. Amy Brownbill, Economist at Markit, finds improving Japan’s manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/a1eee3ad3cbf4ce5a4d7e8d578b33118). Private-sector activity in Japan improved marginally with the Markit Composite Output PMI Index increasing from 51.2 in Nov to 51.9 in Dec, indicating modest improvement (http://www.markiteconomics.com/Survey/PressRelease.mvc/4394f551fb384aeba56261112c667f76). The Markit Business Activity Index of Services increased to 51.7 in Dec from 50.6 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/4394f551fb384aeba56261112c667f76). Amy Brownbill, Ecoomist at Markit and author of the report, finds the reading consistent with growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/4394f551fb384aeba56261112c667f76). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, did not change from 52.0 in Nov to 52.0 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/b58e222a14e14555b7b120935a06b349). New orders, output and foreign orders increased. Amy Brownbill, Economist at Markit, finds manufacturing improvement with prices of inputs driven by devaluation (http://www.markiteconomics.com/Survey/PressRelease.mvc/b58e222a14e14555b7b120935a06b349).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	Dec ∆% -0.4 12 months ∆% 1.9 Blog 1/18/15
Consumer Price Index	Nov NSA ∆% -0.4; Nov 12 months NSA ∆% 2.4 Blog 12/28/14
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	Nov Unemployed 2.19 million Change in unemployed since last year: minus 300 thousand Unemployment rate: 3.5 % Blog 12/28/14
All Industry Indices	Nov month SA ∆% 0.1 12-month NSA ∆% -1.9 Blog 1/25/15
Industrial Production	Nov SA month ∆%: -0.6 12-month NSA ∆% -3.8 Blog 12/28/14
Machine Orders	Total Nov ∆% -10.4 Private ∆%: -10.6 Nov ∆% Excluding Volatile Orders 1.3 Blog 1/18/15
Tertiary Index	Nov month SA ∆% 0.2 Nov 12 months NSA ∆% minus 1.7 Blog 1/18/15
Wholesale and Retail Sales	Nov 12 months: Total ∆%: -2.7 Wholesale ∆%: -4.0 Retail ∆%: 0.4 Blog 12/28/14
Family Income and Expenditure Survey	Nov 12-month ∆% total nominal consumption 0.3, real -2.5 Blog 12/28/14
Trade Balance	Exports Nov 12 months ∆%: 4.9 Imports Nov 12 months ∆% -1.7 Blog 12/21/14

Links to blog comments in Table JPY:

1/18/15 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html

12/28/14 http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html

12/21/14 http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html

12/14/14 http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk.html

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

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

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

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

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

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

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

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

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

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

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

The indices of all industry activity of Japan, which approximates GDP or economic activity, fell to levels close to the worst point of the recession, showing the brutal impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Table VB-1 with the latest revisions shows the quarterly index, which permits comparison with the movement of real GDP. The first row provides weights of the various components of the index: AG (agriculture) 1.4 percent (not shown), CON (construction) 5.7 percent, IND (industrial production) 18.3 percent, TERT (services) 63.2 percent, and GOVT (government) 11.4 percent. GDP decreased 0.5 percent in IIIQ2014 (Table VB-1 at http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk_32.html), industry decreased 1.9 percent, the tertiary sector increased 0.4 percent, government decreased 0.3 percent and construction increased 0.7 percent. The report shows that the all industry index decreased 0.1 percent in IIIQ2014. Industry deducted 0.35 percentage points to growth of the all industry index and the tertiary index added 0.27 percentage points. Anticipation of purchases to avoid the increase in the sales tax in Apr 2014 explains unusually high activity in the economy of Japan in IQ2014 and subsequent decline in IIQ2014. Japan had already experienced a very weak quarter in IVQ2010, with decline of GDP of 0.6 percent (Table VB-1 at http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk_32.html) when it was unexpectedly hit by the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP fell 1.8 percent in IQ2011 and 0.6 percent in IIQ2011. GDP changed 0.0 percent in IQ2011 relative to a year earlier and fell 1.5 percent in IIQ2011 relative to a year earlier (Table VB-1 and Table VB-4 at http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk_32.html). The all industry activity index fell in all quarters of 2012 with exception of growth of 0.1 percent in IQ2012. Weakness in industry was the driver of decline.

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

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
2014
IIIQ2014	0.7	-1.9	0.4	-0.3	-0.1	-0.5
Cont to IIIQ % Change	0.04	-0.35	0.27	-0.04
IIQ2014	-4.6	-3.8	-3.8	0.5	-3.4	-1.7
IQ	-2.7	3.0	1.8	-0.5	1.6	1.4
2013
IVQ	2.8	1.8	-0.2	0.4	0.3	-0.4
IIIQ	4.3	1.8	0.1	-0.2	0.5	0.4
IIQ	3.6	1.6	0.3	0.0	0.6	0.7
IQ	0.9	0.4	0.5	-0.3	0.4	1.5
2012
IVQ2012	3.0	-1.8	0.3	0.1	-0.1	-0.2
IIIQ	1.6	-3.3	0.0	0.0	-0.4	-0.5
IIQ	1.3	-2.1	0.0	0.0	-0.2	-0.4
IQ	2.0	1.6	0.0	0.2	0.1	1.1

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

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

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

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

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

There are more details in Table VB-2. In Nov 2014, the all industry activity index increased 0.1 percent with industry decreasing 0.5 percent and services increasing 0.2 percent while construction decreased 0.1 percent and government decreased 0.1 percent. Industry deducted 0.10 percentage points and services added 0.13 percentage points while construction deducted 0.01 percentage points and government deducted 0.01 percentage points. The all industry activity index is stronger in 2013 with growth of 0.5 percent in Dec 2012, 0.4 percent in Feb 2013, 0.1 percent in Mar 2013, 0.1 percent in Apr 2013 and 0.6 percent in May 2013. After decline of 0.3 percent in Jun 2013, the all industry index rose 0.3 percent in Jul 2013, 0.2 percent in Aug 2013 and 0.3 percent in Sep 2013. The index fell 0.1 percent in Oct 2013 but increased 0.2 percent in Nov 2013. The index changed 0.0 percent in Dec 2013 and increased 1.7 percent in Jan 2014, decreasing 1.1 percent in Feb 2014. The index increased 1.7 percent in Mar 2014 in the rush of expenditures in anticipation of the sales tax increase in Apr 2014 and fell 4.4 percent in Apr 2014 because of the impact of the sales tax. The all industry index rebounded 0.5 percent in May 2014 and fell 0.3 percent in Jun 2014, decreasing 0.4 percent in Jul 2014. The index fell 0.1 percent in Aug 2014 and rebounded 1.3 percent in Sep 2014. The index increased 0.1 percent in No 2014. Industry is recovering with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.3 percent in Mar 2013, 0.6 percent in Apr 2013 and 2.1 percent in May 2013. After decline of 2.7 percent in Jun 2003, industry grew 2.7 percent in Jul 2013 and declined 0.4 percent in Aug 2013. Industry rebounded with 1.5 percent in Sep 2013 and 0.5 percent in Oct 2013. Industry rose 0.3 percent in Nov 2013 and increased 0.5 percent in Dec 2013. Industry grew 3.9 percent in Jan 2014 and fell 2.3 percent in Feb 2014. Industry increased 0.7 percent in Mar 2014 and fell 2.9 percent in Apr 2014. Industry increased 0.7 percent in May 2014 and decreased 3.4 percent in Jun 2014. Industry increased 0.4 percent in Jul 2014, fell 1.9 percent in Aug 2014 and increased 2.9 percent in Sep 2014. Industry increased 0.4 percent in Nov 2014. The highest risk to Japan is if weakening world growth would affect Japanese exports.

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

	CON	IND	TERT	GOVT	ALL IND
Nov 2014	-0.1	-0.5	0.2	-0.1	0.1
Cont to Nov % Change	-0.01	-0.10	0.13	-0.01
Oct	1.5	0.4	-0.1	1.1	0.1
Sep	0.0	2.9	1.3	-0.8	1.3
Aug	2.9	-1.9	-0.1	-0.2	-0.1
Jul	-1.2	0.4	-0.3	0.3	-0.4
Jun	0.1	-3.4	0.0	0.0	-0.3
May	-0.2	0.7	0.9	-0.6	0.5
Apr	-3.2	-2.9	-5.7	1.2	-4.4
Mar	-1.5	0.7	2.6	-0.7	1.7
Feb	-1.3	-2.3	-0.9	0.5	-1.1
Jan	-1.7	3.9	1.5	-0.5	1.7
Dec 2013	-0.2	0.5	-0.1	0.1	0.0
Nov	1.5	0.3	0.3	-0.6	0.2
Oct	1.0	0.5	-0.5	0.8	-0.1
Sep	1.0	1.5	0.1	-0.1	0.3
Aug	0.3	-0.4	0.2	0.1	0.2
Jul	1.1	2.7	-0.1	-0.3	0.3
Jun	2.5	-2.7	-0.3	0.1	-0.3
May	3.0	2.1	0.5	0.2	0.6
Apr	0.8	0.6	-0.1	0.0	0.1
Mar	0.0	0.3	0.1	-0.3	0.1
Feb	0.1	0.9	0.5	-0.1	0.4
Jan	-0.7	-0.8	0.0	0.0	-0.2
Dec 2012	0.9	1.4	0.2	-0.3	0.5
Nov	3.0	-0.9	-0.1	0.3	-0.2
Oct	-0.1	0.3	0.2	0.2	0.2
Sep	1.2	-2.2	0.0	-0.3	-0.4
Aug	0.1	-1.4	0.2	0.1	0.0
Jul	-1.0	-0.5	-0.3	-0.1	-0.3
Jun	1.7	-0.9	0.0	0.1	0.1
May	3.0	-1.8	0.5	0.0	-0.1
Apr	-1.1	-0.4	-0.2	0.0	-0.1
Mar	-0.5	-0.2	-0.3	0.1	-0.2
Feb	0.7	-0.2	0.2	-0.2	0.1
Jan	2.6	0.8	-0.8	0.4	-0.7

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

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

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

Percentage changes from a year earlier in calendar years and relative to the same quarter a year earlier of the all industry activity indices are provided in Table VB-3. The first row shows that services contribute 63.2 percent of the total index and industry contributes 18.3 percent for joint contribution of 81.5 percent. The all industry activity index decreased 1.6 percent in IIIQ2014 relative to a year earlier and GDP decreased 1.3 percent relative to a year earlier (Table VB-4 at http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk_32.html). Industry decreased 1.0 percent relative to a year earlier while the tertiary sector decreased 1.9 percent, deducting combined 1.41 percentage points to growth of the all industry activity index of minus 1.6 percent while construction deducted 0.19 percentage points and government added 0.00 percentage points. The fall of industrial production in 2009 was by a catastrophic 21.9 percent. Japan emerged from the crisis with industrial growth of 16.4 percent in 2010. Quarterly data show that industry is the most dynamic sector of the Japanese economy. The all-industry index increased 0.7 percent in 2013 and real GDP increased 1.6 percent. Industry decreased 0.8 percent, deducting 0.13 percentage points, while the tertiary sector increased 0.7 percent, adding 0.46 percentage points. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 201, declining world trade and revaluation of the yen in fear of world financial risks interrupted the recovery of the Japanese economy from the global recession.

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

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
Calendar Year
2013	10.4	-0.8	0.7	-0.1	0.7	1.6
Cont to 2013 % Change	0.47	-0.13	0.46	-0.01
2012	3.2	0.1	1.4	0.3	1.2	1.8
2011	-2.0	-2.3	0.1	-0.2	-0.5	-0.5
2010	-7.0	16.4	1.3	-0.7	3.1	4.7
2009	-5.6	-21.9	-5.2	0.1	-7.7	-5.5
2008	-7.6	-3.4	-1.0	-1.4	-1.9	-1.0
2014
IIIQ	-3.9	-1.0	-1.9	0.0	-1.6	-1.3
Cont to IIIQ % Change	-0.19	-0.17	-1.24	0.00
IIQ	-0.5	2.6	-2.2	0.2	-0.9	-0.3
IQ	8.1	8.3	2.1	-0.3	3.2	2.5
2013
IVQ	13.4	5.7	0.5	0.0	1.9	2.3
IIIQ	13.0	2.2	1.2	-0.5	1.8	2.2
IIQ	8.8	-3.1	1.3	-0.2	0.6	1.4
IQ2013	5.4	-7.8	-0.1	0.3	-1.2	0.5
2012
IVQ	6.7	-5.9	0.7	-0.1	-0.3	0.0
IIIQ	3.1	-4.2	0.5	0.4	-0.2	0.2
IIQ	4.9	5.5	2.1	0.6	2.6	3.5
IQ	-1.1	6.2	2.4	0.3	2.6	3.5

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

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

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

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

Percentage changes of a month relative to the same month a year earlier for the indices of all industry activity of Japan are shown in Table VB-4. The all industry activity index decreased 1.9 percent in Nov 2014 relative to Nov 2013. Industry decreased 3.7 percent in Nov 2014 relative to a year earlier, deducting 0.66 percentage points to growth of the all industry activity index. The tertiary sector decreased 1.7 percent, subtracting 1.12 percentage points. Construction deducted 0.30 percentage points from the index and government added 0.14 percentage points.

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

	CON	IND	TERT	GOVT	ALL IND
Nov	-5.1	-3.7	-1.7	1.2	-1.9
Cont to Nov % Change	-0.30	-0.66	-1.12	0.14
Oct	-3.5	-0.8	-0.8	-0.2	-0.9
Sep	-3.7	0.7	-0.8	-1.1	-0.7
Aug	-2.8	-3.2	-2.7	0.7	-2.5
Jul	-5.2	-0.7	-2.2	0.5	-1.7
Jun	-2.8	3.1	-1.4	-0.6	-0.5
May	-0.7	0.9	-2.5	0.6	-1.5
Apr	2.0	3.8	-2.6	-0.7	-0.9
Mar	6.3	7.3	3.2	-0.4	3.8
Feb	8.2	7.0	0.9	0.0	2.2
Jan	9.9	10.6	2.0	-0.5	3.5
Dec 2013	11.8	7.2	0.8	-0.4	2.2
Nov	14.2	4.8	0.5	-0.2	1.9
Oct	14.4	5.3	0.1	0.6	1.8
Sep	12.8	5.2	1.4	-0.6	2.4
Aug	13.0	-0.7	0.8	0.1	1.0
Jul	13.2	1.9	1.5	-1.0	1.7
Jun	11.2	-4.7	0.6	0.5	0.0
May	8.9	-0.9	1.8	-0.2	1.3
Apr	6.3	-3.2	1.5	-1.1	0.6
Mar	5.4	-6.9	0.7	0.0	-0.6
Feb	4.3	-9.9	-1.5	1.5	-2.4
Jan	6.8	-6.4	0.3	-0.6	-0.7
Dec 2012	8.7	-7.5	-0.1	0.6	-0.9
Nov	7.6	-5.7	1.0	0.3	0.0
Oct	3.5	-4.7	1.3	-1.1	0.1
Sep	2.9	-7.7	0.1	0.7	-1.2
Aug	2.6	-4.4	0.6	0.9	-0.1
Jul	3.8	-0.2	0.8	-0.3	0.6
Jun	6.7	-1.5	0.8	0.9	0.6
May	5.3	6.1	3.1	-0.4	3.3
Apr	2.6	13.6	2.4	1.3	4.1
Mar	3.0	16.2	4.2	0.5	5.8
Feb	-2.5	2.8	2.4	-0.7	1.8
Jan	-3.4	-1.6	0.4	0.4	-0.1

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

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

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

VC China. China estimates an index of nonmanufacturing purchasing managers based on a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. The total index increased from 55.7 in Jan 2011 to 58.0 in Mar 2012, decreasing to 53.9 in Aug 2013. The index decreased from 56.0 in Nov 2013 to 54.6 in Dec 2013, easing to 53.4 in Jan 2014. The index moved to 54.1 in Dec 2014. The index of new orders increased from 52.2 in Jan 2012 to 54.3 in Dec 2012 but fell to 50.1 in May 2013, barely above the neutral frontier of 50.0. The index of new orders stabilized at 51.0 in Nov-Dec 2013, easing to 50.9 in Jan 2014. The index of new orders moved to 50.5 in Dec 2014.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Dec 2014	54.1	50.5	50.1	47.3	59.5
Nov	53.9	50.1	50.6	47.7	59.7
Oct	53.8	51.0	52.0	48.8	59.9
Sep	54.0	49.5	49.8	47.3	60.9
Aug	54.4	50.0	52.2	48.3	61.2
Jul	54.2	50.7	53.4	49.5	61.5
Jun	55.0	50.7	56.0	50.8	60.4
May	55.5	52.7	54.5	49.0	60.7
Apr	54.8	50.8	52.4	49.4	61.5
Mar	54.5	50.8	52.8	49.5	61.5
Feb	55.0	51.4	52.1	49.0	59.9
Jan	53.4	50.9	54.5	50.1	58.1
Dec 2013	54.6	51.0	56.9	52.0	58.7
Nov	56.0	51.0	54.8	49.5	61.3
Oct	56.3	51.6	56.1	51.4	60.5
Sep	55.4	53.4	56.7	50.6	60.1
Aug	53.9	50.9	57.1	51.2	62.9
Jul	54.1	50.3	58.2	52.4	63.9
Jun	53.9	50.3	55.0	50.6	61.8
May	54.3	50.1	54.4	50.7	62.9
Apr	54.5	50.9	51.1	47.6	62.5
Mar	55.6	52.0	55.3	50.0	62.4
Feb	54.5	51.8	56.2	51.1	62.7
Jan	56.2	53.7	58.2	50.9	61.4
Dec 2012	56.1	54.3	53.8	50.0	64.6
Nov	55.6	53.2	52.5	48.4	64.6
Oct	55.5	51.6	58.1	50.5	63.4
Sep	53.7	51.8	57.5	51.3	60.9
Aug	56.3	52.7	57.6	51.2	63.2
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

Notes: Interm.: Intermediate; Subs: Subscription; Exp: Business Expectations

Source: National Bureau of Statistics of China

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. The index fell from 56.0 in Oct 2013 to 54.1 in Dec 2014.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr 2012, falling to 49.2 in Aug 2012, rebounding to 50.6 in Dec 2012. The index fell to 50.1 in Jun 2013, barely above the neutral frontier at 50.0, recovering to 51.4 in Nov 2013 but falling to 51.0 in Dec 2013. The index fell to 50.5 in Jan 2014 and 50.1 in Dec 2014. The index of new orders fell from 54.5 in Apr 2012 to 51.2 in Dec 2012. The index of new orders fell from 52.3 in Nov 2013 to 52.0 in Dec 2013. The index fell to 50.9 in Jan 2014 and moved to 50.4 in Dec 2014.

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

	IPM	PI	NOI	INV	EMP	SDEL
2014
Dec	50.1	52.2	50.4	47.5	48.1	49.9
Nov	50.3	52.5	50.9	47.7	48.2	50.3
Oct	50.8	53.1	51.6	48.4	48.4	50.1
Sep	51.1	53.6	52.2	48.8	48.2	50.1
Aug	51.1	53.2	52.5	48.6	48.2	50.0
Jul	51.7	54.2	53.6	49.0	48.3	50.2
Jun	51.0	53.0	52.8	48.0	48.6	50.5
May	50.8	52.8	52.3	48.0	48.2	50.3
Apr	50.4	52.5	51.2	48.1	48.3	50.1
Mar	50.3	52.7	50.6	47.8	48.3	49.8
Feb	50.2	52.6	50.5	47.4	48.0	49.9
Jan	50.5	53.0	50.9	47.8	48.2	49.8
Dec 2013	51.0	53.9	52.0	47.6	48.7	50.5
Nov	51.4	54.5	52.3	47.8	49.6	50.6
Oct	51.4	54.4	52.5	48.6	49.2	50.8
Sep	51.1	52.9	52.8	48.5	49.1	50.8
Aug	51.0	52.6	52.4	48.0	49.3	50.4
Jul	50.3	52.4	50.6	47.6	49.1	50.1
Jun	50.1	52.0	50.4	47.4	48.7	50.3
May	50.8	53.3	51.8	47.6	48.8	50.8
Apr	50.6	52.6	51.7	47.5	49.0	50.8
Mar	50.9	52.7	52.3	47.5	49.8	51.1
Feb	50.1	51.2	50.1	49.5	47.6	48.3
Jan	50.4	51.3	51.6	50.1	47.8	50.0
Dec 2012	50.6	52.0	51.2	47.3	49.0	48.8
Nov	50.6	52.5	51.2	47.9	48.7	49.9
Oct	50.2	52.1	50.4	47.3	49.2	50.1
Sep	49.8	51.3	49.8	47.0	48.9	49.5
Aug	49.2	50.9	48.7	45.1	49.1	50.0
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

IPM: Index of Purchasing Managers; PI: Production Index; NOI: New Orders Index; EMP: Employed Person Index; SDEL: Supplier Delivery Time Index

Source: National Bureau of Statistics of China

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

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers. The index fell to 50.1 in Jun 2013. The index decreased from 51.4 in Nov 2013 to 51.0 in Dec 2013. The index moved to 50.1 in Dec 2014.

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

Source: National Bureau of Statistics of China

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

Cumulative growth of China’s GDP in IVQ2014 relative to the same period in 2013 was 7.4 percent, as shown in Table VC-GDP. Secondary industry accounts for 42.6 percent of cumulative GDP in IVQ2014. In cumulative IVQ2014, industry accounts for 35.8 percent of GDP and construction for 7.0 percent. Tertiary industry accounts for 48.2 percent of cumulative GDP in IVQ2014 and primary industry for 9.2 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The strategy is shifting to lower growth rates with improvement in living standards. The bottom block of Table VC-GDP provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 5.7 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 7.0 percent and to 7.4 percent in IIQ2013, rebounding to 9.5 percent in IIIQ2013. Annual equivalent growth was 7.4 percent in IVQ2013, declining to 6.6 percent in IQ2014 and increasing to 7.8 percent in IIQ2014. Annual equivalent growth slowed to 7.8 percent in IIIQ2014 and 6.1 percent in IVQ2014.

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

Cumulative GDP IVQ2014	Value Current CNY Billion	2014 Year-on-Year Constant Prices ∆%
GDP	63,646.3	7.4
Primary Industry	5833.2	4.1
Farming	6015.1	4.2
Secondary Industry	27,139.2	7.3
Industry	22,799.1	7.0
Construction	4472.5	8.9
Tertiary Industry	30,673.9	8.1
Transport, Storage, Post	2875.0	7.0
Wholesale, Retail Trades	6221.6	9.5
Accommodation and Restaurants	1119.9	6.2
Finance	4695.4	10.2
Real Estate	3816.7	2.3
Other	11631.1	8.8
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2014
IVQ2014	1.5	6.1
IIIQ2014	1.9	7.8
IIQ2014	1.9	7.8
IQ2014	1.6	6.6
2013
IVQ2013	1.8	7.4
IIIQ2013	2.3	9.5
IIQ2013	1.8	7.4
IQ2013	1.7	7.0
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.1	8.7
IQ2012	1.4	5.7
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.5	10.4
IQ2011	2.3	9.5

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

Growth of China’s GDP in IVQ2014 relative to the same period in 2013 was 7.3 percent, as shown in Table VC-GDPA. Secondary industry accounts for 42.6 percent of cumulative GDP in IVQ2014. In cumulative IVQ2014, industry accounts for 35.8 percent of GDP and construction for 7.0 percent. Tertiary industry accounts for 48.2 percent of cumulative GDP in IVQ2014 and primary industry for 9.2 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The strategy is changing to lower growth rates while improving living standards. GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.8 percent in IQ2013, 7.5 percent in IIQ2013 and 7.9 percent in IIIQ2013. GDP grew 7.6 percent in IVQ2013 relative to a year earlier and 1.8 percent relative to IIIQ2013, which is equivalent to 7.4 percent per year. GDP grew 7.4 percent in IQ2014 relative to a year earlier and 1.6 percent in IQ2014 that is equivalent to 6.6 percent per year. GP grew 7.5 percent in IIQ2014 relative to a year earlier and 1.9 percent relative to the prior quarter, which is equivalent 7.8 percent. In IIIQ2014, GDP grew 7.3 percent relative to a year earlier and 1.9 percent relative to the prior quarter, which is 7.8 percent in annual equivalent. GDP grew 1.5 percent in IVQ2014, which is 6.1 percent in annual equivalent and 7.3 percent relative to a year earlier.

Table VC-GDPA, China, Growth Rate of GDP, ∆% Relative to a Year Earlier and ∆% Relative to Prior Quarter

	IQ 2013	IIQ 2013	IIIQ 2013	IVQ 2013	IQ 2014	IIQ 2014	IIIQ 2014	IVQ 2014
GDP	7.8	7.5	7.9	7.6	7.4	7.5	7.3	7.3
Primary Industry	3.4	3.0	3.4	4.0	3.5	3.9	4.2	4.1
Secondary Industry	7.8	7.6	7.8	7.8	7.3	7.4	7.4	7.3
Tertiary Industry	8.3	8.3	8.4	8.3	7.1	8.0	7.9	8.1
GDP ∆% Relative to a Prior Quarter	1.7	1.8	2.3	1.8	1.6	1.9	1.9	1.5
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ  2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.5	2.2	1.8	1.4	2.1	2.0	1.9
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

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

Chart VC-GDP of the National Bureau of Statistics of China provides annual value and growth rates of GDP. China’s GDP growth in 2013 is still high at 7.7 percent but at the lowest rhythm in five years.

Chart VC-GDP, China, Gross Domestic Product, Million Yuan and ∆%, 2009-2013

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

Chart VC-FXR provides China’s foreign exchange reserves. FX reserves grew from $2399.2 billion in 2009 to $3821.3 billion in 2013 driven by high growth of China’s trade surplus.

Chart VC-FXR, China, Foreign Exchange Reserves, 2009-2013

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

Chart VC-Trade provides China’s imports and exports. Exports exceeded imports with resulting large trade balance surpluses that increased foreign exchange reserves.

Chart VC-Trade, China, Imports and Exports of Goods, 2009-2013, $100 Million US Dollars

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

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2a890cba4664da9ad061ff1a23ec780) is improving. The overall Flash HSBC China Manufacturing PMI^™ increased from 49.6 in Dec to 49.8 in Jan, while the Flash HSBC China Manufacturing Output Index increased from 49.9 in Dec to 50.1 in Dec, indicating moderate growth. Exports orders indicate expansion at slower rate. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds need for monetary/fiscal stimulus (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2a890cba4664da9ad061ff1a23ec780). The HSBC China Services PMI^™, compiled by Markit, shows the HSBC Composite Output, combining manufacturing and services, increasing from 51.1 in Nov to 51.4 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/b58def8e8ae94ec4a96c19d54c66e1e6). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds need of easing policies in consolidating growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/b58def8e8ae94ec4a96c19d54c66e1e6). The HSBC China Services Business Activity index increased from 53.0 in Nov to 53.4 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/b58def8e8ae94ec4a96c19d54c66e1e6). Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds that the services PMI shows sustained activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/b58def8e8ae94ec4a96c19d54c66e1e6). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, decreased to 49.6 in Dec from 50.0 in Nov, indicating near neutral manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/870b45541fcd4c39aff1342749abe385). New export orders slowed. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds weakening demand in China with possible need of monetary and fiscal policy enhancement (http://www.markiteconomics.com/Survey/PressRelease.mvc/870b45541fcd4c39aff1342749abe385). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Dec 12-month ∆%: minus 3.3 Dec month ∆%: -0.6 Blog 1/18/15
Consumer Price Index	Dec month ∆%: 0.3 Dec 12 months ∆%: 1.5 Blog 1/18/15
Value Added of Industry	Dec month ∆%: 0.75 Jan-Dec 2014/Jan-Dec 2013 ∆%: 8.3 Blog 1/25/15
GDP Growth Rate	Year IVQ2014 ∆%: 7.3 First Four Quarters 2014 ∆%: 7.4 Quarter IIIQ2014 AE ∆%: 6.1 Blog 1/25/15
Investment in Fixed Assets	Total Jan-Dec 2014 ∆%: 15.7 Real estate development: 10.5 Blog 1/25/15
Retail Sales	Dec month ∆%: 1.01 Dec 12 month ∆%: 11.9 Jan-Dec ∆%: 12.0 Blog 1/25/15
Trade Balance	Dec balance $49.6 billion Exports 12M ∆% 9.7 Imports 12M ∆% -2.4 Cumulative Jan-Dec: $382.5 billion Blog 1/18/15

Links to blog comments in Table CNY:

1/18/15 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html

Cumulative growth of China’s GDP in IVQ2014 relative to the same period in 2013 was 7.4 percent, as shown in Table VC-A. Secondary industry accounts for 42.6 percent of cumulative GDP in IVQ2014. In cumulative IVQ2014, industry accounts for 35.8 percent of GDP and construction for 7.0 percent. Tertiary industry accounts for 48.2 percent of cumulative GDP in IVQ2014 and primary industry for 9.2 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The strategy is shifting to lower growth rates with improvement in living standards. The bottom block of Table VC-A provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 5.7 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 7.0 percent and to 7.4 percent in IIQ2013, rebounding to 9.5 percent in IIIQ2013. Annual equivalent growth was 7.4 percent in IVQ2013, declining to 6.6 percent in IQ2014 and increasing to 7.8 percent in IIQ2014. Annual equivalent growth slowed to 7.8 percent in IIIQ2014 and 6.1 percent in IVQ2014.

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

Cumulative GDP IVQ2014	Value Current CNY Billion	2014 Year-on-Year Constant Prices ∆%
GDP	63,646.3	7.4
Primary Industry	5833.2	4.1
Farming	6015.1	4.2
Secondary Industry	27,139.2	7.3
Industry	22,799.1	7.0
Construction	4472.5	8.9
Tertiary Industry	30,673.9	8.1
Transport, Storage, Post	2875.0	7.0
Wholesale, Retail Trades	6221.6	9.5
Accommodation and Restaurants	1119.9	6.2
Finance	4695.4	10.2
Real Estate	3816.7	2.3
Other	11631.1	8.8
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2014
IVQ2014	1.5	6.1
IIIQ2014	1.9	7.8
IIQ2014	1.9	7.8
IQ2014	1.6	6.6
2013
IVQ2013	1.8	7.4
IIIQ2013	2.3	9.5
IIQ2013	1.8	7.4
IQ2013	1.7	7.0
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.1	8.7
IQ2012	1.4	5.7
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.5	10.4
IQ2011	2.3	9.5

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

Growth of China’s GDP in IVQ2014 relative to the same period in 2013 was 7.3 percent, as shown in Table VC-B. Secondary industry accounts for 42.6 percent of cumulative GDP in IVQ2014. In cumulative IVQ2014, industry accounts for 35.8 percent of GDP and construction for 7.0 percent. Tertiary industry accounts for 48.2 percent of cumulative GDP in IVQ2014 and primary industry for 9.2 percent.China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The strategy is changing to lower growth rates while improving living standards. GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.8 percent in IQ2013, 7.5 percent in IIQ2013 and 7.9 percent in IIIQ2013. GDP grew 7.6 percent in IVQ2013 relative to a year earlier and 1.8 percent relative to IIIQ2013, which is equivalent to 7.4 percent per year. GDP grew 7.4 percent in IQ2014 relative to a year earlier and 1.6 percent in IQ2014 that is equivalent to 6.6 percent per year. GP grew 7.5 percent in IIQ2014 relative to a year earlier and 1.9 percent relative to the prior quarter, which is equivalent 7.8 percent. In IIIQ2014, GDP grew 7.3 percent relative to a year earlier and 1.9 percent relative to the prior quarter, which is 7.8 percent in annual equivalent. GDP grew 1.5 percent in IVQ2014, which is 6.1 percent in annual equivalent and 7.3 percent relative to a year earlier.

Table VC-B, China, Growth Rate of GDP, ∆% Relative to a Year Earlier and ∆% Relative to Prior Quarter

	IQ 2013	IIQ 2013	IIIQ 2013	IVQ 2013	IQ 2014	IIQ 2014	IIIQ 2014	IVQ 2014
GDP	7.8	7.5	7.9	7.6	7.4	7.5	7.3	7.3
Primary Industry	3.4	3.0	3.4	4.0	3.5	3.9	4.2	4.1
Secondary Industry	7.8	7.6	7.8	7.8	7.3	7.4	7.4	7.3
Tertiary Industry	8.3	8.3	8.4	8.3	7.1	8.0	7.9	8.1
GDP ∆% Relative to a Prior Quarter	1.7	1.8	2.3	1.8	1.6	1.9	1.9	1.5
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ  2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.5	2.2	1.8	1.4	2.1	2.0	1.9
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

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

Cumulative and 12-months rates of value added of industry in China are provided in Table VC-1. Industry’s value added grew 8.3 percent in Jan-Dec 2014 relative to a year earlier and 7.9 percent in the 12 months ending in Dec 2014. Value added of industry increased 8.3 percent in Jan-Nov 2014 relative to a year earlier and 7.2 percent in the 12 months ending in Nov 2014. Value added of industry grew 8.4 percent in Jan-Oct 2014 relative to a year earlier and 7.7 percent in the 12 months ending in Oct 2014. Value added of industry grew 8.5 percent in Jan-Sep 2014 relative to a year earlier and 8.0 percent in 12 months. Manufacturing grew 9.4 percent in Jan-Dec 2014 relative to a year earlier and 8.9 percent in 12 months. Mining and quarrying grew 4.5 percent in Jan-Dec 2014 relative to a year earlier and 3.4 percent in 12 months. Growth of total industry decelerated from cumulative 14.4 percent in Jan-Mar 2011 to 9.7 percent in Jan-Dec 2013 and 8.3 percent in Jan-Dec 2014.

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

	Industry	Mining & Quarrying	Manufac-turing	State Owned	Joint-Stock
2014
Jan-Dec	8.3	4.5	9.4	4.9	9.7
12M Dec	7.9	3.4	8.9	3.8	9.3
Jan-Nov	8.3	4.6	9.4	5.0	9.7
12M Nov	7.2	3.0	8.1	2.8	8.7
Jan-Oct	8.4	4.8	9.5	5.2	9.8
12M Oct	7.7	4.7	8.5	5.5	9.1
Jan-Sep	8.5	4.8	9.6	5.2	9.9
12M Sep	8.0	3.9	9.1	4.8	9.3
Jan-Aug	8.5	4.9	9.7	5.3	10.0
12M Aug	6.9	4.2	8.0	4.0	9.7
Jan-Jul	8.8	5.0	9.9	5.5	3.4
12M Jul	9.0	6.2	10.0	5.8	4.4
Jan-Jun	8.8	4.6	9.9	5.5	10.2
12M Jun	9.2	7.9	9.8	7.3	10.8
Jan-May	8.7	3.8	9.9	5.1	10.1
12M May	8.8	4.3	9.9	6.1	10.3
Jan-Apr	8.7	3.6	9.9	4.8	10.1
12M Apr	8.7	4.5	9.8	5.7	10.3
Jan-Mar	8.7	3.3	9.9	4.5	10.0
12 M Mar	8.8	2.9	9.9	4.6	10.1
Jan-Feb	8.6	3.5	9.8	4.4	9.9
2013
Jan-Dec	9.7	6.4	10.5	6.9	11.0
12M Dec	9.7	5.4	10.7	8.3	10.8
Jan-Nov	9.7	6.4	10.5	6.8	4.4
12M Nov	10.0	5.6	11.0	9.1	2.4
Jan-Oct	9.7	6.5	10.4	6.5	11.0
12M Oct	10.3	4.3	11.4	8.4	11.1
Jan-Sep	9.6	6.7	10.3	6.3	11.0
12M Sep	10.2	4.9	11.1	7.8	11.1
Jan-Aug	9.5	6.9	10.2	6.1	11.0
12M Aug	10.4	5.8	10.9	9.5	11.7
Jan-Jul	9.4	7.1	10.1	5.6	10.9
12M Jun	9.7	5.5	10.5	8.1	11.1
Jan-Jun	9.3	7.3	10.0	5.2	10.9
12M Jun	8.9	5.8	9.6	6.3	10.5
Jan-May	9.4	8.5	9.7	4.9	11.0
12M May	9.2	8.0	9.8	4.4	10.7
Jan-Apr	9.4	8.6	9.7	4.9	11.1
12 M Apr	9.3	8.5	9.6	4.3	10.9
Jan-Mar	9.5	8.7	9.8	5.2	11.3
12 M Mar	8.9	8.2	9.1	4.3	11.0
Jan-Feb	9.9	9.1	10.2	5.8	11.4
2012
Jan-Dec 2012	10.0	10.1	9.9	6.4	11.8
12 M Dec	10.3	9.6	10.6	8.0	12.1
Jan-Nov	10.0	10.2	9.8	6.3	11.8
12 M Nov	10.1	9.2	10.5	7.2	11.8
Jan-Oct	10.0	10.3	9.7	6.4	11.8
12 M Oct	9.6	9.1	9.7	7.0	11.7
Jan-Sep	10.0	10.4	9.7	6.3	11.8
12 M  Sep	9.2	9.0	9.3	6.3	11.0
Jan-Aug	10.1	10.5	9.8	6.3	15.4
12 M Aug	8.9	8.6	9.0	5.3	14.3
Jan-Jul	10.3	10.8	9.9	6.6	12.1
12 M Jul	9.2	10.1	8.8	4.8	10.9
Jan-Jun	10.5	11.1	10.1	7.0	12.4
12 M Jun	9.5	9.0	9.6	6.5	11.5
Jan-May	10.7	11.5	10.3	6.7	12.4
12 M May	9.6	9.1	9.8	6.6	11.0
Jan-Apr	11.0	12.3	10.5	6.6	12.9
12 M Apr	9.3	10.3	8.9	4.3	10.7
Jan-Mar	11.6	13.2	11.0	7.2	13.8
12 M Mar	11.9	13.9	11.2	8.0	13.7
Jan-Feb	11.4	12.7	10.9	7.3	13.9
2011
Jan-Dec	13.9	13.0	14.3	9.9	15.8
12 M Dec	12.8	12.6	13.0	9.2	14.7
Jan-Nov	14.0	13.0	14.4	9.9	16.0
12 M Nov	12.4	12.4	12.4	7.8	14.4
Jan-Oct	14.1	13.0	14.5	10.1	9.1
12 M Oct	13.2	12.1	13.7	8.9	15.1
Jan-Sep	14.2	13.1	14.6	10.4	16.1
12 M Sep	13.8	12.8	14.3	9.9	16.0
Jan-Aug	14.2	13.1	14.6	10.4	16.1
12 M Aug	13.5	13.4	13.5	9.4	15.5
Jan-Jul	14.3
12 M Jul	14.0	12.8	14.5	9.5
Jan-Jun	14.3	13.1	14.7	10.7	19.7
12 M Jun	15.1	13.9	15.6	10.7	20.8
Jan-May	14.0	12.9	14.4	10.7	19.3
12 M May	13.3	12.9	13.5	8.9	18.7
Jan-Apr	14.2	12.9	14.7	11.2	19.5
12 M Apr	13.4	11.9	14.0	10.4	18.0
Jan-Mar	14.4	13.1	14.9	11.4	19.8
12 M Mar	14.8	12.8	15.6	12.9	19.2
12 M Feb	14.9	13.1	15.6	10.5	21.7
Jan-Feb	14.1	13.3	14.4	10.6	20.3

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

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

Chart VC-1 provides 12-month percentage changes of value added of industry in China. The yearly rate of industry fell from 9.7 percent in Dec 2013 to 7.9 percent in Dec 2014.

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

Source: National Bureau of Statistics of China

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

Yearly rates of growth for the past 12 months and cumulative relative to the earlier year of various segments of industrial production in China are provided in Table VC-2. There is deceleration to 3.2 percent of electricity output in Jan-Dec 2014 relative to a year earlier and increase of 1.3 percent in the 12 months ending in Dec 2014. There are weaker readings in most segments with exception of 7.1 percent for autos. Rates from Jan to Dec 2011 relative to the same period a year earlier fluctuated but remained mostly above 10 percent with the exception of motor vehicles and crude oil. There is deceleration in Jan-Dec 2012 of percentage change with no segment showing growth exceeding 10 percent with exception of 12-month growth of 13.5 percent for pig iron and 16.7 percent for nonferrous metals. In Jan-Sep 2013, many segments grew at rates exceeding or around 10 percent with exception of electricity at 6.8 percent, crude oil at 4.2 percent and pig iron at 6.9 percent. Electricity fell from growth of 16.2 percent in the 12 months ending in Jun 2011 to 0.0 percent in the 12 months ending in Jun 2012, rebounding to 4.8 percent in Aug 2012 but declining to 1.5 percent in Sep 2012, increasing to 3.9 percent in Oct 2012, 7.9 percent in Nov 2012 and 7.6 percent in Dec 2012. Electricity grew 6.8 percent in Jan-Jul 2013 relative to a year earlier and increased 8.2 percent in the 12 months ending in Sep 2013. Electricity output increased 7.6 percent in Jan-Dec 2013 relative to a year earlier and 8.3 percent in 12 months ending in Dec 2013. Auto production jumped to 18.4 percent in Jan-Dec 2013 relative to a year earlier and 22.8 percent in 12 months ending in Dec 2013.

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

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

M: month

Source: National Bureau of Statistics of China

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

Monthly growth rates of industrial production in China are provided in Table VC-3. Monthly rates have fluctuated around 1 percent. Jan and Feb 2012 are somewhat weaker but there was improvement to 1.25 percent in Mar 2012. The rate of 0.33 percent in Apr 2012 is the lowest in the monthly series from Feb 2011 to Dec 2014. Monthly sales growth remained below 1 percent in all months from Jan 2012 to Dec 2013 with the exception of Mar 2012. Value added of industry increased 0.54 percent in Nov 2014 and 0.75 percent in Dec 2014.

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

2011	Month ∆%
Feb	0.93
Mar	0.99
Apr	1.32
May	0.79
Jun	1.30
Jul	0.82
Aug	0.85
Sep	0.95
Oct	0.71
Nov	0.68
Dec	0.94
Jan 2012	0.50
Feb	0.61
Mar	1.25
Apr	0.33
May	0.89
Jun	0.83
Jul	0.59
Aug	0.61
Sep	0.89
Oct	0.76
Nov	0.86
Dec	0.90
Jan 2013	0.61
Feb	0.78
Mar	0.72
Apr	0.80
May	0.74
Jun	0.62
Jul	0.90
Aug	1.09
Sep	0.54
Oct	0.81
Nov	0.73
Dec	0.51
Jan 2014	0.55
Feb	0.56
Mar	0.84
Apr	0.64
May	0.65
Jun	0.72
Jul	0.64
Aug	0.21
Sep	0.92
Oct	0.52
Nov	0.54
Dec	0.75

Source: National Bureau of Statistics of China

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

Table VC-4 provides cumulative growth of investment in fixed assets in China in Jan-Dec 2011, Jan-Dec 2012, Jan-Dec 2013 and Jan-Dec 2014 relative to a year earlier. Total fixed investment had grown at a high rate fluctuating around 25 percent and fixed investment in real estate development has grown at rates in excess of 30 percent but rates have declined significantly to still quite high percentages. In Jan-Dec 2014, investment in fixed assets in China grew 15.7 percent relative to a year earlier and 10.5 percent in real estate development. There was slight deceleration in the final two months of 2011 that continued into Jan-Dec 2013 and Jan-Dec 2014.

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

	Total	State	Real Estate Development
Jan-Dec 2014	15.7	13.0	10.5
Jan-Nov	15.8	13.7	11.9
Jan-Oct	15.9	14.0	12.4
Jan-Sep	16.1	14.1	12.5
Jan-Aug	16.5	14.2	13.2
Jan-Jul	17.0	14.7	13.7
Jan-Jun	17.3	14.8	14.1
Jan-May	17.2	15.1	14.7
Jan-Apr	17.3	14.4	16.4
Jan-Mar	17.6	14.5	16.8
Jan-Feb	17.9	NA	19.3
Jan-Dec 2013	19.6	16.3	19.8
Jan-Nov	19.9	16.8	19.5
Jan-Oct	20.1	17.1	19.2
Jan-Sep	20.2	17.6	19.7
Jan-Aug	20.3	NA	19.3
Jan-Jul	20.1	17.5	20.5
Jan-Jun	20.1	17.5	20.3
Jan-May	20.4	17.7	20.6
Jan-Apr	20.6	18.1	21.1
Jan-Mar	20.9	18.7	20.2
Jan-Feb	21.2	16.9	22.8
Jan-Dec 2012	20.6	14.7	16.2
Jan-Nov	20.7	14.5	16.7
Jan-Oct	20.7	14.2	15.4
Jan-Sep	20.5	13.6	15.4
Jan-Aug	20.2	12.9	15.6
Jan-Jul	20.4	12.6	15.4
Jan-Jun	20.4	13.8	16.6
Jan-May	20.1	10.0	18.5
Jan-Apr	20.2	9.5	18.7
Jan-Mar	20.9	9.0	23.5
Jan-Feb	21.5	8.8	27.8
Jan-Dec 2011	23.8	11.1	27.9
Jan-Nov	24.5	11.7	29.9
Jan-Oct	24.9	12.4	31.1
Jan-Sep	24.9	12.7	32.0
Jan-Aug	25.0	12.1	33.2
Jan-Jul	25.4	13.6	33.6
Jan-Jun	25.6	14.6	32.9
Jan-May	25.8	14.9	34.6
Jan-Apr	25.4	16.6	34.3
Jan-Mar	25.0	17.0	34.1
Jan-Feb	24.9	15.6	35.2

Source: National Bureau of Statistics of China

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

Chart VC-2 provides percentage changes of cumulative fixed asset investment in China relative to a year earlier from 2013 to 2014. Growth fell from 19.6 percent in Jan-Dec 2013 to 15.7 percent in Jan-Dec 2014.

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

Source: National Bureau of Statistics of China

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

China has used restriction of reserves of banks to moderate real estate investment. These policies have been reversed because of lower inflation and weakening economic growth. Chart VC-3 shows decline of fluctuating cumulative growth rates of investment in real estate development relative to a year earlier from 19.8 percent in Jan-Dec 2013 to 10.5 percent in Jan-Dec 2014.

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

Source: National Bureau of Statistics of China

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

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

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

	12-Month ∆%	Cumulative ∆%/ Cumulative Year Earlier
2014
Jan-Dec	11.9	12.0
Jan-Nov	11.7	12.0
Jan-Oct	11.5	12.0
Jan-Sep	11.6	12.0
Jan-Aug	11.9	12.1
Jan-Jul	12.2	12.1
Jan-Jun	12.4	12.1
Jan-May	12.5	12.1
Jan-Apr	11.9	12.0
Jan-Mar	12.2	12.0
Jan-Feb	11.8	NA
2013
Dec	13.6	13.1
Nov	13.7	13.0
Oct	13.3	13.0
Sep	13.3	12.9
Aug	13.4	12.8
Jul	13.2	12.8
Jun	13.3	12.7
May	12.9	12.6
Apr	12.8	12.5
Mar	12.6	12.4
Feb	12.3	12.3
2012
Dec	15.2	14.3
Nov	14.9	14.2
Oct	14.5	14.1
Sep	14.2	14.1
Aug	13.2	14.1
Jul	13.1	14.2
Jun	13.7	14.4
May	13.8	14.5
Apr	14.1	14.7
Mar	15.2	14.8
Feb	14.7	14.7
2011
Dec	18.1	17.1
Nov	17.3	17.0
Oct	17.2	17.0
Sep	17.7	17.0
Aug	17.0	16.9
Jul	17.2	16.8
Jun	17.7	16.8
May	16.9	16.6
Apr	17.1	16.5
Mar	17.4	17.4
Feb	11.6	15.8
Jan	19.9	19.9

Source: National Bureau of Statistics of China

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

Chart VC-4 of the National Bureau of Statistics of China provides 12-month rates of growth of retail sales from 2013 to 2014. There is again a drop into 2013 with the lowest percentages in Chart VC-4 followed by moderate increases. The growth rate of retail sales fell to 11.9 percent in Jan-Dec 2014 relative to a year earlier.

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

Source: National Bureau of Statistics of China

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

Table VC-6 provides monthly percentage changes of retail sales in China. Although the rate of 0.19 percent in Jan 2012 is the lowest in Table VC-6, the rate of 1.32 percent in Sep 2012 is relatively high and 1.23 percent in Dec 2012 is closer to rates in 2011. Sales are lower in Jan-Feb 2013 because of the Lunar New Year celebrations, rebounding in Mar-Dec 2013. There is weakness in Jan-Feb 2014 also partly under influence of the celebration of the Lunar New Year followed with 0.98 percent in Mar 2014. Retail sales increased 1.01 percent in Dec 2014.

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

2011	Month ∆%
Feb	1.35
Mar	1.26
Apr	1.30
May	1.39
Jun	1.49
Jul	1.57
Aug	1.50
Sep	1.33
Oct	1.36
Nov	1.26
Dec	1.41
2012
Jan	0.19
Feb	0.99
Mar	1.21
Apr	0.93
May	1.11
Jun	1.12
Jul	1.03
Aug	1.11
Sep	1.32
Oct	1.18
Nov	1.21
Dec	1.23
Jan 2013	0.14
Feb	0.87
Mar	1.50
Apr	0.99
May	0.95
Jun	1.09
Jul	1.08
Aug	0.92
Sep	1.02
Oct	0.98
Nov	1.00
Dec	0.94
2014
Jan	0.85
Feb	0.95
Mar	0.98
Apr	0.84
May	1.11
Jun	0.95
Jul	0.89
Aug	0.89
Sep	0.87
Oct	1.01
Nov	0.90
Dec	1.01

Source: National Bureau of Statistics of China

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

VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.3 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.6 percent in 2011. EUROSTAT estimates growth of GDP of the euro area of minus 0.7 percent in 2012 and minus 0.4 percent in 2013 but 1.1 percent in 2014 and 1.7 percent in 2015.

Table VD-EUR, Euro Area, Yearly Percentage Change of Harmonized Index of Consumer Prices, Unemployment and GDP ∆%

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	9.6	2.9
2000	2.2	8.8	3.8
2001	2.4	8.2	2.0
2002	2.3	8.5	0.9
2003	2.1	9.0	0.7
2004	2.2	9.2	2.2
2005	2.2	9.1	1.7
2006	2.2	8.4	3.3
2007	2.2	7.5	3.0
2008	3.3	7.6	0.4
2009	0.3	9.6	-4.5
2010	1.6	10.1	1.9
2011	2.7	10.1	1.6
2012	2.5	11.3	-0.7
2013*	1.3	12.0	-0.4
2014*			1.1
2015*			1.7

*EUROSTAT forecast Source: EUROSTAT

http://ec.europa.eu/eurostat

http://ec.europa.eu/eurostat/data/database

The GDP of the euro area in 2012 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $12,199.1 billion or 16.9 percent of world GDP of $72,216.4 billion (http://www.imf.org/external/pubs/ft/weo/2012/02/weodata/index.aspx). The sum of the GDP of France $2613.9 billion with the GDP of Germany of $3429.5 billion, Italy of $2014.1 billion and Spain $1323.5 billion is $9381.0 billion or 76.9 percent of total euro area GDP and 13.0 percent of World GDP. The four largest economies account for slightly more than three quarters of economic activity of the euro area. Table VD-EUR1 is constructed with the dataset of EUROSTAT, providing growth rates of the euro area as a whole and of the largest four economies of Germany, France, Italy and Spain annually from 1996 to 2011 with the estimate of 2012 and forecasts for 2013, 2014 and 2015 by EUROSTAT. The impact of the global recession on the overall euro area economy and on the four largest economies was quite strong. There was sharp contraction in 2009 and growth rates have not rebounded to earlier growth with exception of Germany in 2010 and 2011.

Table VD-EUR1, Euro Area, Real GDP Growth Rate, ∆%

	Euro Area	Germany	France	Italy	Spain
2015*	1.7	1.9	1.7	1.2	1.7
2014*	1.1	1.7	0.9	0.7	0.5
2013*	-0.4	0.4	0.2	-1.9	-1.2
2012	-0.7	0.7	0.0	-2.4	-1.6
2011	1.6	3.3	2.0	0.4	0.1
2010	1.9	4.0	1.7	1.7	-0.2
2009	-4.5	-5.1	-3.1	-5.5	-3.8
2008	0.4	1.1	-0.1	-1.2	0.9
2007	3.0	3.3	2.3	1.7	3.5
2006	3.3	3.7	2.5	2.2	4.1
2005	1.7	0.7	1.8	0.9	3.6
2004	2.2	1.2	2.5	1.7	3.3
2003	0.7	-0.4	0.9	0.0	3.1
2002	0.9	0.0	0.9	0.5	2.7
2001	2.0	1.5	1.8	1.9	3.7
2000	3.8	3.1	3.7	3.7	5.0
1999	2.9	1.9	3.3	1.5	4.7
1998	2.8	1.9	3.4	1.4	4.5
1997	2.6	1.7	2.2	1.9	3.9
1996	1.5	0.8	1.1	1.1	2.5

Source: EUROSTAT

http://ec.europa.eu/eurostat

http://ec.europa.eu/eurostat/data/database

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, increased from 51.4 in Dec to 52.2 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/d69ce69ee5104958871505c2fa8a688c). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests GDP growth at around 0.2 percent in IQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/d69ce69ee5104958871505c2fa8a688c). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP increased from 51.1 in Nov to 51.4 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/7af39047a865414bab33228b63be59ff). Chris Williamson, Chief Economist at Markit, finds slowing growth of GDP at around 0.1 percent in IVQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/7af39047a865414bab33228b63be59ff). The Markit Eurozone Services Business Activity Index increased from 51.1 in Nov to 51.6 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/7af39047a865414bab33228b63be59ff). The Markit Eurozone Manufacturing PMI^® increased to 50.6 in Dec from 50.1 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/718a95fe800e414d89e4fe0726e66070). New export orders increased at faster pace. Chris Williamson, Chief Economist at Markit, finds near stagnation of industrial growth in the euro area (http://www.markiteconomics.com/Survey/PressRelease.mvc/718a95fe800e414d89e4fe0726e66070). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIIQ2014 ∆% 0.2; IIIQ2014/IIIQ2013 ∆% 0.8 Blog 12/7/14
Unemployment	Nov 2014: 11.5 % unemployment rate; Nov 2014: 18.394 million unemployed Blog 1/11/15
HICP	Dec month ∆%: -0.1 12 months Dec ∆%: -0.2 Blog 1/18/15
Producer Prices	Euro Zone industrial producer prices Nov ∆%: -0.3 Nov 12-month ∆%: -1.6 Blog 1/11/14
Industrial Production	Nov month ∆%: 0.2; Nov 12 months ∆%: -0.4 Blog 1/18/15
Retail Sales	Nov month ∆%: 0.6 Nov 12 months ∆%: 1.5 Blog 1/11/15
Confidence and Economic Sentiment Indicator	Sentiment 100.7 Dec 2014 Consumer minus 10.9 Dec 2014 Blog 1/11/15
Trade	Jan-Nov 2014/Jan-Nov 2013 Exports ∆%: 1.8 Imports ∆%: 0.0 Nov 2014 12-month Exports ∆% 0.6 Imports ∆% -1.8 Blog 1/18/15

Links to blog comments in Table EUR:

1/18/15 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html

1/11/15 http://cmpassocregulationblog.blogspot.com/2015/01/fluctuating-valuations-of-risk.html

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

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1971 to 2013, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.6 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.1 percent in 2010, 3.6 percent in 2011 and 0.4 percent in 2012. Growth decelerated to 0.1 percent in 2013.

The Federal Statistical Agency of Germany analyzes the fall and recovery of the German economy (http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/Content/Statistics/VolkswirtschaftlicheGesamtrechnungen/Inlandsprodukt/Aktuell,templateId=renderPrint.psml):

“The German economy again grew strongly in 2011. The price-adjusted gross domestic product (GDP) increased by 3.0% compared with the previous year. Accordingly, the catching-up process of the German economy continued during the second year after the economic crisis. In the course of 2011, the price-adjusted GDP again exceeded its pre-crisis level. The economic recovery occurred mainly in the first half of 2011. In 2009, Germany experienced the most serious post-war recession, when GDP suffered a historic decline of 5.1%. The year 2010 was characterised by a rapid economic recovery (+3.7%).”

Table VE-4 provides annual growth rates of the German economy from 1970 to 2013, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.6 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.1 percent in 2010, 3.6 percent in 2011 and 0.4 percent in 2012. Growth in 2013 was 0.1 percent.

Table VE-DE, Germany, GDP ∆% on Prior Year

	Price Adjusted Chain-Linked	Price- and Calendar-Adjusted Chain Linked
Average ∆% 1991-2013	1.3
Average ∆% 1991-1999	1.5
Average ∆% 2000-2007	1.4
Average ∆% 2003-2007	2.2
Average ∆% 2007-2013	0.5
Average ∆% 2009-2013	2.0
2013	0.1	0.2
2012	0.4	0.6
2011	3.6	3.7
2010	4.1	3.9
2009	-5.6	-5.6
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.9
2004	1.2	0.7
2003	-0.7	-0.7
2002	0.0	0.0
2001	1.7	1.8
2000	3.0	3.2
1999	2.0	1.9
1998	2.0	1.7
1997	1.8	1.9
1996	0.8	0.8
1995	1.7	1.8
1994	2.5	2.5
1993	-1.0	-1.0
1992	1.9	1.5
1991	5.1	5.2
1990	5.3	5.5
1989	3.9	4.0
1988	3.7	3.4
1987	1.4	1.3
1986	2.3	2.3
1985	2.3	2.3
1984	2.8	2.9
1983	1.6	1.5
1982	-0.4	-0.5
1981	0.5	0.6
1980	1.4	1.3
1979	4.2	4.3
1978	3.0	3.1
1977	3.3	3.5
1976	4.9	4.5
1975	-0.9	-0.9
1974	0.9	1.0
1973	4.8	5.0
1972	4.3	4.3
1971	3.1	3.0
1970	NA	NA

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvironment/NationalAccounts/NationalAccounts.html

https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvironment/NationalAccounts/DomesticProduct/CurrentRevision.html

https://www.destatis.de/EN/Methods/NationalAccountRevision/Revision2014_BackgroundPaper.pdf?__blob=publicationFile

https://www.destatis.de/EN/PressServices/Press/pr/2014/02/PE14_048_811.html

https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_278_811.html https://www.destatis.de/EN/PressServices/Press/pr/2013/11/PE13_381_811.html

https://www.destatis.de/EN/PressServices/Press/pr/2014/01/PE14_016_811.html

https://www.destatis.de/DE/PresseService/Presse/Pressekonferenzen/2014/BIP2013/Pressebroschuere_BIP2013.html

https://www.destatis.de/EN/PressServices/Press/pr/2014/05/PE14_167_811.html

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

https://www.destatis.de/EN/PressServices/Press/pr/2014/11/PE14_401_811.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, increased from 52.0 in Dec to 52.6 in Jan. The index of manufacturing output reached 52.3 in Jan, increasing from 51.8 in Dec, while the index of services increased to 52.7 in Dec from 52.1 in Dec. The overall Flash Germany Manufacturing PMI^® decreased from 51.2 in Dec to 51.0 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/b36bd29c628047739c3e404c195963a5). New orders in manufacturing contracted. Oliver Kolodseike, Economist at Markit, finds improving GDP growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/b36bd29c628047739c3e404c195963a5). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 51.7 in Nov to 52.0 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/4f337543002f446a8ab8ee397aff2b2d). Oliver Kolodseike, Senior Economist at Markit and author of the report, finds slow growth in IVQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/4f337543002f446a8ab8ee397aff2b2d). The Germany Services Business Activity Index decreased from 54.4 in Oct to 52.1 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/4f337543002f446a8ab8ee397aff2b2d). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 49.5 in Nov to 51.2 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/4ef269fb4b7c4e8ba3629311b36b17cb). New export orders increased. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds improvement of manufacturing but without definitive signs of whether it is temporary (http://www.markiteconomics.com/Survey/PressRelease.mvc/4ef269fb4b7c4e8ba3629311b36b17cb).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIIQ2014 0.1 ∆%; III/Q2014/IIIQ2013 ∆% 1.2 2013/2012: 0.1% GDP ∆% 1970-2013 Blog 8/26/12 5/27/12 11/25/12 2/24/13 5/19/13 5/26/13 8/18/13 8/25/13 11/17/13 11/24/13 1/26/14 2/16/14 3/2/14 5/18/14 5/25/14 8/17/14 9/7/14 11/16/14 11/30/14
Consumer Price Index	Dec month NSA ∆%: 0.0 Dec 12-month NSA ∆%: 0.2 Blog 1/18/15
Producer Price Index	Dec month ∆%: -0.7 NSA, minus 0.5 CSA 12-month NSA ∆%: -1.7 Blog 1/25/15
Industrial Production	MFG Nov month CSA ∆%: 0.2 12-month NSA: -1.4 Blog 1/11/15
Machine Orders	MFG Nov month ∆%: -2.4 Nov 12-month ∆%: -1.4 Blog 1/11/15
Retail Sales	Nov Month ∆% 1.0 12-Month ∆% -0.8 Blog 1/11/15
Employment Report	Unemployment Rate SA Nov 5.0% Blog 1/11/15
Trade Balance	Exports Nov 12-month NSA ∆%: 1.4 Imports Nov 12 months NSA ∆%: 1.7 Exports Nov month CSA ∆%: -2.1; Imports Nov month CSA minus 1.5 Blog 1/11/15

Links to blog comments in Table DE:

1/18/15 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html

1/11/15 http://cmpassocregulationblog.blogspot.com/2015/01/fluctuating-valuations-of-risk.html

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

11/16/14 http://cmpassocregulationblog.blogspot.com/2014/11/fluctuating-financial-variables.html

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

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

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

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

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

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

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

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

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

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

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

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

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

Period	Average ∆%
1949-2013	3.2
2007-2013	0.3
2000-2013	1.1
2000-2012	1.1
2000-2007	1.8
1990-1999	2.0
1980-1989	2.6
1970-1979	3.7
1960-1969	5.7
1950-1959	4.2

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20141223

The Markit Flash France Composite Output Index decreased from 49.7 in Dec to 49.5 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/a2da71a5f606408ea3c8486499f1156a). Jack Kennedy, Senior Economist at Markit and author of the report, finds continuing weak performance (http://www.markiteconomics.com/Survey/PressRelease.mvc/a2da71a5f606408ea3c8486499f1156a). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased from 47.9 in Nov to 49.7 in Dec, indicating marginal contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9c207bff1f141eab3825a1e08fa8743). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds restraint of growth by the private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9c207bff1f141eab3825a1e08fa8743). The Markit France Services Activity index increased from 47.9 in Nov to 50.6 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9c207bff1f141eab3825a1e08fa8743). The Markit France Manufacturing Purchasing Managers’ Index^® decreased to 47.5 in Dec from 48.4 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/944c79ea443643ea93349eeda9c44f4d). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds faster decline of output and employment in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/944c79ea443643ea93349eeda9c44f4d). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Dec month ∆% 0.1 12 months ∆%: 0.1 1/18/15
PPI	Nov month ∆%: -0.2 Nov 12 months ∆%: -2.0 Blog 12/28/14
GDP Growth	IIIQ2014/IIQ2014 ∆%:0.3 IIIQ2014/IIIQ2013 ∆%: 0.4 Blog 3/31/13 5/19/12 6/30/13 9/29/13 11/17/13 12/29/13 2/16/14 4/6/14 5/18/14 6/29/14 8/17/14 9/28/14 11/16/14 12/28/14
Industrial Production	Nov ∆%: Manufacturing -0.6 12-Month ∆%: Manufacturing -1.3 Blog 1/18/15
Consumer Spending	Manufactured Goods Nov ∆%: 0.4 Nov 12-Month Manufactured Goods ∆%: -1.1 Blog 12/28/14
Employment	Unemployment Rate: IIIQ2014 9.9% Blog 12/7/14
Trade Balance	Nov Exports ∆%: month 0.6, 12 months -1.9 Nov Imports ∆%: month 4.4, 12 months -2.4 Blog 1/18/15
Confidence Indicators	Historical average 100 Nov Mfg Business Climate 99.0 Blog 12/28/14

Links to blog comments in Table FR:

1/18/15 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html

12/28/14 http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html

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

11/16/14 http://cmpassocregulationblog.blogspot.com/2014/11/fluctuating-financial-variables.html

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

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

6/29/14 http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html

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

4/6/14 http://cmpassocregulationblog.blogspot.com/2014/04/interest-rate-risks-twenty-eight.html

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

12/29/13 http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html

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

9/29/13 http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html

6/30/13 http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

VG Italy. Table VG-IT provides percentage changes in a quarter relative to the same quarter a year earlier of Italy’s expenditure components in chained volume measures. GDP has been declining at sharper rates from minus 0.7 percent in IVQ2011 to minus 2.5 percent in IVQ2012, minus 2.5 percent in IQ2013, minus 2.2 percent in IIQ2013 and minus 1.8 percent in IIIQ2013. GDP fell 1.2 percent in IVQ2013 relative to a year earlier. GDP fell 0.3 percent in IQ2014 relative to a year earlier and decreased 0.4 percent in IIQ2014 relative to a year earlier. GDP fell 0.5 percent in IIIQ2014 relative to a year earlier. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates. The rates of decline of GDP, consumption and GFCF were somewhat milder in IIIQ2013 and IVQ2013 than in IQ2013 and the final three quarters of 2012. Consumption fell 0.3 percent in IQ2014 and GFCF fell 1.4 percent. In IIQ2014, consumption increased 0.2 percent relative to a year earlier and GFCF fell 2.2 percent. GDP fell 0.5 percent in IIIQ2014 relative to a year earlier while consumption increased 0.4 percent and GFCF fell 3.1 percent.

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

	GDP	Imports	Consumption	GFCF	Exports
2014
IIIQ	-0.5	-0.7	0.4	-3.1	1.3
IIQ	-0.4	1.8	0.2	-2.2	2.5
IQ	-0.3	-0.1	-0.3	-1.4	1.5
2013
IVQ	-1.2	0.5	-1.1	-3.4	1.4
IIIQ	-1.8	-1.7	-2.2	-4.3	0.4
IIQ	-2.2	-4.1	-2.7	-6.2	0.4
IQ	-2.5	-5.0	-2.9	-7.6	1.3
2012
IVQ	-2.5	-7.6	-3.5	-7.8	1.3
IIIQ	-2.5	-8.0	-3.7	-8.1	2.5
IIQ	-2.4	-8.6	-3.6	-7.6	1.2
IQ	-1.9	-8.5	-3.0	-6.5	1.6
2011
IVQ	-0.7	-7.0	-2.1	-4.0	2.4
IIIQ	0.5	0.4	-0.8	-2.4	4.6
IIQ	1.3	3.7	0.4	-0.9	7.7
IQ	1.9	8.4	0.7	0.6	10.3
2010
IVQ	2.3	14.6	1.3	0.9	13.0
IIIQ	1.8	12.9	1.1	0.6	12.4
IIQ	1.9	14.2	1.0	-0.4	13.2
IQ	0.7	6.7	0.9	-3.3	6.8
2009
IVQ	-3.5	-6.3	0.2	-8.2	-9.3
IIIQ	-5.0	-12.2	-0.8	-12.6	-16.4
IIQ	-6.6	-17.9	-1.4	-13.6	-21.4
IQ	-6.9	-17.2	-1.8	-12.4	-22.8
2008
IVQ	-3.0	-8.2	-0.9	-8.3	-10.3
IIIQ	-1.9	-5.0	-0.8	-4.5	-3.9
IIQ	-0.2	-0.1	-0.3	-1.5	0.4
IQ	0.5	1.7	0.1	-1.0	2.9

GFCF: Gross Fixed Capital Formation

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/140552

The Markit/ADACI Business Activity Index increased from 50.8 in Oct to 51.8 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/e5d7ad3821eb4839a5d9e2736c52ae01). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds weakening demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/e5d7ad3821eb4839a5d9e2736c52ae01). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), decreased from 49.0 in Nov to 48.4 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/adfcb225d48e4463913877323a4b6df6). New export orders continued to increase. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds fragile conditions in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/adfcb225d48e4463913877323a4b6df6). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Dec month ∆%: 0.0 Dec 12-month ∆%: 0.0 Blog 1/18/15
Producer Price Index	Nov month ∆%: -0.2 Oct 12-month ∆%: -1.6 Blog 1/4/15
GDP Growth	IIIQ2014/IIQ2014 SA ∆%: minus 0.1 IIIQ2014/IIQ2013 NSA ∆%: minus 0.5 Blog 3/17/13 6/16/13 8/11/13 9/15/13 11/17/13 12/15/13 2/16/14 3/16/14 5/18/14 6/15/14 8/10/14 8/31/14 10/19/14 11/16/14 12/7/14
Labor Report	Nov 2014 Participation rate 64.3% Employment ratio 55.5% Unemployment rate 13.4% Youth Unemployment 43.9% Blog 1/11/15
Industrial Production	Nov month ∆%: 0.3 12 months CA ∆%: -1.8 Blog 1/18/15
Retail Sales	Nov month ∆%: 0.1 Nov 12-month ∆%: -2.3 Blog 1/25/15
Business Confidence	Mfg Dec 97.5, Aug 95.7 Construction Dec 72.3, Aug 76.5 Blog 1/4/15
Trade Balance	Balance Nov SA €3591 million versus Oct €3934 Exports Nov month SA ∆%: minus 1.1; Imports month ∆%: -0.1 Exports 12 months Nov NSA ∆%: 1.7 Imports 12 months NSA ∆%: 0.0 Blog 1/25/15

Links to blog comments in Table IT:

1/18/15 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html

1/11/15 http://cmpassocregulationblog.blogspot.com/2015/01/fluctuating-valuations-of-risk.html

1/4/15 http://cmpassocregulationblog.blogspot.com/2015/01/peaking-valuations-of-risk-financial.html

12/28/14 http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html

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

11/16/14 http://cmpassocregulationblog.blogspot.com/2014/11/fluctuating-financial-variables.html

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

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

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

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

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

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

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

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

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

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

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

3/17/13 http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html

Italy is competitive in various economic activities. Current restraints consist of low economic growth with high debt/GDP ratio and need for structural changes. Table VG-1 provides growth of retail sales for Italy. Retail sales increased 0.1 percent in Nov 2014 relative to Oct 2014, decreased 0.2 percent in Sep-Nov 2014 relative to Jun-Aug 2014, decreased 2.3 percent in Nov 2014 relative to Nov 2013 and decreased 1.4 percent cumulatively in Jan-Nov 2014 relative to Jan-Nov 2013.

Table VG-1, Italy, Retail Sales ∆%

	Nov 2014/  Oct 2014 SA	Sep-Nov 14/   Jun-Aug SA	Nov 2014/ Nov 2013 NSA	Jan-Nov 2014/ Jan-Nov 2013
Food	0.2	0.1	-2.2	-1.3
Non-food	0.0	-0.4	-2.4	-1.3
Total	0.1	-0.2	-2.3	-1.4

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/146132

Chart VG-1 provides 12-month percentage changes of retail sales at current prices. There is improvement in the final segment from Feb to May 2013 with sharper decline in Jun 2013 and recovery in Jul-Aug 2013. Sales declined again in Sep 2013, increasing in Oct-Nov 2013. Sales fell in Dec 2013 and improved in Jan 2014. Sales stabilized in Feb 2014 and deteriorated in Mar 2014. Sales improved in Apr 2014 and deteriorated in May-Jun 2014. There is marginal improvement in Jul 2014 followed by deterioration in Aug-Sep 2014 with stability in Oct 2014 and deterioration in Nov 2014.

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

Source: Istituto Nazionale di Statistica

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

A longer perspective of retail sales in Italy is provided by monthly and 12-month percentage changes in 2011, Jan-Dec 2012, Jan-Dec 2013, Jan-Nov 2014 and annual rates for 2011, 2012 and 2013 in Table VG-2. Retail sales did not decline very sharply during the global recession but fell 0.8 percent in 2011, 1.7 percent in 2012 and 2.1 percent in 2013. There is an evident declining trend in 2011 with few monthly increases and similar weakness in 2012 with multiple monthly declines. Negative percentage changes in 12 months increased to more than 3 percent with decrease of 3.2 percent in the 12 months ending in Mar 2013 and decrease of 3.0 percent in the 12 months ending in Jun 2013. Retail sales increased 0.1 percent in Nov 2014 and decreased 2.3 percent in 12 months.

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

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/146132

Exports and imports of Italy and monthly growth rates SA are in Table VG-3. There have been significant fluctuations. Seasonally adjusted exports decreased 1.1 percent in Nov 2014 while imports decreased 0.1 percent. The SA trade balance deteriorated from surplus of €3934 million in Oct 2014 to surplus of €3591 million in Nov 2014.

Table VG-3, Italy, Exports, Imports and Trade Balance SA Million Euros and Quarter and Month SA ∆%

	Exports	∆%	Imports	∆%	Balance
2012
IQ	96,268	1.0	96,978	-0.8	-710
2Q	97,768	1.6	96,102	-0.9	1,666
3Q	99,312	1.6	96,066	0.0	3,246
4Q	97,961	-1.4	92,923	-3.3	5,038
2013
IQ	97,795	-0.2	91,782	-1.2	6,013
2Q	98,094	0.3	89,556	-2.4	8,538
3Q	98,103	0.0	91,690	2.4	6,413
4Q	98,511	0.4	89,464	-2.4	9,047
2014
IQ	98,934	0.4	88,514	-1.1	10,420
IIQ	99,494	0.6	89,395	1.0	10,099
IIIQ	99,311	-0.2	89,228	-0.2	10,083
2012
Nov	32,947	0.6	31,056	-1.1	1,891
Dec	32,248	-2.1	30,450	-2.0	1,798
2013
Jan	33,067	2.5	31,286	2.7	1,781
Feb	32,129	-2.8	30,172	-3.6	1,957
Mar	32,599	1.5	30,324	0.5	2,275
Apr	32,486	-0.3	29,974	-1.2	2,512
May	32,631	0.4	29,609	-1.2	3,022
Jun	32,977	1.1	29,973	1.2	3,004
Jul	32,611	-1.1	30,388	1.4	2,223
Aug	32,656	0.1	30,587	0.7	2,069
Sep	32,836	0.6	30,715	0.4	2,121
Oct	32,631	-0.6	29,952	-2.5	2,679
Nov	32,146	-1.5	29,219	-2.4	2,927
Dec	33,734	4.9	30,293	3.7	3,441
2014
Jan	33,297	-1.3	29,763	-1.7	3,534
Feb	32,956	-1.0	29,475	-1.0	3,481
Mar	32,681	-0.8	29,276	-0.7	3,405
Apr	32,821	0.4	29,165	-0.4	3,656
May	33,587	2.3	29,943	2.7	3,644
Jun	33,086	-1.5	30,287	1.1	2,799
Jul	32,597	-1.5	29,576	-2.3	3,021
Aug	33,126	1.6	29,599	0.1	3,527
Sep	33,588	1.4	30,053	1.5	3,535
Oct	33,719	0.4	29,785	-0.9	3,934
Nov	33,334	-1.1	29,743	-0.1	3,591

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/145600

Italy’s trade account not seasonally adjusted is in Table VG-4. Values are different because the data are original and not adjusted. Exports increased 1.7 percent in the 12 months ending in Nov 2014 while imports changed 0.0 percent with actual trade surplus of €3541 million. Twelve-month rates of growth picked up again in Aug 2011 with 15.2 percent for exports and 12.6 percent for imports. In Sep 2011, exports grew 10.2 percent relative to a year earlier while imports grew only 3.6 percent. In Oct 2011, exports grew 4.5 percent while imports fell 0.2 percent. In Nov 2011, exports grew 6.5 percent in 12 months while imports grew 0.5 percent. Exports continued to growth of 7.9 percent in the 12 months ending in Aug 2012 while imports fell 1.8 percent. The actual or not seasonally adjusted trade balance deficit fell from €2948 million in Aug 2011 to surplus of €1407 million in Dec 2011 but turned into deficit of €4691 million in Jan 2012. The deficit improved to lower deficit of €1311 million in Feb 2012 and surplus of €1831 million in Mar 2012, returning to deficit of €421 million in Apr and surplus of €833 million in May. In Jun 2012, the actual surplus was €2681 million and then €4673 million in Jul 2012, which was the highest in 2012, but deteriorated to actual deficit of €535 million in Aug 2012. Exports fell 20.9 percent and imports 22.1 percent during the global recession in 2009. Growth of exports was 12.2 percent in the 12 months ending in Oct 2012 while imports increased 1.4 percent, increasing the trade surplus to €2337 million. The trade surplus was €2314 million in Dec 2012 with growth of exports of minus 4.5 percent in 12 months while imports fell 7.8 percent. The trade balance deteriorated to deficit of €1852 million in Jan 2013 even with growth of exports of 9.0 percent in 12 months while imports fell 1.1 percent. The trade balance returned to surplus of €1053 million in Feb 2013 with decline of exports by 2.8 percent and decrease of imports by 9.8 percent. The surplus widened to €3030 million in Mar 2013 with exports declining 5.9 percent and imports falling 9.8 percent. The surplus shrank to €1946 million in Apr 2013 with growth of exports of 4.6 and decline of imports of 3.1 percent. The surplus increased to €3913 million in May 2013 with declines of exports of 1.5 percent and of imports of 10.5 percent. The surplus declined to €3425 million in Jun 2013 with decline of exports of 3.1 percent in 12 months and of imports of 5.7 percent.

Table VG-4, Italy, Exports, Imports and Trade Balance NSA Million Euros and Year-on-Year ∆%

	Exports	∆%	Imports	∆%	Balance
2011	375,904	11.4	401,428	9.3	-25,524
2012	390,182	3.8	380,292	-5.3	9,890
2013	390,233	0.0	361,002	-5.1	29,230
2011
IQ11	90,128	18.1	103,760	21.7	-13,632
IIQ11	97,274	13.4	104,303	22.4	-7,029
IIIQ11	92,567	9.8	96,138	12.8	-3,571
IVQ11	95,935	5.5	97,227	-2.7	-1,292
2012
IQ12	95,398	5.8	99,568	-4.0	-4,170
IIQ2012	100,172	3.0	97,079	-6.9	3,093
IIIQ2012	94,938	2.6	90,670	-5.7	4,268
IVQ2012	99,674	3.9	92,975	-4.4	6,699
2013
IQ13	94,837	-0.6	92,606	-7.0	2,231
IIQ13	99,971	-0.2	90,687	-6.6	9,284
IIIQ13	95,197	0.3	87,750	-3.2	7,447
IVQ13	100,227	0.6	89,959	-3.2	10,268
2014
IQ14	96,151	1.4	89,407	-3.5	6,744
IIQ14	100,736	0.8	90,277	-0.5	10,459
IIIQ14	97,260	2.2	86,256	-1.7	11,003
2012
Nov	33,688	3.8	31,641	-7.0	2,047
Dec	29,948	-4.5	27,634	-7.8	2,314
2013
Jan	29,957	9.0	31,809	-1.1	-1,852
Feb	30,921	-2.8	29,868	-9.8	1,053
Mar	33,959	-5.9	30,929	-9.8	3,030
Apr	31,959	4.6	30,013	-3.1	1,946
May	34,689	-1.5	30,775	-10.5	3,913
Jun	33,324	-3.1	29,899	-5.7	3,425
Jul	38,415	3.3	32,546	0.1	5,869
Aug	24,589	-6.0	23,689	-11.3	900
Sep	32,194	1.9	31,515	0.2	679
Oct	36,291	0.7	32,444	-3.7	3,847
Nov	32,572	-3.3	29,584	-6.5	2,988
Dec	31,364	4.7	27,931	1.1	3,433
2014
Jan	30,074	0.4	29,823	-6.2	251
Feb	31,802	2.8	29,151	-2.4	2,651
Mar	34,274	0.9	30,433	-1.6	3,842
Apr	32,498	1.7	28,991	-3.4	3,507
May	34,685	0.0	31,065	0.9	3,620
Jun	33,552	0.7	30,220	1.1	3,332
Jul	38,616	0.5	31,694	-2.6	6,923
Aug	24,069	-2.1	22,009	-7.1	2,060
Sep	34,574	7.4	32,554	3.3	2,020
Oct	37,335	2.9	31,939	-1.6	5,396
Nov	33,138	1.7	29,597	0.0	3,541

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/145600

Growth rates of Italy’s trade and major products are in Table VG-5 for the period Jan-Nov 2014 relative to Jan-Nov 2013. Growth rates of cumulative imports relative to a year earlier are negative for energy with minus 18.4 percent. Exports of durable goods grew 1.7 percent and exports of capital goods increased 3.9 percent. The higher rate of growth of exports of 1.6 percent in Jan-Nov 2014/Jan-Nov 2013 relative to that of imports of minus 1.7 percent may reflect weak demand in Italy with GDP declining during nine consecutive quarters from IIIQ2011 through IIIQ2013 together with softening commodity prices. GDP decreased marginally 0.1 percent in IVQ2013, changed 0.0 percent in IQ2014 and fell 0.2 percent in IIQ2014. Italy’s GDP fell 0.1 percent in IIIQ2014.

Table VG-5, Italy, Exports and Imports % Share of Products in Total and ∆%

	Exports Share %	Exports ∆% Jan-Nov 2014/ Jan-Nov 2013	Imports Share %	Imports ∆% Jan-Nov 2014/ Jan-Nov 2013
Consumer Goods	31.0	3.2	27.3	2.6
Durable	6.0	1.7	2.9	7.9
Non-Durable	25.1	3.5	24.4	2.0
Capital Goods	32.3	3.9	20.5	4.7
Inter- mediate Goods	32.3	-0.3	32.4	0.9
Energy	4.4	-12.4	19.9	-18.4
Total ex Energy	95.6	2.2	80.1	2.4
Total	100.0	1.6	100.0	-1.7

Note: % Share for 2012 total trade.

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/145600

Table VG-6 provides Italy’s trade balance by product categories in Nov 2014 and cumulative Jan-Nov 2014. Italy’s trade balance excluding energy, generated surplus of €6920 million in Nov 2014 and €77,274 million cumulative in Jan-Nov 2014 but the energy trade balance created deficit of €3379 million in Nov 2014 and cumulative €40,131 million in Jan-Nov 2014. The overall surplus in Nov 2014 was €3541 million with cumulative surplus of €37,143 million in Jan-Nov 2014. Italy has significant competitiveness in various economic activities in contrast with some other countries with debt difficulties.

Table VG-6, Italy, Trade Balance by Product Categories, € Millions

	Nov 2014	Cumulative Jan-Nov 2014
Consumer Goods	2,289	21,781
Durable	1,105	11,408
Nondurable	1,184	10,373
Capital Goods	4,064	48,464
Intermediate Goods	568	7,029
Energy	-3,379	-40,131
Total ex Energy	6,920	77,274
Total	3,541	37,143

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/145600

Professors Ricardo Caballero and Francesco Giavazzi (2012Jan15) find that the resolution of the European sovereign crisis with survival of the euro area would require success in the restructuring of Italy. Growth of the Italian economy would ensure that success. A critical problem is that the common euro currency prevents Italy from devaluing the exchange rate to parity or the exchange rate that would permit export growth to promote internal economic activity, which could generate fiscal revenues for primary fiscal surpluses that ensure creditworthiness. Fiscal consolidation and restructuring are important but of long-term gestation. Immediate growth of the Italian economy would consolidate the resolution of the sovereign debt crisis. Caballero and Giavazzi (2012Jan15) argue that 55 percent of the exports of Italy are to countries outside the euro area such that devaluation of 15 percent would be effective in increasing export revenue. Newly available data in Table VG-7 providing Italy’s trade with regions and countries supports the argument of Caballero and Giavazzi (2012Jan15). Italy’s exports to the European Monetary Union (EMU), or euro area, are only 39.8 percent of the total in Nov 2014. Exports to the non-European Union area with share of 46.2 percent in Italy’s total exports are growing at minus 0.6 percent in Jan-Nov 2014 relative to Jan-Nov 2013 while those to EMU are growing at 2.4 percent.

Table VG-7, Italy, Exports and Imports by Regions and Countries, % Share and 12-Month ∆%

Nov 2014	Exports % Share	∆% Jan-Nov 2014/ Jan-Nov 2013	Imports % Share	∆% Jan-Nov 2014/ Jan-Nov 2013
EU	53.8	3.5	55.4	1.1
EMU 18	39.8	2.4	44.3	0.0
France	10.8	-1.6	8.5	0.2
Germany	12.4	3.4	14.8	2.5
Spain	4.4	4.2	4.5	3.7
UK	5.0	6.0	2.7	3.4
Non EU	46.2	-0.6	44.6	-5.1
Europe non EU	13.0	-7.9	12.1	-6.4
USA	6.9	9.9	3.2	8.0
China	2.5	5.9	6.4	7.9
OPEC	6.0	-3.3	8.1	-30.4
Total	100.0	1.6	100.0	-1.7

Notes: EU: European Union; EMU: European Monetary Union (euro zone)

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/145600

Table VG-8 provides Italy’s trade balance by regions and countries. Italy had trade deficit of €647 million with the 18 countries of the euro zone (EMU 18) in Nov 2014 and cumulative deficit of €187 million in Jan-Nov 2014. Depreciation to parity could permit greater competitiveness in improving the trade surplus of €5835 million in Jan-Nov 2014 with Europe non-European Union, the trade surplus of €15,660 million with the US and the trade surplus with non-European Union of €22,807 million in Jan-Nov 2014. There is significant rigidity in the trade deficit in Jan-Nov 2014 of €13,552 million with China. There is a trade surplus of €1388 million with members of the Organization of Petroleum Exporting Countries (OPEC). Higher exports could drive economic growth in the economy of Italy that would permit less onerous adjustment of the country’s fiscal imbalances, raising the country’s credit rating.

Table VG-8, Italy, Trade Balance by Regions and Countries, Millions of Euro 

Regions and Countries	Trade Balance Nov 2014 Millions of Euro	Trade Balance Cumulative Jan-Nov 2014 Millions of Euro
EU	815	14,336
EMU 18	-647	-187
France	760	10,379
Germany	-509	-3,784
Spain	39	813
UK	1,027	9,923
Non EU	2,727	22,807
Europe non EU	555	5,835
USA	1,541	15,660
China	-1,049	-13,552
OPEC	237	1,388
Total	3,541	37,143

Notes: EU: European Union; EMU: European Monetary Union (euro zone)

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/145600

VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 4.3 percent in 2009 after dropping 0.3 percent in 2008. Recovery of 1.9 percent in 2010 is relatively low in comparison with annual growth rates in 2007 and earlier years. Growth was only 1.6 percent in 2011 and 0.7 percent in 2012. Growth increased to 1.7 percent in 2013. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.6 percent per year on average between 1948 and 2013, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 2.9 percent. Growth in the current cyclical expansion has been only at 1.2 percent as advanced economies struggle with weak internal demand and world trade. GDP in 2013 higher by 1.1 percent relative to 2007.

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

	∆% on Prior Year
1998	3.5
1999	3.2
2000	3.8
2001	2.7
2002	2.5
2003	4.3
2004	2.5
2005	2.8
2006	3.0
2007	2.6
2008	-0.3
2009	-4.3
2010	1.9
2011	1.6
2012	0.7
2013	1.7
Average Growth Rates ∆% per Year
1948-2013	2.6
1950-1959	3.1
1960-1969	3.1
1970-1979	2.6
1980-1989	3.1
1990-1999	2.2
2000-2007	2.9
2007-2012*	-0.6
2007-2013*	1.1
2000-2013	1.6

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

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2014/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from 56.2 in Oct to 58.6 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/c5ca3e98654d444d8c2026c74987e333). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at around 0.7 percent in IVQ2014 and 3.0 percent in 2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/c5ca3e98654d444d8c2026c74987e333). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) decreased to 52.5 in Dec from 53.3 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d01268bff024ebe82c225f3023f5c87). New export orders stabilized in Dec with restrained global markets and strong UK currency with increases in business from North America and the Middle East. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing conditions are strong but slowing (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d01268bff024ebe82c225f3023f5c87

Table UK, UK Economic Indicators

CPI	Dec month ∆%: 0.0 Dec 12-month ∆%: 0.5 Blog 1/18/15
Output/Input Prices	Output Prices: Dec 12-month NSA ∆%: -0.8; excluding food, petroleum ∆%: 0.8 Input Prices: Dec 12-month NSA ∆%: -10.7 Excluding ∆%: -1.9 Blog 1/18/15
GDP Growth	IIIQ2014 prior quarter ∆% 0.7; year earlier same quarter ∆%: 2.6 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13 9/29/13 10/27/13 12/1/13 12/22/13 2/2/14 3/2/14 4/6/14 5/4/14 5/25/14 6/29/14 7/27/14 8/17/14 10/5/14 10/26/14 11/30/14 12/28/14
Industrial Production	Nov 2014/Nov 2013 ∆%: Production Industries 1.1; Manufacturing 2.7 Blog 1/18/15
Retail Sales	Nov month ∆%: 1.6 Nov 12-month ∆%: 6.4 Blog 12/21/14
Labor Market	Sep-Nov Unemployment Rate: 5.8%; Claimant Count 2.6%; Earnings Growth 1.7% Blog 1/25/15 LMGDP 11/16/14
GDP and the Labor Market	IIIQ2014 Weekly Hours 103.4, GDP 103.3, Employment 103.7 IQ2008 =100 GDP IIIQ14 103.3 IQ2008=100 Blog 11/16/14
Trade Balance	Balance SA Aug minus ₤1406 million Exports Nov ∆%: -0.4; Sep-Nov ∆%: -0.5 Imports Nov ∆%: -2.3 Sep-Nov ∆%: -4.7 Blog 1/18/15

Links to blog comments in Table UK:

1/18/15 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html

12/28/14 http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html

12/21/14 http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html

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

11/16/14 http://cmpassocregulationblog.blogspot.com/2014/11/fluctuating-financial-variables.html

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

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

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

7/27/14 http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html

6/29/14 http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html

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

5/4/2014 http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html

4/6/14 http://cmpassocregulationblog.blogspot.com/2014/04/interest-rate-risks-twenty-eight.html

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

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html

12/22/13 http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

12/1/13 http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world.html

10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html

9/29/13 http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html

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

7/28/13 http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html

4/28/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html

03/31/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html

Table VH-L1 of the UK Office for national Statistics provides the data for GDP and the labor market (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2014--quaterly-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q2-2014--august-quarterly-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--may-gdp-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--april-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q4--march-gdp-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--february-gdp-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--february-labour-market-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--december-gdp-update/sum-dec-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--november-gdp-update/sum-nov-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html) Table VH-L1 provides total weekly hours, output and employment quarterly from 2008 to 2014. Improving output has been accompanied recently by improvements in hours worked and employment. From IQ2008 to IIIQ2014, employment increased 3.7 percent and hours worked 3.4 percent while GDP was 3.3 percent higher. In IIIQ2014, GDP grew 0.7 percent relative to IIQ2012 and 3.0 percent relative to IIIQ2013 and is now 3.4 percent above the peak in IQ2008 (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2014--quaterly-update/index.html).

Table VH-L1, UK, Indices of Quarterly Employment Ages 16 and Over, Total Hours Worked, GDP and Output per Hour, 2008-2014

			Index, Q1 2008 =100
	GDP, CVM	Employment, Aged 16 +	Total weekly hours, Aged 16 +
	YBEZ	MGRZ	YBUS
2008 Q1	100.0	100.0	100.0
Q2	99.7	100.1	98.9
Q3	98.0	99.6	99.0
Q4	95.9	99.5	98.4
2009 Q1	94.1	98.9	96.7
Q2	94.0	98.0	96.3
Q3	94.1	97.9	95.8
Q4	94.5	98.0	95.9
2010 Q1	94.9	97.7	95.7
Q2	95.9	98.3	96.6
Q3	96.5	99.0	97.0
Q4	96.6	98.8	97.5
2011 Q1	97.1	99.2	97.5
Q2	97.3	99.2	96.5
Q3	98.0	98.6	97.0
Q4	98.0	98.8	97.3
2012 Q1	98.0	99.2	97.9
Q2	97.9	99.9	98.5
Q3	98.6	100.2	99.4
Q4	98.3	100.8	99.8
2013 Q1	98.8	100.6	100.0
Q2	99.5	100.8	100.1
Q2	100.3	101.4	101.2
Q4	101.0	102.0	101.5
2014 Q1	101.7	102.9	102.4
Q2	102.6	103.4	103.3
Q3	103.3	103.7	103.4

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q2-2014--august-quarterly-update/index.html

Chart VH-2 of the UK Office for National Statistics provides comparison of output performance during four cycles in the 1970s, 1980s, 1990s and 2000s. Output is indexed to the pre-recession peak. For example, the index for the current economic cycles is 100 for IQ2008. Output performance was stronger in the earlier economic cycles.

Chart VH-2, UK, Index of Output in Economic Cycles

UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html

Table VH-L2 provides output in the four economic cycles. Output increased 8.8 percent in the cycle of the early 1970s, 11.7 percent in the cycle of the 1980s and 15.8 percent in the cycle of the 1990s. Output is 1.3 percent below the pre-recession peak in IQ2008.

Table VH-L2, Index of Output in Economic Cycles, Pre-Contraction = 100

Early 70s (1973 Q2=100)	Early 80s (1979 Q4=100)	Early 90s (1990 Q2=100)	Latest (2008 Q1=100)
ABMI	ABMI	ABMI	ABMI
100.0	100.0	100.0	100.0
99.1	99.0	99.1	99.1
99.1	97.3	98.4	97.6
96.8	97.1	98.3	95.6
98.6	95.8	97.9	93.2
99.5	95.4	97.6	92.8
98.4	95.4	97.9	92.8
98.6	96.6	98.4	93.2
97.2	96.6	98.6	93.7
97.0	97.1	99.4	94.6
98.4	98.3	100.3	95.0
100.0	98.3	101.4	94.8
99.1	99.0	102.1	95.3
100.0	100.4	103.2	95.4
102.1	101.3	104.1	95.9
102.3	102.5	105.5	95.8
101.8	103.8	107.1	95.7
102.5	104.8	108.7	95.4
104.1	104.2	109.6	96.1
104.6	104.6	110.1	96.0
105.5	106.3	110.9	96.5
106.7	107.5	112.3	97.3
107.6	109.2	112.9	98.0
106.7	109.2	114.2	98.7
111.3	110.1	114.8
108.8	111.7	115.8

UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html

Labor market statistics of the UK for the quarter Sep 2014-Nov 2014 are provided in Table VH-L2. The unemployment rate fell to 5.8 percent and the number unemployed decreased 418,000 in the year, reaching 1.914 million. The employment rate is 73.0 percent. Earnings including bonuses increased 1.7 percent over the earlier year. The claimant count or those receiving unemployment benefits stands at 2.6 percent, down 0.1 percentage points on the month and down 1.1 percentage points on the year.

Table VH-L2, UK, Labor Market Statistics

	Quarter Sep 2014-Nov 2014
Unemployment Rate	5.8 %, 6.0% prior quarter and 7.1% year earlier
Number Unemployed	(1) Down 58,000 on quarter and down 418,000 from year earlier to reach 1.914 million (2) Unemployment rate 16 to 24 years of age 16.6% of that age group (3) Unemployed 16 to 24 years excluding those in full-time education 520,000 (244,000 in full-time education); unemployment rate 16.9% up 0.9% Points
Number Unemployed > one and two years	(1) Number unemployed over one year: 658,000, down 53,000 on quarter, down 184,000 on year (2) Number unemployed over two years: 355,000, down 33,000 on quarter, down 95,000 on year
Inactivity Rate 16-64 Years of Age (Definition: Not in employment but have not been seeking employment in the past four weeks or are unable to start work in two weeks)	(1) 22.4%, 22.2% prior quarter, 22.3% year earlier (2) Economically inactive 16-64 up 66,000 on quarter and up 41,000 on year to 9.094 million
Employment Rate	73.0%, 73.0% prior quarter, 72.0% year earlier
Number Employed	(1) Up 37,000 on quarter, +512,000 on year to 30.801 million                              (2) Number of employees up 433,000 on year to 26.066 million (3) Self-employed rose 123,000 on year to 4.520 million (4) Full-time 22.524 million, up 428,000 on year (5) 8.277 million working part-time, up 85,000 on year
Earnings Growth Rates Year on Year	(1) Total 1.7% (including bonuses) over year earlier; regular 1.8%; private sector 2.1% on year earlier, public sector 0.7 % on year earlier   (2) Regular private 2.2% (excluding bonuses); regular public 0.8% on year earlier
Full-time and Part-time	(1) Number employees full-time 19.239 million, up 386,000 on year; self-employed full-time 3.220 million up 55,000 on year (2) Number employees part-time 6.827 million, up 47,000 on year; self-employed part-time 1.300 million, up 68,000 in year
Claimant Count (Jobseeker’s Allowance, JSA)	(1) Latest estimate: 867,700; down 29,700 in month, down 370,800 on year earlier (2) Claimant count 2.6%, down 0.1 on month and down 1.1 % points on year

Note: Labor Force Survey does not measure monthly changes. Comparisons on quarter are on quarter before prior quarter

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/january-2015/index.html

Table VH-L3 provides indicators of the labor force survey of the UK for Sep 2014-Nov 2014 and earlier quarters. There has been improvement in UK labor markets with the rate of unemployment decreasing from 7.1 percent in Sep-Nov 2013 to 5.9 percent in Sep-Nov 2014.

Table VH-L3, UK, Labor Force Survey Indicators

	LFHP	EMP	PART	UNE	RATE
Sep-Nov 2012	40,512	29,846	71.3	2,526	7.8
Sep-Nov 2013	40,571	30,288	72.0	2,332	7.1
Dec-Feb 2013	40,592	30,491	72.4	2,254	6.9
Mar-May 2014	40,612	30,717	72.9	2,126	6.5
Jun-Aug 2014	40,633	30,763	73.0	1.972	6.0
Sep-Nov 2014	40,657	30,801	73.0	1,914	5.8

Notes: LFHP: Labor Force Household Population Ages 16 to 64 in thousands; EMP: Employed Ages 16 and over in thousands; PART: Employment as % of Population Ages 16 to 64; UNE: Unemployed Ages 16 and over in thousands; Rate: Number Unemployed Ages 16 and over as % of Employed plus Unemployed

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/january-2015/index.html

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015.