Financial and International Developments Influencing Monetary Policy, Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars Below Trend, Stagnating Real Private Fixed Investment, United States Housing Collapse, Decline of United States Homeownership, World Cyclical Slow Growth and Global Recession Risk
Carlos M. Pelaez
© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015
I Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars Below Trend
IA Mediocre Cyclical United States Economic Growth
IA1 Contracting Real Private Fixed Investment
II United States Housing Collapse
III World Financial Turbulence
IIIA Financial Risks
IIIE Appendix Euro Zone Survival Risk
IIIF Appendix on Sovereign Bond Valuation
IV Global Inflation
V World Economic Slowdown
VA United States
VB Japan
VC China
VD Euro Area
VE Germany
VF France
VG Italy
VH United Kingdom
VI Valuation of Risk Financial Assets
VII Economic Indicators
VIII Interest Rates
IX Conclusion
References
Appendixes
Appendix I The Great Inflation
IIIB Appendix on Safe Haven Currencies
IIIC Appendix on Fiscal Compact
IIID Appendix on European Central Bank Large Scale Lender of Last Resort
IIIG Appendix on Deficit Financing of Growth and the Debt Crisis
IIIGA Monetary Policy with Deficit Financing of Economic Growth
IIIGB Adjustment during the Debt Crisis of the 1980s
V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/ns/cs.aspx?id=28) to show GDP in dollars in 2012 and the growth rate of real GDP of the world and selected regional countries from 2013 to 2016. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has changed its forecast of the world economy to 3.3 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 ∆% | Real GDP ∆% | Real GDP ∆% | Real GDP ∆% | |
| 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 (Section I and 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. In IVQ2014, US GDP increased 0.7 percent at SAAR of 2.6 percent and increased 2.5 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. UK GDP increased 0.5 percent in IVQ2014 and increased 2.7 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 | 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 | 2.7 |
| Japan | QOQ: –0.5 | 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 | 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 | 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 | 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 | |
| USA | QOQ: 0.7 SAAR: 2.6 | 2.5 |
| China | 1.5 | 7.3 |
| UK | 0.5 | 2.7 |
QOQ: Quarter relative to prior quarter; SAAR: seasonally adjusted annual rate
Source: Country Statistical Agencies http://www.census.gov/aboutus/stat_int.html
Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP.
- Japan. Japan provides the most worrisome data (Section VB and earlier http://cmpassocregulationblog.blogspot.com/2014/12/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 Dec 2014, Japan’s exports increased 12.9 percent in 12 months while imports increased 1.9 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 | Exports 12 M ∆% | Imports | Imports 12 M ∆% | |
| USA | -1.0 Nov | 2.9 Jan-Nov | -2.2 Nov | 3.0 Jan-Nov |
| Japan | Dec 12.9 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 | Dec 1.9 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 V-5 for Dec 2014. The share of Asia in Japan’s trade is close to one-half for 54.1 percent of exports and 46.0 percent of imports. Within Asia, exports to China are 18.4 percent of total exports and imports from China 22.6 percent of total imports. While exports to China increased 4.3 percent in the 12 months ending in Dec 2014, imports from China increased 6.8 percent. The largest export market for Japan in Dec 2014 is the US with share of 20.3 percent of total exports, which is close to that of China, and share of imports from the US of 8.7 percent in total imports. Japan’s exports to the US increased 23.7 percent in the 12 months ending in Dec 2014 and imports from the US decreased 22.4 percent. Western Europe has share of 10.5 percent in Japan’s exports and of 9.8 percent in imports. Rates of growth of exports of Japan in Dec 2014 are 23.7 percent for exports to the US, 13.6 percent for exports to Brazil and minus 3.5 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 Dec 2014 are mixed. Imports from Asia increased 7.6 percent in the 12 months ending in Dec 2014 while imports from China increased 6.8 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
| Dec 2014 | Exports | 12 months ∆% | Imports Millions Yen | 12 months ∆% |
| Total | 6,896,467 | 12.9 | 7,557,180 | 1.9 |
| Asia | 3,727,702 % Total 54.1 | 11.0 | 3,476,931 % Total 46.0 | 7.6 |
| China | 1,267,729 % Total 18.4 | 4.3 | 1,710,736 % Total 22.6 | 6.8 |
| USA | 1,397,957 % Total 20.3 | 23.7 | 659,331 % Total 8.7 | 22.4 |
| Canada | 85,270 | 22.7 | 95,371 | 0.1 |
| Brazil | 47,640 | 13.6 | 82,948 | -9.3 |
| Mexico | 116,511 | 45.1 | 40,518 | 16.8 |
| Western Europe | 726,827 % Total 10.5 | 6.8 | 738,401 % Total 9.8 | -4.5 |
| Germany | 172,628 | -3.5 | 223,787 | -7.9 |
| France | 60,967 | -2.4 | 89,727 | 0.3 |
| UK | 127,481 | 17.2 | 59,662 | 7.8 |
| Middle East | 306,959 | 27.1 | 1,233,711 | -18.9 |
| Australia | 116,466 | -6.5 | 489,214 | 8.6 |
Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm
World trade projections of the IMF are in Table V-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’ IndexTM (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 increased from 53.3 in Dec to 54.0 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/3b941f12d3724e4cb923968e1f814a36). 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 |
| Producer Price Index | Finished Goods Dec 12-month NSA ∆%: -0.5; ex food and energy ∆% 1.8 Final Demand Dec 12-month NSA ∆%: 1.1; ex food and energy ∆% 2.1 |
| PCE Inflation | Nov 12-month NSA ∆%: headline 1.2; ex food and energy ∆% 1.4 |
| Employment Situation | Household Survey: Dec Unemployment Rate SA 5.6% |
| Nonfarm Hiring | Nonfarm Hiring fell from 63.3 million in 2006 to 54.2 million in 2013 or by 9.1 million |
| GDP Growth | BEA Revised National Income Accounts 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 IVQ2014/IVQ2013 2.5 IQ2012 SAAR 2.3 IIQ2012 SAAR 1.6 IIIQ2012 SAAR 2.5 IVQ2012 SAAR 0.1 IQ2013 SAAR 2.7 IIQ2013 SAAR 1.8 IIIQ2013 SAAR 4.5 IVQ2013 SAAR 3.5 IQ2014 SAAR -2.1 IIQ2014 SAAR 4.6 IIIQ2014 SAAR 5.0 IVQ2014 SAAR 2.6 |
| Real Private Fixed Investment | SAAR IVQ2014 2.3 ∆% IVQ2007 to IVQ2014: 2.8% Blog 2/1/15 |
| 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 |
| Quarterly Services Report | IIIQ14/IIIQ13 NSA ∆%: Financial & Insurance 4.8 |
| Employment Cost Index | Compensation Private IVQ2014 SA ∆%: 0.6 |
| Industrial Production | Dec month SA ∆%: -0.1 Manufacturing Dec SA 0.3 ∆% Dec 12 months SA ∆% 4.9, NSA 5.0 |
| 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 |
| Philadelphia Fed Business Outlook Index | General Index from Dec 24.3 to Jan 6.3 |
| 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 |
| Durable Goods | Dec New Orders SA ∆%: minus 3.4; ex transport ∆%: minus 0.8 |
| 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 |
| Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers | Nov 14 12-M NSA ∆%: Sales Total Business 0.2; Manufacturers -1.2 |
| Sales for Retail and Food Services | Jan-Dec 2014/Jan-Nov 2013 ∆%: Retail and Food Services 4.0; Retail ∆% 3.0 |
| Value of Construction Put in Place | Nov SAAR month SA ∆%: minus 0.3 Nov 12-month NSA: 2.8 |
| Case-Shiller Home Prices | Nov 2014/Nov 2013 ∆% NSA: 10 Cities 4.7; 20 Cities: 4.3; National: 4.7 |
| FHFA House Price Index Purchases Only | Nov SA ∆% 0.8; |
| New House Sales | Dec 2014 month SAAR ∆%: minus 11.6 |
| Housing Starts and Permits | Dec Starts month SA ∆% 4.4; Permits ∆%: -1.9 |
| Trade Balance | Balance Nov SA -$39,001 million versus Oct -$42,249 million |
| Export and Import Prices | Dec 12-month NSA ∆%: Imports -5.5; Exports -3.2 |
| Consumer Credit | Nov ∆% annual rate: Total 5.1; Revolving -1.3; Nonrevolving 7.5 |
| Net Foreign Purchases of Long-term Treasury Securities | Nov Net Foreign Purchases of Long-term US Securities: $33.5 billion |
| Treasury Budget | Fiscal Year 2015/2013 ∆% Dec: Receipts 11.0; Outlays 9.2; Individual Income Taxes 10.2 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:
1/25/15 http://cmpassocregulationblog.blogspot.com/2015/01/competitive-currency-conflicts-world.html
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
The Bureau of Labor Statistics (BLS) of the US Department of Labor provides the quarterly employment cost index (ECI). The ECI is highly useful in several ways including: (1)
- How costs of employees may affect hiring decisions and thus the overall economy
- Impact of employment costs on inflation and thus monetary policy
- Relation of employee costs to inflation on issues such as welfare of the working population and their ability to consume that could affect economic growth.
The BLS estimates total compensation composed of wages and salaries, which are about 70 percent of total compensation, and benefits, accounting for the remaining 30 percent (http://www.bls.gov/news.release/pdf/eci.pdf 1). There is vast theoretical and empirical literature on how benefits interact with wage determination. The ECI is considered initially with current data in Table VA-1A and subsequently with charts of the BLS on evolution over the past decade. The BLS provides data for the entire civilian population, the private sector and state/local government. The data are available quarterly and for the 12 months of the ending month of the quarter. Total compensation 12-month percentage changes have moderated for the entire civilian population, the private sector and state and local government. In the 12 months ending in Dec 2014, total compensation increased 2.3 percent for the private sector, which is marginally higher than inflation of 0.8 percent in the 12 months ending in Dec 2014 (http://www.bls.gov/cpi/data.htm), 2.2 percent for the entire civilian population and 2.0 percent for state and local government. Wages and salaries in the 12 months ending in Dec 2014 increased at relatively subdued rates of 2.2 percent for the private sector, which is higher than inflation of 0.8 percent in the 12 months ending in Dec 2014 (http://www.bls.gov/cpi/data.htm), 2.1 percent for the entire civilian population and only 1.6 percent for state/local workers. Wages have been losing or gaining slightly relative to headline CPI inflation of 0.8 percent in the 12 months ending in Dec 2014 (http://www.bls.gov/cpi/data.htm). Compensation benefits of the private sector increased at 2.3 percent in the 12 months ending in Dec 2014, which is close to 2.2 percent for wages and salaries.
Table VA-1A, Employment Cost Index Quarterly and 12-Month Changes %
| IIIQ14 SA | IVQ14 SA | 12 M | 12 M Mar 14 NSA | 12 M Jun 14 | 12 M Sep 14 | 12 M Dec 14 NSA | |
| Civilian | |||||||
| Comp | 0.7 | 0.6 | 2.0 | 1.8 | 2.0 | 2.2 | 2.2 |
| Wages/ | 0.8 | 0.5 | 1.9 | 1.6 | 1.8 | 2.1 | 2.1 |
| Benefits | 0.6 | 0.6 | 2.2 | 2.1 | 2.5 | 2.4 | 2.6 |
| Private | |||||||
| Comp | 0.7 | 0.6 | 2.0 | 1.7 | 2.0 | 2.3 | 2.3 |
| Wages/ | 0.7 | 0.6 | 2.1 | 1.7 | 1.9 | 2.3 | 2.2 |
| Benefits | 0.6 | 0.6 | 1.9 | 1.8 | 2.4 | 2.3 | 2.5 |
| State Local | |||||||
| Comp | 0.5 | 0.6 | 1.9 | 1.9 | 2.0 | 2.1 | 2.0 |
| Wages/ | 0.6 | 0.4 | 1.1 | 1.2 | 1.3 | 1.6 | 1.6 |
| Benefits | 0.3 | 1.0 | 3.3 | 3.0 | 3.2 | 3.0 | 2.9 |
Notes: Civilian includes private industry plus state and local government; SA: seasonally adjusted; NSA: not seasonally adjusted; Comp: compensation; Govt: government; 12M: 12 months
Source: US Bureau of Labor Statistics
A series of charts of the BLS provides evolution of the ECI during the past decade. Percentage changes in 12 months of total civilian compensation in Chart VA-1A were in a range of around 3 to 4 percent before the global recession, declining to less than 2 percent with the contraction and increasing above 2 percent in the expansion. Recently, rates have fallen, stagnated, fell again, recovered and stabilized.
Chart VA-1A, US, ECI, Total Compensation, All Civilian, 12-Month Percent Change, 2001-2014
Source: US Bureau of Labor Statistics
Chart VA-2A provides 12 months percentage rates of change of wages and salaries for the entire civilian population. The rates collapsed with the global recession and have flattened around 1.5 percent since 2010 while inflation has accelerated and decelerated following world inflation waves (http://cmpassocregulationblog.blogspot.com/2015/01/competitive-currency-conflicts-world.html). Nominal wages and salaries for the entire civilian population increase in the final segment.
Chart VA-2A, US, ECI, Wages and Salaries, All Civilian 12-Month Percent Change, 2001-2014
Source: US Bureau of Labor Statistics
Twelve-month percentage changes of benefits of the total civilian population in Chart VA-3A were much higher in the first part of the 2000s, surpassing relatively subdued inflation but declined to less than 2 percent with the global recession. After 2010, there is a clear rising trend of benefit above 3 percent with decline in recent months of 2011 and then stagnation and declines in 2012-2013. There is some increase into 2014.
Chart VA-3A, US, ECI, Total Benefits, All Civilian 12 Months Percent Change, 2001-2014
Source: US Bureau of Labor Statistics
ECI total compensation 12-months percentage changes from 2001 to 2014 for the private sector are shown in Chart VA-4. Behavior is similar as for total civilian compensation. Private-sector compensation had stabilized around 2 percent with inflation rising to 2.7 percent in the 12 months ending in Mar 2012. Compensation increase of 1.9 percent in the 12 months ending in Mar 2013 exceeded 12-month inflation of 1.5 percent. Compensation increased 1.9 percent in the 12 months ending in Jun 2013, almost equal to 12-month CPI inflation of 1.8 percent. Compensation at 1.9 percent in Sep 2013 exceeded 12-month CPI inflation of 1.2 percent. Compensation of 2.0 percent in the 12 months ending in Dec 2013 exceeded CPI inflation of 1.5 percent. Compensation of 1.6 percent in Mar 2014 exceeded CPI inflation of 1.5 percent. Compensation of 2.0 percent in Jun 2014 was lower than inflation of 2.1 percent. Compensation of 2.2 in Sep 2014 exceeded inflation of 1.7 percent. Compensation of 2.2 in Dec 2014 exceeded inflation of 0.8 percent.
Chart VA-4A, US, ECI, Total Compensation, Private Industry 12 Months Percent Change, 2001-2014
Source: US Bureau of Labor Statistics
There is different behavior of 12 months percentage rates of private-sector wages and salaries in Chart VA-5A. Rates fell in the first part of the decade and then rose into 2007. Rates of change in 12 months of wages and salaries in the private sector fell during the global contraction to barely above 1 percent and have not rebounded sufficiently while inflation has returned in waves.
Chart VA-5A, US, ECI, Wages and Salaries, Private Industry, 12 Months Percent Change, 2001-2014
Source: US Bureau of Labor Statistics
Chart VA-6A provides 12-month percentage rates of change of the consumer price index of the US. Inflation has risen sharply into 2011 with 3.0 percent in the 12 months ending in Dec while wage and salary increases in the private sector have risen by 1.6 percent in the 12 months ending in Dec. Wages and salaries rose 1.8 percent in the 12 months ending in Mar 2012 while inflation was 2.7 percent in the 12 months ending in Mar 2012. Wage and salaries of the private sector increased 1.8 percent in the 12 months ending in Jun 2012, which is almost equal to inflation of 1.7 percent. Wages and salaries increased 1.8 percent in the 12 months ending in Sep 2012 while inflation was 2.0 percent. Wages and salaries increased 1.7 percent in Dec 2012 while inflation was 1.7 percent. Wages and salaries increased 1.7 percent in the 12 months ending in Mar 2013 while inflation was 1.5 percent. Wages and salaries increased 1.9 percent in the 12 months ending in Jun 2013 while inflation was 1.8 percent. The increase of wages and salaries of 1.8 percent in the 12 months ending in Sep 2013 exceeded inflation of 1.2 percent. Wages and salaries increased 2.1 percent in the 12 months ending in Dec 2013, exceeding CPI inflation of 1.5 percent in the 12 months ending in Dec 2013. Wages and salaries increased 1.7 percent in the 12 months ending in Mar 2014, slightly higher than CPI inflation of 1.5 percent. Wages and salaries of the private sector increased 1.9 percent in the 12 months ending in Jun 2014, slightly lower than inflation of 2.1 percent. Wages and salaries of the private sector increased 2.3 in the 12 months ending in Sep 2014, exceeding inflation of 1.7 percent. Wages and Salaries of the private sector increased 2.2 percent in Dec 2014, which is higher than inflation of 0.8 percent.
Chart VA-6A, US, Consumer Price Index, 12-Month Percentage Change, NSA, 2001-2014
Source: US Bureau of Labor Statistics
http://www.bls.gov/cpi/data.htm
Growth of benefits has been more dynamic than total compensation and wages and salaries, as shown in Chart VA-7A. In 2004, the 12-month rate of change exceeded 7 percent. Rates of increase of benefits costs then fell even before the global recession, touching 1 percent in late 2010, rose sharply above 3 percent in 2011 and have fallen in recent months to around 2 percent.
Chart VA-7A, US, ECI, Total Benefits, Private Industry, 12 Months Percent Change, 2001-2014
Source: US Bureau of Labor Statistics
Behavior at the margin is provided by rates of change in a quarter relative to the prior quarter, as shown in Chart VA-8A. Quarterly rates of change of total civilian compensation were high in the early 2000s, fell sharply with the global recession, recovered mildly and stagnated in recent quarters.
Chart VA-8A, US, Employment Cost Index All Civilian Total Compensation Three-Month % Change, 2001-2014
Source: US Bureau of Labor Statistics
Chart VA-9A provides the quarterly rates of change of wages and salaries of the entire civilian population. The rates of change sank below 0.5 percent per quarter and have remained subdued since the global recession.
Chart VA-9A, US, ECI, Wages and Salaries, All Civilian, Three-Month % Change, 2001-2014
Source: US Bureau of Labor Statistics
Quarterly rates of change of benefits of the total civilian population in Chart VA-10A had declined before the global recession. The rate collapsed in recent quarters.
Chart VA-10A, US, ECI, Total Benefits, All Civilian, Three-Month % Change, 2001-2014
Source: US Bureau of Labor Statistics
Quarterly rates of change of total compensation of the private sector in Chart VA-11A have not returned to the levels before the contraction except with sporadic jump in 2011 followed by contraction and stagnation in recent quarters.
Chart VA-11A, US, ECI, Total Compensation, Private Industry, Three-Month % Change, 2001-2014
Source: US Bureau of Labor Statistics
Quarterly rates of change of wages and salaries of the private sector in Chart VA-12A show significant fluctuation. Quarterly rates of change have fallen below 0.5 percent in the current expansion with increase in 2014.
Chart VA-12A, US, ECI, Wages and Salaries, Private Industry, Three-Month % Change, 2001-2014
Source: US Bureau of Labor Statistics
The three-month rates of change of benefits of private industry in Chart VA-13A have fluctuated widely with the only negative change in 2007. The 12-month rate of private-sector benefits fell in past month, oscillating/stabilizing in the final segment.
Chart VA-13A, US, ECI, Total Benefits, Private Industry, Three-Month % Change, 2001-2014
Source: US Bureau of Labor Statistics http://www.bls.gov/ncs/ect/
Manufacturers’ shipments of durable goods increased 1.1 percent in Dec 2014, decreasing 0.7 percent in Nov2014 and decreasing 0.1 percent in Oct 2014. New orders decreased 3.4 percent in Dec 2014 after decreasing 2.1 percent in Nov 2014 and increasing 0.3 percent in Oct 2014, as shown in Table VA-1. These data are very volatile. Volatility is illustrated by decrease of 12.9 percent in Nov 2012 after increase of orders for nondefense aircraft of 2642.2 percent in Sep 2012 after decrease of 97.2 percent in Aug and increases of 51.1 percent in Jul 2012 and 32.5 percent in Jun 2012. Nondefense aircraft new orders decreased 55.5 percent in Dec 2014 after decreasing 11.0 percent in Nov 2014 and increasing 0.8 percent in Oct 2014. New orders excluding transportation equipment decreased 0.8 percent in Dec 2014, decreasing 1.3 percent in Nov 2014 and decreasing 1.2 percent in Oct 2014. Capital goods new orders, indicating investment, decreased 9.3 percent in Dec 2014, decreasing 2.6 percent in Nov 2014 and increasing 1.0 percent in Oct 2014. New orders of nondefense capital goods decreased 9.7 percent in Dec 2014, after decreasing 1.6 percent in Nov 2014 and changing 0.0 percent in Oct 2014. Capital goods orders excluding volatile aircraft decreased 0.6 percent in Dec 2014, decreasing 0.6 percent in Nov 2014 and decreasing 1.8 percent in Oct 2014.
Table VA-1, US, Durable Goods Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%
| Dec 2014 | Nov 2014 | Oct 2014 ∆% | |
| Total | |||
| S | 1.1 | -0.7 | -0.1 |
| NO | -3.4 | -2.1 | 0.3 |
| Excluding | |||
| S | 0.2 | -0.6 | -0.5 |
| NO | -0.8 | -1.3 | -1.2 |
| Excluding | |||
| S | 1.0 | -0.8 | -0.3 |
| NO | -3.2 | -1.4 | -0.7 |
| Machinery | |||
| S | -1.5 | -0.9 | -0.9 |
| NO | -3.7 | -0.9 | -2.1 |
| Computers & Electronic Products | |||
| S | 0.0 | -0.4 | -0.3 |
| NO | -1.3 | -0.5 | 0.0 |
| Computers | |||
| S | -3.6 | -1.4 | -0.7 |
| NO | -10.4 | -1.0 | -3.3 |
| Transport | |||
| S | 3.1 | -1.0 | 0.7 |
| NO | -9.2 | -3.9 | 3.5 |
| Motor Vehicles | |||
| S | 3.1 | 0.2 | 0.7 |
| NO | 2.7 | 0.4 | 0.7 |
| Nondefense | |||
| S | 2.5 | -4.6 | -2.1 |
| NO | -55.5 | -11.0 | 0.8 |
| Capital Goods | |||
| S | 0.4 | -1.0 | -1.0 |
| NO | -9.3 | -2.6 | 1.0 |
| Nondefense Capital Goods | |||
| S | 0.2 | -1.3 | -1.3 |
| NO | -9.7 | -1.6 | 0.0 |
| Capital Goods ex Aircraft | |||
| S | -0.2 | -0.6 | -0.9 |
| NO | -0.6 | -0.6 | -1.8 |
Note: Mfg: manufacturing; S: shipments; NO: new orders; Transport: transportation
Source: US Census Bureau
http://www.census.gov/manufacturing/m3/
Chart VA-1 of the US Census Bureau provides new orders of durable goods seasonally adjusted since Jan 1992. New orders fell sharply during the global recession. New orders recovered at faster rates and then flattened together with the rest of the economy after 2012. There are also downward effects of lower inflation because data are nominal without adjustment for inflation.
Chart VA-1, US, Durable Goods New orders, SA
Source: US Census Bureau
http://www.census.gov/manufacturing/m3/
Chart VA-2 provides monthly changes in durable goods new orders. There is significant volatility in these data, preventing clear identification of trends.
Chart VA-2, US, Manufacturers’ Durable Goods New Orders 2013-2014
Source: US Census Bureau
http://www.census.gov/briefrm/esbr/www/esbr021.html
Additional perspective on manufacturers’ shipments and new orders of durable goods is in Table VA-2. Values are cumulative millions of dollars in Jan-Dec 2014 not seasonally adjusted (NSA) and without adjustment for inflation. Shipments of durable goods of all manufacturing industries in Jan-Dec 2014 total $2,902.0 billion and new orders total $2,919.3 billion, growing respectively by 5.0 percent and 6.2 percent relative to the same period in 2013. Excluding transportation equipment, shipments grew 5.3 percent and new orders increased 5.2 percent. Excluding defense, shipments grew 5.4 percent and new orders grew 6.0 percent. Important information not in Table VA-2 is the large share of nondurable goods. Capital goods have relatively high value of $1053.0 billion for shipments, growing 4.8 percent, and new orders $1140.0 billion, increasing 6.8 percent. Excluding aircraft, capital goods shipments reached $829.8 billion, growing by 5.0 percent, and new orders $850.4 billion, increasing 4.8 percent. Data weakened in 2013-2014 with effects of lower inflation on nominal values with recovery later in the year.
Table VA-2, US, Value of Manufacturers’ Shipments and New Orders of Durable Goods, NSA, Millions of Dollars
| Jan-Dec 2014 | Shipments | ∆% 2014/ 2013 | New Orders | ∆% 2014/ |
| Total | 2,902,036 | 5.0 | 2,919,275 | 6.2 |
| Excluding Transport | 2,043,133 | 5.3 | 1,977,864 | 5.2 |
| Excluding Defense | 2,759,675 | 5.4 | 2,780,740 | 6.0 |
| Machinery | 434,383 | 5.5 | 442,375 | 5.9 |
| Computers & Electronic Products | 347,267 | 4.3 | 265,963 | 3.9 |
| Computers & Related Products | 25,718 | -8.3 | 26,507 | -6.0 |
| Transport Equipment | 858,903 | 4.4 | 941,411 | 8.3 |
| Motor Vehicles | 564,664 | 4.3 | 566,130 | 4.6 |
| Nondefense Aircraft | 151,006 | 10.7 | 223,118 | 16.1 |
| Capital Goods | 1,053,002 | 4.8 | 1,140,301 | 6.8 |
| Nondefense Capital Goods | 963,780 | 5.8 | 1,029,566 | 6.5 |
| Capital Goods ex Aircraft | 829,831 | 5.0 | 850,446 | 4.8 |
Note: Transport: transportation
Source: US Census Bureau
http://www.census.gov/manufacturing/m3/
Chart VA-3 of the US Census Bureau provides new orders of durable goods not seasonally adjusted since Jan 1992. New orders are oscillating around the highest value before the global recession, which could be lower in real terms because of continuing inflation.
Chart VA-3, US, Durable Goods New orders, NSA
Source: US Census Bureau
http://www.census.gov/manufacturing/m3/
Chart VA-4 of the Board of Governors of the Federal Reserve System shows that output of durable manufacturing accelerated in the 1980s and 1990s with slower growth in the 2000s perhaps because processes matured. Growth was robust after the major drop during the global recession but appears to vacillate in the final segment.
Chart VA-4, US, Output of Durable Manufacturing, 1972-2014
Source: Board of Governors of the Federal Reserve System
http://www.federalreserve.gov/releases/g17/Current/default.htm
Manufacturing jobs not seasonally adjusted increased 193,000 from Dec 2013 to
Dec 2014 or at the average monthly rate of 16,083. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. 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 I-13 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 87.4 percent in IIIQ2014. Most of US national income is in the form of services. In Dec 2014, there were 141.256 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 118.951 million NSA in Dec 2014 accounted for 84.2 percent of total nonfarm jobs of 141.256 million, of which 12.243 million, or 10.3 percent of total private jobs and 8.7 percent of total nonfarm jobs, were in manufacturing. Private service-providing jobs were 99.711 million NSA in Dec 2014, or 70.6 percent of total nonfarm jobs and 83.8 percent of total private-sector jobs. Manufacturing has share of 11.3 percent in US national income in IIIQ2014 and durable goods 6.5 percent, as shown in Table I-13. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.
Table I-13, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total
| SAAR | % Total | SAAR IIIQ2014 | % Total | |
| National Income WCCA | 15,222.0 | 100.0 | 15,472.0 | 100.0 |
| Domestic Industries | 15,008.6 | 98.6 | 15,242.2 | 98.5 |
| Private Industries | 13,287.8 | 87.3 | 13,516.5 | 87.4 |
| Agriculture | 179.0 | 1.2 | 167.3 | 1.1 |
| Mining | 261.4 | 1.7 | 274.4 | 1.8 |
| Utilities | 215.6 | 1.4 | 221.7 | 1.4 |
| Construction | 670.3 | 4.4 | 680.4 | 4.4 |
| Manufacturing | 1712.8 | 11.3 | 1741.7 | 11.3 |
| Durable Goods | 975.4 | 6.4 | 1,000.7 | 6.5 |
| Nondurable Goods | 737.4 | 4.8 | 740.9 | 4.8 |
| Wholesale Trade | 917.7 | 6.0 | 936.9 | 6.1 |
| Retail Trade | 1048.0 | 6.9 | 1054.2 | 6.8 |
| Transportation & WH | 478.1 | 3.1 | 480.3 | 3.1 |
| Information | 580.3 | 3.8 | 576.5 | 3.7 |
| Finance, Insurance, RE | 2642.8 | 17.4 | 2787.2 | 18.0 |
| Professional & Business Services | 2064.5 | 13.6 | 2060.0 | 13.3 |
| Education, Health Care | 1484.3 | 9.8 | 1494.1 | 9.7 |
| Arts, Entertainment | 605.0 | 4.0 | 610.6 | 3.9 |
| Other Services | 428.0 | 2.8 | 431.3 | 2.8 |
| Government | 1720.8 | 11.3 | 1725.6 | 11.2 |
| Rest of the World | 213.5 | 1.4 | 229.9 | 1.5 |
Notes: SSAR: Seasonally-Adjusted Annual Rate; WCCA: Without Capital Consumption Adjustment by Industry; WH: Warehousing; RE, includes rental and leasing: Real Estate; Art, Entertainment includes recreation, accommodation and food services; BS: business services
Source: US Bureau of Economic Analysis
http://www.bea.gov/iTable/index_nipa.cfm
VB Japan. The GDP of Japan grew at 1.0 percent per year on average from 1991 to 2002, with the GDP implicit deflator falling at 0.8 percent per year on average. The average growth rate of Japan’s GDP was 4 percent per year on average from the middle of the 1970s to 1992 (Ito 2004). Low growth in Japan in the 1990s is commonly labeled as “the lost decade” (see Pelaez and Pelaez, The Global Recession Risk (2007), 81-115). Table VB-GDP provides yearly growth rates of Japan’s GDP from 1995 to 2013. Growth weakened from 2.7 per cent in 1995 and 1996 to contractions of 1.5 percent in 1999 and 0.4 percent in 2001 and growth rates below 2 percent with exception of 2.3 percent in 2003. Japan’s GDP contracted sharply by 3.7 percent in 2006 and 2.0 percent in 2009. As in most advanced economies, growth was robust at 3.4 percent in 2010 but mediocre at 0.3 percent in 2011 and 0.7 percent in 2013. Japan’s GDP grew 2.3 percent in 2013.
Table VB-GDP, Japan, Yearly Percentage Change of GDP ∆%
| Calendar Year | ∆% |
| 1995 | 2.7 |
| 1996 | 2.7 |
| 1997 | 0.1 |
| 1998 | -1.5 |
| 1999 | 0.5 |
| 2000 | 2.0 |
| 2001 | -0.4 |
| 2002 | 1.1 |
| 2003 | 2.3 |
| 2004 | 1.5 |
| 2005 | 1.9 |
| 2006 | 1.8 |
| 2007 | 1.8 |
| 2008 | -3.7 |
| 2009 | -2.0 |
| 2010 | 3.4 |
| 2011 | 0.3 |
| 2012 | 0.7 |
| 2013 | 2.3 |
Source: Source: Japan Economic and Social Research Institute, Cabinet Office
http://www.esri.cao.go.jp/index-e.html
http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (https://www.boj.or.jp/en/mopo/outlook/gor1404b.pdf) with changes on Jul 14, 2014 (https://www.boj.or.jp/en/announcements/release_2014/k140715a.pdf). For fiscal 2013, the forecast is of growth of GDP between 2.2 and 2.3 percent, with the all items CPI less fresh food of 0.8 percent (https://www.boj.or.jp/en/mopo/outlook/gor1404b.pdf). The critical difference is forecast of the CPI excluding fresh food of 3.2 to 3.5 percent in 2014, 1.9 to 2.8 percent in 2015 and 2.0 to 3.0 in 2016 (https://www.boj.or.jp/en/announcements/release_2014/k140715a.pdf). Consumer price inflation in Japan excluding fresh food was 0.4 percent in Apr 2014 and 3.4 percent in 12 months (http://www.stat.go.jp/english/data/cpi/1581.htm), significantly because of the increase of the tax on value added of consumption in Apr 2014. The new monetary policy of the Bank of Japan aims to increase inflation to 2 percent. These forecasts are biannual in Apr and Oct. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:
“The Bank of Japan conducts monetary policy based on the principle that the policy shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy, and is responsible for maintaining financial system stability. The Bank aims to achieve price stability on a sustainable basis, given that there are various factors that affect prices in the short run.
The Bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan's economy make progress. Based on this recognition, the Bank sets the price stability target at 2 percent in terms of the year-on-year rate of change in the consumer price index.
Under the price stability target specified above, the Bank will pursue monetary easing and aim to achieve this target at the earliest possible time. Taking into consideration that it will take considerable time before the effects of monetary policy permeate the economy, the Bank will ascertain whether there is any significant risk to the sustainability of economic growth, including from the accumulation of financial imbalances.”
The Bank of Japan also provided explicit analysis of its view on price stability in a “Background note regarding the Bank’s thinking on price stability” (http://www.boj.or.jp/en/announcements/release_2013/data/rel130123a1.pdf http://www.boj.or.jp/en/announcements/release_2013/rel130123a.htm/). The Bank of Japan also amended “Principal terms and conditions for the Asset Purchase Program” (http://www.boj.or.jp/en/announcements/release_2013/rel130122a.pdf): “Asset purchases and loan provision shall be conducted up to the maximum outstanding amounts by the end of 2013. From January 2014, the Bank shall purchase financial assets and provide loans every month, the amount of which shall be determined pursuant to the relevant rules of the Bank.”
Financial markets in Japan and worldwide were shocked by new bold measures of “quantitative and qualitative monetary easing” by the Bank of Japan (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The objective of policy is to “achieve the price stability target of 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) at the earliest possible time, with a time horizon of about two years” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The main elements of the new policy are as follows:
- 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).
- 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.
- 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).
- 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.
- 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 | Real GDP | CPI All Items Less Fresh Food | Excluding Effects of Consumption Tax Hikes |
| 2013 | |||
| Apr 2014 | +2.2 to +2.3 | +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 | +3.0 to +3.5 | +1.0 to +1.5 |
| 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 | +1.9 to +2.8 | +1.2 to +2.1 |
| 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 | +2.0 to +3.0 | +1.3 to +2.3 |
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 |
| Corporate Goods Prices | Dec ∆% -0.4 |
| Consumer Price Index | Dec NSA ∆% 0.1; Dec 12 months NSA ∆% 2.4 |
| Real GDP Growth | IIIQ2014 ∆%: -0.5 on IIQ2014; IIIQ2014 SAAR -1.9; |
| Employment Report | Dec Unemployed 2.10 million Change in unemployed since last year: minus 150 thousand |
| All Industry Indices | Nov month SA ∆% 0.1 Blog 1/25/15 |
| Industrial Production | Dec SA month ∆%: 1.0 |
| Machine Orders | Total Nov ∆% -10.4 Private ∆%: -10.6 Nov ∆% Excluding Volatile Orders 1.3 |
| Tertiary Index | Nov month SA ∆% 0.2 |
| Wholesale and Retail Sales | Dec 12 months: |
| Family Income and Expenditure Survey | Dec 12-month ∆% total nominal consumption -0.6, real -3.4 Blog 2/1/15 |
| Trade Balance | Exports Dec 12 months ∆%: 12.9 Imports Dec 12 months ∆% 1.9 Blog 2/1/15 |
Links to blog comments in Table JPY:
1/25/15 http://cmpassocregulationblog.blogspot.com/2015/01/competitive-currency-conflicts-world.html
1/18/15 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.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 employment report for Japan in Dec 2014 is in Table VB-1. The number unemployed reached 2.10 million in Dec 2014, declining 150 thousand from a year earlier or 6.7 percent. The rate of unemployment not seasonally adjusted reached 3.4 percent, decreasing 0.1 percentage points from a year earlier. Population changed 0.0 percent from a year earlier. The labor force increased 0.4 percentage points from a year earlier and the labor participation rate stood at 59.3, decreasing 0.3 percentage points from a year earlier. The employment rate moved to 57.4 percent, which is higher by 0.3 percentage points relative to a year earlier.
Table VB-1, Japan, Employment Report Dec 2014
| Dec 2014 Unemployed | 2.10 million |
| Change since last year | -150 thousand; ∆% –6.7 |
| Unemployment rate | SA 3.4%, -0.1 from earlier month; NSA 3.2%, -0.2 from earlier year |
| Population ≥ 15 years | 110.80 million |
| Change since last year | ∆% 0.0 |
| Labor Force | 65.67 million |
| Change since last year | ∆% 0.4 |
| Employed | 63.57 million |
| Change since last year | ∆% 0.6 |
| Labor force participation rate | 59.3 |
| Change since last year | 0.3 |
| Employment rate | 57.4% |
| Change since last year | 0.4 |
Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/data/roudou/results/month/index.htm
Table VB-2 provides the rate of unemployment of Japan seasonally adjusted that decreased to 3.4 percent in Dec 2014 from 4.4 percent in May 2012. The rate of unemployment SA fell 0.3 percentage points from 3.7 percent in Dec 2013 to 3.4 percent in Dec 2014.
Table VB-2, Japan, Unemployment Rate, SA
| Unemployment Rate SA | |
| Dec 2014 | 3.4 |
| Nov | 3.5 |
| Oct | 3.5 |
| Sep | 3.6 |
| Aug | 3.5 |
| Jul | 3.8 |
| Jun | 3.7 |
| May | 3.5 |
| Apr | 3.6 |
| Mar | 3.6 |
| Feb | 3.6 |
| Jan | 3.7 |
| Dec 2013 | 3.7 |
| Nov | 3.9 |
| Oct | 4.0 |
| Sep | 4.0 |
| Aug | 4.1 |
| Jul | 3.9 |
| Jun | 3.9 |
| May | 4.1 |
| Apr | 4.1 |
| Mar | 4.1 |
| Feb | 4.3 |
| Jan | 4.2 |
| Dec 2012 | 4.3 |
| Nov | 4.1 |
| Oct | 4.1 |
| Sep | 4.3 |
| Aug | 4.2 |
| Jul | 4.4 |
| Jun | 4.3 |
| May | 4.4 |
Source: Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/data/roudou/results/month/index.htm
Chart VB-1 of Japan’s Statistics Bureau at the Ministry of Internal Affairs and Communications provides the unemployment rate of Japan from 2011 to 2014. There is clear trend of decline with multiple oscillations and increase in Jun-Jul 2014. The rate increased in Sep 2014 and fell in Oct 2014, stabilizing in Nov 2014 and declining in Dec 2014.
Chart VB-1, Japan, Unemployment Rate, Seasonally Adjusted
Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/data/roudou/results/month/index.htm
During the “lost decade” of the 1990s from 1991 to 2002 (Pelaez and Pelaez, The Global Recession Risk (2007), 82-3), Japan’s GDP grew at the average yearly rate of 1.0 percent, the CPI at 0.1 percent and the implicit deflator at minus 0.8 percent. Japan’s growth rate from the mid-1970s to 1992 was 4 percent (Ito 2004). Table VB-3 provides Japan’s rates of unemployment, participation in labor force and employment for selected years from 1953 to 1985 and yearly from 1990 to 2013. The rate of unemployment jumped from 2.1 percent in 1991 to 5.4 percent in 2002, which was a year of global economic weakness. The participation rate dropped from 64.0 percent in 1992 to 61.2 percent in 2002 and the employment rate fell from 62.6 percent in 1992 to 57.9 percent in 2002. The rate of unemployment rose from 3.9 percent in 2007 to 5.1 percent in 2010, falling to 4.6 percent in 2011, 4.3 percent in 2012 and 3.6 percent in 2014. The participation rate fell from 60.4 percent in 2007 to 59.6 percent in 2010, falling to 59.3 percent in 2011 and 59.1 in 2012 and increasing to 59.4 percent in 2014. The employment rate fell from 58.1 in percent in 2007 to 56.6 percent in 2010 and 56.5 percent in 2011 and 2012, increasing to 57.3 percent in 2014. The global recession adversely affected labor markets in advanced economies.
Table VB-3, Japan, Rates of Unemployment, Participation in Labor Force and Employment, %
| Participation | Employment Rate | Unemployment Rate | |
| 1953 | 70.0 | 68.6 | 1.9 |
| 1960 | 69.2 | 68.0 | 1.7 |
| 1965 | 65.7 | 64.9 | 1.2 |
| 1970 | 65.4 | 64.6 | 1.1 |
| 1975 | 63.0 | 61.9 | 1.9 |
| 1980 | 63.3 | 62.0 | 2.0 |
| 1985 | 63.0 | 61.4 | 2.6 |
| 1990 | 63.3 | 61.9 | 2.1 |
| 1991 | 63.8 | 62.4 | 2.1 |
| 1992 | 64.0 | 62.6 | 2.2 |
| 1993 | 63.8 | 62.2 | 2.5 |
| 1994 | 63.6 | 61.8 | 2.9 |
| 1995 | 63.4 | 61.4 | 3.2 |
| 1996 | 63.5 | 61.4 | 3.4 |
| 1997 | 63.7 | 61.5 | 3.4 |
| 1998 | 63.3 | 60.7 | 4.1 |
| 1999 | 62.9 | 59.9 | 4.7 |
| 2000 | 62.4 | 59.5 | 4.7 |
| 2001 | 62.0 | 58.9 | 5.0 |
| 2002 | 61.2 | 57.9 | 5.4 |
| 2003 | 60.8 | 57.6 | 5.3 |
| 2004 | 60.4 | 57.6 | 4.7 |
| 2005 | 60.4 | 57.7 | 4.4 |
| 2006 | 60.4 | 57.9 | 4.1 |
| 2007 | 60.4 | 58.1 | 3.9 |
| 2008 | 60.2 | 57.8 | 4.0 |
| 2009 | 59.9 | 56.9 | 5.1 |
| 2010 | 59.6 | 56.6 | 5.1 |
| 2011 | 59.3 | 56.5 | 4.6 |
| 2012 | 59.1 | 56.5 | 4.3 |
| 2013 | 59.3 | 56.9 | 4.0 |
| 2014 | 59.4 | 57.3 | 3.6 |
Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/data/roudou/results/month/index.htm
Industrial production in Japan increased 1.0 percent in Dec 2014 and increased 0.3 percent in 12 months, as shown in Table VB-4. Industrial production decreased 0.5 percent in Nov 2014 and decreased 3.7 percent in 12 months. Industrial production increased 0.4 percent in Oct 2014 and decreased 0.8 percent relative to a year earlier. Industrial production increased 2.9 percent in Sep 2014 and 0.8 percent in 12 months. Industrial production decreased 1.9 percent in Aug 2014 and fell 3.3 percent in 12 months. Industrial production increased 0.4 percent in Jul 2014 and fell 0.7 percent in 12 months. Japan’s industrial production fell 3.4 percent in Jun 2014 and increased 3.1 percent in 12 months. In May 2014, industrial production in Japan increased 0.7 percent, rebounding from the increase in the sales tax, and increased 1.0 percent in the 12 months ending in May 2014. Industrial production fell 2.8 percent in Apr 2014, mostly because of the increase in the tax on value added of consumption in Apr 2014, and increased 3.8 percent in 12 months. Decline of 2.8 percent in Jun 2013 interrupted four consecutive monthly increases from Feb through May 2013. Another interruption occurred in Aug 2013 with decrease of 0.5 percent and decline of 0.6 percent in 12 months. There was a third interruption with decline of 2.3 percent in Feb 2014 but increase of 7.0 percent in 12 months. Japan’s industrial production is strengthening with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.3 percent in Mar 2013, 0.6 percent in Apr 2013, 2.1 percent in May 2013, 2.7 percent in Jul 2013, 1.5 percent in Sep 2013, 0.6 percent in Oct 2013 and 0.5 percent in Dec 2013. Improvement continued with 3.9 percent in Jan 2014 and rebound of 0.7 percent in May 2014 from the drop of 2.8 percent in Apr caused by the increases in the sales tax. Growth in 12 months improved from minus 10.0 percent in Feb 2013 to 7.2 percent in Dec 2013, 10.6 percent in Jan 2014, 7.0 percent in Feb 2014 and 7.4 percent in Mar 2014. The increase of the sales tax of Apr 2014 interrupted improvement but growth in 12 months was positive at 1.0 percent in May 2014 and 3.1 percent in Jun 2014. There is deterioration in Nov 2014 with decline of 3.8 percent in 12 months followed by growth of 0.3 percent in the 12 months ending in Dec 2014. Industrial production fell 21.9 percent in 2009 after falling 3.4 percent in 2008 but recovered by 15.6 percent in 2010. The annual average in calendar year 2011 fell 2.8 percent largely because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Industrial production increased 0.6 percent in 2012 and fell 0.8 percent in 2013. Industrial production grew 2.1 percent in 2014.
Table VB-4, Japan, Industrial Production ∆%
| ∆% Month SA | ∆% 12 Months NSA | |
| Dec 2014 | 1.0 | 0.3 |
| Nov | -0.5 | -3.7 |
| Oct | 0.4 | -0.8 |
| Sep | 2.9 | 0.8 |
| Aug | -1.9 | -3.3 |
| Jul | 0.4 | -0.7 |
| Jun | -3.4 | 3.1 |
| May | 0.7 | 1.0 |
| Apr | -2.8 | 3.8 |
| Mar | 0.7 | 7.4 |
| Feb | -2.3 | 7.0 |
| Jan | 3.9 | 10.6 |
| Dec 2013 | 0.5 | 7.2 |
| Nov | 0.3 | 4.8 |
| Oct | 0.6 | 5.4 |
| Sep | 1.5 | 5.3 |
| Aug | -0.5 | -0.6 |
| Jul | 2.7 | 1.9 |
| Jun | -2.8 | -4.7 |
| May | 2.1 | -1.0 |
| Apr | 0.6 | -3.2 |
| Mar | 0.3 | -7.0 |
| Feb | 0.9 | -10.0 |
| Jan | -0.7 | -6.4 |
| Dec 2012 | 1.4 | -7.6 |
| Nov | -1.0 | -5.5 |
| Oct | 0.3 | -4.7 |
| Sep | -2.2 | -7.6 |
| Aug | -1.4 | -4.1 |
| Jul | -0.5 | 0.1 |
| Jun | -0.8 | -0.6 |
| May | -1.8 | 7.6 |
| Apr | -0.5 | 15.1 |
| Mar | 0.2 | 16.6 |
| Calendar Year | ||
| 2014 | 2.1 | |
| 2013 | -0.8 | |
| 2012 | 0.6 | |
| 2011 | -2.8 | |
| 2010 | 15.6 |
Source: Japan, Ministry of Economy, Trade and Industry (METI)
http://www.meti.go.jp/english/statistics/index.html
The survey of household income and consumption of Japan in Table VB-5 is showing noticeable improvement in recent months relative to earlier months with interruption in Apr-May 2014 because of the increase in the tax on value added of consumption. Table VB-4 shows decrease of nominal consumption of 0.6 percent in the 12 months ending in Dec 2014 and decrease of 3.4 percent in real terms. There are likely effects of anticipating consumption before the increase in the value added tax on consumption in Apr 2014 with decline of consumption after the actual increase of the tax. There are segments of decreasing real consumption in Dec 2014: furniture and household utensils 5.5 percent in nominal terms and 2.3 percent in real terms. Transportation/communications decreased 12.1 percent in nominal terms and 13.8 percent in real terms. Clothing and footwear decreased 1.0 percent in real terms and increased 2.2 percent in nominal terms. Education increased 6.9 percent in real terms and 9.3 percent in nominal terms. Fuel, light and water charges increased 2.2 percent in nominal terms and decreased 2.4 percent in real terms. Real household income decreased 0.8 percent; real disposable income decreased 0.3 percent; and real consumption expenditures decreased 3.0 percent.
Table VB-5, Japan, Family Income and Expenditure Survey, 12-month ∆% Relative to a Year Earlier
| Dec 2014 | Nominal | Real |
| Households of Two or More Persons | ||
| Total Consumption | -0.6 | -3.4 |
| Excluding Housing, Vehicles & Remittance | 0.7 | -2.1 |
| Food | 1.1 | -1.9 |
| Housing | 11.5 | 10.0 |
| Fuel, Light & Water Charges | 2.2 | -2.4 |
| Furniture & Household Utensils | -2.3 | -5.5 |
| Clothing & Footwear | 2.2 | -1.0 |
| Medical Care | 4.4 | 2.9 |
| Transport and Communications | -12.1 | -13.8 |
| Education | 3.8 | 1.6 |
| Culture & Recreation | -2.9 | -6.4 |
| Other Consumption Expenditures | -0.6 | -3.4* |
| Workers’ Households | ||
| Income | 2.1 | -0.8 |
| Disposable Income | 2.6 | -0.3 |
| Consumption Expenditures | -0.2 | -3.0 |
*Real: nominal deflated by CPI excluding imputed rent
Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute
http://www.stat.go.jp/english/data/kakei/156.htm
Chart VB-2 of the Ministry of Internal Affairs and Communication provides year-on-year change of real consumption expenditures. There is improvement followed by deterioration in the final segment with wide oscillations. There was deterioration in Nov 2011, renewed strength in Dec 2011, another decline in Jan 2012 and increase in Feb and Mar 2012 with stabilization in Apr and May 2012 but sharp decline into Jun 2012. Recovery in Jul and Aug 2012 was interrupted in Sep-Oct 2012 and new increases in Nov 2012, Jan 2013, Feb 2013, Mar 2013 and Apr 2013 (http://www.stat.go.jp/english/data/kakei/156.htm). Total consumption decreased 1.6 percent in real terms in May 2013 and decreased 1.9 percent in nominal terms relative to a year earlier. Real consumption fell 0.4 percent in Jun 2013 and nominal consumption declined 0.1 percent. Consumption rebounded in Jul 2013 with increase of real consumption by 0.1 percent and nominal consumption by 1.0 percent. In Aug 2013, real consumption fell 1.6 percent relative to a year earlier and 0.5 percent in nominal terms. There was marked improvement in Sep 2013 with growth of nominal consumption of 5.2 percent in 12 months and 3.7 percent in real consumption. Nominal consumption increased 2.1 in Nov 2013 and real consumption increased 0.2 percent. Nominal consumption increased 2.7 percent in Dec 2013 and real consumption increased 0.7 percent. In Jan 2014, nominal consumption increased 2.8 percent and real consumption 1.1 percent. Nominal consumption decreased 0.6 percent in Feb 2014 and real consumption decreased 2.5 percent. Nominal consumption increased 9.3 percent in Mar 2014 and real consumption 7.2 percent. The final segment of Chart VB-2 shows contraction of nominal consumption expenditures of 0.7 percent in Apr 2014 and decline of real consumption of 4.6 percent largely because of the increase in the tax on value added of consumption. Contraction deepened with decline of nominal consumption expenditures by 3.9 percent in May 2014 and decline of real consumption expenditures by 8.0 percent. Recovery occurred in Jun 2014 with increase of nominal consumption by 1.3 percent and milder decline of real consumption by 3.0 percent. There is new deterioration in Jul 2013 with decline of 2.0 percent in nominal terms and 5.9 percent in real terms. Nominal consumption fell 0.9 percent in the 12 months ending in Aug 2014 and real consumption fell 4.7 percent. Real consumption expenditures fell 5.6 percent in the 12 months ending in Sep 2014 and nominal consumption expenditures decreased 1.9 percent. Real consumption expenditures fell 4.0 percent in the 12 months ending in Oct 2014 and nominal consumption expenditures fell 0.7 percent. Real consumption expenditures decreased 2.5 percent in the 12 months ending in Nov 2014 and nominal consumption increased 0.3 percent. Real consumption decreased 3.4 percent in the 12 months ending in Dec 2014 and nominal consumption fell 0.6 percent.
Chart VB-2, Japan, Real Percentage Change of Consumption Year-on-Year
Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute
http://www.stat.go.jp/english/data/kakei/156.htm
Percentage changes in 12 months of nominal and real consumption expenditures in Japan are provided in Table VB-6. Real consumption fell 3.4 percent in the 12 months ending in Dec 2014 while nominal consumption fell 0.6 percent. Real consumption fell 2.5 percent in the 12 months ending in Nov 2014 and nominal consumption increased 0.3 percent. In Oct 2014, real consumption fell 4.0 percent in 12 months and nominal consumption fell 0.7 percent. Real consumption fell 5.6 percent in the 12 months ending in Sep 2014 while nominal consumption fell 1.9 percent. In Real consumption fell 4.7 percent in Aug 2014 while nominal consumption fell 0.9 percent. In Jul 2014, real consumption declined 5.9 percent and nominal consumption fell 2.0 percent. Real consumption fell 3.0 percent in Jun 2014 while nominal consumption increased 1.3 percent. Real consumption fell 8.0 percent in the 12 months ending in May 2014 and nominal consumption fell 3.9 percent largely because of the increase in the sales tax in Apr 2014. Real consumption fell 4.6 percent in the 12 months ending in Apr 2014 and nominal consumption fell 0.7 percent because of the increase in the sales tax in Apr 2014. Real consumption increased 7.2 percent in the 12 months ending in Mar 2013 while nominal consumption increased 9.3 percent, partly in anticipation of the increase in the value added tax in Apr 2014. Real consumption fell 2.5 percent in the 12 months ending in Feb 2014 and nominal consumption fell 0.6 percent. Real consumption expenditures increased 1.1 percent in the 12 months ending in Jan 2014 and nominal consumption expenditures 2.8 percent. Real consumption expenditures increased 0.7 percent in the 12 months ending in Dec 2013 and nominal consumption expenditures increased 2.7 percent. Real consumption expenditures increased 0.2 percent in the 12 months ending in Nov 2013 and nominal consumption expenditures increased 2.1 percent. Real consumption expenditures increased 0.9 percent in the 12 months ending in Oct 2013 and nominal consumption expenditures increased 2.3 percent. Real consumption expenditures increased 3.7 percent in the 12 months ending in Sep 2013 and nominal consumption expenditures 5.2 percent. Real consumption expenditures fell 1.6 percent in Aug 2013 relative to a year earlier and nominal consumption expenditures fell 0.5 percent. There is recovery in Jul 2013 with real consumption expenditures increasing 0.1 percent and nominal consumption expenditures increasing 1.0 percent. Real consumption expenditures decreased 0.4 percent in the 12 months ending in Jun 2013 and 0.1 percent in nominal terms. Declines in May and Jun 2013 interrupted growth from Jan to Apr 2013. There was sharp decline in nominal consumption of 8.8 percent in Mar 2011 and 8.2 percent in real consumption because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Dec was the first month in 2011 with increases in 12 months in both nominal and real consumption expenditures followed by Feb 2012 through Aug 2012. Nominal and real consumption fell in both Sep and Oct 2012 and increased in Nov 2012. Real consumption fell 0.7 percent in the 12 months ending in Dec 2012 and nominal consumption fell 0.8 percent. Real consumption expenditures increased 2.4 percent in the 12 months ending in Jan 2013 and 2.1 percent in nominal terms. Nominal consumption increased 0.8 percent in Feb 2013 and nominal consumption increased 0.1 percent. Real consumption increased 5.2 percent in the 12 months ending in Mar 2013 and nominal consumption 4.1 percent. Real consumption fell 4.6 percent in the 12 months ending in Apr 2014 and nominal consumption fell 0.7 percent. Consumption was an important driver of GDP growth in Japan in IQ2012. Real GDP grew at the seasonally adjusted annual rate (SAAR) of 4.6 percent in IQ2012 with private consumption contributing 1.4 percentage points for the highest contribution to growth (Table VB-2 at http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk_32.html). There was deceleration in IIQ2012 with growth of GDP at SAAR of minus 1.7 percent and contribution of 1.6 percentage points of personal consumption. In IIIQ2012, Japan’s GDP contracted at the SAAR of 2.0 percent and personal consumption deducted 0.9 percentage points. Japan’s GDP grew at the SAAR of minus 0.9 percent in IVQ2012 with personal consumption contributing 0.3 percentage points. Japan’s GDP growth in IQ2013 was at 6.0 percent SAAR with highest contribution of 3.1 percentage points by personal consumption expenditures. In IIQ2013, Japan’s GDP grew at 3.0 percent SAAR with personal consumption expenditures contributing 1.9 percentage points. Japan’s GDP grew at 1.6 percent SAAR in IIIQ2013 with personal consumption expenditures contributing 0.7 percentage points. In IVQ2013, Japan’s GDP grew at minus 1.5 percent SAAR with personal consumption expenditures deducting 0.2 percentage points. The GDP of Japan grew at 5.8 percent SAAR in IQ2014 with personal consumption expenditures contributing 5.8 percent. Japan’s GDP contracted at SAAR of 6.7 percent in IIQ2014 with personal consumption expenditures deducting 12.4 percent in large part because of the increase of the sales tax in Apr 2014. The GDP of Japan contracted at 1.9 percent SAAR in IIIQ2014 with personal consumption expenditures adding 0.9 percentage points.
Table VB-6, Japan, Family Income and Expenditure Survey 12-months ∆% Relative to a Year Earlier
| Nominal Consumption Expenditures | Real Consumption Expenditures | |
| Dec 2014 | -0.6 | -3.4 |
| Nov | 0.3 | -2.5 |
| Oct | -0.7 | -4.0 |
| Sep | -1.9 | -5.6 |
| Aug | -0.9 | -4.7 |
| Jul | -2.0 | -5.9 |
| Jun | 1.3 | -3.0 |
| May | -3.9 | -8.0 |
| Apr | -0.7 | -4.6 |
| Mar | 9.3 | 7.2 |
| Feb | -0.6 | -2.5 |
| Jan | 2.8 | 1.1 |
| Dec 2013 | 2.7 | 0.7 |
| Nov | 2.1 | 0.2 |
| Oct | 2.3 | 0.9 |
| Sep | 5.2 | 3.7 |
| Aug | -0.5 | -1.6 |
| Jul | 1.0 | 0.1 |
| Jun | -0.1 | -0.4 |
| May | -1.9 | -1.6 |
| Apr | 0.8 | 1.5 |
| Mar | 4.1 | 5.2 |
| Feb | 0.1 | 0.8 |
| Jan | 2.1 | 2.4 |
| Dec 2012 | -0.8 | -0.7 |
| Nov | 0.1 | 0.2 |
| Oct | -0.5 | -0.1 |
| Sep | -1.2 | -0.9 |
| Aug | 1.4 | 1.8 |
| Jul | 1.2 | 1.7 |
| Jun | 1.5 | 1.6 |
| May | 4.3 | 4.0 |
| Apr | 3.2 | 2.6 |
| Mar | 4.1 | 3.4 |
| Feb | 2.7 | 2.3 |
| Jan | -2.1 | -2.3 |
| Dec 2011 | 0.3 | 0.5 |
| Nov | -3.8 | -3.2 |
| Oct | -0.6 | -0.4 |
| Sep | -1.9 | -1.9 |
| Aug | -3.9 | -4.1 |
| Jul | -1.8 | -2.1 |
| Jun | -3.9 | -3.5 |
| May | -1.6 | -1.2 |
| Apr | -2.5 | -2.0 |
| Mar | -8.8 | -8.2 |
| Feb | -0.1 | 0.5 |
| Jan | -0.9 | -0.3 |
| Dec 2010 | -3.2 | -3.3 |
| Dec 2009 | 0.3 | 2.1 |
Source:
Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute
http://www.stat.go.jp/english/data/kakei/156.htm
Japan is experiencing weak internal demand as in most advanced economies, interrupted by strong growth in IQ2012 but renewed weakening at the end of IIQ2012, beginning of IIIQ2012 and in IVQ2012. There was recovery in IQ2013, IIQ2013 and IIIQ2013. Recovery interrupted in IVQ2013, accelerating in IQ2014. There was weakening again in IIQ2014 and IIIQ2014. Table VB-7 provides Japan’s wholesale and retail sales. There is strong performance in May 2013 with growth of 0.8 percent for retail sales followed by 1.6 percent in Jun 2013. Retail sales fell 0.3 percent in Jul 2013, rebounding 1.1 percent in Aug 2013. Retail sales increased 3.0 percent in the 12 months ending in Sep 2013 and 2.4 percent in the 12 months ending in Oct 2013. Retail sales increased 4.1 percent in the 12 months ending in Nov 2013 and 2.5 percent in the 12 months ending in Dec 2013. Retail sales grew 4.4 percent in the 12 months ending in Jan 2014 and 3.6 percent in the 12 months ending in Feb 2014. Japan’s retail sales increased 11.0 percent in the 12 months ending in Mar 2014 in part anticipating the increase in the tax on the value added of consumption. Retail sales fell 4.3 percent in Apr 2014 after the increase in the sales tax. Retail sales fell 0.4 percent in the 12 months ending in May 2014 and fell 0.6 percent in the 12 months ending in Jun 2014. Retail sales increased 0.6 percent in the 12 months ending in Jul 2014 and 1.2 percent in the 12 months ending in Aug 2014. Retail sales increased 2.3 percent in the 12 months ending in Sep 2014 and 1.4 percent in the 12 months ending in Oct 2014. Retail sales increased 0.5 percent in the 12 months ending in Nov 2014 and 0.2 percent in the 12 months ening in Dec 2014. Retail sales are recovering from deep drops in Mar and Apr 2011 following the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Retail sales have been increasing in 12-month percentage changes from Dec 2011 through May 2012. Retail sales fell again by 1.3 percent in Jul 2012, increasing 1.3 percent in Aug 2012 and 0.4 percent in Sep 2012 but declining 1.2 percent in Oct 2012, rebounding by 0.9 percent in Nov 2012 and only 0.2 percent in Dec 2012 but contracting 1.1 percent in Jan 2013 and 2.2 percent in Feb 2013.
Table VB-7, Japan, Wholesale and Retail Sales 12 Month ∆%
| Total | Wholesale | Retail | |
| Dec 2014 | -1.3 | -2.1 | 0.2 |
| Nov | -2.7 | -4.1 | 0.5 |
| Oct | 0.3 | -0.1 | 1.4 |
| Sep | 1.6 | 1.3 | 2.3 |
| Aug | -1.6 | -2.8 | 1.2 |
| Jul | 0.1 | -0.1 | 0.6 |
| Jun | -0.6 | -0.5 | -0.6 |
| May | -1.0 | -1.3 | -0.4 |
| Apr | -3.4 | -3.0 | -4.3 |
| Mar | 8.5 | 7.5 | 11.0 |
| Feb | 2.5 | 2.0 | 3.6 |
| Jan | 4.4 | 4.4 | 4.4 |
| Dec 2013 | 2.8 | 2.9 | 2.5 |
| Nov | 2.9 | 2.4 | 4.1 |
| Oct | 2.0 | 1.8 | 2.4 |
| Sep | 2.8 | 2.7 | 3.0 |
| Aug | 0.6 | 0.4 | 1.1 |
| Jul | 1.3 | 2.0 | -0.3 |
| Jun | 0.5 | 0.1 | 1.6 |
| May | 0.6 | 0.5 | 0.8 |
| Apr | -0.1 | -0.1 | -0.2 |
| Mar | -1.3 | -1.8 | -0.3 |
| Feb | -1.6 | -1.3 | -2.2 |
| Jan | -0.3 | 0.1 | -1.1 |
| Dec 2012 | -1.7 | -2.5 | 0.2 |
| Nov | -0.9 | -1.6 | 0.9 |
| Oct | -1.6 | -1.8 | -1.2 |
| Sep | -3.6 | -5.1 | 0.4 |
| Aug | -2.7 | -4.4 | 1.3 |
| Jul | -3.1 | -4.0 | -1.3 |
| Jun | -2.6 | -3.6 | -0.2 |
| May | 2.7 | 2.6 | 3.0 |
| Apr | 1.8 | 0.4 | 5.0 |
| Mar | 3.2 | 0.9 | 9.3 |
| Feb | -0.1 | -1.3 | 3.1 |
| Jan | -2.1 | -3.8 | 1.6 |
| Dec 2011 | -0.8 | -2.0 | 2.5 |
| Nov | -2.3 | -2.4 | -2.2 |
| Oct | 1.1 | 0.8 | 1.9 |
| Sep | 0.3 | 0.8 | -1.1 |
| Aug | 3.1 | 5.2 | -2.6 |
| Jul | 2.3 | 3.0 | 0.6 |
| Jun | 3.1 | 3.8 | 1.2 |
| May | 1.3 | 2.3 | -1.3 |
| Apr | -2.6 | -1.7 | -4.8 |
| Mar | -1.3 | 1.2 | -8.3 |
| Feb | 5.3 | 7.2 | 0.1 |
| Jan | 3.3 | 4.6 | 0.1 |
| Dec 2010 | 3.5 | 5.7 | -2.1 |
| Calendar Year | |||
| 2014 | 0.6 | 0.1 | 1.7 |
| 2013 | 0.9 | 0.8 | 1.0 |
| 2012 | -0.9 | -2.0 | 1.8 |
| 2011 | 1.0 | 1.9 | -1.0 |
| 2010 | 2.4 | 2.3 | 2.6 |
| 2009 | -20.5 | -25.6 | -2.3 |
| 2008 | 1.2 | 1.5 | 0.3 |
Source: Japan, Ministry of Economy, Trade and Industry (METI)
http://www.meti.go.jp/english/statistics/index.html
The structure of exports and imports of Japan is in Table VB-8. Japan imports all types of raw materials and fuels at rapidly increasing prices caused by the carry trade from zero interest rates to commodities, oscillating under shocks of risk aversion. Mineral fuels account for 32.1 percent of Japan’s imports and decreased 10.6 percent in the 12 months ending in Dec 2014 because of alternating carry trades into commodity futures in accordance with risk aversion together with yen devaluation. Weakness of world demand depresses prices of industrial goods. Manufactured products contribute 12.7 percent of Japan’s exports with increase of 9.4 percent in the 12 months ending in Dec 2014. Machinery contributes 20.0 percent of Japan’s exports with increase of 11.3 percent in the 12 months ending in Dec 2014. Electrical machinery contributes 17.4 percent of Japan’s exports with increase of 13.9 percent in the 12 months ending in Dec 2014. Exports of transport equipment with share of 22.1 percent in total exports increased 10.9 percent in the 12 months ending in Dec 2014 but had been increasing at high rates because of the low level after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. The breakdown of transport equipment in Table VB-8 shows increase of the major categories of motor vehicles of 12.5 percent: cars increased 12.2 percent with increase of 16.1 percent in the minor category of buses and trucks, increase of 5.7 percent for parts of motor vehicles, increase of 9.6 percent for motorcycles and increase of 1.1 percent for ships. The result of rising commodity prices and stable or declining prices of industrial products is pressure on Japan’s terms of trade with oscillations when risk aversion causes reversal of carry trades from zero interest rates to commodity prices. Data in Table VB-8 are in millions of yen that have been affected by recent depreciation of the yen relative to the USD with invoicing of many products in dollars in world trade.
Table VB-8, Japan, Structure and Growth of Exports and Imports % and ∆% Millions Yens
| Dec 2014 | Value JPY Millions | % of Total | 12 Months ∆% | Contribution Degree % |
| Exports | 6,896,467 | 100.0 | 12.9 | 12.9 |
| Foodstuffs | 52,632 | 0.8 | 10.7 | 0.1 |
| Raw Materials | 110,783 | 1.6 | 9.9 | 0.2 |
| Mineral Fuels | 124,374 | 1.8 | 15.2 | 0.3 |
| Chemicals | 725,480 | 10.5 | 8.0 | 0.9 |
| Manufactured Goods | 877,511 | 12.7 | 9.4 | 1.2 |
| Machinery | 1,380,253 | 20.0 | 11.3 | 2.3 |
| Electrical Machinery | 1,198,417 | 17.4 | 13.9 | 2.4 |
| Transport Equipment | 1,522,721 | 22.1 | 10.9 | 2.4 |
| Motor Vehicles | 1,020,475 | 14.8 | 12.5 | 1.9 |
| Cars | 872,571 | 12.7 | 12.2 | 1.6 |
| Buses & Trucks | 139,942 | 2.0 | 16.1 | 0.3 |
| Parts of Motor Vehicles | 326,011 | 4.7 | 5.7 | 0.3 |
| Motorcycles | 35,214 | 0.5 | 9.6 | 0.1 |
| Ships | 59,281 | 0.9 | 1.1 | 0.0 |
| Other | 904,295 | 13.1 | 26.6 | 3.1 |
| Imports | 7,557,180 | 100.0 | 1.9 | 1.9 |
| Foodstuffs | 610,956 | 8.1 | 6.5 | 0.5 |
| Raw Materials | 464,232 | 6.1 | 6.6 | 0.4 |
| Mineral Fuels | 2,432,850 | 32.1 | -10.6 | -3.9 |
| Chemicals | 559,301 | 7.4 | 3.4 | 0.2 |
| Manufactured Goods | 611,298 | 8.1 | 10.1 | 0.8 |
| Machinery | 597,613 | 7.9 | 8.0 | 0.6 |
| Electrical Machinery | 1,061,084 | 14.0 | 14.5 | 1.8 |
| Transport Equipment | 289,914 | 3.8 | 15.7 | 0.5 |
| Other | 938,931 | 12.4 | 8.0 | 0.9 |
Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm
Table VB-9 provides Japan’s exports, imports and trade balance in five-year intervals from 1950 to 1975 and then yearly from 1979 to 2013. Exports grew at the average yearly rate of 3.4 percent while imports grew at 3.6 percent per year in the years from 1979 to 2013. Abstracting from the global recession and the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011, exports grew at the average annual rate of 4.8 percent between 1979 and 2007 and imports at 4.0 percent. The global recession had a brutal impact on Japan’s trade. Exports fell 35.5 percent from 2007 to 2009 while imports fell 29.6 percent. Japan had the first trade deficit in 2011 since 1980 and the highest deficits in 2012 and 2013.
Table VB-9, Japan, Exports and Imports Calendar Year 1950-2013 Billion Yen
| Years | Exports | Imports | Balance |
| 1950 | 298 | 348 | -50 |
| 1955 | 723 | 889 | -166 |
| 1960 | 1,459 | 1,616 | -157 |
| 1965 | 3,042 | 2,940 | 102 |
| 1970 | 6,954 | 6,797 | 157 |
| 1975 | 16,545 | 17,170 | -625 |
| 1979 | 22,531 | 24,245 | -1,714 |
| 1980 | 29,382 | 31,995 | -2,613 |
| 1981 | 33,468 | 31,464 | 2,004 |
| 1982 | 34,432 | 32,656 | 1,776 |
| 1983 | 34,909 | 30,014 | 4,895 |
| 1984 | 40,325 | 32,321 | 8,004 |
| 1985 | 41,955 | 31,084 | 10,871 |
| 1986 | 35,289 | 21,550 | 13,739 |
| 1987 | 33,315 | 21,736 | 11,579 |
| 1988 | 33,939 | 24,006 | 9,933 |
| 1989 | 37,822 | 28,978 | 8,844 |
| 1990 | 41,456 | 33,855 | 7,601 |
| 1991 | 42,359 | 31,900 | 10,459 |
| 1992 | 43,012 | 29,527 | 13,485 |
| 1993 | 40,202 | 26,826 | 13,376 |
| 1994 | 40,497 | 28,104 | 12,393 |
| 1995 | 41,530 | 31,548 | 9,982 |
| 1996 | 44,731 | 37,993 | 6,738 |
| 1997 | 50,937 | 40,956 | 9,981 |
| 1998 | 50,645 | 36,653 | 13,992 |
| 1999 | 47,547 | 35,268 | 12,279 |
| 2000 | 51,654 | 40,938 | 10,716 |
| 2001 | 48,979 | 42,415 | 6,564 |
| 2002 | 52,108 | 42,227 | 9,881 |
| 2003 | 54,548 | 44,362 | 10,186 |
| 2004 | 61,169 | 49,216 | 11,953 |
| 2005 | 65,656 | 56,949 | 8,707 |
| 2006 | 75,246 | 67,344 | 7,902 |
| 2007 | 83,931 | 73,135 | 10,796 |
| 2008 | 81,018 | 78,955 | 2,063 |
| 2009 | 54,170 | 51,499 | 2,671 |
| 2010 | 67,399 | 60,764 | 6,635 |
| 2011 | 65,546 | 68,111 | -2,565 |
| 2012 | 63,748 | 70,689 | -6,941 |
| 2013 | 69,774 | 81,243 | -11,469 |
Source: Japan, Ministry of Finance
http://www.customs.go.jp/toukei/info/index_e.htm
The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table VB-10 for Dec 2014. The share of Asia in Japan’s trade is close to one-half for 54.1 percent of exports and 46.0 percent of imports. Within Asia, exports to China are 18.4 percent of total exports and imports from China 22.6 percent of total imports. While exports to China increased 4.3 percent in the 12 months ending in Dec 2014, imports from China increased 6.8 percent. The largest export market for Japan in Dec 2014 is the US with share of 20.3 percent of total exports, which is close to that of China, and share of imports from the US of 8.7 percent in total imports. Japan’s exports to the US increased 23.7 percent in the 12 months ending in Dec 2014 and imports from the US decreased 22.4 percent. Western Europe has share of 10.5 percent in Japan’s exports and of 9.8 percent in imports. Rates of growth of exports of Japan in Dec 2014 are 23.7 percent for exports to the US, 13.6 percent for exports to Brazil and minus 3.5 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 Dec 2014 are mixed. Imports from Asia increased 7.6 percent in the 12 months ending in Dec 2014 while imports from China increased 6.8 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-10, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen
| Dec 2014 | Exports | 12 months ∆% | Imports Millions Yen | 12 months ∆% |
| Total | 6,896,467 | 12.9 | 7,557,180 | 1.9 |
| Asia | 3,727,702 % Total 54.1 | 11.0 | 3,476,931 % Total 46.0 | 7.6 |
| China | 1,267,729 % Total 18.4 | 4.3 | 1,710,736 % Total 22.6 | 6.8 |
| USA | 1,397,957 % Total 20.3 | 23.7 | 659,331 % Total 8.7 | 22.4 |
| Canada | 85,270 | 22.7 | 95,371 | 0.1 |
| Brazil | 47,640 | 13.6 | 82,948 | -9.3 |
| Mexico | 116,511 | 45.1 | 40,518 | 16.8 |
| Western Europe | 726,827 % Total 10.5 | 6.8 | 738,401 % Total 9.8 | -4.5 |
| Germany | 172,628 | -3.5 | 223,787 | -7.9 |
| France | 60,967 | -2.4 | 89,727 | 0.3 |
| UK | 127,481 | 17.2 | 59,662 | 7.8 |
| Middle East | 306,959 | 27.1 | 1,233,711 | -18.9 |
| Australia | 116,466 | -6.5 | 489,214 | 8.6 |
Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm
Table VB-11 provides the trade balance of Japan by countries and regions in Dec 2014. The significantly large deficits of JPY 927,119 million with the Middle East, JPY 443,007 million with China, JPY 372,748 million with Australia and JPY 11,574 million with Western Europe exceed surpluses of JPY 738,626 million with the US, JPY 75,993 million with Mexico and JPY 67,819 million with the UK.
Table VB-11, Japan, Trade Balance, Millions of Yen
| Dec 2014 | Millions of Yen |
| Total | -660,713 |
| Asia | 250,771 |
| China | -443,007 |
| USA | 738,626 |
| Canada | -10,101 |
| Brazil | -35,308 |
| Mexico | 75,993 |
| Western Europe | -11,574 |
| Germany | -51,159 |
| France | -28,760 |
| UK | 67,819 |
| Middle East | -927,119 |
| Australia | -372,748 |
Source: Japan, Ministry of Finance
http://www.customs.go.jp/toukei/info/index_e.htm
Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 IQ2012. The only strong contribution of net trade was 3.9 percent in IIIQ2011. Net trade added 1.7 percentage points to GDP growth in IQ2013 and 0.2 percentage points in IIQ2013 but deducted 1.5 percentage points in IIIQ2013 and deducted 2.3 percentage points in IVQ2013. Net trade deducted 0.8 percentage points from GDP growth in IQ2014. Net trade added 4.2 percentage points to GDP growth in IIQ2014 and 0.3 percentage points in IIIQ2014. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.
Table VB-3, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %
| Net Trade | Exports | Imports | |
| 2014 | |||
| I | -0.8 | 4.1 | -4.9 |
| II | 4.2 | -0.3 | 4.5 |
| III | 0.3 | 0.9 | -0.6 |
| 2013 | |||
| I | 1.7 | 2.4 | -0.7 |
| II | 0.2 | 1.7 | -1.5 |
| III | -1.5 | -0.4 | -1.2 |
| IV | -2.3 | 0.1 | -2.5 |
| 2012 | |||
| I | 0.4 | 1.7 | -1.3 |
| II | -1.5 | -0.3 | -1.2 |
| III | -1.9 | -2.4 | 0.5 |
| IV | -0.5 | -1.9 | 1.4 |
| 2011 | |||
| I | -1.2 | -0.4 | -0.7 |
| II | -4.5 | -4.6 | 0.2 |
| III | 3.9 | 5.8 | -1.9 |
| IV | -3.0 | -1.9 | -1.0 |
| 2010 | |||
| I | 2.1 | 3.5 | -1.3 |
| II | 0.0 | 2.6 | -2.6 |
| III | 0.5 | 1.4 | -0.9 |
| IV | -0.3 | 0.1 | -0.4 |
| 2009 | |||
| I | -4.4 | -16.4 | 12.0 |
| II | 7.3 | 4.7 | 2.7 |
| III | 2.2 | 5.3 | -3.1 |
| IV | 2.8 | 4.1 | -1.3 |
| 2008 | |||
| I | 1.2 | 2.1 | -0.9 |
| II | 0.4 | -1.6 | 2.0 |
| III | 0.0 | 0.2 | -0.2 |
| IV | -11.4 | -10.2 | -1.2 |
| 2007 | |||
| I | 1.2 | 1.7 | -0.5 |
| II | 0.7 | 1.6 | -0.9 |
| III | 2.0 | 1.5 | 0.6 |
| IV | 1.4 | 2.1 | -0.6 |
Source: Japan Economic and Social Research Institute, Cabinet Office
http://www.esri.cao.go.jp/index-e.html
http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 104.9 in Jun 2009 to 94.0 in Jan 2012 or minus 10.4 percent and increased to 116.9 in Dec 2014 for a gain of 24.4 percent relative to Jan 2012 and 11.4 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials.
Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2014
Source: Bank of Japan
http://www.stat-search.boj.or.jp/index_en.html
Chart IV-5A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 96.4 in Dec 2014 or minus 6.5 percent relative to Apr 2012 and fell 1.5 percent to 96.4 in Dec 2014 relative to Jun 2009.
Chart IV-5A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2014
Source: Bank of Japan
http://www.stat-search.boj.or.jp/index_en.html
Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-6 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan (for the relation of terms of trade and growth see Pelaez 1979, 1976a). The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 113.1 in Apr 2012 or 21.0 percent and to 129.6 in Dec 2014 or gain of 14.6 percent relative to Apr 2012 and 38.6 percent relative to Jun 2009.
Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2014
Source: Bank of Japan
http://www.stat-search.boj.or.jp/index_en.html
Chart IV-6A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 103.6 in Dec 2014 or minus 13.3 percent relative to Apr 2012 and gain of 20.2 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency decreased 1.5 percent from Jun 2009 to Dec 2014 while the import corporate goods price index increased 20.2 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.
Chart IV-6A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2014
Source: Bank of Japan
http://www.stat-search.boj.or.jp/index_en.html
Table IV-6B provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Dec 2014. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Dec 2014, the export index on the contract currency basis decreased 2.8 percent and increased 1.2 percent on the yen basis. For the entire period from Jan 2008 to Dec 2014, the import price index increased 2.9 percent on the contract currency basis and increased 8.9 percent on the yen basis. During significant part of the expansion period, prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.
Table IV-6B, Japan, Exports and Imports Corporate Goods Price Index, Contract Currency Basis and Yen Basis
| X-CC | X-Y | M-CC | M-Y | |
| 2008/01 | 99.2 | 115.5 | 100.7 | 119.0 |
| 2008/02 | 99.8 | 116.1 | 102.4 | 120.6 |
| 2008/03 | 100.5 | 112.6 | 104.5 | 117.4 |
| 2008/04 | 101.6 | 115.3 | 110.1 | 125.2 |
| 2008/05 | 102.4 | 117.4 | 113.4 | 130.4 |
| 2008/06 | 103.5 | 120.7 | 119.5 | 140.3 |
| 2008/07 | 104.7 | 122.1 | 122.6 | 143.9 |
| 2008/08 | 103.7 | 122.1 | 123.1 | 147.0 |
| 2008/09 | 102.7 | 118.3 | 117.1 | 137.1 |
| 2008/10 | 100.2 | 109.6 | 109.1 | 121.5 |
| 2008/11 | 98.6 | 104.5 | 97.8 | 105.8 |
| 2008/12 | 97.9 | 100.6 | 89.3 | 93.0 |
| 2009/01 | 98.0 | 99.5 | 85.6 | 88.4 |
| 2009/02 | 97.5 | 100.1 | 85.7 | 89.7 |
| 2009/03 | 97.3 | 104.2 | 85.2 | 93.0 |
| 2009/04 | 97.6 | 105.6 | 84.4 | 93.0 |
| 2009/05 | 97.5 | 103.8 | 84.0 | 90.8 |
| 2009/06 | 97.9 | 104.9 | 86.2 | 93.5 |
| 2009/07 | 97.5 | 103.1 | 89.2 | 95.0 |
| 2009/08 | 98.3 | 104.4 | 89.6 | 95.8 |
| 2009/09 | 98.3 | 102.1 | 91.0 | 94.7 |
| 2009/10 | 98.0 | 101.2 | 91.0 | 94.0 |
| 2009/11 | 98.4 | 100.8 | 92.8 | 94.8 |
| 2009/12 | 98.3 | 100.7 | 95.4 | 97.5 |
| 2010/01 | 99.4 | 102.2 | 97.0 | 100.0 |
| 2010/02 | 99.7 | 101.6 | 97.6 | 99.8 |
| 2010/03 | 99.7 | 101.8 | 97.0 | 99.2 |
| 2010/04 | 100.5 | 104.6 | 99.9 | 104.6 |
| 2010/05 | 100.7 | 102.9 | 101.7 | 104.9 |
| 2010/06 | 100.1 | 101.6 | 100.0 | 102.3 |
| 2010/07 | 99.4 | 99.0 | 99.9 | 99.8 |
| 2010/08 | 99.1 | 97.3 | 99.5 | 97.5 |
| 2010/09 | 99.4 | 97.0 | 100.0 | 97.2 |
| 2010/10 | 100.1 | 96.4 | 100.5 | 95.8 |
| 2010/11 | 100.7 | 97.4 | 102.6 | 98.2 |
| 2010/12 | 101.2 | 98.3 | 104.4 | 100.6 |
| 2011/01 | 102.1 | 98.6 | 107.2 | 102.6 |
| 2011/02 | 102.9 | 99.5 | 109.0 | 104.3 |
| 2011/03 | 103.5 | 99.6 | 111.8 | 106.3 |
| 2011/04 | 104.1 | 101.7 | 115.9 | 111.9 |
| 2011/05 | 103.9 | 99.9 | 118.8 | 112.4 |
| 2011/06 | 103.8 | 99.3 | 117.5 | 110.5 |
| 2011/07 | 103.6 | 98.3 | 118.3 | 110.2 |
| 2011/08 | 103.6 | 96.6 | 118.6 | 108.1 |
| 2011/09 | 103.7 | 96.1 | 117.0 | 106.2 |
| 2011/10 | 103.0 | 95.2 | 116.6 | 105.6 |
| 2011/11 | 101.9 | 94.8 | 115.4 | 105.4 |
| 2011/12 | 101.5 | 94.5 | 116.1 | 106.2 |
| 2012/01 | 101.8 | 94.0 | 115.0 | 104.2 |
| 2012/02 | 102.4 | 95.8 | 115.8 | 106.4 |
| 2012/03 | 102.9 | 99.2 | 118.3 | 112.9 |
| 2012/04 | 103.1 | 98.7 | 119.5 | 113.1 |
| 2012/05 | 102.3 | 96.3 | 118.1 | 109.8 |
| 2012/06 | 101.4 | 95.0 | 115.2 | 106.7 |
| 2012/07 | 100.6 | 94.0 | 112.0 | 103.5 |
| 2012/08 | 100.9 | 94.1 | 112.4 | 103.6 |
| 2012/09 | 101.0 | 94.1 | 114.7 | 105.2 |
| 2012/10 | 101.1 | 94.7 | 113.8 | 105.2 |
| 2012/11 | 100.9 | 95.9 | 113.2 | 106.5 |
| 2012/12 | 100.7 | 98.0 | 113.4 | 109.5 |
| 2013/01 | 101.0 | 102.4 | 113.8 | 115.4 |
| 2013/02 | 101.5 | 105.9 | 114.8 | 120.2 |
| 2013/03 | 101.3 | 106.6 | 115.1 | 122.0 |
| 2013/04 | 100.2 | 107.5 | 114.1 | 123.8 |
| 2013/05 | 99.6 | 109.1 | 112.6 | 125.3 |
| 2013/06 | 99.2 | 106.1 | 112.0 | 121.2 |
| 2013/07 | 99.1 | 107.5 | 111.6 | 122.8 |
| 2013/08 | 99.0 | 106.1 | 111.8 | 121.3 |
| 2013/09 | 99.0 | 107.2 | 113.0 | 124.0 |
| 2013/10 | 99.2 | 106.7 | 113.1 | 122.9 |
| 2013/11 | 99.1 | 108.0 | 113.1 | 124.9 |
| 2013-12 | 99.1 | 110.4 | 113.8 | 129.0 |
| 2014-01 | 99.2 | 110.7 | 114.5 | 130.2 |
| 2014-02 | 98.9 | 109.2 | 113.9 | 127.8 |
| 2014-03 | 98.6 | 109.1 | 113.5 | 127.5 |
| 2014-04 | 98.5 | 109.2 | 112.8 | 127.0 |
| 2014-05 | 98.3 | 108.5 | 112.5 | 126.0 |
| 2014-06 | 98.1 | 108.3 | 112.6 | 126.3 |
| 2014-07 | 98.2 | 108.2 | 112.6 | 126.0 |
| 2014-08 | 98.3 | 109.0 | 112.4 | 126.8 |
| 2014-09 | 98.1 | 111.2 | 111.6 | 129.5 |
| 2014-10 | 97.5 | 111.0 | 109.8 | 128.0 |
| 2014-11 | 97.1 | 115.9 | 107.0 | 131.6 |
| 2014-12 | 96.4 | 116.9 | 103.6 | 129.6 |
Note: X-CC: Exports Contract Currency; X-Y: Exports Yen; M-CC: Imports Contract; M-Y: Imports Yen
Source: Bank of Japan
http://www.boj.or.jp/en/statistics/index.htm/
There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Jan 2011 to Jan 2015. The index of current prices paid or costs of inputs moved from 16.13 in Dec 2012 to 12.63 in Jan 2015 while the index of current prices received or sales prices increased from 1.08 in Dec 2012 to 12.63 in Jan 2015. The farther the index is from the area of no change at zero, the faster the rate of change. Prices paid or of inputs at 10.42 in Dec 2014 are expanding at faster pace than prices received or of sales of products at 6.25. Prices paid or of inputs at 12.63 Jan 2015 are moving at the same rate as prices received or of sales of products at 12.63. The index of future prices paid or expectations of costs of inputs in the next six months fell from 51.61 in Dec 2012 to 33.68 in Jan 2015 while the index of future prices received or expectation of sales prices in the next six months decreased from 25.81 in Dec 2012 to 15.79 in Jan 2015. Priced paid or of inputs are expected to increase at a faster pace in the next six months than prices received or prices of sales products. Prices of sales of finished products are less dynamic than prices of costs of inputs during waves of increases. Prices of costs of costs of inputs fall less rapidly than prices of sales of finished products during waves of price decreases. As a result, margins of prices of sales less costs of inputs oscillate with typical deterioration against producers, forcing companies to manage tightly costs and labor inputs. Instability of sales/costs margins discourages investment and hiring.
Table IV-5, US, FRBNY Empire State Manufacturing Survey, Diffusion Indexes, Prices Paid and Prices Received, SA
| Current Prices Paid | Current Prices Received | Six Months Prices Paid | Six Months Prices Received | |
| Jan 2015 | 12.63 | 12.63 | 33.68 | 15.79 |
| Dec 2014 | 10.42 | 6.25 | 40.63 | 32.29 |
| Nov | 10.64 | 0.00 | 41.49 | 25.53 |
| Oct | 11.36 | 6.82 | 42.05 | 26.14 |
| Sep | 23.91 | 17.39 | 43.48 | 32.61 |
| Aug | 27.27 | 7.95 | 42.05 | 21.59 |
| Jul | 25.00 | 6.82 | 37.50 | 18.18 |
| Jun | 17.20 | 4.30 | 36.56 | 16.13 |
| May | 19.78 | 6.59 | 31.87 | 14.29 |
| Apr | 22.45 | 10.20 | 33.67 | 14.29 |
| Mar | 21.18 | 2.35 | 43.53 | 25.88 |
| Feb | 25.00 | 15.00 | 40.00 | 23.75 |
| Jan | 36.59 | 13.41 | 45.12 | 23.17 |
| Dec 2013 | 15.66 | 3.61 | 48.19 | 27.71 |
| Nov | 17.11 | -3.95 | 42.11 | 17.11 |
| Oct | 21.69 | 2.41 | 45.78 | 25.30 |
| Sep | 21.51 | 8.60 | 39.78 | 24.73 |
| Aug | 20.48 | 3.61 | 40.96 | 19.28 |
| Jul | 17.39 | 1.09 | 28.26 | 11.96 |
| Jun | 20.97 | 11.29 | 45.16 | 17.74 |
| May | 20.45 | 4.55 | 29.55 | 14.77 |
| Apr | 28.41 | 5.68 | 44.32 | 14.77 |
| Mar | 25.81 | 2.15 | 50.54 | 23.66 |
| Feb | 26.26 | 8.08 | 44.44 | 13.13 |
| Jan | 22.58 | 10.75 | 38.71 | 21.51 |
| Dec 2012 | 16.13 | 1.08 | 51.61 | 25.81 |
| Nov | 14.61 | 5.62 | 39.33 | 15.73 |
| Oct | 17.20 | 4.30 | 44.09 | 24.73 |
| Sep | 19.15 | 5.32 | 40.43 | 23.40 |
| Aug | 16.47 | 2.35 | 31.76 | 14.12 |
| Jul | 7.41 | 3.70 | 35.80 | 16.05 |
| Jun | 19.59 | 1.03 | 34.02 | 17.53 |
| May | 37.35 | 12.05 | 57.83 | 22.89 |
| Apr | 45.78 | 19.28 | 50.60 | 22.89 |
| Mar | 50.62 | 13.58 | 66.67 | 32.10 |
| Feb | 25.88 | 15.29 | 62.35 | 34.12 |
| Jan | 26.37 | 23.08 | 53.85 | 30.77 |
| Dec 2011 | 24.42 | 3.49 | 56.98 | 36.05 |
| Nov | 18.29 | 6.10 | 36.59 | 25.61 |
| Oct | 22.47 | 4.49 | 40.45 | 17.98 |
| Sep | 32.61 | 8.70 | 53.26 | 22.83 |
| Aug | 28.26 | 2.17 | 42.39 | 15.22 |
| Jul | 43.33 | 5.56 | 51.11 | 30.00 |
| Jun | 56.12 | 11.22 | 55.10 | 19.39 |
| May | 69.89 | 27.96 | 68.82 | 35.48 |
| Apr | 57.69 | 26.92 | 56.41 | 38.46 |
| Mar | 53.25 | 20.78 | 71.43 | 36.36 |
| Feb | 45.78 | 16.87 | 55.42 | 27.71 |
| Jan 2011 | 35.79 | 15.79 | 60.00 | 42.11 |
Source: http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html
Price indexes of the Federal Reserve Bank of Philadelphia Outlook Survey are in Table IV-6. As inflation waves throughout the world (http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html) indexes of both current and expectations of future prices paid and received were quite high until May 2011. Prices paid, or inputs, were more dynamic, reflecting carry trades from zero interest rates to commodity futures. All indexes softened after May 2011 with even decline of prices received in Aug 2011 during the first round of risk aversion. Current and future price indexes have increased again but not back to the intensity in the beginning of 2011 because of risk aversion frustrating carry trades even induced by zero interest rates. The index of prices paid or prices of inputs moved from 20.8 in Dec 2012 to 9.8 in Jan 2015. The index of current prices received was minus 2.4 in Apr 2013, indicating decrease of prices received. The index of current prices received decreased from 9.2 in Dec 2012 to -0.2 in Jan 2015. The farther the index is from the area of no change at zero, the faster the rate of change. The index of current prices paid or costs of inputs at 9.8 in Jan 2015 indicates faster increase than the index of current prices received or sales prices of production contracting at -0.2. The index of future prices paid decreased to 26.0 in Jan 2015 from 40.6 in Dec 2012 while the index of future prices received decreased from 21.9 in Dec 2012 to 20.7 in Jan 2015. Expectations are incorporating faster increases in prices of inputs or costs of production, 26.0 in Jan 2015, than of sales prices of produced goods, 20.7 in Jan 2015, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages investment and hiring.
Table IV-6, US, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Prices Paid and Prices Received, SA
| Current Prices Paid | Current Prices Received | Future Prices Paid | Future Prices Received | |
| 10-Dec | 42.8 | 5.3 | 56 | 24.2 |
| 11-Jan | 48.1 | 12.3 | 58.3 | 34.8 |
| 11-Feb | 61.1 | 13.4 | 67.7 | 31.5 |
| 11-Mar | 59 | 17.6 | 62.4 | 33.4 |
| 11-Apr | 52.1 | 23.6 | 56.2 | 35.7 |
| 11-May | 49.8 | 20.6 | 54.9 | 28.6 |
| 11-Jun | 37.4 | 7.2 | 41.4 | 6.9 |
| 11-Jul | 34.4 | 5.5 | 49.3 | 17.5 |
| 11-Aug | 23.6 | -3.9 | 43.5 | 22.8 |
| 11-Sep | 30.7 | 6.3 | 38.3 | 20.6 |
| 11-Oct | 23 | 1.7 | 41.5 | 27.9 |
| 11-Nov | 22.2 | 5.3 | 33.3 | 26.3 |
| 11-Dec | 25.1 | 5.8 | 42 | 21.1 |
| 12-Jan | 25.8 | 8.6 | 46.9 | 22.2 |
| 12-Feb | 32.7 | 9.9 | 50.5 | 26.3 |
| 12-Mar | 16.6 | 6.5 | 38.7 | 24.3 |
| 12-Apr | 19.9 | 10 | 36.7 | 23.7 |
| 12-May | 8.9 | 0.9 | 39.9 | 9.6 |
| 12-Jun | 3.4 | -4.5 | 34.5 | 16.9 |
| 12-Jul | 9 | 3.5 | 29.1 | 21.4 |
| 12-Aug | 17 | 6.1 | 36.8 | 23.9 |
| 12-Sep | 14 | 2.6 | 39 | 24.9 |
| 12-Oct | 18 | 5.2 | 44.1 | 15.4 |
| 12-Nov | 22.8 | 5.1 | 44.6 | 10.6 |
| 12-Dec | 20.8 | 9.2 | 40.6 | 21.9 |
| 13-Jan | 12.3 | -0.5 | 33.2 | 22.3 |
| 13-Feb | 11.9 | -0.7 | 33.9 | 22.5 |
| 13-Mar | 11.4 | 0.6 | 34.3 | 19.3 |
| 13-Apr | 7.6 | -2.4 | 31.1 | 14.7 |
| 13-May | 11.9 | 0.5 | 34.3 | 19.8 |
| 13-Jun | 20.8 | 13.6 | 33.1 | 24 |
| 13-Jul | 20.3 | 6 | 42.7 | 26.9 |
| 13-Aug | 19.6 | 12 | 36.9 | 23 |
| 13-Sep | 23.8 | 11.6 | 39 | 27.9 |
| 13-Oct | 18.5 | 10.2 | 41.2 | 35 |
| 13-Nov | 24.4 | 7.6 | 39.4 | 36 |
| 13-Dec | 16.9 | 8.5 | 37.9 | 28.8 |
| 14-Jan | 18.8 | 6.3 | 34.3 | 14.2 |
| 14-Feb | 14.8 | 7.9 | 27.2 | 18.1 |
| 14-Mar | 18.3 | 6.4 | 31.8 | 18.8 |
| 14-Apr | 14.5 | 9.6 | 38.3 | 18.6 |
| 14-May | 26.5 | 18 | 36.9 | 29.6 |
| 14-Jun | 32 | 13.1 | 45.1 | 30.1 |
| 14-Jul | 32.3 | 14.7 | 40.1 | 25 |
| 14-Aug | 24.1 | 5.1 | 47.5 | 27.7 |
| 14-Sep | 24.4 | 8 | 41.9 | 26.6 |
| 14-Oct | 24.9 | 18.2 | 30.5 | 23 |
| 14-Nov | 15.8 | 10 | 30.5 | 18.7 |
| 14-Dec | 14.4 | 9.8 | 22.3 | 20.6 |
| 15-Jan | 9.8 | -0.2 | 26 | 20.7 |
Source: Federal Reserve Bank of Philadelphia
http://www.philadelphiafed.org/index.cfm
Chart IV-1 of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices paid or prices of inputs from 2006 to 2014. Recession dates are in shaded areas. In the middle of deep global contraction after IVQ2007, input prices continued to increase in speculative carry trades from central bank policy rates falling toward zero into commodities futures. The index peaked above 70 in the second half of 2008. Inflation of inputs moderated significantly during the shock of risk aversion in late 2008, even falling briefly into contraction territory below zero during several months in 2009 in the flight away from risk financial assets into US government securities (Cochrane and Zingales 2009) that unwound carry trades. Return of risk appetite induced carry trade with significant increase until return of risk aversion in the first round of the European sovereign debt crisis in Apr 2010. Carry trades returned during risk appetite in expectation that the European sovereign debt crisis was resolved. The various inflation waves originating in carry trades induced by zero interest rates with alternating episodes of risk aversion are mirrored in the prices of inputs after 2011, in particular after Aug 2012 with the announcement of the Outright Monetary Transactions Program of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). Subsequent risk aversion and flows of capital away from commodities into stocks and high-yield bonds caused sharp decline in the index of prices paid followed by another recent rebound with marginal decline and new increase. The index falls, rebounds and falls again in the final segment but there are no episodes of contraction after 2009.
Chart IV-1, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid Diffusion Index SA
Source: Federal Reserve Bank of Philadelphia
http://www.philadelphiafed.org/index.cfm
Chart IV-2 of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices received from 2006 to 2014. The significant difference between the index of current prices paid in Chart IV-1 and the index of current prices received in Chart IV-2 is that increases in prices paid are significantly sharper than increases in prices received. There were several periods of negative readings of prices received from 2010 to 2014 but none of prices paid. Prices paid relative to prices received deteriorate most of the time largely because of the carry trades from zero interest rates to commodity futures. Profit margins of business are compressed intermittently by fluctuations of commodity prices induced by unconventional monetary policy of zero interest rates, frustrating production, investment and hiring decisions of business, which is precisely the opposite outcome pursued by unconventional monetary policy.
Chart IV-2, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Received Diffusion Index SA
Source: Federal Reserve Bank of Philadelphia
http://www.philadelphiafed.org/index.cfm
© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015.
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