CMP Associates Regulation Blog: World Financial Turbulence, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Industrial Production, United States Producer Prices, World Cyclical Slow Growth and Global Recession Risk: Part V

World Financial Turbulence, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Industrial Production, United States Producer Prices, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

I United States Industrial Production

II United States Producer Prices

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

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 2014. Growth weakened from 1.9 per cent in 1995 and 2.6 percent in 1996 to contractions of 2.0 percent in 1998 and 0.2 percent in 1999. Growth rates were below 2 percent with exception of 2.3 percent in 2000, 2.4 percent in 2004 and 2.2 percent in 2007. Japan’s GDP contracted sharply by 1.0 percent in 2008 and 5.5 percent in 2009. As in most advanced economies, growth was robust at 4.7 percent in 2010 but mediocre at minus 0.5 percent in 2011 because of the tsunami and 1.8 percent in 2012. Japan’s GDP grew 1.6 percent in 2013 and stagnated in 2014. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). Japan’s real GDP in calendar year 2014 is 0.7 percent higher than in calendar year 2007 (http://www.esri.cao.go.jp/index-e.html).

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

Calendar Year	∆%
1995	1.9
1996	2.6
1997	1.6
1998	-2.0
1999	-0.2
2000	2.3
2001	0.4
2002	0.3
2003	1.7
2004	2.4
2005	1.3
2006	1.7
2007	2.2
2008	-1.0
2009	-5.5
2010	4.7
2011	-0.5
2012	1.8
2013	1.6
2014	0.0

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/announcements/release_2015/k150121a.pdf) with changes on Jul 21, 2015 (https://www.boj.or.jp/en/announcements/release_2015/k150121a.pdf). For fiscal 2014, the forecast is of growth of GDP between minus 0.7 to minus 0.3 percent, with the all items CPI less fresh food 2.9 to 3.3 percent (https://www.boj.or.jp/en/announcements/release_2015/k150121a.pdf). The critical difference is forecast of the CPI excluding fresh food of 0.3 to 1.4 percent in 2015 and 0.9 to 2.3 percent in 2016 (https://www.boj.or.jp/en/announcements/release_2015/k150121a.pdf). Consumer price inflation in Japan excluding fresh food was minus 0.2 percent in Dec 2014 and 2.5 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 Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2013
Apr 2014	+2.2 to +2.3 [+2.2]	+0.8
Jan 2014	+2.5 to +2.9 [+2.7]	+0.7 to +0.9 [+0.7]
Oct 2013	+2.6 to +3.0 [+2.7]	+0.6 to +1.0 [+0.7]
Jul 2013	+2.5 to +3.0 [+2.8]	+0.5 to +0.8 [+0.6]
2014
Jan 2015	-0.6 to -0.4 [-0.5]	+2.9 to +3.2 [+2.9]	+0.9 to +1.2 [+0.9]
Oct 2014	+0.2 to +0.7 [+0.5]	+3.1 to +3.4 [+3.2]	+1.1 to +1.4 [+1.2]
Jul 2014	+0.6 to +1.3 [+1.0]	+3.2 to +3.5 [+3.3]	+1.2 to +1.5 [+1.3]
Apr 2014	+0.8 to +1.3 [+1.1]	+3.0 to +3.5 [+3.3]	+1.0 to +1.5 [+1.3]
Jan 2014	+0.9 to 1.5 [+1.4]	+2.9 to +3.6 [+3.3]	+0.9 to +1.6 [+1.3]
Oct 2013	+0.9 to +1.5 [+1.5]	+2.8 to +3.6 [+3.3]	+0.8 to +1.6 [+1.3]
Jul 2013	+0.8 to +1.5 [+1.3]	+2.7 to +3.6 [+3.3]	+0.7 to +1.6 [+1.3]
2015
Jan 2015	+1.8 to +2.3 [+2.1]	+0.4 to +1.3 [+1.0]	+0.4 to +1.3 [+1.0]
Oct 2014	+1.2 to +1.7 [+1.5]	+1.8 to 2.6 [+2.4]	+1.1 to +1.9 [+1.7]
Jul 2014	+1.2 to +1.6 [+1.5]	+1.9 to +2.8 [+2.6]	+1.2 to +2.1 [+1.9]
Apr 2014	+1.2 to +1.5 [+1.5]	+1.9 to +2.8 [+2.6]	+1.2 to +2.1 [+1.9]
Jan 2014	+1.2 to +1.8 [+1.5]	+1.7 to +2.9 [+2.6]	+1.0 to +2.2 [+1.9]
Oct 2013	+1.3 to +1.8 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
Jul 2013	+1.3 to +1.9 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
2016
Jan 2015	+1.5 to +1.7 [+1.6]	+1.5 to +2.3 [+2.2]	+1.5 to +2.3 [+2.2]
Oct 2014	+1.0 to +1.4 [+1.2]	+1.9 to 3.0 [+2.8]	+1.2 to 2.3 [+2.1]
Jul 2014	+1.0 to +1.5 [+1.3]	+2.0 to +3.0 [+2.8]	+1.3 to +2.3 [+2.1]
Apr 2014	+1.0 to +1.5 [+1.3]	+2.0 to +3.0 [+2.8]	+1.3 to +2.3 [+2.1]

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

Source: Policy Board, Bank of Japan

https://www.boj.or.jp/en/announcements/release_2015/k150121a.pdf

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

The Markit/JMMA Flash Japan Manufacturing PMI Index™ with the Flash Japan Manufacturing PMI™ decreased from 52.2 in Jan to 51.5 in Feb and the Flash Japan Manufacturing Output Index™ did not change from 52.7 in Jan to 52.7 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/ca6a231ce52548dfbbc034868f886d7a). 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/ca6a231ce52548dfbbc034868f886d7a). Private-sector activity in Japan stabilized with the Markit Composite Output PMI Index decreasing from 51.9 in Dec to 51.7 in Jan, indicating modest improvement in business activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/117f9bf5e5ec451ea6dc46bd00bad841). The Markit Business Activity Index of Services decreased to 51.3 in Jan from 51.7 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/117f9bf5e5ec451ea6dc46bd00bad841). Amy Brownbill, Ecoomist at Markit and author of the report, finds the reading consistent with growth in the beginning of 2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/117f9bf5e5ec451ea6dc46bd00bad841). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased marginally from 52.0 in Dec to 52.2 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/618efac17046436b879e5b824f41cfbf). 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/618efac17046436b879e5b824f41cfbf).Table JPY provides the country data table for Japan.

Table JPY, Japan, Economic Indicators

Historical GDP and CPI	1981-2010 Real GDP Growth and CPI Inflation 1981-2010 Blog 8/9/11 Table 26
Corporate Goods Prices	Jan ∆% -1.3 12 months ∆% 0.3 Blog 2/15/15
Consumer Price Index	Dec NSA ∆% 0.1; Dec 12 months NSA ∆% 2.4 Blog 2/1/15
Real GDP Growth	IVQ2014 ∆%: 0.6 on IIIQ2014; IVQ2014 SAAR 2.2; ∆% from quarter a year earlier: -0.5 % Blog 6/16/13 8/18/13 9/15/13 11/17/13 12/15/13 2/23/14 3/16/14 5/18/14 6/15/14 8/17/14 9/14/14 11/23/14 12/14/14 2/22/15
Employment Report	Dec Unemployed 2.10 million Change in unemployed since last year: minus 150 thousand Unemployment rate: 3.4 % Blog 2/1/15
All Industry Indices	Dec month SA ∆% -0.3 12-month NSA ∆% -0.9 Blog 2/22/15
Industrial Production	Dec SA month ∆%: 1.0 12-month NSA ∆% 0.3 Blog 2/1/15
Machine Orders	Total Dec ∆% 8.6 Private ∆%: 17.5 Dec ∆% Excluding Volatile Orders 8.3 Blog 2/15/15
Tertiary Index	Dec month SA ∆% -0.3 Dec 12 months NSA ∆% minus -0.8 Blog 2/15/15
Wholesale and Retail Sales	Dec 12 months: Total ∆%: -1.3 Wholesale ∆%: -2.1 Retail ∆%: 0.2 Blog 2/1/15
Family Income and Expenditure Survey	Dec 12-month ∆% total nominal consumption -0.6, real -3.4 Blog 2/1/15
Trade Balance	Exports Jan 12 months ∆%: 17.0 Imports Jan 12 months ∆% -9.0 Blog 2/22/15

Links to blog comments in Table JPY:

2/15/15 http://cmpassocregulationblog.blogspot.com/2015/02/g20-monetary-policy-recovery-without.html

2/1/15 http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html

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

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

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

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

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

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

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

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

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

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

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

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

Japan’s economy grew 1.3 percent in IQ2014, seasonally adjusted, partly because of anticipation of purchases to avoid the increase in the tax on value added of consumption in Apr 2014, contracting 1.7 percent in IIQ2014, as shown in Table VB-1, incorporating the latest estimates and revisions. Japan’s GDP contracted 0.6 percent in IIIQ2014 and grew 0.6 percent in IVQ2014. The economy of Japan contracted 0.4 percent in IVQ2013 after growing 0.4 percent in IIIQ2013, 0.8 percent in IIQ2013 and 1.4 percent in IQ2013. Japan’s GDP decreased 0.2 percent in IVQ2012 relative to IIIQ2012. IQ2012 GDP growth was revised to 1.1 percent; IIQGDP growth was revised to -0.4 percent; and IIIQ2012 growth was revised to -0.6 percent. The economy of Japan had already weakened in IVQ2010 when GDP fell revised 0.6 percent. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell 1.9 percent in IQ2011 and fell again 0.6 percent in IIQ2011 because of the disruption of the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Recovery was robust in the first two quarters of 2010 but GDP grew at 1.4 percent in IIIQ2010 and fell 0.6 percent in IVQ2010. The deepest quarterly contractions in the global recession were 3.3 percent in IVQ2008 and 4.1 percent in IQ2009. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). Using seasonally adjusted and price adjusted data (http://www.esri.cao.go.jp/index-e.html), Japan’s GDP fell 9.3 percent from the peak in IQ2008 before the contraction to the lowest reading in IQ2009. Japan’s GDP fell 0.7 percent from IQ2008 to IVQ2014. GDP in Japan grew 9.4 percent from IIQ2009 to IVQ2014 at the annual equivalent rate of 1.6 percent.

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

	IQ	IIQ	IIIQ	IVQ
2014	1.3	-1.7	-0.6	0.6
2013	1.4	0.8	0.4	-0.4
2012	1.1	-0.4	-0.6	-0.2
2011	-1.9	-0.6	2.6	0.2
2010	1.4	1.2	1.4	-0.6
2009	-4.1	1.8	0.0	1.7
2008	0.6	-1.1	-1.1	-3.3
2007	0.9	0.2	-0.4	0.9
2006	0.4	0.4	-0.1	1.3
2005	0.3	1.3	0.3	0.2
2004	1.0	0.0	0.1	-0.3
2003	-0.5	1.2	0.4	1.0
2002	-0.2	1.0	0.6	0.4
2001	0.6	-0.2	-1.1	-0.1
2000	1.6	0.2	-0.3	0.7
1999	-0.8	0.4	-0.1	0.5
1998	-1.9	-0.6	0.3	0.5
1997	0.8	-1.0	0.4	-0.1

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Table VB-2 provides contributions to real GDP at seasonally adjusted annual rates (SAAR). GDP expanded at 2.2 percent in IVQ2014 with contribution of 0.7 percent by personal consumption expenditures, 0.9 percent by net trade and 0.1 percent by government consumption expenditures. Gross fixed capital formation contributed 0.0 percent and private inventory divestment 0.7 percent. Japan contracted at 6.7 percent in IIQ2014 with deduction of 12.4 percentage points of personal consumption expenditures and deduction of 3.9 percentage points of gross fixed capital formation. Japan’s GDP contracted at 6.7 percent in IIIQ2014 with deductions of 12.5 percent by personal consumption and 4.1 percent by gross fixed capital formation. Trade added 0.2 percentage points and government expenditures 0.2 percent. Gross fixed capital formation deducted 0.5 percent and inventory divestment deducted 2.7 percent. Trade added 4.2 percentage points to GDP growth in IIQ2014; private inventory investment added 5.3 percentage points; and government expenditures added 0.3 percentage points. The GDP of Japan expanded at 5.5 percent in IQ2014 with contributions of 5.4 percent by personal consumption and 3.2 percent of gross fixed capital formation. There were deductions of 1.2 percent by trade, 1.7 percent by inventory divestment and 0.3 percent by government expenditures. The GDP of Japan contracted at 1.4 percent annual equivalent in IVQ2013 with contraction of personal consumption expenditures of 0.3 percent and growth of GFCF at 1.1 percent. Trade deducted 2.1 percentage points. Japan grew at 1.5 percent in IIIQ 2013 with contribution of 0.8 percentage points by personal consumption and 1.9 percentage points by GFCF. Trade deducted 1.5 percentage points. Japan grew at 3.2 percent SAAR in IIQ2013 driven by contributions of 2.0 percent of personal consumption (PC), 0.2 percent of net trade and gross fixed capital formation (GFCF) at 2.0 percent. In IQ2013, Japan’s GDP increased at the SAAR of 5.7 percent in large part because of 3.2 percent in personal consumption and 1.6 percent in trade. The SAAR of GDP in IVQ2012 was minus 0.7 percent: 0.2 percentage points from growth of personal consumption expenditures (PC) less 0.4 percentage points of net trade (exports less imports) less 0.8 percentage points of private inventory investment (PINV) plus 0.6 percentage points of government consumption and minus 0.2 percentage points of gross fixed capital formation (GFCF). The SAAR of GDP in IIIQ2011 was revised to a high 10.8 percent. Net trade deducted from GDP growth in three quarters of 2011 and provided the growth impulse of 3.9 percentage points in IIIQ2011. Growth in 2011 and IQ2012 was driven by personal consumption expenditures that deducted 0.8 percentage points from GDP growth in IIIQ2012 but added 0.2 percentage points to GDP growth in IVQ2012.

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

	GDP	PC	GFCF	Trade	PINV	GOVC
2014
I	5.5	5.4	3.2	-1.2	-1.7	-0.3
II	-6.7	-12.5	-4.1	4.2	5.3	0.3
III	-2.3	0.6	-0.5	0.2	-2.7	0.2
IV	2.2	0.7	0.0	0.9	0.7	0.1
2013
I	5.7	3.2	0.4	1.6	0.0	0.6
II	3.2	2.0	2.0	0.2	-1.7	0.5
III	1.5	0.8	1.9	-1.5	0.5	-0.1
IV	-1.4	-0.3	1.1	-2.1	-0.3	0.1
2012
I	4.4	1.4	-0.4	0.3	2.1	0.9
II	-1.5	1.6	0.5	-1.4	-1.8	-0.3
III	-2.2	-0.8	-0.9	-1.9	1.0	0.4
IV	-0.7	0.2	-0.2	-0.4	-0.8	0.6
2011
I	-7.3	-4.0	-0.2	-1.1	-1.8	-0.1
II	-2.2	2.6	0.3	-4.4	-1.1	0.4
III	10.8	3.9	1.3	3.9	1.5	0.1
IV	0.6	1.0	3.2	-3.0	-0.8	0.3
2010
I	5.7	1.8	0.2	2.1	2.2	-0.6
II	4.8	0.1	1.2	0.1	2.2	1.2
III	5.8	3.1	0.9	0.5	1.1	0.3
IV	-2.3	-1.1	-1.2	-0.4	0.0	0.3
2009
I	-15.4	-1.9	-2.0	-4.4	-7.7	0.7
II	7.6	4.2	-3.0	7.5	-1.8	0.7
III	0.1	-0.1	-1.4	2.2	-1.6	1.0
IV	7.0	3.4	0.0	2.7	0.6	0.3
2008
I	2.4	1.5	0.4	1.2	-0.6	-0.1
II	-4.3	-3.1	-2.2	0.5	1.3	-0.8
III	-4.2	-0.6	-1.0	0.0	-2.6	0.0
IV	-12.5	-2.8	-4.6	-11.4	5.8	0.3
2007
I	3.8	0.9	0.5	1.2	1.1	0.3
II	0.8	0.6	-1.5	0.8	0.1	0.5
III	-1.5	-1.0	-1.7	2.0	-0.6	-0.2
IV	3.5	0.3	0.3	1.4	1.0	0.6

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

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 IQ2012. The only strong contribution of net trade was 3.9 percent in IIIQ2011. Net trade added 1.6 percentage points to GDP growth in IQ2013 and 0.2 percentage points in IIQ2013 but deducted 1.5 percentage points in IIIQ2013 and deducted 2.1 percentage points in IVQ2013. Net trade deducted 1.2 percentage points from GDP growth in IQ2014. Net trade added 4.2 percentage points to GDP growth in IIQ2014 and 0.2 percentage points in IIIQ2014. Net trade added 0.9 percentage points to GDP growth in IVQ2014. 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	-1.2	4.2	-5.4
II	4.2	-0.2	4.5
III	0.2	1.0	-0.8
IV	0.9	1.9	-1.0
2013
I	1.6	2.5	-0.9
II	0.2	1.8	-1.5
III	-1.5	-0.3	-1.2
IV	-2.1	-0.1	-2.0
2012
I	0.3	1.7	-1.4
II	-1.4	-0.3	-1.2
III	-1.9	-2.4	0.5
IV	-0.4	-2.0	1.6
2011
I	-1.1	-0.4	-0.7
II	-4.4	-4.6	0.2
III	3.9	5.7	-1.9
IV	-3.0	-2.0	-0.9
2010
I	2.1	3.5	-1.4
II	0.1	2.7	-2.6
III	0.5	1.4	-0.9
IV	-0.4	0.0	-0.4
2009
I	-4.4	-16.4	12.0
II	7.5	4.7	2.7
III	2.2	5.2	-3.1
IV	2.7	4.1	-1.4
2008
I	1.2	2.1	-1.0
II	0.5	-1.6	2.1
III	0.0	0.1	-0.2
IV	-11.4	-10.2	-1.2
2007
I	1.2	1.7	-0.5
II	0.8	1.6	-0.8
III	2.0	1.4	0.6
IV	1.4	2.1	-0.7

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

apan’s percentage growth of GDP not seasonally adjusted in a quarter relative to the same quarter a year earlier is shown in Table VB-4. Contraction of GDP in a quarter relative to the same quarter a year earlier extended over seven quarters from IIQ2008 through IVQ2009. Contraction was sharpest in IQ2009 with output declining 9.4 percent relative to a year earlier. Yearly quarterly rates of growth of Japan were relatively high for a mature economy through the decade with the exception of the contractions from IVQ2001 to IIQ2002 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused flat GDP in IQ2011 at 0.0 percent relative to the same quarter a year earlier and decline of 1.5 percent in IIQ2011. GDP fell 0.5 percent in IIIQ2011 relative to a year earlier and increased 0.1 percent in IVQ2011 relative to a year earlier. Growth resumed with 3.5 percent in IQ2012 relative to a year earlier. Growth of 3.5 percent in IIQ2012 is largely caused by the low level in IIQ2011 resulting from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP increased 0.2 percent in IIIQ2012 relative to a year earlier and changed 0.0 percent in IVQ2012 relative to a year earlier. GDP increased 0.5 percent in IQ2013 relative to a year earlier and 1.4 percent in IIQ2013. Growth of 2.2 percent in IIIQ2013 relative to a year earlier is partly due to the decline of 0.6 percent in GDP in IIIQ2012. GDP increased 2.3 percent in IVQ2013 relative to a year earlier. The GDP of Japan increased 2.4 percent in IQ2014 relative to a year earlier. Japan’s GDP contracted 0.4 percent in IIQ2014 relative to a year earlier. GDP contracted 1.4 percent in IIIQ2014 relative to a year earlier. Japan’s GDP contracted 0.5 percent in IVQ2014 relative to a year earlier. Japan faces the challenge of recovery from the devastation of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in an environment of declining world trade and bouts of risk aversion that cause appreciation of the Japanese yen, eroding the country’s competitiveness in world markets. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). Using price adjusted but not seasonally adjusted data (http://www.esri.cao.go.jp/index-e.html), Japan’s GDP contracted 11.5 percent from the high in IVQ2007 to the low in IIQ2009. GDP fell 0.1 percent from IVQ2007 to IVQ2014. Japan’s GDP grew 12.9 percent from IIIQ2009 to IVQ2014 at the annual equivalent rate of 2.2 percent.

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

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

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

The indices of all industry activity of Japan, which approximates GDP or economic activity, fell to levels close to the worst point of the recession, showing the brutal impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Table VB-5 with the latest revisions shows the quarterly index, which permits comparison with the movement of real GDP. The first row provides weights of the various components of the index: AG (agriculture) 1.4 percent (not shown), CON (construction) 5.7 percent, IND (industrial production) 18.3 percent, TERT (services) 63.2 percent, and GOVT (government) 11.4 percent. GDP increased 0.6 percent in IVQ2014 (Table VB-1 and earlier http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk_32.html), industry increased 1.6 percent, the tertiary sector increased 0.6 percent, government increased 0.2 percent and construction increased 1.9 percent. The report shows that the all industry index increased 0.8 percent in IVQ2014. Industry added 0.29 percentage points to growth of the all industry index and the tertiary index added 0.40 percentage points. Anticipation of purchases to avoid the increase in the sales tax in Apr 2014 explains unusually high activity in the economy of Japan in IQ2014 and subsequent decline in IIQ2014. Japan had already experienced a very weak quarter in IVQ2010, with decline of GDP of 0.6 percent (Table VB-1 and earlier http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk_32.html) when it was unexpectedly hit by the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP fell 1.9 percent in IQ2011 and 0.6 percent in IIQ2011. GDP changed 0.0 percent in IQ2011 relative to a year earlier and fell 1.5 percent in IIQ2011 relative to a year earlier (Table VB-1 and Table VB-4 and earlier http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk_32.html). The all industry activity index fell in all quarters of 2012 with exception of growth of 0.1 percent in IQ2012. Weakness in industry was the driver of decline.

Table VB-5, Japan, Indices of All Industry Activity Percentage Change from Prior Quarter SA ∆%

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
2014
IVQ2014	1.9	1.6	0.6	0.2	0.8	0.6
Cont to IVQ % Change	0.10	0.29	0.40	0.02
IIIQ2014	0.7	-1.9	0.4	-0.3	-0.1	-0.6
IIQ2014	-4.6	-3.8	-3.8	0.5	-3.4	-1.7
IQ	-2.7	3.0	1.8	-0.5	1.6	1.3
2013
IVQ	2.8	1.8	-0.2	0.4	0.3	-0.4
IIIQ	4.3	1.8	0.1	-0.2	0.5	0.4
IIQ	3.6	1.6	0.3	0.0	0.6	0.8
IQ	0.9	0.4	0.5	-0.3	0.4	1.4
2012
IVQ2012	3.0	-1.8	0.3	0.1	-0.1	-0.2
IIIQ	1.6	-3.3	0.0	0.0	-0.4	-0.6
IIQ	1.3	-2.1	0.0	0.0	-0.2	-0.4
IQ	2.0	1.6	0.0	0.2	0.1	1.1

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

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

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

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

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

There are more details in Table VB-6. In Dec 2014, the all industry activity index decreased 0.3 percent with industry increasing 0.9 percent and services decreasing 0.3 percent while construction increased 0.1 percent and government decreased 0.7 percent. Industry added 0.15 percentage points and services deducted 0.20 percentage points while construction added 0.01 percentage points and government deducted 0.08 percentage points. The all industry activity index is stronger in 2013 with growth of 0.5 percent in Dec 2012, 0.4 percent in Feb 2013, 0.1 percent in Mar 2013, 0.1 percent in Apr 2013 and 0.6 percent in May 2013. After decline of 0.3 percent in Jun 2013, the all industry index rose 0.3 percent in Jul 2013, 0.2 percent in Aug 2013 and 0.3 percent in Sep 2013. The index fell 0.1 percent in Oct 2013 but increased 0.2 percent in Nov 2013. The index changed 0.0 percent in Dec 2013 and increased 1.7 percent in Jan 2014, decreasing 1.1 percent in Feb 2014. The index increased 1.7 percent in Mar 2014 in the rush of expenditures in anticipation of the sales tax increase in Apr 2014 and fell 4.4 percent in Apr 2014 because of the impact of the sales tax. The all industry index rebounded 0.5 percent in May 2014 and fell 0.3 percent in Jun 2014, decreasing 0.4 percent in Jul 2014. The index fell 0.1 percent in Aug 2014 and rebounded 1.3 percent in Sep 2014. The index increased 0.1 percent in Nov 2014 and decreased 0.3 percent in Dec 2014. Industry is recovering with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.3 percent in Mar 2013, 0.6 percent in Apr 2013 and 2.1 percent in May 2013. After decline of 2.7 percent in Jun 2003, industry grew 2.7 percent in Jul 2013 and declined 0.4 percent in Aug 2013. Industry rebounded with 1.5 percent in Sep 2013 and 0.5 percent in Oct 2013. Industry rose 0.3 percent in Nov 2013 and increased 0.5 percent in Dec 2013. Industry grew 3.9 percent in Jan 2014 and fell 2.3 percent in Feb 2014. Industry increased 0.7 percent in Mar 2014 and fell 2.9 percent in Apr 2014. Industry increased 0.7 percent in May 2014 and decreased 3.4 percent in Jun 2014. Industry increased 0.4 percent in Jul 2014, fell 1.9 percent in Aug 2014 and increased 2.9 percent in Sep 2014. Industry increased 0.4 percent in Oct 2014 and fell 0.5 percent in Nov 2014, increasing 0.9 percent in Dec 2014. The highest risk to Japan is if weakening world growth would affect Japanese exports.

Table VB-6, Japan, Indices of All Industry Activity Percentage Change from Prior Month SA ∆%

	CON	IND	TERT	GOVT	ALL IND
Dec 2014	0.1	0.9	-0.3	-0.7	-0.3

Cont to Nov % Change	0.01	0.15	-0.20	-0.08
Nov	-0.9	-0.5	0.2	-0.2	0.0
Oct	1.5	0.4	-0.2	1.2	0.1
Sep	0.0	2.9	1.3	-0.8	1.3
Aug	2.9	-1.9	-0.1	-0.2	-0.1
Jul	-1.2	0.4	-0.3	0.3	-0.4
Jun	0.1	-3.4	0.0	0.0	-0.3
May	-0.2	0.7	0.9	-0.6	0.5
Apr	-3.2	-2.9	-5.7	1.2	-4.4
Mar	-1.5	0.7	2.6	-0.7	1.7
Feb	-1.3	-2.3	-0.9	0.5	-1.1
Jan	-1.7	3.9	1.5	-0.5	1.7
Dec 2013	-0.2	0.5	-0.1	0.1	0.0
Nov	1.5	0.3	0.3	-0.6	0.2
Oct	1.0	0.5	-0.5	0.8	-0.1
Sep	1.0	1.5	0.1	-0.1	0.3
Aug	0.3	-0.4	0.2	0.1	0.2
Jul	1.1	2.7	-0.1	-0.3	0.3
Jun	2.5	-2.7	-0.3	0.1	-0.3
May	3.0	2.1	0.5	0.2	0.6
Apr	0.8	0.6	-0.1	0.0	0.1
Mar	0.0	0.3	0.1	-0.3	0.1
Feb	0.1	0.9	0.5	-0.1	0.4
Jan	-0.7	-0.8	0.0	0.0	-0.2
Dec 2012	0.9	1.4	0.2	-0.3	0.5
Nov	3.0	-0.9	-0.1	0.3	-0.2
Oct	-0.1	0.3	0.2	0.2	0.2
Sep	1.2	-2.2	0.0	-0.3	-0.4
Aug	0.1	-1.4	0.2	0.1	0.0
Jul	-1.0	-0.5	-0.3	-0.1	-0.3
Jun	1.7	-0.9	0.0	0.1	0.1
May	3.0	-1.8	0.5	0.0	-0.1
Apr	-1.1	-0.4	-0.2	0.0	-0.1
Mar	-0.5	-0.2	-0.3	0.1	-0.2
Feb	0.7	-0.2	0.2	-0.2	0.1
Jan	2.6	0.8	-0.8	0.4	-0.7

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

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

Percentage changes from a year earlier in calendar years and relative to the same quarter a year earlier of the all industry activity indices are provided in Table VB-7. The first row shows that services contribute 63.2 percent of the total index and industry contributes 18.3 percent for joint contribution of 81.5 percent. The all industry activity index decreased 1.3 percent in IVQ2014 relative to a year earlier and GDP decreased 0.5 percent relative to a year earlier (Table VB-4 and earlier http://cmpassocregulationblog.blogspot.com/2014/12/global-financial-and-economic-risk_32.html). Industry decreased 1.5 percent relative to a year earlier while the tertiary sector decreased 1.2 percent, deducting combined 1.03 percentage points to growth of the all industry activity index of minus 1.3 percent while construction deducted 0.28 percentage points and government added 0.01 percentage points. The fall of industrial production in 2009 was by a catastrophic 21.9 percent. Japan emerged from the crisis with industrial growth of 16.4 percent in 2010. Quarterly data show that industry is the most dynamic sector of the Japanese economy. The all-industry index decreased 0.2 percent in 2014 and real GDP changed 0.0 percent. Industry increased 2.0 percent, adding 0.34 percentage points, while the tertiary sector decreased 0.8 percent, deducting 0.53 percentage points. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 201, declining world trade and revaluation of the yen in fear of world financial risks interrupted the recovery of the Japanese economy from the global recession.

Table VB-7, Japan, Indices of All Industry Activity Percentage Change from Earlier Calendar Year and Same Quarter Year Earlier NSA ∆%

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
Calendar Year
2014	-0.6	2.0	-0.8	0.0	-0.2	0.0
Cont to 2014 % Change	-0.03	0.34	-0.53	0.00
2013	10.4	-0.8	0.7	-0.1	0.7	1.6
2012	3.2	0.1	1.4	0.3	1.2	1.8
2011	-2.0	-2.3	0.1	-0.2	-0.5	-0.5
2010	-7.0	16.4	1.3	-0.7	3.1	4.7
2009	-5.6	-21.9	-5.2	0.1	-7.7	-5.5
2008	-7.6	-3.4	-1.0	-1.4	-1.9	-1.0
2014
IVQ	-4.8	-1.5	-1.2	0.1	-1.3	-0.5
Cont to IVQ % Change	-0.28	-0.26	-0.77	0.01
IIIQ	-3.9	-1.0	-1.9	0.0	-1.6	-1.4
IIQ	-0.5	2.6	-2.2	0.2	-0.9	-0.4
IQ	8.1	8.3	2.1	-0.3	3.2	2.4
2013
IVQ	13.4	5.7	0.5	0.0	1.9	2.3
IIIQ	13.0	2.2	1.2	-0.5	1.8	2.2
IIQ	8.8	-3.1	1.3	-0.2	0.6	1.4
IQ2013	5.4	-7.8	-0.1	0.3	-1.2	0.5
2012
IVQ	6.7	-5.9	0.7	-0.1	-0.3	0.0
IIIQ	3.1	-4.2	0.5	0.4	-0.2	0.2
IIQ	4.9	5.5	2.1	0.6	2.6	3.5
IQ	-1.1	6.2	2.4	0.3	2.6	3.5

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

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

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

Percentage changes of a month relative to the same month a year earlier for the indices of all industry activity of Japan are shown in Table VB-8. The all industry activity index decreased 0.9 percent in Dec 2014 relative to Dec 2013. Industry increased 0.1 percent in Dec 2014 relative to a year earlier, adding 0.02 percentage points to growth of the all industry activity index. The tertiary sector decreased 0.8 percent, subtracting 0.50 percentage points. Construction deducted 0.29 percentage points from the index and government deducted 0.11 percentage points.

Table VB-8, Japan, Indices of All Industry Activity Percentage Change from Same Month Year Earlier NSA ∆%

	CON	IND	TERT	GOVT	ALL IND
Dec	-5.1	0.1	-0.8	-1.0	-0.9
Cont to Dec % Change	-0.29	0.02	-0.50	-0.11
Nov	5.8	-3.7	-1.8	1.2	-2.0
Oct	-3.5	-0.8	-0.9	-0.1	-0.9
Sep	-3.7	0.7	-0.8	-1.1	-0.7
Aug	-2.8	-3.2	-2.7	0.7	-2.5
Jul	-5.2	-0.7	-2.2	0.5	-1.7
Jun	-2.8	3.1	-1.4	-0.6	-0.5
May	-0.7	0.9	-2.5	0.6	-1.5
Apr	2.0	3.8	-2.6	-0.7	-0.9
Mar	6.3	7.3	3.2	-0.4	3.8
Feb	8.2	7.0	0.9	0.0	2.2
Jan	9.9	10.6	2.0	-0.5	3.5
Dec 2013	11.8	7.2	0.8	-0.4	2.2
Nov	14.2	4.8	0.5	-0.2	1.9
Oct	14.4	5.3	0.1	0.6	1.8
Sep	12.8	5.2	1.4	-0.6	2.4
Aug	13.0	-0.7	0.8	0.1	1.0
Jul	13.2	1.9	1.5	-1.0	1.7
Jun	11.2	-4.7	0.6	0.5	0.0
May	8.9	-0.9	1.8	-0.2	1.3
Apr	6.3	-3.2	1.5	-1.1	0.6
Mar	5.4	-6.9	0.7	0.0	-0.6
Feb	4.3	-9.9	-1.5	1.5	-2.4
Jan	6.8	-6.4	0.3	-0.6	-0.7
Dec 2012	8.7	-7.5	-0.1	0.6	-0.9
Nov	7.6	-5.7	1.0	0.3	0.0
Oct	3.5	-4.7	1.3	-1.1	0.1
Sep	2.9	-7.7	0.1	0.7	-1.2
Aug	2.6	-4.4	0.6	0.9	-0.1
Jul	3.8	-0.2	0.8	-0.3	0.6
Jun	6.7	-1.5	0.8	0.9	0.6
May	5.3	6.1	3.1	-0.4	3.3
Apr	2.6	13.6	2.4	1.3	4.1
Mar	3.0	16.2	4.2	0.5	5.8
Feb	-2.5	2.8	2.4	-0.7	1.8
Jan	-3.4	-1.6	0.4	0.4	-0.1

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-9. 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 28.6 percent of Japan’s imports and decreased 24.4 percent in the 12 months ending in Jan 2015 because of alternating carry trades into commodity futures in accordance with risk aversion together with yen devaluation. Weakness of world demand depresses prices of industrial goods. Manufactured products contribute 12.6 percent of Japan’s exports with increase of 12.9 percent in the 12 months ending in Jan 2015. Machinery contributes 18.7 percent of Japan’s exports with increase of 16.8 percent in the 12 months ending in Jan 2015. Electrical machinery contributes 17.2 percent of Japan’s exports with increase of 23.1 percent in the 12 months ending in Jan 2015. Exports of transport equipment with share of 23.4 percent in total exports increased 13.1 percent in the 12 months ending in Jan 2015 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-9 shows increase of the major categories of motor vehicles of 12.7 percent: cars increased 11.8 percent with increase of 20.1 percent in the minor category of buses and trucks, increase of 6.3 percent for parts of motor vehicles, decrease of 1.3 percent for motorcycles and increase of 44.8 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-9 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-9, Japan, Structure and Growth of Exports and Imports % and ∆% Millions Yens

Jan 2015	Value JPY Millions	% of Total	12 Months ∆%	Contribution Degree %
Exports	6,144,713	100.0	17.0	17.0
Foodstuffs	46,957	0.8	52.3	0.3
Raw Materials	90,666	1.5	10.2	0.2
Mineral Fuels	121,468	2.0	0.1	0.0
Chemicals	674,070	11.0	7.5	0.9
Manufactured Goods	771,381	12.6	12.9	1.7
Machinery	1,151,630	18.7	16.8	3.2
Electrical Machinery	1,056,917	17.2	23.1	3.8
Transport Equipment	1,439,012	23.4	13.1	3.2
Motor Vehicles	878,343	14.3	12.7	1.9
Cars	765,552	12.5	11.8	1.5
Buses & Trucks	106,941	1.7	20.1	0.3
Parts of Motor Vehicles	268,927	4.4	6.3	0.3
Motorcycles	28,410	0.5	-1.3	0.0
Ships	187,371	3.0	44.8	1.1
Other	792,613	12.9	34.0	3.8
Imports	7,322,176	100.0	-9.0	-9.0
Foodstuffs	576,484	7.9	3.0	0.2
Raw Materials	491,209	6.7	-2.6	-0.2
Mineral Fuels	2,096,872	28.6	-24.4	-8.4
Chemicals	611,493	8.4	1.2	0.1
Manufactured Goods	638,256	8.7	2.1	0.2
Machinery	634,345	8.7	-1.9	-0.1
Electrical Machinery	1,032,319	14.1	-1.8	-0.2
Transport Equipment	284,234	3.9	2.2	0.1
Other	956,963	13.1	-4.8	-0.6

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

Table VB-10 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-10, 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 in Table VB-11 for Jan 2015. The share of Asia in Japan’s trade is close to one-half for 53.9 percent of exports and 48.7 percent of imports. Within Asia, exports to China are 17.0 percent of total exports and imports from China 24.3 percent of total imports. While exports to China increased 20.8 percent in the 12 months ending in Jan 2015, imports from China decreased 6.9 percent. The largest export market for Japan in Jan 2015 is the US with share of 19.4 percent of total exports, which is close to that of China, and share of imports from the US of 8.8 percent in total imports. Japan’s exports to the US increased 16.5 percent in the 12 months ending in Jan 2015 and imports from the US decreased 1.4 percent. Western Europe has share of 10.9 percent in Japan’s exports and of 10.1 percent in imports. Rates of growth of exports of Japan in Jan 2015 are 16.5 percent for exports to the US, 6.6 percent for exports to Brazil and 0.4 percent for exports to Germany. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity. Growth rates of imports in the 12 months ending in Jan 2015 are mixed. Imports from Asia decreased 3.0 percent in the 12 months ending in Jan 2015 while imports from China decreased 3.0 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-11, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Jan 2015	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,144,713	17.0	7,322,176	-9.0
Asia	3,314,119 % Total 53.9	22.7	3,562,992 % Total 48.7	-3.0
China	1,041,905 % Total 17.0	20.8	1,778,299 % Total 24.3	-6.9
USA	1,192,663 % Total 19.4	16.5	647,255 % Total 8.8	-1.4
Canada	78,303	20.8	93,241	5.2
Brazil	40,584	6.6	86,272	-14.3
Mexico	87,868	21.2	38,506	7.0
Western Europe	671,916 % Total 10.9	8.2	741,708 % Total 10.1	-3.3
Germany	160,392	0.4	208,587	-8.8
France	48,630	-0.4	98,481	-0.5
UK	115,715	31.7	59,238	10.2
Middle East	216,735	6.1	1,022,772	-38.3
Australia	115,777	5.1	467,520	-1.9

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

Table VB-12 provides the trade balance of Japan by countries and regions in Jan 2015. The significantly large deficits of JPY 806,037 million with the Middle East, JPY 736,394 million with China, JPY 351,743 million with Australia and JPY 69,792 million with Western Europe exceed surpluses of JPY 545,408 million with the US, JPY 49,362 million with Mexico and JPY 56,477 million with the UK.

Table VB-12, Japan, Trade Balance, Millions of Yen

Jan 2015	Millions of Yen
Total	-1,177,463
Asia	-248,873
China	-736,394
USA	545,408
Canada	-14,938
Brazil	-45,688
Mexico	49,362
Western Europe	-69,792
Germany	-48,195
France	-49,851
UK	56,477
Middle East	-806,037
Australia	-351,743

Source: Japan, Ministry of Finance

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

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

	Net Trade	Exports	Imports
2014
I	-1.2	4.2	-5.4
II	4.2	-0.2	4.5
III	0.2	1.0	-0.8
IV	0.9	1.9	-1.0
2013
I	1.6	2.5	-0.9
II	0.2	1.8	-1.5
III	-1.5	-0.3	-1.2
IV	-2.1	-0.1	-2.0
2012
I	0.3	1.7	-1.4
II	-1.4	-0.3	-1.2
III	-1.9	-2.4	0.5
IV	-0.4	-2.0	1.6
2011
I	-1.1	-0.4	-0.7
II	-4.4	-4.6	0.2
III	3.9	5.7	-1.9
IV	-3.0	-2.0	-0.9
2010
I	2.1	3.5	-1.4
II	0.1	2.7	-2.6
III	0.5	1.4	-0.9
IV	-0.4	0.0	-0.4
2009
I	-4.4	-16.4	12.0
II	7.5	4.7	2.7
III	2.2	5.2	-3.1
IV	2.7	4.1	-1.4
2008
I	1.2	2.1	-1.0
II	0.5	-1.6	2.1
III	0.0	0.1	-0.2
IV	-11.4	-10.2	-1.2
2007
I	1.2	1.7	-0.5
II	0.8	1.6	-0.8
III	2.0	1.4	0.6
IV	1.4	2.1	-0.7

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 113.7 in Jan 2014 for a gain of 21.0 percent relative to Jan 2012 and 8.4 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, 2008-2015

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 95.0 in Jan 2015 or minus 7.9 percent relative to Apr 2012 and fell 3.0 percent to 95.0 in Jan 2015 relative to Jun 2009.

Chart IV-5A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2015

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 121.6 in Jan 2015 or gain of 7.5 percent relative to Apr 2012 and 30.1 percent relative to Jun 2009.

Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2015

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 98.5 in Jan 2015 or minus 17.6 percent relative to Apr 2012 and gain of 14.3 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 3.0 percent from Jun 2009 to Jan 2015 while the import corporate goods price index increased 14.3 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, 2008-2015

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 Jan 2015. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Jan 2015, the export index on the contract currency basis decreased 4.2 percent and decreased 1.6 percent on the yen basis. For the entire period from Jan 2008 to Jan 2015, the import price index decreased 2.2 percent on the contract currency basis and increased 2.2 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	96.1	116.6	103.4	129.4
2015-01	95.0	113.7	98.5	121.6

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/

Chart IV-7, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2015

Source: Bank of Japan

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

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

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

Source: US Bureau of Labor Statistics

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

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-7. The increase in the tax on value added of consumption caused sharp increases in prices across all segments. Petroleum and coal with weight of 5.7 percent decreased 12.9 percent in Jan 2015 and decreased 23.1 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, decreased 0.5 percent in Jan 2015 and increased 3.0 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income (for analysis of terms of trade and growth see Pelaez (1979, 1976a). There are now inflation effects of the intentional policy of devaluing the yen and recent collapse of commodity prices.

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

Jan 2015	Weight	Month ∆%	12 Month ∆%
Total	1000.0	-1.3	0.3
Food, Beverages, Tobacco, Feedstuffs	137.5	0.2	3.5
Petroleum & Coal	57.4	-12.9	-23.1
Production Machinery	30.8	-0.5	3.0
Electronic Components	31.0	-0.1	-0.1
Electric Power, Gas & Water	52.7	0.4	8.3
Iron & Steel	56.6	-0.3	1.9
Chemicals	92.1	-3.6	-4.7
Transport Equipment	136.4	0.1	2.6

Source: Bank of Japan

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

Percentage point contributions to change of the corporate goods price index (CGPI) in Jan 2015 are provided in Table IV-8 divided into domestic, export and import segments. The final block provides change in the corporate goods price without the effects of the increase in the tax on value added of consumption. In the domestic CGPI, decreasing 1.3 percent in Jan 2015, the energy shock is evident in the deduction of 0.83 percentage points by petroleum and coal products and 0.34 percentage points in chemicals and related products in reversal of carry trades of exposures in commodity futures. The exports CGPI decreased 1.1 percent on the basis of the contract currency with deduction of 0.58 percentage points by chemicals and related products and 0.51 percentage points by other primary products and manufactured goods. The imports CGPI decreased 4.7 percent on the contract currency basis. Petroleum, coal and natural gas products deducted 4.15 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide. The final block D shows that the change in the domestic corporate goods price index without the effects of the consumption tax is minus 1.3 percent.

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

Groups Jan 2015	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change: -1.3%
Petroleum & Coal Products	-0.83
Chemicals & Related Products	-0.34
Agriculture, Forestry & Fishery Products	-0.11
Nonferrous Metals	-0.04
Scrap & Waste	-0.03
Food, Beverages, Tobacco & Feedstuffs	0.03
Electric Power, Gas & Water	0.03
Information & Communications Equipment	0.02
B. Export Price Index	Monthly Change: -1.1% contract currency
Chemicals & Related Products	-0.58
Other Primary Products & Manufactured Goods	-0.51
Metals & Related Products	-0.20
Transportation Equipment	-0.08
Electric & Electronic Products	0.11
C. Import Price Index	Monthly Change: -4.7% contract currency basis
Petroleum, Coal & Natural Gas	-4.15
Metals & Related Products	-0.51
Chemicals & Related Products	-0.06
Other Primary Products & Manufactured Goods	-0.05
Electric & Electronic Products	-0.03
Foodstuffs & Feedstuffs	-0.02
D. Domestic Corporate Goods Price Index Excluding Consumption Tax	Monthly Change: -1.3%
Petroleum & Coal Products	-0.83
Chemicals & Related Products	-0.34
Agriculture, Forestry & Fishery Products	-0.11
Nonferrous Metals	-0.04
Scrap & Waste	-0.03
Food, Beverages, Tobacco & Feedstuffs	0.03
Electric Power, Gas & Water	0.03
Information & Communications Equipment	0.02

Source: Bank of Japan

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

There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Jan 2011 to Feb 2015. The index of current prices paid or costs of inputs moved from 16.13 in Dec 2012 to 14.61 in Feb 2015 while the index of current prices received or sales prices increased from 1.08 in Dec 2012 to 3.37 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 costs of inputs are expanding in Feb 2015 at a faster rate than prices received or of sales of products at 3.37. 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 26.97 in Feb 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 5.62 in Feb 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
Feb 2015	14.61	3.37	26.97	5.62
Jan	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/2015/01/competitive-currency-conflicts-world.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 4.7 in Feb 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 32.2 in Feb 2015 from 40.6 in Dec 2012 while the index of future prices received decreased from 21.9 in Dec 2012 to 19.3 in Feb 2015. Expectations are incorporating faster increases in prices of inputs or costs of production, 32.2 in Feb 2015, than of sales prices of produced goods, 19.3 in Feb 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	56.0	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
15-Feb	4.7	-0.2	32.2	19.3

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 2015. 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 2015. 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 2015 but none of prices paid. Prices paid relative to prices received deteriorate most of the time largely because of the carry trades from zero interest rates to commodity futures. Profit margins of business are compressed intermittently by fluctuations of commodity prices induced by unconventional monetary policy of zero interest rates, frustrating production, investment and hiring decisions of business, which is precisely the opposite outcome pursued by unconventional monetary policy.

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

Source: Federal Reserve Bank of Philadelphia

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

VC China. China estimates an index of nonmanufacturing purchasing managers based on a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. The total index increased from 55.7 in Jan 2011 to 58.0 in Mar 2012, decreasing to 53.9 in Aug 2013. The index decreased from 56.0 in Nov 2013 to 54.6 in Dec 2013, easing to 53.4 in Jan 2014. The index moved to 53.7 in Jan 2015. The index of new orders increased from 52.2 in Jan 2012 to 54.3 in Dec 2012 but fell to 50.1 in May 2013, barely above the neutral frontier of 50.0. The index of new orders stabilized at 51.0 in Nov-Dec 2013, easing to 50.9 in Jan 2014. The index of new orders moved to 50.2 in Jan 2015.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Jan 2015	53.7	50.2	47.6	46.9	59.6
Dec 2014	54.1	50.5	50.1	47.3	59.5
Nov	53.9	50.1	50.6	47.7	59.7
Oct	53.8	51.0	52.0	48.8	59.9
Sep	54.0	49.5	49.8	47.3	60.9
Aug	54.4	50.0	52.2	48.3	61.2
Jul	54.2	50.7	53.4	49.5	61.5
Jun	55.0	50.7	56.0	50.8	60.4
May	55.5	52.7	54.5	49.0	60.7
Apr	54.8	50.8	52.4	49.4	61.5
Mar	54.5	50.8	52.8	49.5	61.5
Feb	55.0	51.4	52.1	49.0	59.9
Jan	53.4	50.9	54.5	50.1	58.1
Dec 2013	54.6	51.0	56.9	52.0	58.7
Nov	56.0	51.0	54.8	49.5	61.3
Oct	56.3	51.6	56.1	51.4	60.5
Sep	55.4	53.4	56.7	50.6	60.1
Aug	53.9	50.9	57.1	51.2	62.9
Jul	54.1	50.3	58.2	52.4	63.9
Jun	53.9	50.3	55.0	50.6	61.8
May	54.3	50.1	54.4	50.7	62.9
Apr	54.5	50.9	51.1	47.6	62.5
Mar	55.6	52.0	55.3	50.0	62.4
Feb	54.5	51.8	56.2	51.1	62.7
Jan	56.2	53.7	58.2	50.9	61.4
Dec 2012	56.1	54.3	53.8	50.0	64.6
Nov	55.6	53.2	52.5	48.4	64.6
Oct	55.5	51.6	58.1	50.5	63.4
Sep	53.7	51.8	57.5	51.3	60.9
Aug	56.3	52.7	57.6	51.2	63.2
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

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

Source: National Bureau of Statistics of China

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. The index fell from 56.0 in Oct 2013 to 53.7 in Jan 2015.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr 2012, falling to 49.2 in Aug 2012, rebounding to 50.6 in Dec 2012. The index fell to 50.1 in Jun 2013, barely above the neutral frontier at 50.0, recovering to 51.4 in Nov 2013 but falling to 51.0 in Dec 2013. The index fell to 50.5 in Jan 2014, 50.1 in Dec 2014 and 49.8 in Jan 2015. The index of new orders fell from 54.5 in Apr 2012 to 51.2 in Dec 2012. The index of new orders fell from 52.3 in Nov 2013 to 52.0 in Dec 2013. The index fell to 50.9 in Jan 2014 and moved to 50.4 in Dec 2014. The index moved to 50.2 in Jan 2015.

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

	IPM	PI	NOI	INV	EMP	SDEL
2015
Jan	49.8	51.7	50.2	47.3	47.9	50.2
2014
Dec	50.1	52.2	50.4	47.5	48.1	49.9
Nov	50.3	52.5	50.9	47.7	48.2	50.3
Oct	50.8	53.1	51.6	48.4	48.4	50.1
Sep	51.1	53.6	52.2	48.8	48.2	50.1
Aug	51.1	53.2	52.5	48.6	48.2	50.0
Jul	51.7	54.2	53.6	49.0	48.3	50.2
Jun	51.0	53.0	52.8	48.0	48.6	50.5
May	50.8	52.8	52.3	48.0	48.2	50.3
Apr	50.4	52.5	51.2	48.1	48.3	50.1
Mar	50.3	52.7	50.6	47.8	48.3	49.8
Feb	50.2	52.6	50.5	47.4	48.0	49.9
Jan	50.5	53.0	50.9	47.8	48.2	49.8
Dec 2013	51.0	53.9	52.0	47.6	48.7	50.5
Nov	51.4	54.5	52.3	47.8	49.6	50.6
Oct	51.4	54.4	52.5	48.6	49.2	50.8
Sep	51.1	52.9	52.8	48.5	49.1	50.8
Aug	51.0	52.6	52.4	48.0	49.3	50.4
Jul	50.3	52.4	50.6	47.6	49.1	50.1
Jun	50.1	52.0	50.4	47.4	48.7	50.3
May	50.8	53.3	51.8	47.6	48.8	50.8
Apr	50.6	52.6	51.7	47.5	49.0	50.8
Mar	50.9	52.7	52.3	47.5	49.8	51.1
Feb	50.1	51.2	50.1	49.5	47.6	48.3
Jan	50.4	51.3	51.6	50.1	47.8	50.0
Dec 2012	50.6	52.0	51.2	47.3	49.0	48.8
Nov	50.6	52.5	51.2	47.9	48.7	49.9
Oct	50.2	52.1	50.4	47.3	49.2	50.1
Sep	49.8	51.3	49.8	47.0	48.9	49.5
Aug	49.2	50.9	48.7	45.1	49.1	50.0
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

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

Source: National Bureau of Statistics of China

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

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers. The index fell to 50.1 in Jun 2013. The index decreased from 51.4 in Nov 2013 to 51.0 in Dec 2013. The index moved to 49.8 in Jan 2015.

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

Source: National Bureau of Statistics of China

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2a890cba4664da9ad061ff1a23ec780) is improving. The overall Flash HSBC China Manufacturing PMI^™ increased from 49.6 in Dec to 49.8 in Jan, while the Flash HSBC China Manufacturing Output Index increased from 49.9 in Dec to 50.1 in Dec, indicating moderate growth. Exports orders indicate expansion at slower rate. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds need for monetary/fiscal stimulus (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2a890cba4664da9ad061ff1a23ec780). The HSBC China Services PMI^™, compiled by Markit, shows the HSBC Composite Output, combining manufacturing and services, decreasing from 51.4 in Dec to 51.0 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/7b9ad608264c4ac4b19ccf5aa289da44). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds need of easing policies in consolidating growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/7b9ad608264c4ac4b19ccf5aa289da44). The HSBC China Services Business Activity index decreased from 53.4 in Dec to 51.8 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/7b9ad608264c4ac4b19ccf5aa289da44). Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds that the services PMI shows sustained activity at slower pace (http://www.markiteconomics.com/Survey/PressRelease.mvc/7b9ad608264c4ac4b19ccf5aa289da44). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 49.7 in Jan from 49.6 in Dec, indicating near neutral manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/957ace7aa01b4f878c48ea65443be5ea). New export orders slowed. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds weakening demand in China with possible need of monetary and fiscal policy enhancement (http://www.markiteconomics.com/Survey/PressRelease.mvc/957ace7aa01b4f878c48ea65443be5ea). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Jan 12-month ∆%: minus 4.3 Jan month ∆%: -1.1 Blog 2/15/15
Consumer Price Index	Jan month ∆%: 0.3 Jan 12 months ∆%: 0.8 Blog 2/15/15
Value Added of Industry	Dec month ∆%: 0.75 Jan-Dec 2014/Jan-Dec 2013 ∆%: 8.3 Blog 1/25/15
GDP Growth Rate	Year IVQ2014 ∆%: 7.3 First Four Quarters 2014 ∆%: 7.4 Quarter IIIQ2014 AE ∆%: 6.1 Blog 1/25/15
Investment in Fixed Assets	Total Jan-Dec 2014 ∆%: 15.7 Real estate development: 10.5 Blog 1/25/15
Retail Sales	Dec month ∆%: 1.01 Dec 12 month ∆%: 11.9 Jan-Dec ∆%: 12.0 Blog 1/25/15
Trade Balance	Jan balance $60.0 billion Exports 12M ∆% -3.3 Imports 12M ∆% -19.9 Cumulative Jan 2015: $60.0 billion Blog 2/15/15

Links to blog comments in Table CNY:

2/15/15 http://cmpassocregulationblog.blogspot.com/2015/02/g20-monetary-policy-recovery-without.html

1/25/15 http://cmpassocregulationblog.blogspot.com/2015/01/competitive-currency-conflicts-world.html

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

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

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

*EUROSTAT forecast Source: EUROSTAT

http://ec.europa.eu/eurostat

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

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

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

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

Source: EUROSTAT

http://ec.europa.eu/eurostat

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

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, increased from 52.6 in Jan to 53.5 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/be007dfe9a364164b10392d0572ffcf2). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests GDP growth at around 0.3 percent in IQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/be007dfe9a364164b10392d0572ffcf2). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP increased from 51.4 in Dec to 52.6 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ca7fcbe048340c7ae60a02626922ff1). Chris Williamson, Chief Economist at Markit, finds slowing growth of GDP at around 0.3 percent in IQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ca7fcbe048340c7ae60a02626922ff1). The Markit Eurozone Services Business Activity Index increased from 51.6 in Dec to 52.7 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ca7fcbe048340c7ae60a02626922ff1). The Markit Eurozone Manufacturing PMI^® increased to 51.0 in Jan from 50.6 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/3300af07e7f240a492f4b407a4715d61). New export orders are weak. Chris Williamson, Chief Economist at Markit, finds modest improvement of industrial growth in the euro area (http://www.markiteconomics.com/Survey/PressRelease.mvc/3300af07e7f240a492f4b407a4715d61). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IVQ2014 ∆% 0.3; IVQ2014/IVQ2013 ∆% 0.9 Blog 2/15/15
Unemployment	Dec 2014: 11.4 % unemployment rate; Dec 2014: 18.129 million unemployed Blog 2/1/15
HICP	Dec month ∆%: -0.1 12 months Dec ∆%: -0.2 Blog 1/18/15
Producer Prices	Euro Zone industrial producer prices Dec ∆%: -1.0 Dec 12-month ∆%: -2.7 Blog 2/8/15
Industrial Production	Dec month ∆%: 0.0; Dec 12 months ∆%: -0.2 Blog 2/15/15
Retail Sales	Dec month ∆%: 0.3 Dec 12 months ∆%: 2.8 Blog 2/8/15
Confidence and Economic Sentiment Indicator	Sentiment 101.2 Jan 2015 Consumer minus 8.5 Jan 2015 Blog 2/1/15
Trade	Jan-Dec 2014/Jan-Dec 2013 Exports ∆%: 2.4 Imports ∆%: 0.1 Dec 2014 12-month Exports ∆% 8.0 Imports ∆% 1.0 Blog 2/22/15

Links to blog comments in Table EUR:

2/15/15 http://cmpassocregulationblog.blogspot.com/2015/02/g20-monetary-policy-recovery-without.html

2/8/15 http://cmpassocregulationblog.blogspot.com/2015/02/job-creation-and-monetary-policy-twenty.html

2/1/15 http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html

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

Growth of euro zone trade continues to be relatively resilient as shown in Table VD-1 but with deceleration at the margin. Exports grew 2.4 percent and imports increased 0.1 percent in Jan-Dec 2014 relative to Jan-Dec 2013. The 12-month rate of growth of exports was 8.0 percent in Dec 2014 while imports increased 1.0 percent. In Nov 2014, exports increased 0.9 percent in 12 months and imports decreased 2.2 percent. At the margin, rates of growth of trade are declining in part because of moderation of commodity prices.

Table VD-1, Euro Zone, Exports, Imports and Trade Balance, Billions of Euros and Percent, NSA

	Exports	Imports
Jan-Dec 2014	1,939.0	1,744.2
Jan-Dec 2013	1,894.7	1,742.4
∆%	2.4	0.1
Dec 2014	161.5	137.2
Dec 2013	149.5	135.9
∆%	8.0	1.0
Nov 2014	163.2	142.0
Nov 2013	161.7	145.2
∆%	0.9	-2.2
Trade Balance	Jan-Dec 2014	Jan-Dec 2013
€ Billions	194.8	152.3

Source: EUROSTAT

http://ec.europa.eu/eurostat

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

The structure of trade of the euro zone in Nov 2014 is provided in Table VD-2. Data are still not available for trade structure for Dec 2014. Manufactured exports increased 2.8 percent in Jan-Nov 2014 relative to Jan-Nov 2013 while imports increased 4.8 percent. The trade surplus in manufactured products was higher than the trade deficit in primary products in Jan-Nov 2014 but by more than in Jan-Nov 2013 partly because of the commodity shock caused by carry trades.

Table VD-2, Euro Zone, Structure of Exports, Imports and Trade Balance, € Billions, NSA, ∆%

	Primary	Manufactured	Other	Total
Exports
Jan-Nov 2014 € B	274.3	1456.7	46.4	1777.5
Jan-Nov 2013 € B	282.0	1416.7	46.6	1745.3
∆%	-2.7	2.8	-0.4	1.8
Imports
Jan-Nov 2014 € B	535.9	1042.9	28.2	1607.0
Jan-Nov 2013 € B	580.7	995.2	30.6	1606.5
∆%	-7.7	4.8	-7.8	0.0
Trade Balance € B
Jan-Nov 2014	-261.6	413.8	18.2	170.5
Jan-Nov 2013	-298.7	421.4	16.0	138.8

Note: there are minor rounding errors

Source: EUROSTAT

http://ec.europa.eu/eurostat

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

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1971 to 2014, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.6 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.1 percent in 2010, 3.6 percent in 2011 and 0.4 percent in 2012. Growth decelerated to 0.1 percent in 2013, increasing to 1.5 percent in 2014.

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

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

Table VE-4 provides annual growth rates of the German economy from 1970 to 2014, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.6 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.1 percent in 2010, 3.6 percent in 2011 and 0.4 percent in 2012. Growth in 2013 was 0.1 percent. The GDP of Germany grew 1.5 percent in 2014.

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

	Price Adjusted Chain-Linked	Price- and Calendar-Adjusted Chain Linked
Average ∆% 1991-2014	1.3
Average ∆% 1991-1999	1.5
Average ∆% 2000-2007	1.4
Average ∆% 2003-2007	2.2
Average ∆% 2007-2014	0.7
Average ∆% 2009-2014	1.9
2014	1.5	1.5
2013	0.1	0.2
2012	0.4	0.6
2011	3.6	3.7
2010	4.1	3.9
2009	-5.6	-5.6
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.9
2004	1.2	0.7
2003	-0.7	-0.7
2002	0.0	0.0
2001	1.7	1.8
2000	3.0	3.2
1999	2.0	1.9
1998	2.0	1.7
1997	1.8	1.9
1996	0.8	0.8
1995	1.7	1.8
1994	2.5	2.5
1993	-1.0	-1.0
1992	1.9	1.5
1991	5.1	5.2
1990	5.3	5.5
1989	3.9	4.0
1988	3.7	3.4
1987	1.4	1.3
1986	2.3	2.3
1985	2.3	2.3
1984	2.8	2.9
1983	1.6	1.5
1982	-0.4	-0.5
1981	0.5	0.6
1980	1.4	1.3
1979	4.2	4.3
1978	3.0	3.1
1977	3.3	3.5
1976	4.9	4.5
1975	-0.9	-0.9
1974	0.9	1.0
1973	4.8	5.0
1972	4.3	4.3
1971	3.1	3.0
1970	NA	NA

Source: Statistisches Bundesamt Deutschland (Destatis)

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

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

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

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

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

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

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

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

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

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

https://www.destatis.de/EN/PressServices/Press/pr/2015/02/PE15_048_811.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, increased from 53.5 in Jan to 54.3 in Feb. The index of manufacturing output reached 52.0 in Feb, decreasing from 52.3 in Jan, while the index of services increased to 55.5 in Feb from 54.0 in Jan. The overall Flash Germany Manufacturing PMI^® did not change from 50.9 in Jan to 50.9 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/54a10c0e6ce14dfbb978cdc2ae5b1d92). New orders in manufacturing expanded. Oliver Kolodseike, Economist at Markit, finds improving GDP growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/54a10c0e6ce14dfbb978cdc2ae5b1d92). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 52.0 in Dec to 53.5 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/4439591371004e5b81a173ab5a27e9dd). Oliver Kolodseike, Senior Economist at Markit and author of the report, finds improvement in 2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/4439591371004e5b81a173ab5a27e9dd). The Germany Services Business Activity Index increased from 52.1 in Dec to 53.5 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/4439591371004e5b81a173ab5a27e9dd). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, decreased from 51.2 in Dec to 50.9 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/d01543f85bbb4426968a22857f762717). New export orders decreased. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds improvement of manufacturing still at a low level (http://www.markiteconomics.com/Survey/PressRelease.mvc/d01543f85bbb4426968a22857f762717).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IVQ2014 0.7 ∆%; IV/Q2014/IVQ2013 ∆% 1.6 2013/2012: 0.1% GDP ∆% 1970-2013 Blog 8/26/12 5/27/12 11/25/12 2/24/13 5/19/13 5/26/13 8/18/13 8/25/13 11/17/13 11/24/13 1/26/14 2/16/14 3/2/14 5/18/14 5/25/14 8/17/14 9/7/14 11/16/14 11/30/14 2/15/15
Consumer Price Index	Jan month NSA ∆%: -1.1 Jan 12-month NSA ∆%: 0.4 Blog 2/15/15
Producer Price Index	Jan month ∆%: -0.6 NSA, minus 0.5 CSA 12-month NSA ∆%: -2.2 Blog 2/22/15
Industrial Production	MFG Dec month CSA ∆%: 0.5 12-month NSA: 2.5 Blog 2/15/15
Machine Orders	MFG Dec month ∆%: 4.2 Dec 12-month ∆%: 5.6 Blog 2/8/15
Retail Sales	Dec Month ∆% 0.2 12-Month ∆% 4.0 Blog 2/1/15
Employment Report	Unemployment Rate SA Dec 4.8% Blog 2/1/15
Trade Balance	Exports Dec 12-month NSA ∆%: 10.0 Imports Dec 12 months NSA ∆%: 4.0 Exports Dec month CSA ∆%: 3.4; Imports Dec month CSA minus 0.8 Blog 2/15/15

Links to blog comments in Table DE:

2/15/15 http://cmpassocregulationblog.blogspot.com/2015/02/g20-monetary-policy-recovery-without.html

2/8/15 http://cmpassocregulationblog.blogspot.com/2015/02/job-creation-and-monetary-policy-twenty.html

2/1/15 http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html

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

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

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

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

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

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

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

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

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

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

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

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

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

VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IVQ1949 to IVQ2014 is quite high at 3.2 percent. France’s growth rates were quite high in the four decades of the 1950s, 1960, 1970s and 1980s with an average growth rate of 4.0 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 2.0 percent in the 1990s and 1.8 percent from 2000 to 2007. The average growth rate from 2000 to 2014, using fourth quarter data, is 1.0 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.

Table VF-FR, France, Average Growth Rates of GDP Fourth Quarter, 1949-2014

Period	Average ∆%
1949-2014	3.2
2007-2014	0.3
2000-2014	1.0
2000-2013	1.1
2000-2007	1.8
1990-1999	2.0
1980-1989	2.6
1970-1979	3.7
1960-1969	5.7
1950-1959	4.2

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20150213

The Markit Flash France Composite Output Index increased from 49.3 in Jan to 52.2 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/b6bc1f701e814e5fab60f5e56429f5e4). Jack Kennedy, Senior Economist at Markit and author of the report, finds possible improvement in IQ2015 GDP (http://www.markiteconomics.com/Survey/PressRelease.mvc/b6bc1f701e814e5fab60f5e56429f5e4). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, decreased from 49.7 in Dec to 49.3 in Jan, indicating marginal contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/6125b8f5670345fc95608961c451a13d). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds restraint of growth by the private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/6125b8f5670345fc95608961c451a13d). The Markit France Services Activity index decreased from 50.6 in Dec to 49.4 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/6125b8f5670345fc95608961c451a13d). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 49.2 in Jan from 47.5 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/5c64595cdb86401685388c76f015bc55). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds stabilization in manufacturing with weak demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/5c64595cdb86401685388c76f015bc55). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Jan month ∆% -1.0 12 months ∆%: -0.4 2/22/15
PPI	Dec month ∆%: -0.8 Dec 12 months ∆%: -2.8 Blog 2/1/15
GDP Growth	IVQ2014/IIIQ2014 ∆%:0.1 IVQ2014/IVQ2013 ∆%: 0.2 Blog 3/31/13 5/19/12 6/30/13 9/29/13 11/17/13 12/29/13 2/16/14 4/6/14 5/18/14 6/29/14 8/17/14 9/28/14 11/16/14 12/28/14 2/15/15
Industrial Production	Dec ∆%: Manufacturing 1.2 12-Month ∆%: Manufacturing 0.3 Blog 2/15/15
Consumer Spending	Manufactured Goods Dec ∆%: 1.2 Dec 12-Month Manufactured Goods ∆%: 0.9 Blog 2/1/15
Employment	Unemployment Rate: IIIQ2014 9.9% Blog 12/7/14
Trade Balance	Nov Exports ∆%: month 0.6, 12 months -1.9 Nov Imports ∆%: month 4.4, 12 months -2.4 Blog 1/18/15
Confidence Indicators	Historical average 100 Nov Mfg Business Climate 99.0 Blog 12/28/14

Links to blog comments in Table FR:

2/15/15 http://cmpassocregulationblog.blogspot.com/2015/02/g20-monetary-policy-recovery-without.html

2/1/15 http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

VG Italy. Table VG-IT provides percentage changes in a quarter relative to the same quarter a year earlier of Italy’s expenditure components in chained volume measures. GDP has been declining at sharper rates from minus 0.7 percent in IVQ2011 to minus 2.5 percent in IVQ2012, minus 2.5 percent in IQ2013, minus 2.2 percent in IIQ2013 and minus 1.8 percent in IIIQ2013. GDP fell 1.2 percent in IVQ2013 relative to a year earlier. GDP fell 0.3 percent in IQ2014 relative to a year earlier and decreased 0.4 percent in IIQ2014 relative to a year earlier. GDP fell 0.4 percent in IIIQ2014 relative to a year earlier. GDP fell 0.3 percent in IVQ2014 relative to a year earlier. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates. The rates of decline of GDP, consumption and GFCF were somewhat milder in IIIQ2013 and IVQ2013 than in IQ2013 and the final three quarters of 2012. Consumption fell 0.3 percent in IQ2014 and GFCF fell 1.4 percent. In IIQ2014, consumption increased 0.2 percent relative to a year earlier and GFCF fell 2.2 percent. GDP fell 0.5 percent in IIIQ2014 relative to a year earlier while consumption increased 0.4 percent and GFCF fell 3.1 percent.

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

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

GFCF: Gross Fixed Capital Formation

Source: Istituto Nazionale di Statistica

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

The Markit/ADACI Business Activity Index increased from 49.4 in Dec to 51.2 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/de602c4f66774a9498effbd5e79d4f8e). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds weak demand in stabilizing economy (http://www.markiteconomics.com/Survey/PressRelease.mvc/de602c4f66774a9498effbd5e79d4f8e). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 48.4 in Dec to 49.9 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/b6c075a50679413aa05172baa1dc30bc). New export orders continued to increase. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds fragile conditions in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/b6c075a50679413aa05172baa1dc30bc). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Jan month ∆%: -0.4 Jan 12-month ∆%: -0.6 Blog 2/22/15
Producer Price Index	Dec month ∆%: -0.8 Dec 12-month ∆%: -2.1 Blog 2/1/15
GDP Growth	IVQ2014/IIIQ2014 SA ∆%: 0.0 IVQ2014/IVQ2013 NSA ∆%: minus 0.3 Blog 3/17/13 6/16/13 8/11/13 9/15/13 11/17/13 12/15/13 2/16/14 3/16/14 5/18/14 6/15/14 8/10/14 8/31/14 10/19/14 11/16/14 12/7/14 2/15/15
Labor Report	Dec 2014 Participation rate 64.2% Employment ratio 55.7% Unemployment rate 12.9% Youth Unemployment 42.0% Blog 2/1/15
Industrial Production	Dec month ∆%: 0.4 12 months CA ∆%: 0.1 Blog 2/15/15
Retail Sales	Nov month ∆%: 0.1 Nov 12-month ∆%: -2.3 Blog 1/25/15
Business Confidence	Mfg Jan 97.1, Sep 95.5 Construction Jan 77.3, Sep 75.3 Blog 2/1/15
Trade Balance	Balance Dec SA €5153 million versus Nov €3816 Exports Dec month SA ∆%: 2.6; Imports month ∆%: -1.6 Exports 12 months Dec NSA ∆%: 6.3 Imports 12 months NSA ∆%: -1.3 Blog 2/22/15

Links to blog comments in Table IT:

2/15/15 http://cmpassocregulationblog.blogspot.com/2015/02/g20-monetary-policy-recovery-without.html

2/1/15 http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html

1/25/15 http://cmpassocregulationblog.blogspot.com/2015/01/competitive-currency-conflicts-world.html

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Exports and imports of Italy and monthly growth rates SA are in Table VG-1. There have been significant fluctuations. Seasonally adjusted exports increased 2.6 percent in Dec 2014 while imports decreased 1.6 percent. The SA trade balance improved from surplus of €3816 million in Nov 2014 to surplus of €5153 million in Dec 2014.

Table VG-1, Italy, Exports, Imports and Trade Balance SA Million Euros and Quarter and Month SA ∆%

	Exports	∆%	Imports	∆%	Balance
2012
IQ	96,216	1.0	97,058	-0.7	-842
IIQ	97,788	1.6	96,094	-1.0	1,694
IIIQ	99,362	1.6	95,948	-0.2	3,414
IVQ	97,935	-1.4	92,877	-3.2	5,058
2013
IQ	97,738	-0.2	91,864	-1.1	5,874
IIQ	98,096	0.4	89,557	-2.5	8,539
IIIQ	98,163	0.1	91,582	2.3	6,581
IVQ	98,418	0.3	89,428	-2.4	8,990
2014
IQ	98,859	0.4	88,597	-0.9	10,262
IIQ	99,477	0.6	89,408	0.9	10,069
IIIQ	99,416	-0.1	89,154	-0.3	10,262
IVQ	101,513	2.1	88,476	-0.8	13,037
2012
Dec	32,171	-2.4	30,493	-1.7	1,678
2013
Jan	33,040	2.7	31,319	2.7	1,721
Feb	32,109	-2.8	30,201	-3.6	1,908
Mar	32,589	1.5	30,344	0.5	2,245
Apr	32,475	-0.3	29,989	-1.2	2,486
May	32,642	0.5	29,604	-1.3	3,038
Jun	32,979	1.0	29,964	1.2	3,015
Jul	32,622	-1.1	30,367	1.3	2,255
Aug	32,669	0.1	30,554	0.6	2,115
Sep	32,872	0.6	30,661	0.4	2,211
Oct	32,670	-0.6	29,906	-2.5	2,764
Nov	32,179	-1.5	29,176	-2.4	3,003
Dec	33,569	4.3	30,346	4.0	3,223
2014
Jan	33,272	-0.9	29,796	-1.8	3,476
Feb	32,927	-1.0	29,506	-1.0	3,421
Mar	32,660	-0.8	29,295	-0.7	3,365
Apr	32,796	0.4	29,184	-0.4	3,612
May	33,583	2.4	29,951	2.6	3,632
Jun	33,098	-1.4	30,273	1.1	2,825
Jul	32,623	-1.4	29,550	-2.4	3,073
Aug	33,155	1.6	29,563	0.0	3,592
Sep	33,638	1.5	30,041	1.6	3,597
Oct	33,787	0.4	29,719	-1.1	4,068
Nov	33,424	-1.1	29,608	-0.4	3,816
Dec	34,302	2.6	29,149	-1.6	5,153

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/149478

Italy’s trade account not seasonally adjusted is in Table VG-2. Values are different because the data are original and not adjusted. Exports increased 6.3 percent in the 12 months ending in Dec 2014 while imports decreased 1.3 percent with actual trade surplus of €5756 million. Twelve-month rates of growth picked up again in Aug 2011 with 15.2 percent for exports and 12.6 percent for imports. In Sep 2011, exports grew 10.2 percent relative to a year earlier while imports grew only 3.6 percent. In Oct 2011, exports grew 4.5 percent while imports fell 0.2 percent. In Nov 2011, exports grew 6.5 percent in 12 months while imports grew 0.5 percent. Exports continued to growth of 7.9 percent in the 12 months ending in Aug 2012 while imports fell 1.8 percent. The actual or not seasonally adjusted trade balance deficit fell from €2948 million in Aug 2011 to surplus of €1407 million in Dec 2011 but turned into deficit of €4691 million in Jan 2012. The deficit improved to lower deficit of €1311 million in Feb 2012 and surplus of €1831 million in Mar 2012, returning to deficit of €421 million in Apr and surplus of €833 million in May. In Jun 2012, the actual surplus was €2681 million and then €4673 million in Jul 2012, which was the highest in 2012, but deteriorated to actual deficit of €535 million in Aug 2012. Exports fell 20.9 percent and imports 22.1 percent during the global recession in 2009. Growth of exports was 12.2 percent in the 12 months ending in Oct 2012 while imports increased 1.4 percent, increasing the trade surplus to €2337 million. The trade surplus was €2314 million in Dec 2012 with growth of exports of minus 4.5 percent in 12 months while imports fell 7.8 percent. The trade balance deteriorated to deficit of €1852 million in Jan 2013 even with growth of exports of 9.0 percent in 12 months while imports fell 1.1 percent. The trade balance returned to surplus of €1053 million in Feb 2013 with decline of exports by 2.8 percent and decrease of imports by 9.8 percent. The surplus widened to €3030 million in Mar 2013 with exports declining 5.9 percent and imports falling 9.8 percent. The surplus shrank to €1946 million in Apr 2013 with growth of exports of 4.6 and decline of imports of 3.1 percent. The surplus increased to €3913 million in May 2013 with declines of exports of 1.5 percent and of imports of 10.5 percent. The surplus declined to €3425 million in Jun 2013 with decline of exports of 3.1 percent in 12 months and of imports of 5.7 percent.

Table VG-2, Italy, Exports, Imports and Trade Balance NSA Million Euros and Year-on-Year ∆%


2011	375,904	11.4	401,428	9.3	-25,524
2012	390,182	3.8	380,292	-5.3	9,890
2013	390,233	0.0	361,002	-5.1	29,230
2011
IQ	90,128	18.1	103,760	21.7	-13,632
IIQ	97,274	13.4	104,303	12.6	-7,029
IIIQ	92,567	9.8	96,138	7.3	-3,571
IVQ	95,935	5.5	97,227	-2.7	-1,292
2012
IQ	95,398	5.8	99,568	-4.0	-4,170
IIQ	100,172	3.0	97,079	-6.9	3,093
IIIQ	94,938	2.6	90,670	-5.7	4,268
IVQ	99,674	3.9	92,975	-4.4	6,699
2013
IQ	94,837	-0.6	92,606	-7.0	2,231
IIQ	99,971	-0.2	90,687	-6.6	9,284
IIIQ	95,197	0.3	87,750	-3.2	7,447
IVQ	100,227	0.6	89,959	-3.2	10,268
2014
IQ	96,151	1.4	89,407	-3.5	6,744
IIQ	100,736	0.8	90,277	-0.5	10,459
IIIQ	97,260	2.2	86,256	-1.7	11,003
IVQ	103,806	3.6	89,115	-0.9	14,691
2012
Dec	29,948	-4.5	27,634	-7.8	2,314
2013
Jan	29,957	9.0	31,809	-1.1	-1,852
Feb	30,921	-2.8	29,868	-9.8	1,053
Mar	33,959	-5.9	30,929	-9.8	3,030
Apr	31,959	4.6	30,013	-3.1	1,946
May	34,689	-1.5	30,775	-10.5	3,913
Jun	33,324	-3.1	29,899	-5.7	3,425
Jul	38,415	3.3	32,546	0.1	5,869
Aug	24,589	-6.0	23,689	-11.3	900
Sep	32,194	1.9	31,515	0.2	679
Oct	36,291	0.7	32,444	-3.7	3,847
Nov	32,572	-3.3	29,584	-6.5	2,988
Dec	31,364	4.7	27,931	1.1	3,433
2014
Jan	30,074	0.4	29,823	-6.2	251
Feb	31,802	2.8	29,151	-2.4	2,651
Mar	34,274	0.9	30,433	-1.6	3,842
Apr	32,498	1.7	28,991	-3.4	3,507
May	34,685	0.0	31,065	0.9	3,620
Jun	33,552	0.7	30,220	1.1	3,332
Jul	38,616	0.5	31,694	-2.6	6,923
Aug	24,069	-2.1	22,009	-7.1	2,060
Sep	34,574	7.4	32,554	3.3	2,020
Oct	37,335	2.9	31,939	-1.6	5,396
Nov	33,138	1.7	29,599	0.1	3,539
Dec	33,332	6.3	27,577	-1.3	5,756

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/149478

Growth rates of Italy’s trade and major products are in Table VG-3 for the period Jan-Dec 2014 relative to Jan-Dec 2013. Growth rates of cumulative imports relative to a year earlier are negative for energy with minus 19.5 percent. Exports of durable goods grew 2.0 percent and exports of capital goods increased 4.5 percent. The higher rate of growth of exports of 2.0 percent in Jan-Dec 2014/Jan-Dec 2013 relative to that of imports of minus 1.6 percent may reflect weak demand in Italy with GDP declining during nine consecutive quarters from IIIQ2011 through IIIQ2013 together with softening commodity prices. GDP decreased marginally 0.1 percent in IVQ2013, changed 0.0 percent in IQ2014 and fell 0.2 percent in IIQ2014. Italy’s GDP fell 0.1 percent in IIIQ2014 and changed 0.0 percent in IVQ2014.

Table VG-3, Italy, Exports and Imports % Share of Products in Total and ∆%

	Exports Share %	Exports ∆% Jan-Dec 2014/ Jan-Dec 2013	Imports Share %	Imports ∆% Jan-Dec 2014/ Jan-Dec 2013
Consumer Goods	31.0	3.7	27.3	3.1
Durable	6.0	2.0	2.9	8.6
Non-Durable	25.1	4.1	24.4	2.4
Capital Goods	32.3	4.5	20.5	5.2
Inter- mediate Goods	32.3	0.0	32.4	1.0
Energy	4.4	-14.4	19.9	-19.5
Total ex Energy	95.6	2.7	80.1	2.8
Total	100.0	2.0	100.0	-1.6

Note: % Share for 2012 total trade.

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/149478

Table VG-4 provides Italy’s trade balance by product categories in Dec 2014 and cumulative Jan-Dec 2014. Italy’s trade balance excluding energy, generated surplus of €8748 million in Dec 2014 and €86,021 million cumulative in Jan-Dec 2014 but the energy trade balance created deficit of 2993 million in Dec 2014 and cumulative €43,124 million in Jan-Dec 2014. The overall surplus in Dec 2014 was €5756 million with cumulative surplus of €42,897 million in Jan-Dec 2014. Italy has significant competitiveness in various economic activities in contrast with some other countries with debt difficulties.

Table VG-4, Italy, Trade Balance by Product Categories, € Millions

	Dec 2014	Cumulative Jan-Dec 2014
Consumer Goods	2,231	24,017
Durable	1,037	12,446
Nondurable	1,193	11,571
Capital Goods	5,314	53,774
Intermediate Goods	1,204	8,230
Energy	-2,993	-43,124
Total ex Energy	8,748	86,021
Total	5,756	42,897

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/149478

Professors Ricardo Caballero and Francesco Giavazzi (2012Jan15) find that the resolution of the European sovereign crisis with survival of the euro area would require success in the restructuring of Italy. Growth of the Italian economy would ensure that success. A critical problem is that the common euro currency prevents Italy from devaluing the exchange rate to parity or the exchange rate that would permit export growth to promote internal economic activity, which could generate fiscal revenues for primary fiscal surpluses that ensure creditworthiness. Fiscal consolidation and restructuring are important but of long-term gestation. Immediate growth of the Italian economy would consolidate the resolution of the sovereign debt crisis. Caballero and Giavazzi (2012Jan15) argue that 55 percent of the exports of Italy are to countries outside the euro area such that devaluation of 15 percent would be effective in increasing export revenue. Newly available data in Table VG-5 providing Italy’s trade with regions and countries supports the argument of Caballero and Giavazzi (2012Jan15). Italy’s exports to the European Monetary Union (EMU), or euro area, are only 39.8 percent of the total in Dec 2014. Exports to the non-European Union area with share of 46.2 percent in Italy’s total exports are growing at minus 0.1 percent in Jan-Dec 2014 relative to Jan-Dec 2013 while those to EMU are growing at 2.7 percent.

Table VG-5, Italy, Exports and Imports by Regions and Countries, % Share and 12-Month ∆%

Dec 2014	Exports % Share	∆% Jan-Dec 2014/ Jan-Dec 2013	Imports % Share	∆% Jan-Dec 2014/ Jan-Dec 2013
EU	53.8	3.7	55.4	1.3
EMU 18	39.8	2.7	44.3	0.3
France	10.8	-0.7	8.5	0.4
Germany	12.4	3.3	14.8	2.5
Spain	4.4	4.6	4.5	4.1
UK	5.0	6.6	2.7	4.1
Non EU	46.2	-0.1	44.6	-5.4
Europe non EU	13.0	-7.2	12.1	-8.3
USA	6.9	10.2	3.2	8.3
China	2.5	6.6	6.4	8.6
OPEC	6.0	-2.6	8.1	-29.4
Total	100.0	2.0	100.0	-1.6

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/149478

Table VG-6 provides Italy’s trade balance by regions and countries. Italy had trade deficit of €586 million with the 18 countries of the euro zone (EMU 18) in Dec 2014 and cumulative deficit of €775 million in Jan-Dec 2014. Depreciation to parity could permit greater competitiveness in improving the trade surplus of €6862 million in Jan-Dec 2014 with Europe non-European Union, the trade surplus of €17,307 million with the US and the trade surplus with non-European Union of €28,056 million in Jan-Dec 2014. There is significant rigidity in the trade deficit in Jan-Dec 2014 of €14,560 million with China. There is a trade surplus of €2201 million with members of the Organization of Petroleum Exporting Countries (OPEC). Higher exports could drive economic growth in the economy of Italy that would permit less onerous adjustment of the country’s fiscal imbalances, raising the country’s credit rating.

Table VG-6, Italy, Trade Balance by Regions and Countries, Millions of Euro

Regions and Countries	Trade Balance Dec 2014 Millions of Euro	Trade Balance Cumulative Jan-Dec 2014 Millions of Euro
EU	506	14,840
EMU 18	-586	-775
France	989	11,367
Germany	-773	-4,559
Spain	108	924
UK	907	10,831
Non EU	5,249	28,056
Europe non EU	1,027	6,862
USA	1,647	17,307
China	-1,008	-14,560
OPEC	813	2,201
Total	5,756	42,897

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/149478

VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 4.3 percent in 2009 after dropping 0.3 percent in 2008. Recovery of 1.9 percent in 2010 is relatively low in comparison with annual growth rates in 2007 and earlier years. Growth was only 1.6 percent in 2011 and 0.7 percent in 2012. Growth increased to 1.7 percent in 2013 and 2.6 percent in 2014. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.6 percent per year on average between 1948 and 2013, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 2.9 percent. Growth in the current cyclical expansion from 2010 to 2014 has been only at 1.7 percent as advanced economies struggle with weak internal demand and world trade. GDP in 2014 higher by 3.7 percent relative to 2007 while it would have been 22.2 higher at trend of 2.9 percent as from 2000 to 2007.

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

	∆% on Prior Year
1998	3.5
1999	3.2
2000	3.8
2001	2.7
2002	2.5
2003	4.3
2004	2.5
2005	2.8
2006	3.0
2007	2.6
2008	-0.3
2009	-4.3
2010	1.9
2011	1.6
2012	0.7
2013	1.7
2014	2.6
Average Growth Rates ∆% per Year
1948-2014	2.6
1950-1959	3.1
1960-1969	3.1
1970-1979	2.6
1980-1989	3.1
1990-1999	2.2
2000-2007	2.9
2007-2013*	1.1
2007-2014*	3.7
2000-2014	1.7

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

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q4-2014/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from 55.8 in Dec to 57.2 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/7f74a45a346049b090efdde7439da2fa). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at around 0.5 percent in IQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/7f74a45a346049b090efdde7439da2fa). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased to 53.0 in Jan from 52.7 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/8e3dcd3441ab4a48b0e5c1c95742e8fc). New export orders increased moderately in Jan with increases in business from France, German, Japan, Poland, USA and the Middle East. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing conditions suggest growth at a quarterly rate of 0.2 percent in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/8e3dcd3441ab4a48b0e5c1c95742e8fc). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Jan month ∆%: -0.9 Dec 12-month ∆%: 0.3 Blog 2/22/15
Output/Input Prices	Output Prices: Jan 12-month NSA ∆%: -1.8; excluding food, petroleum ∆%: 0.5 Input Prices: Dec 12-month NSA ∆%: -14.2 Excluding ∆%: -2.9 Blog 2/22/15
GDP Growth	IVQ2014 prior quarter ∆% 0.5; year earlier same quarter ∆%: 2.7 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13 9/29/13 10/27/13 12/1/13 12/22/13 2/2/14 3/2/14 4/6/14 5/4/14 5/25/14 6/29/14 7/27/14 8/17/14 10/5/14 10/26/14 11/30/14 12/28/14 2/1/15
Industrial Production	Dec 2014/Dec 2013 ∆%: Production Industries 0.5; Manufacturing 2.4 Blog 2/15/15
Retail Sales	Jan month ∆%: -0.3 Jan 12-month ∆%: 5.4 Blog 2/22/15
Labor Market	Oct-Dec Unemployment Rate: 5.7%; Claimant Count 2.5%; Earnings Growth 2.1% Blog 2/22/15 LMGDP 11/16/14
GDP and the Labor Market	IIIQ2014 Weekly Hours 103.4, GDP 103.3, Employment 103.7 IQ2008 =100 GDP IIIQ14 103.3 IQ2008=100 Blog 11/16/14
Trade Balance	Balance SA Aug minus ₤2895 million Exports Dec ∆%: -0.2; Oct-Dec ∆%: -0.1 Imports Dec ∆%: -2.2 Oct-Dec ∆%: -2.2 Blog 2/15/15

Links to blog comments in Table UK:

2/15/15 http://cmpassocregulationblog.blogspot.com/2015/02/g20-monetary-policy-recovery-without.html

2/1/15 http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: UK Office for National Statistics

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

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

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

UK Office for National Statistics

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

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

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

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

UK Office for National Statistics

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

Labor market statistics of the UK for the quarter Oct 2014-Dec 2014 are provided in Table VH-L2. The unemployment rate fell to 5.7 percent and the number unemployed decreased 486,000 in the year, reaching 1.862 million. The employment rate is 73.2 percent. Earnings including bonuses increased 2.1 percent over the earlier year. The claimant count or those receiving unemployment benefits stands at 2.5 percent, down 0.1 percentage points on the month and down 1.1 percentage points on the year.

Table VH-L2, UK, Labor Market Statistics

	Quarter Oct 2014-Dec 2014
Unemployment Rate	5.7 %, 6.0% prior quarter and 7.2% year earlier
Number Unemployed	(1) Down 97,000 on quarter and down 486,000 from year earlier to reach 1.862 million (2) Unemployment rate 16 to 24 years of age 16.6% of that age group (3) Unemployed 16 to 24 years excluding those in full-time education 498,000 (242,000 in full-time education); unemployment rate 16.2% change 0.0% Points
Number Unemployed > one and two years	(1) Number unemployed over one year: 638,000, down 50,000 on quarter, down 210,000 on year (2) Number unemployed over two years: 339,000, down 37,000 on quarter, down 115,000 on year
Inactivity Rate 16-64 Years of Age (Definition: Not in employment but have not been seeking employment in the past four weeks or are unable to start work in two weeks)	(1) 22.3%, 22.3% prior quarter, 22.3% year earlier (2) Economically inactive 16-64 up 22,000 on quarter and up 6,000 on year to 9.052 million
Employment Rate	73.2%, 73.0% prior quarter, 72.0% year earlier
Number Employed	(1) Up 103,000 on quarter, +608,000 on year to 30.896 million (2) Number of employees up 433,000 on year to 26.181 million (3) Self-employed rose 88,000 on year to 4.501 million (4) Full-time 22.597 million, up 460,000 on year (5) 8.299 million working part-time, up 148,000 on year
Earnings Growth Rates Year on Year	(1) Total 2.1% (including bonuses) over year earlier; regular 1.7%; private sector 2.5% on year earlier, public sector 0.7 % on year earlier (2) Regular private 2.1% (excluding bonuses); regular public 0.6% on year earlier
Full-time and Part-time	(1) Number employees full-time 19.337 million, up 464,000 on year; self-employed full-time 3.197 million up 15,000 on year (2) Number employees part-time 6.843 million, up 89,000 on year; self-employed part-time 1.304 million, up 74,000 in year
Claimant Count (Jobseeker’s Allowance, JSA)	(1) Latest estimate: 823,000; down 38,600 in month, down 383,500 on year earlier (2) Claimant count 2.5%, down 0.1 on month and down 1.1 % points on year

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

Source: UK Office for National Statistics

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

Table VH-L3 provides indicators of the labor force survey of the UK for Oct 2014-Dec 2014 and earlier quarters. There has been improvement in UK labor markets with the rate of unemployment decreasing from 7.2 percent in Oct-Dec 2013 to 5.7 percent in Oct-Dec 2014.

Table VH-L3, UK, Labor Force Survey Indicators

	LFHP	EMP	PART	UNE	RATE
Oct-Dec 2012	40,516	29,910	71.4	2,529	7.8
Oct-Dec 2013	40,578	30,288	72.0	2,348	7.2
Jan-Mar 2013	40,598	30,534	72.5	2,212	6.8
Apr-Jun 2014	40,618	30,680	72.8	2,074	6.3
Jul-Sep 2014	40,641	30,793	73.0	1.959	6.0
Oct-Dec 2014	40,665	30,896	73.2	1,862	5.7

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

Source: UK Office for National Statistics

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

The volume of retail sales in the UK decreased 0.3 percent in Jan 2015 and increased 5.4 percent in the 12 months ending in Jan 2015, as shown in Table VH-1. Percentage changes of retail sales in 12 months had been positive in several months since Sep 2011 with exceptions, such as declines of 2.5 percent in Apr 2012 and 1.0 percent in Mar 2013. The quarter ending in Jul 2013 is quite strong with growth of 2.4 percent in May, 0.4 percent in Jun and 0.8 percent in Jul, interrupted by decline of 0.7 percent in Aug 2013 followed by increase of 1.0 percent in Sep 2013. The volume of retail sales fell 1.1 percent in Oct 2013, decreasing 0.1 percent in Nov 2013 and jumping 2.5 percent in Dec 2013. Retail sales decreased 1.6 percent in Jan 2014 and increased 0.8 percent in Apr 2014. Retail sales decreased 0.3 percent in Jan 2015 and increased 5.4 percent in the 12 months ending in Jan 2015.

Table VH-1, UK, Volume of Retail Sales ∆%

2012	Mar	1.9	2.4
	Apr	-2.5	-2.2
	May	1.4	1.3
	Jun	0.3	1.6

	Jul	0.2	1.4
	Aug	0.2	1.9
	Sep	0.3	1.8
	Oct	-0.7	0.1
	Nov	-0.2	0.1
	Dec	-0.6	-0.3

2013	Jan	-0.2	-1.3
	Feb	1.8	1.7
	Mar	-1.0	-1.2
	Apr	-0.8	0.4
	May	2.5	1.5
	Jun	0.4	1.6

	Jul	0.8	2.3
	Aug	-0.7	1.4
	Sep	1.0	2.1
	Oct	-1.1	1.7
	Nov	-0.1	1.7
	Dec	2.5	5.0

2014	Jan	-1.6	3.4
	Feb	1.2	2.8
	Mar	0.4	4.3
	Apr	0.8	6.0
	May	0.1	3.5
	Jun	0.2	3.3

	Jul	0.1	2.5
	Aug	0.4	3.7
	Sep	-0.4	2.3
	Oct	1.2	4.7
	Nov	1.5	6.5
	Dec	0.2	4.0

2015	Jan	-0.3	5.4

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/january-2015/index.html

Retail sales in the UK struggle with oscillating and relatively high inflation, declining recently. Table VH-2 provides 12-month percentage changes of the implied deflator of UK retail sales. The implied deflator of all retail sales declined 3.1 percent in the 12 months ending in Ja5 2015 while that of sales excluding auto fuel decreased 1.6 percent. The 12-month increase of the implied deflator of auto fuel in Jan 2015 was minus 15.1 percent. The 12-month increase of the implied deflator of auto fuel sales rose to 17.1 percent in Sep 2011, which is the highest 12-month increase in 2011, but then declined to 0.3 percent in Dec 2012 and minus 0.2 percent in Jan 2013. The 12-month implied deflator of auto fuel sales decreased 2.3 percent in May 2013, increasing 1.3 percent in Jun 2013 and 2.6 percent in Jul 2013. The percentage change of the implied deflator of sales of food stores at 2.3 percent in Dec 2013 is higher than for total retail sales of 0.7 percent. Increases in fuel prices at the retail level have occurred throughout most years since 2005 with exception of the decline of 9.7 percent in Dec 2008 when commodity carry trades were reversed in the panic of the financial crisis. UK inflation is particularly sensitive to changes in commodity prices.

Table VH-2, UK, Implied Deflator of Retail Sales, 12-Month Percentage Changes

		All Retail	All Retail ex Auto Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Fuel Stores
2009	Feb	1.1	2.7	8.4	-2.0	-11.1
	Mar	0.7	2.5	7.9	-1.9	-12.5
	Apr	0.2	1.8	6.2	-1.8	-11.2
	May	0.0	1.6	5.7	-1.8	-12.5
	Jun	-1.0	0.7	4.3	-2.3	-13.3

	Jul	-1.4	0.4	3.5	-2.3	-13.7
	Aug	-0.9	0.2	2.3	-1.7	-9.0
	Sep	-0.7	0.1	1.9	-1.4	-5.9
	Oct	0.3	0.6	2.5	-1.1	-0.8
	Nov	1.5	0.6	1.8	-0.7	10.1
	Dec	3.8	2.5	2.2	2.0	17.0

2010	Jan	4.2	2.1	2.7	1.4	23.4
	Feb	3.1	1.1	1.6	0.9	20.6
	Mar	3.7	1.6	2.3	1.0	22.8
	Apr	4.2	2.1	3.0	1.5	23.4
	May	3.5	1.6	2.1	1.3	21.0
	Jun	2.7	1.4	2.2	0.9	14.8

	Jul	2.8	1.7	3.0	0.6	13.5
	Aug	2.7	1.8	3.5	0.5	11.4
	Sep	3.2	2.7	4.4	1.4	8.4
	Oct	3.4	2.6	4.2	1.2	10.8
	Nov	3.7	3.1	5.0	1.5	9.8
	Dec	3.7	3.3	5.3	1.5	12.5

2011	Jan	4.3	3.3	5.5	1.5	14.5
	Feb	4.9	3.9	5.6	2.3	15.1
	Mar	4.3	3.1	4.4	2.0	15.0
	Apr	4.2	3.4	4.9	2.0	12.3
	May	4.7	3.6	5.7	1.9	13.2
	Jun	4.8	3.6	6.3	1.4	14.6

	Jul	5.3	4.1	6.1	2.4	14.6
	Aug	5.6	4.2	6.1	2.7	16.3
	Sep	5.4	3.9	6.3	2.0	17.1
	Oct	5.1	3.8	5.2	2.7	14.8
	Nov	4.4	3.3	4.8	2.1	12.7
	Dec	3.7	2.7	4.4	1.4	9.1

2012	Jan	3.0	2.6	3.6	1.7	5.3
	Feb	3.0	2.6	4.1	1.3	5.4
	Mar	3.1	2.9	4.6	1.4	4.9
	Apr	2.6	2.2	3.8	0.8	5.2
	May	1.6	1.7	3.2	0.5	1.2
	Jun	0.7	1.0	2.3	0.0	-1.2

	Jul	0.6	0.9	2.1	0.0	-1.4
	Aug	0.6	0.7	2.2	-0.5	0.3
	Sep	1.0	0.9	2.1	-0.1	2.9
	Oct	1.3	1.2	2.9	-0.2	2.6
	Nov	1.1	1.1	3.2	-0.6	1.3
	Dec	1.5	1.4	3.1	0.1	0.3

2013	Jan	1.3	1.5	3.8	-0.6	-0.2
	Feb	1.2	1.2	3.3	-0.6	1.1
	Mar	1.1	1.3	3.1	-0.5	0.5
	Apr	0.7	1.2	3.5	-0.7	-3.0
	May	1.1	1.6	3.6	-0.2	-2.3
	Jun	1.8	1.8	3.4	0.6	1.3

	Jul	1.9	1.8	3.5	0.3	2.6
	Aug	1.7	1.7	3.5	0.3	1.5
	Sep	1.1	1.4	3.4	-0.2	-1.2
	Oct	0.8	1.4	3.4	-0.2	-3.5
	Nov	0.7	1.1	2.7	-0.1	-3.0
	Dec	0.7	0.8	2.3	-0.1	-1.0

2014	Jan	0.4	0.6	1.8	-0.3	-1.4
	Feb	0.0	0.6	1.7	-0.3	-4.5
	Mar	-0.3	0.4	1.9	-0.5	-5.9
	Apr	-0.3	0.2	1.0	-0.4	-4.4
	May	-0.4	-0.2	0.4	-0.6	-2.2
	Jun	0.1	0.5	0.9	0.4	-2.5

	Jul	-0.7	-0.4	0.2	-0.6	-2.5
	Aug	-1.0	-0.4	0.0	-0.5	-5.1
	Sep	-1.4	-0.9	-0.3	-1.2	-5.4
	Oct	-1.5	-1.2	-0.4	-1.6	-4.3
	Nov	-2.0	-1.7	-1.0	-1.8	-5.3
	Dec	-2.2	-1.5	-0.9	-1.6	-9.7

2015	Jan	-3.1	-1.6	-1.6	-1.2	-15.1

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/january-2015/index.html

UK monthly retail volume of sales is quite volatile, as shown in Table VH-3. Total volume of sales decreased 0.8 percent in Apr 2013 and increased 2.5 percent in May 2013, 0.4 percent in Jun 2013 and 0.8 percent in Jul 2013 but declined 0.7 percent in Aug 2013. Retail sales increased 1.0 percent in Sep 2013 and fell 1.1 percent in Oct 2013. Retail sales decreased 0.1 percent in Nov 2013 and increased 2.5 percent in Dec 2013. Total volume of retail sales fell 1.6 percent in Jan 2014 and increased 1.2 percent in Feb 2014. Total volume of retail sales increased 0.4 percent in Mar 2014 and 0.8 percent in Apr 2014. Retail sales increased 0.1 percent in May 2014. Retail sales increased 0.2 percent in Jun 2014 and increased 0.1 percent in Jul 2014. Retail sales increased 0.4 percent in Aug 2014. There was decrease of 0.7 percent in retail sales excluding auto fuels in Jan 2015 and decrease of 0.9 percent in food stores, decrease of 0.6 percent in nonfood stores and increase of 3.0 percent in auto fuel stores. Multiple positive and negative variations and changes in magnitudes confirm high volatility.

Table VH-3, UK, Growth of Retail Sales Volume by Component Groups Month SA ∆%

		All Retail	All Retail ex Auto Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Fuel Stores
2012	Mar	1.9	1.4	-0.5	3.2	5.7
	Apr	-2.5	-1.1	-0.5	-2.1	-12.4
	May	1.4	0.9	0.8	0.9	5.4
	Jun	0.3	0.7	0.1	1.5	-3.1

	Jul	0.2	-0.2	-0.1	-0.8	2.7
	Aug	0.2	0.1	0.6	0.6	0.5
	Sep	0.3	0.1	-0.2	-0.3	1.9
	Oct	-0.7	-0.4	-0.8	-0.4	-3.0
	Nov	-0.2	0.0	-0.3	0.3	-1.5
	Dec	-0.6	-0.8	-0.4	-1.5	0.7

2013	Jan	-0.2	0.1	-0.1	-0.2	-2.6
	Feb	1.8	1.7	0.2	3.3	2.3
	Mar	-1.0	-1.1	1.8	-4.7	-0.4
	Apr	-0.8	-1.0	-5.0	3.8	0.3
	May	2.5	2.6	4.2	0.6	1.7
	Jun	0.4	0.5	0.1	0.8	-0.7

	Jul	0.8	0.7	2.5	-1.2	1.4
	Aug	-0.7	-0.7	-2.2	0.0	-0.8
	Sep	1.0	1.1	-0.3	3.4	-0.3
	Oct	-1.1	-1.0	-0.2	-2.0	-2.5
	Nov	-0.1	-0.2	0.1	-0.4	0.1
	Dec	2.5	2.9	1.9	3.3	-0.2

2014	Jan	-1.6	-1.6	-2.8	0.3	-2.0
	Feb	1.2	1.1	1.6	-0.7	2.0
	Mar	0.4	-0.2	-1.5	1.4	5.6
	Apr	0.8	1.5	2.7	-0.3	-4.8
	May	0.1	0.2	-1.1	1.1	-0.6
	Jun	0.2	-0.2	0.0	-0.2	3.8

	Jul	0.1	0.4	0.1	1.0	-3.0
	Aug	0.4	0.4	-0.6	1.6	0.8
	Sep	-0.4	-0.4	0.4	-1.8	-0.5
	Oct	1.2	1.2	0.5	2.0	1.2
	Nov	1.5	1.6	0.4	2.4	0.9
	Dec	0.2	-0.1	1.1	-1.0	2.7

2015	Jan	-0.3	-0.7	-0.9	-0.6	3.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/january-2015/index.html

Percentage growth in 12 months of retail sales volume by component groups in the UK is in Table VH-4. Total retail sales increased 5.4 percent in the 12 months ending in Jan 2015 with increase of 4.8 percent in sales excluding auto fuel. Sales of food stores increased 2.5 percent in the 12 months ending in Jan 2015 while sales of nonfood stores increased 5.0 percent. Sales of auto fuel stores increased 11.1 percent in Jan 2015 relative to a year earlier.

Table VH-4, UK, Growth of Retail Sales Volume by Component Groups 12-Month ∆%

		All Retail	All Retail ex Auto Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Fuel Stores
2012	Mar	2.4	1.8	-0.3	2.6	7.5
	Apr	-2.2	-1.5	-3.7	-1.0	-7.5
	May	1.3	1.8	0.9	1.4	-2.3
	Jun	1.6	2.5	1.3	3.1	-5.2

	Jul	1.4	2.0	0.4	2.0	-2.5
	Aug	1.9	2.3	0.8	3.7	-1.5
	Sep	1.8	2.1	0.6	2.8	-0.7
	Oct	0.1	0.7	-1.1	1.2	-4.7
	Nov	0.1	1.3	-0.9	2.8	-9.1
	Dec	-0.3	0.5	-1.0	0.6	-6.3

2013	Jan	-1.3	-0.2	-2.0	-0.3	-9.3
	Feb	1.7	2.6	-1.3	4.4	-4.7
	Mar	-1.2	0.0	1.0	-3.6	-10.1
	Apr	0.4	0.1	-3.6	2.1	2.9
	May	1.5	1.8	-0.4	1.9	-0.7
	Jun	1.6	1.6	-0.4	1.2	1.8

	Jul	2.3	2.5	2.2	0.8	0.6
	Aug	1.4	1.7	-0.6	0.3	-0.8
	Sep	2.1	2.7	-0.8	4.1	-2.9
	Oct	1.7	2.2	-0.1	2.4	-2.4
	Nov	1.7	2.0	0.3	1.7	-0.8
	Dec	5.0	5.8	2.7	6.6	-1.7

2014	Jan	3.4	4.0	-0.1	7.2	-1.1
	Feb	2.8	3.3	1.4	3.0	-1.4
	Mar	4.3	4.2	-1.9	9.6	4.5
	Apr	6.0	6.8	6.0	5.3	-0.8
	May	3.5	4.3	0.6	5.8	-3.1
	Jun	3.3	3.5	0.6	4.7	1.3

	Jul	2.5	3.2	-1.8	7.1	-3.1
	Aug	3.7	4.4	-0.2	8.7	-1.5
	Sep	2.3	2.8	0.5	3.2	-1.8
	Oct	4.7	5.1	1.1	7.5	1.9
	Nov	6.5	6.9	1.4	10.5	2.8
	Dec	4.0	3.8	0.6	5.9	5.7

2015	Jan	5.4	4.8	2.5	5.0	11.1

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/january-2015/index.html

Table VH-5 provides the analysis of the UK Office for National Statistics of contributions to 12-month percentage changes of value and volume of retail sales in the UK. The volume of retail sales seasonally adjusted increased 5.4 percent in the 12 months ending in Jan 2015. Sales of predominantly food stores with weight of 41.6 percent increased 2.5 percent in the 12 months ending in Jan 2015, adding 1.0 percentage points. Mostly nonfood stores with weight of 41.0 percent increased 5.0 percent with contribution of 2.1 percentage points. Positive contribution to 12-month percentage changes of volume was made by non-store retailing with weight of 6.5 percent, growth of 17.1 percent and positive contribution of 1.1 percentage points. Automotive fuel with weight of 10.9 percent and growth of 11.1 percent added 1.2 percentage points. The value of retail sales increased 2.3 percent in the 12 months ending in Jan 2015. There were positive contributions: 1.6 percentage points for predominantly nonfood stores and 1.0 percentage points for non-store retailing. Automotive fuel stores deducted 0.5 percentage points while food stores added 0.2 percentage points.

Table VH-5, UK, Volume and Value of Retail Sales 12-month ∆% and Percentage Points Contributions by Sectors

Jan 2015	Weight % of All Retailing	Volume SA 12- Month ∆%	PP Cont. % points	Value SA 12- Month ∆%	PP Cont. % points
All Retailing	100.0	5.4		2.3
Mostly Food Stores	41.6	2.5	1.0	0.6	0.2
Mostly Nonfood Stores	41.0	5.0	2.1	3.7	1.6
Non-store Retailing	6.5	17.1	1.1	14.1	1.0
Automotive Fuel	10.9	11.1	1.2	-4.6	-0.5

Cont.: Contribution

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/january-2015/index.html

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World Financial Turbulence, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Industrial Production, United States Producer Prices, World Cyclical Slow Growth and Global Recession Risk: Part V

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