Dollar Devaluation and Carry Trade Reversals, Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars below Trend, Stagnating Private Fixed Investment, Stagnating Real Disposable Income, Financial Repression, World Cyclical Slow Growth and Global Recession Risk: Part V

 

Dollar Devaluation and Carry Trade Reversals, Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars below Trend, Stagnating Private Fixed Investment, Stagnating Real Disposable Income, Financial Repression, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

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

I Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars below Trend

IA Mediocre Cyclical United States Economic Growth

IA1 Contracting Real Private Fixed Investment

II Stagnating Real Disposable Income and Consumption Expenditures

IB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/ns/cs.aspx?id=29) to show GDP in dollars in 2013 and the growth rate of real GDP of the world and selected regional countries from 2013 to 2017. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has changed its forecast of the world economy to 3.4 percent in 2014 but accelerating to 3.5 percent in 2015, 3.8 percent in 2016 and 3.8 percent in 2016. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $34,883 billion of world output of $75,471 billion, or 46.2 percent, but are projected to grow at much lower rates than world output, 2.1 percent on average from 2014 to 2017 in contrast with 3.6 percent for the world as a whole. While the world would grow 15.3 percent in the four years from 2014 to 2017, the G7 as a whole would grow 8.6 percent. The difference in dollars of 2013 is high: growing by 15.2 percent would add around $11.5 trillion of output to the world economy, or roughly, two times the output of the economy of Japan of $4,920 billion but growing by 8.6 percent would add $6.5 trillion of output to the world, or about the output of Japan in 2013. The “two speed” concept is in reference to the growth of the 150 countries labeled as emerging and developing economies (EMDE) with joint output in 2013 of $29,358 billion, or 38.9 percent of world output. The EMDEs would grow cumulatively 19.9 percent or at the average yearly rate of 4.7 percent, contributing $5.8 trillion from 2014 to 2017 or the equivalent of somewhat less than the GDP of $9,469 billion of China in 2013. The final four countries in Table V-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output in 2013 adds to $15,814 billion, or 21.0 percent of world output, which is equivalent to 45.3 percent of the combined output of the major advanced economies of the G7.

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

	GDP USD 2013	Real GDP ∆% 2014	Real GDP ∆% 2015	Real GDP ∆% 2016	Real GDP ∆% 2017
World	75,471	3.4	3.5	3.8	3.8
G7	34,883	1.7	2.3	2.3	2.0
Canada	1,839	2.5	2.2	2.0	2.0
France	2,807	0.4	1.2	1.5	1.7
DE	3,731	1.6	1.6	1.7	1.5
Italy	2,138	-0.4	0.5	1.1	1.1
Japan	4,920	-0.1	1.0	1.2	0.4
UK	2,680	2.6	2.7	2.3	2.2
US	16,768	2.4	3.1	3.1	2.7
Euro Area	13,143	0.9	1.5	1.7	1.6
DE	3,731	1.6	1.6	1.7	1.5
France	2,807	0.4	1.2	1.5	1.7
Italy	2,138	-0.4	0.5	1.1	1.1
POT	225	0.9	1.6	1.5	1.4
Ireland	232	4.8	3.9	3.3	2.8
Greece	242	0.7	2.5	3.7	3.2
Spain	1,393	1.4	2.5	2.0	1.8
EMDE	29,358	4.6	4.3	4.7	5.0
Brazil	2,391	0.1	-1.0	1.0	2.3
Russia	2,079	0.6	-3.8	-1.1	1.0
India	1,875	7.2	7.5	7.5	7.6
China	9,469	7.4	6.8	6.3	6.0

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

Source: IMF World Economic Outlook databank

http://www.imf.org/external/pubs/ft/weo/2015/01/weodata/index.aspx

Continuing high rates of unemployment in advanced economies constitute another characteristic of the database of the WEO (http://www.imf.org/external/pubs/ft/weo/2015/01/weodata/index.aspx ). Table V-2 is constructed with the WEO database to provide rates of unemployment from 2013 to 2017 for major countries and regions. In fact, unemployment rates for 2014 in Table I-2 are high for all countries: unusually high for countries with high rates most of the time and unusually high for countries with low rates most of the time. The rates of unemployment are particularly high in 2014 for the countries with sovereign debt difficulties in Europe: 13.9 percent for Portugal (POT), 11.3 percent for Ireland, 26.5 percent for Greece, 24.5 percent for Spain and 12.8 percent for Italy, which is lower but still high. The G7 rate of unemployment is 7.1 percent. Unemployment rates are not likely to decrease substantially if slow growth persists in advanced economies.

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

	% Labor Force 2013	% Labor Force 2014	% Labor Force 2015	% Labor Force 2016	% Labor Force 2017
World	NA	NA	NA	NA	NA
G7	7.1	6.4	6.0	5.8	5.8
Canada	7.1	6.9	7.0	6.9	6.8
France	10.3	10.2	10.1	9.9	9.7
DE	5.2	5.0	4.9	4.8	4.8
Italy	12.2	12.8	12.6	12.3	12.0
Japan	4.0	3.6	3.7	3.7	3.8
UK	7.6	6.2	5.4	5.4	5.4
US	7.4	6.2	5.5	5.2	5.0
Euro Area	12.0	11.6	11.1	10.6	10.3
DE	5.2	5.0	4.9	4.8	4.8
France	10.3	10.2	10.1	9.9	9.7
Italy	12.2	12.8	12.6	12.3	12.0
POT	16.2	13.9	13.1	12.6	12.1
Ireland	13.0	11.3	9.8	8.8	8.3
Greece	27.5	26.5	24.8	22.1	20.0
Spain	26.1	24.5	22.6	21.1	19.9
EMDE	NA	NA	NA	NA	NA
Brazil	5.4	4.8	5.9	6.3	5.9
Russia	5.5	5.1	6.5	6.5	6.0
India	NA	NA	NA	NA	NA
China	4.1	4.1	4.1	4.1	4.1

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

Source: IMF World Economic Outlook

http://www.imf.org/external/pubs/ft/weo/2015/01/weodata/index.aspx

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog from IQ2012 to IIIQ2014 available now for all countries. There are preliminary estimates for most countries for IVQ2014. Growth is weak throughout most of the world.

• Japan. The GDP of Japan increased 1.1 percent in IQ2012, 4.3 percent at SAAR (seasonally adjusted annual rate) and 3.5 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP fell 0.4 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 1.4 percent, which is much lower than 4.3 percent in IQ2012. Growth of 3.5 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan’s GDP contracted 0.5 percent in IIIQ2012 at the SAAR of minus 2.2 percent and increased 0.2 percent relative to a year earlier. Japan’s GDP decreased 0.2 percent in IVQ2012 at the SAAR of minus 0.6 percent and changed 0.0 percent relative to a year earlier. Japan grew 1.4 percent in IQ2013 at the SAAR of 5.6 percent and increased 0.5 percent relative to a year earlier. Japan’s GDP increased 0.8 percent in IIQ2013 at the SAAR of 3.3 percent and increased 1.4 percent relative to a year earlier. Japan’s GDP grew 0.4 percent in IIIQ2013 at the SAAR of 1.4 percent and increased 2.2 percent relative to a year earlier. In IVQ2013, Japan’s GDP decreased 0.3 percent at the SAAR of minus 1.2 percent, increasing 2.3 percent relative to a year earlier. Japan’s GDP increased 1.3 percent in IQ2014 at the SAAR of 5.1 percent and increased 2.4 percent relative to a year earlier. In IIQ2014, Japan’s GDP fell 1.6 percent at the SAAR of minus 6.4 percent and fell 0.3 percent relative to a year earlier. Japan’s GDP contracted 0.7 percent in IIIQ2014 at the SAAR of minus 2.6 percent and fell 1.4 percent relative to a year earlier. In IVQ2014, Japan’s GDP grew 0.4 percent, at the SAAR of 1.5 percent, decreasing 0.8 percent relative to a year earlier.
• China. China’s GDP grew 1.4 percent in IQ2012, annualizing to 5.7 percent, and 8.1 percent relative to a year earlier. The GDP of China grew at 2.1 percent in IIQ2012, which annualizes to 8.7 percent and 7.6 percent relative to a year earlier. China grew at 2.0 percent in IIIQ2012, which annualizes at 8.2 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 1.9 percent, which annualizes at 7.8 percent, and 7.9 percent in IVQ2012 relative to IVQ2011. In IQ2013, China grew at 1.7 percent, which annualizes at 7.0 percent and 7.8 percent relative to a year earlier. In IIQ2013, China grew at 1.8 percent, which annualizes at 7.4 percent and 7.5 percent relative to a year earlier. China grew at 2.3 percent in IIIQ2013, which annualizes at 9.5 percent and 7.9 percent relative to a year earlier. China grew at 1.8 percent in IVQ2013, which annualized to 7.4 percent and 7.6 percent relative to a year earlier. China’s GDP grew 1.6 percent in IQ2014, which annualizes to 6.6 percent, and 7.4 percent relative to a year earlier. China’s GDP grew 2.0 percent in IIQ2014, which annualizes at 8.2 percent, and 7.5 percent relative to a year earlier. China’s GDP grew 1.9 percent in IIIQ2014, which is equivalent to 7.8 percent in a year, and 7.3 percent relative to a year earlier. The GDP of China grew 1.5 percent in IVQ2014, which annualizes at 6.1 percent, and 7.3 percent relative to a year earlier. The GDP of China grew at 1.3 percent in IQ2015, which annualizes at 5.3 percent, and 7.0 percent relative to a year earlier. There is decennial change in leadership in China (http://www.xinhuanet.com/english/special/18cpcnc/index.htm). Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2015.
• Euro Area. GDP fell 0.1 percent in the euro area in IQ2012 and decreased 0.4 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.3 percent IIQ2012 and fell 0.8 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.1 percent and declined 0.8 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.4 percent relative to the prior quarter and fell 0.9 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.4 percent and decreased 1.2 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IIQ2013 and fell 0.6 percent relative to a year earlier. In IIIQ2013, euro area GDP increased 0.2 percent and fell 0.3 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IVQ2013 and increased 0.4 percent relative to a year earlier. In IQ2014, the GDP of the euro area increased 0.3 percent and 1.1 percent relative to a year earlier. The GDP of the euro area increased 0.1 percent in IIQ2014 and increased 0.8 percent relative to a year earlier. The euro area’s GDP increased 0.2 percent in IIIQ2014 and increased 0.8 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IVQ2014 and increased 0.9 percent relative to a year earlier.
• Germany. The GDP of Germany increased 0.3 percent in IQ2012 and 1.5 percent relative to a year earlier. In IIQ2012, Germany’s GDP increased 0.1 percent and increased 0.3 percent relative to a year earlier but 0.8 percent relative to a year earlier when adjusted for calendar (CA) effects. In IIIQ2012, Germany’s GDP increased 0.1 percent and 0.1 percent relative to a year earlier. Germany’s GDP contracted 0.4 percent in IVQ2012 and decreased 0.3 percent relative to a year earlier. In IQ2013, Germany’s GDP decreased 0.4 percent and fell 1.8 percent relative to a year earlier. In IIQ2013, Germany’s GDP increased 0.8 percent and 0.5 percent relative to a year earlier. The GDP of Germany increased 0.3 percent in IIIQ2013 and 0.8 percent relative to a year earlier. In IVQ2013, Germany’s GDP increased 0.4 percent and 1.0 percent relative to a year earlier. The GDP of Germany increased 0.8 percent in IQ2014 and 2.6 percent relative to a year earlier. In IIQ2014, Germany’s GDP contracted 0.1 percent and increased 1.0 percent relative to a year earlier. The GDP of Germany increased 0.1 percent in IIIQ2014 and increased 1.2 percent relative to a year earlier. Germany’s GDP increased 0.7 percent in IVQ2014 and increased 1.6 percent relative to a year earlier.
• United States. Growth of US GDP in IQ2012 was 0.6 percent, at SAAR of 2.3 percent and higher by 2.6 percent relative to IQ2011. US GDP increased 0.4 percent in IIQ2012, 1.6 percent at SAAR and 2.3 percent relative to a year earlier. In IIIQ2012, US GDP grew 0.6 percent, 2.5 percent at SAAR and 2.7 percent relative to IIIQ2011. In IVQ2012, US GDP grew 0.0 percent, 0.1 percent at SAAR and 1.6 percent relative to IVQ2011. In IQ2013, US GDP grew at 2.7 percent SAAR, 0.7 percent relative to the prior quarter and 1.7 percent relative to the same quarter in 2013. In IIQ2013, US GDP grew at 1.8 percent in SAAR, 0.4 percent relative to the prior quarter and 1.8 percent relative to IIQ2012. US GDP grew at 4.5 percent in SAAR in IIIQ2013, 1.1 percent relative to the prior quarter and 2.3 percent relative to the same quarter a year earlier (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html). In IVQ2013, US GDP grew 0.9 percent at 3.5 percent SAAR and 3.1 percent relative to a year earlier. In IQ2014, US GDP decreased 0.5 percent, increased 1.9 percent relative to a year earlier and fell 2.1 percent at SAAR. In IIQ2014, US GDP increased 1.1 percent at 4.6 percent SAAR and increased 2.6 percent relative to a year earlier. US GDP increased 1.2 percent in IIIQ2014 at 5.0 percent SAAR and increased 2.7 percent relative to a year earlier. In IVQ2014, US GDP increased 0.5 percent at SAAR of 2.2 percent and increased 2.4 percent relative to a year earlier. GDP increased 0.1 percent in IQ2015 at SAAR of 0.2 percent and grew 3.0 percent relative to a year earlier.
• United Kingdom. In IQ2012, UK GDP increased 0.1 percent, increasing 1.0 percent relative to a year earlier. UK GDP fell 0.2 percent in IIQ2012 and increased 0.6 percent relative to a year earlier. UK GDP increased 0.8 percent in IIIQ2012 and increased 0.7 percent relative to a year earlier. UK GDP fell 0.3 percent in IVQ2012 relative to IIIQ2012 and increased 0.4 percent relative to a year earlier. UK GDP increased 0.6 percent in IQ2013 and 0.9 percent relative to a year earlier. UK GDP increased 0.6 percent in IIQ2013 and 1.7 percent relative to a year earlier. In IIIQ2013, UK GDP increased 0.7 percent and 1.6 percent relative to a year earlier. UK GDP increased 0.4 percent in IVQ2013 and 2.4 percent relative to a year earlier. In IQ2014, UK GDP increased 0.9 percent and 2.7 percent relative to a year earlier. UK GDP increased 0.8 percent in IIQ2014 and 2.9 percent relative to a year earlier. In IIIQ2014, UK GDP increased 0.6 percent and increased 2.8 percent relative to a year earlier. UK GDP increased 0.6 percent in IVQ2014 and increased 3.0 percent relative to a year earlier. In IQ2015, GDP increased 0.3 percent and 2.4 percent relative to a year earlier.
• Italy. Italy has experienced decline of GDP in nine consecutive quarters from IIIQ2011 to IIIQ2013 and in IIQ2014 and IIIQ2014. Italy’s GDP fell 0.9 percent in IQ2012 and declined 2.3 percent relative to IQ2011. Italy’s GDP fell 0.6 percent in IIQ2012 and declined 3.1 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.6 percent and declined 3.1 percent relative to a year earlier. The GDP of Italy contracted 0.6 percent in IVQ2012 and fell 2.7 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.8 percent and fell 2.6 percent relative to a year earlier. Italy’s GDP fell 0.1 percent in IIQ2013 and 2.0 percent relative to a year earlier. The GDP of Italy increased 0.1 percent in IIIQ2013 and declined 1.4 percent relative to a year earlier. Italy’s GDP changed 0.0 percent in IVQ2013 and decreased 0.8 percent relative to a year earlier. In IQ2014, Italy’s GDP decreased 0.1 percent and fell 0.1 percent relative to a year earlier. The GDP of Italy fell 0.2 percent in IIQ2014 and declined 0.3 percent relative to a year earlier. In IIIQ2014, Italy’s GDP contracted 0.1 percent and fell 0.5 percent relative to a year earlier. The GDP of Italy changed 0.0 percent in IVQ20214 and declined 0.5 percent relative to a year earlier
• France. France’s GDP increased 0.2 percent in IQ2012 and increased 0.6 percent relative to a year earlier. France’s GDP decreased 0.3 percent in IIQ2012 and increased 0.4 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.2 percent and increased 0.4 percent relative to a year earlier. France’s GDP fell 0.2 percent in IVQ2012 and changed 0.0 percent relative to a year earlier. In IQ2013, France’s GDP decreased 0.1 percent and declined 0.3 percent relative to a year earlier. The GDP of France increased 0.7 percent in IIQ2013 and 0.7 percent relative to a year earlier. France’s GDP decreased 0.1 percent in IIIQ2013 and increased 0.3 percent relative to a year earlier. The GDP of France increased 0.3 percent in IVQ2013 and 0.8 percent relative to a year earlier. In IQ2014, France’s GDP decreased 0.1 percent and increased 0.8 percent relative to a year earlier. In IIQ2014, France’s GDP contracted 0.1 percent and changed 0.0 percent relative to a year earlier. France’s GDP increased 0.3 percent in IIIQ2014 and increased 0.4 percent relative to a year earlier. The GDP of France increased 0.1 percent in IVQ2014 and increased 0.2 percent relative to a year earlier

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

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.6        SAAR: 2.3	2.6
Japan	QOQ: 1.1 SAAR: 4.3	3.5
China	1.4	8.1
Euro Area	-0.1	-0.4
Germany	0.3	1.5
France	0.2	0.6
Italy	-0.9	-2.3
United Kingdom	0.1	1.0
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.4         SAAR: 1.6	2.3
Japan	QOQ: -0.4 SAAR: -1.4	3.5
China	2.1	7.6
Euro Area	-0.3	-0.8
Germany	0.1	0.3 0.8 CA
France	-0.3	0.4
Italy	-0.6	-3.1
United Kingdom	-0.2	0.6
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.6  SAAR: 2.5	2.7
Japan	QOQ: –0.5 SAAR: –2.2	0.2
China	2.0	7.4
Euro Area	-0.1	-0.8
Germany	0.1	0.1
France	0.2	0.4
Italy	-0.6	-3.1
United Kingdom	0.8	0.7
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: 0.1	1.6
Japan	QOQ: -0.2 SAAR: -0.6	0.0
China	1.9	7.9
Euro Area	-0.4	-0.9
Germany	-0.4	-0.3
France	-0.2	0.0
Italy	-0.6	-2.7
United Kingdom	-0.3	0.4
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.7 SAAR: 2.7	1.7
Japan	QOQ: 1.4 SAAR: 5.6	0.5
China	1.7	7.8
Euro Area	-0.4	-1.2
Germany	-0.4	-1.8
France	-0.1	-0.3
Italy	-0.8	-2.6
UK	0.6	0.9
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.4 SAAR: 1.8	1.8
Japan	QOQ: 0.8 SAAR: 3.3	1.4
China	1.8	7.5
Euro Area	0.3	-0.6
Germany	0.8	0.5
France	0.7	0.7
Italy	-0.1	-2.0
UK	0.6	1.7
	IIIQ2013/IIQ2013	III/Q2013/  IIIQ2012
USA	QOQ: 1.1 SAAR: 4.5	2.3
Japan	QOQ: 0.4 SAAR: 1.4	2.2
China	2.3	7.9
Euro Area	0.2	-0.3
Germany	0.3	0.8
France	-0.1	0.3
Italy	0.1	-1.4
UK	0.7	1.6
	IVQ2013/IIIQ2013	IVQ2013/IVQ2012
USA	QOQ: 0.9 SAAR: 3.5	3.1
Japan	QOQ: -0.3 SAAR: -1.2	2.3
China	1.8	7.6
Euro Area	0.3	0.4
Germany	0.4	1.0
France	0.3	0.8
Italy	0.0	-0.8
UK	0.4	2.4
	IQ2014/IVQ2013	IQ2014/IQ2013
USA	QOQ -0.5 SAAR -2.1	1.9
Japan	QOQ: 1.3 SAAR: 5.1	2.4
China	1.6	7.4
Euro Area	0.3	1.1
Germany	0.8	2.6
France	-0.1	0.8
Italy	-0.1	-0.1
UK	0.9	2.7
	IIQ2014/IQ2014	IIQ2014/IIQ2013
USA	QOQ 1.1 SAAR 4.6	2.6
Japan	QOQ: -1.6 SAAR: -6.4	-0.3
China	2.0	7.5
Euro Area	0.1	0.8
Germany	-0.1	1.0
France	-0.1	0.0
Italy	-0.2	-0.3
UK	0.8	2.9
	IIIQ2014/IIQ2014	IIIQ2014/IIIQ2013
USA	QOQ: 1.2 SAAR: 5.0	2.7
Japan	QOQ: -0.7 SAAR: -2.6	-1.4
China	1.9	7.3
Euro Area	0.2	0.8
Germany	0.1	1.2
France	0.3	0.4
Italy	-0.1	-0.5
UK	0.6	2.8
	IVQ2014/IIIQ2014	IVQ2014/IVQ2013
USA	QOQ: 0.5 SAAR: 2.2	2.4
Japan	QOQ: 0.4 SAAR: 1.5	-0.8
China	1.5	7.3
Euro Area	0.3	0.9
Germany	0.7	1.6
France	0.1	0.2
Italy	0.0	-0.5
UK	0.6	3.0
	IQ2015/IVQ2014	IQ2015/IQ2014
USA	QOQ: 0.1 SAAR: 0.2	3.0
China	1.3	7.0
UK	0.3	2.4

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

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

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

• Japan. Japan provides the most worrisome data (http://cmpassocregulationblog.blogspot.com/2015/04/imf-view-of-economy-and-finance-united.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/impatience-with-monetary-policy-of.html and earlier http://cmpassocregulationblog.blogspot.com/2015/02/world-financial-turbulence-squeeze-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/interest-rate-risks-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html and earlier http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html and earlier http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-zero-interest-rates-world.html http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations_8763.html http://cmpass ocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html and earlier http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and_4699.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and for GDP http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html and earlier http://cmpassocreulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html). In Mar 2015, Japan’s exports increased 8.5 percent in 12 months while imports decreased 14.5 percent. The second part of Table V-4 shows that net trade deducted 1.4 percentage points from Japan’s growth of GDP in IIQ2012, deducted 1.9 percentage points from GDP growth in IIIQ2012 and deducted 0.4 percentage points from GDP growth in IVQ2012. Net trade added 0.3 percentage points to GDP growth in IQ2012, 1.6 percentage points in IQ2013 and 0.2 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.5 percentage points from GDP growth in Japan. Net trade ducted 2.1 percentage points from GDP growth in Japan in IVQ2013. Net trade deducted 1.2 percentage point from GDP growth of Japan in IQ2014. Net trade added 4.2 percentage points to GDP growth in IIQ2014. Net trade added 0.2 percentage points to GDP growth in IIIQ2014 and added 0.9 percentage points in IVQ2014.

• China. In Mar 2015, China exports decreased 48.3 percent relative to a year earlier and imports decreased 12.7 percent.
• Germany. Germany’s exports increased 1.5 percent in the month of Feb 2015 and increased 3.9 percent in the 12 months ending in Feb 2015. Germany’s imports increased 1.8 percent in the month of Feb 2015 and increased 0.8 percent in the 12 months ending in Feb. Net trade contributed 0.8 percentage points to growth of GDP in IQ2012, contributed 0.4 percentage points in IIQ2012, contributed 0.3 percentage points in IIIQ2012, deducted 0.5 percentage points in IVQ2012, deducted 0.3 percentage points in IQ2013 and added 0.1 percentage points in IIQ2013. Net traded deducted 0.5 percentage points from Germany’s GDP growth in IIIQ2013 and added 0.5 percentage points to GDP growth in IVQ2013. Net trade deducted 0.1 percentage points from GDP growth in IQ2014. Net trade added 0.0 percentage points to GDP growth in IIQ2014 and added 0.4 percentage points in IIIQ2014. Net trade added 0.2 percentage points to GDP growth in IVQ2014.
• United Kingdom. Net trade contributed 0.7 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.7 percentage points from UK growth. Net trade contributed 0.1 percentage points to UK value added in IVQ2013. Net trade contributed 0.1 percentage points to UK value added in IQ2014 and 0.2 percentage points in IIQ2014. Net trade deducted 0.5 percentage points to GDP growth in IIIQ2014 and added 0.8 percentage points in IVQ2014.
• France. France’s exports increased 1.4 percent in Feb 2015 while imports increased 0.6 percent. France’s exports increased 3.0 percent in the 12 months ending in Feb 2015 and imports decreased 1.5 percent relative to a year earlier. Net traded added 0.1 percentage points to France’s GDP in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.1 percentage points from France’s GDP growth in IQ2013 and added 0.3 percentage points in IIQ2013, deducting 1.7 percentage points in IIIQ2013. Net trade added 0.1 percentage points to France’s GDP in IVQ2013 and deducted 0.1 percentage points in IQ2014. Net trade deducted 0.2 percentage points from France’s GDP growth in IIQ2014 and deducted 0.2 percentage points in IIIQ2014. Net trade added 0.2 percentage points to France’s GDP growth in IVQ2014.
• United States. US exports decreased 1.6 percent in Feb 2015 and goods exports decreased 4.6 percent in Jan-Feb 2015 relative to a year earlier. Imports decreased 4.4 percent in Feb 2015 and goods imports decreased 3.5 percent in Jan-Feb 2015 relative to a year earlier. Net trade deducted 0.04 percentage points from GDP growth in IIQ2012 and added 0.39 percentage points in IIIQ2012 and 0.79 percentage points in IVQ2012. Net trade deducted 0.08 percentage points from US GDP growth in IQ2013 and deducted 0.54 percentage points in IIQ2013. Net traded added 0.59 percentage points to US GDP growth in IIIQ2013. Net trade added 1.08 percentage points to US GDP growth in IVQ2013. Net trade deducted 1.66 percentage points from US GDP growth in IQ2014 and deducted 0.34 percentage points in IIQ2014. Net trade added 0.78 percentage points to IIIQ2014. Net trade deducted 1.03 percentage points from GDP growth in IVQ2014 and deducted 1.25 percentage points from GDP growth in IQ2015. Industrial production increased 0.1 percent in Feb 2015 and decreased 0.3 percent in Jan 2015 after decreasing 0.2 percent in Dec 2014, with all data seasonally adjusted. The Federal Reserve completed its annual revision of industrial production and capacity utilization on Mar 28, 2014 (http://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm). The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

Industrial production decreased 0.6 percent in Mar 2015 and increased 0.1 percent in Feb 2015 after decreasing 0.4 percent in Jan 2015, with all data seasonally adjusted. The Federal Reserve completed its annual revision of industrial production and capacity utilization on Mar 28, 2014 (http://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm). The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production decreased 0.6 percent in March after increasing 0.1 percent in February. For the first quarter of 2015 as a whole, industrial production declined at an annual rate of 1.0 percent, the first quarterly decrease since the second quarter of 2009. The decline last quarter resulted from a drop in oil and gas well drilling and servicing of more than 60 percent at an annual rate and from a decrease in manufacturing production of 1.2 percent. In March, manufacturing output moved up 0.1 percent for its first monthly gain since November; however, factory output in January is now estimated to have fallen 0.6 percent, about twice the size of the previously reported decline. The index for mining decreased 0.7 percent in March. The output of utilities fell 5.9 percent to largely reverse a similarly sized increase in February, which was related to unseasonably cold temperatures. At 105.2 percent of its 2007 average, total industrial production in March was 2.0 percent above its level of a year earlier. Capacity utilization for the industrial sector decreased 0.6 percentage point in March to 78.4 percent, a rate that is 1.7 percentage points below its long-run (1972–2014) average.” In the six months ending in Mar 2015, United States national industrial production accumulated increase of 0.1 percent at the annual equivalent rate of 0.2 percent, which is lower than growth of 2.0 percent in the 12 months ending in Mar 2015. Excluding growth of 1.1 percent in Nov 2014, growth in the remaining five months from Oct 2014 to Mar 2015 accumulated to minus 1.0 percent or minus 2.4 percent annual equivalent. Industrial production declined in three of the past six months. Industrial production contracted at annual equivalent 3.5 percent in the most recent quarter from Jan 2015 to Mar 2015 and expanded at 4.1 percent in the prior quarter Oct to Dec 2014. Business equipment accumulated growth of 1.5 percent in the six months from Oct 2014 to Mar 2015 at the annual equivalent rate of 3.0 percent, which is lower than growth of 3.2 percent in the 12 months ending in Mar 2015. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for the industrial sector decreased 0.6 percentage point in March to 78.4 percent, a rate that is 1.7 percentage points below its long-run (1972–2014) average.” United States industry apparently decelerated to a lower growth rate followed by possible acceleration and oscillating growth in past months.

Manufacturing fell 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased by 25.1 percent from the trough in Apr 2009 to Dec 2014. Manufacturing grew 26.5 percent from the trough in Apr 2009 to Mar 2015. Manufacturing output in Mar 2015 is 1.2 percent below the peak in Jun 2007. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2015 would have accumulated to 23.9 percent. GDP in IQ2015 would be $18,574.8 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,270.0 billion than actual $16,304.8 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.7 million unemployed or underemployed equivalent to actual unemployment/underemployment of 16.1 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/03/global-competitive-devaluation-rules.html). US GDP in IQ2015 is 12.2 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,304.8 billion in IQ2015 or 8.8 percent at the average annual equivalent rate of 1.2 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth at average 3.3 percent per year from Mar 1919 to Mar 2015. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 125.5771 in Mar 2015. The actual index NSA in Mar 2015 is 101.8045, which is 18.9 percent below trend. Manufacturing output grew at average 2.4 percent between Dec 1986 and Dec 2014, raising the index at trend to 117.2305 in Mar 2015. The output of manufacturing at 101.8045 in Mar 2015 is 13.2 percent below trend under this alternative calculation.

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

	Exports M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	-1.6 Jan	-4.6 Jan-Feb	-4.4 Jan	-3.5 Jan-Feb
Japan		Mar 2015 8.5 Feb 2.4 Jan 17.0 Dec 12.9 Nov 4.9 Oct 9.6 Sep 6.9 Aug -1.3 Jul 3.9 Jun -2.0 May 2014 -2.7 Apr 2014 5.1 Mar 2014 1.8 Feb 2014 9.5 Jan 2014 9.5 Dec 2013 15.3 Nov 2013 18.4 Oct 2013 18.6 Sep 2013 11.5 Aug 2013 14.7 Jul 2013 12.2 Jun 2013 7.4 May 2013 10.1 Apr 2013 3.8 Mar 2013 1.1 Feb 2013 -2.9 Jan 2013 6.4 Dec -5.8 Nov -4.1 Oct -6.5 Sep -10.3 Aug -5.8 Jul -8.1		Mar 2015 -14.5 Feb -3.6 Jan -9.0 Dec 1.9 Nov -1.7 Oct 2.7 Sep 6.2 Aug -1.5 Jul 2.3 Jun 8.4 May 2014 -3.6 Apr 2013 3.4 Mar 2014 18.1 Feb 2014 9.0 Jan 2014 25.0 Dec 2013 24.7 Nov 2013 21.1 Oct 2013 26.1 Sep 2013 16.5 Aug 2013 16.0 Jul 2013 19.6 Jun 2013 11.8 May 2013 10.0 Apr 2013 9.4 Mar 2013 5.5 Feb 2013 7.3 Jan 2013 7.3 Dec 1.9 Nov 0.8 Oct -1.6 Sep 4.1 Aug -5.4 Jul 2.1
China		2015 -15.0 Mar 48.3 Feb -3.3 Jan 2014 9.7 Dec 4.7 Nov 11.6 Oct 15.3 Sep 9.4 Aug 14.5 Jul 7.2 Jun 7.0 May 0.9 Apr -6.6 Mar -18.1 Feb 10.6 Jan 2013 4.3 Dec 12.7 Nov 5.6 Oct -0.3 Sep 7.2 Aug 5.1 Jul -3.1 Jun 1.0 May 14.7 Apr 10.0 Mar 21.8 Feb 25.0 Jan		2015 -12.7 Mar -20.5 Feb -19.9 Jan 2014 -2.4 Dec -6.7 Nov 4.6 Oct 7.0 Sep -2.4 Aug -1.6 Jul 5.5 Jun -1.6 May -0.8 Apr -11.3 Mar 10.1 Feb 10.0 Jan 2013 8.3 Dec 5.3 Nov 7.6 Oct 7.4 Sep 7.0 Aug 10.9 Jul -0.7 Jun -0.3 May 16.8 Apr 14.1 Mar -15.2 Feb 28.8 Jan
Euro Area	2.2 12 M-Feb	1.8 Jan-Feb	0.1 12-M Feb	-2.8 Jan-Feb
Germany	1.5 Feb CSA	3.9 Feb	1.8 Feb CSA	0.8 Feb
France Feb	1.4	3.0	0.6	1.5
Italy Feb	2.5	3.7	0.6	1.0
UK	-2.4 Feb	0.5 Dec 14-Feb 15 /Dec 13-Feb 14	0.7 Feb	-1.8 Dec 14-Feb 15 /Dec 13-Feb 14
Net Trade % Points GDP Growth	% Points
USA	IQ2015 -1.25 IVQ2014 -1.03 IIIQ2014 0.78 IIQ2014 -0.34 IQ2014 -1.66 IVQ2013 1.08 IIIQ2013 0.59 IIQ2013 -0.54 IQ2013 -0.08 IVQ2012 +0.79 IIIQ2012 0.39 IIQ2012 -0.04 IQ2012 -0.11
Japan	0.3 IQ2012 -1.4 IIQ2012 -1.9 IIIQ2012 -0.4 IVQ2012 1.6 IQ2013 0.2 IIQ2013 -1.5 IIIQ2013 -2.1 IVQ2013 -1.2 IQ2014 4.2 IIQ2014 0.2 IIIQ2014 0.9 IVQ2014
Germany	IQ2012 0.8 IIQ2012 0.4 IIIQ2012 0.3 IVQ2012 -0.5 IQ2013 -0.3 IIQ2013 0.1 IIIQ2013 -0.5 IVQ2013 0.5 IQ2014 -0.1 IIQ2014 0.0 IIIQ2014 0.4 IVQ2014 0.2
France	0.1 IIIQ2012 0.1 IVQ2012 -0.1 IQ2013 0.3 IIQ2013 -1.7 IIIQ2013 0.1 IVQ2013 -0.1 IQ2014 -0.2 IIQ2014 -0.2 IIIQ2014 0.2 IVQ2014
UK	0.7 IIQ2013 -1.7 IIIQ2013 0.1 IVQ2013 0.1 IQ2014 0.2 IIQ2214 -0.5 IIIQ2014 0.8 IVQ2014

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is in Table VB-11 for Mar 2015. The share of Asia in Japan’s trade is close to one-half for 53.1 percent of exports and 45.9 percent of imports. Within Asia, exports to China are 17.3 percent of total exports and imports from China 20.5 percent of total imports. While exports to China increased 3.9 percent in the 12 months ending in Mar 2015, imports from China decreased 19.6 percent. The largest export market for Japan in Mar 2015 is the US with share of 19.9 percent of total exports, which is close to that of China, and share of imports from the US of 11.6 percent in total imports. Japan’s exports to the US increased 21.3 percent in the 12 months ending in Mar 2015 and imports from the US increased 23.9 percent. Western Europe has share of 10.3 percent in Japan’s exports and of 11.7 percent in imports. Rates of growth of exports of Japan in Mar 2015 are 21.3 percent for exports to the US, 9.0 percent for exports to Brazil and minus 3.6 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 Mar 2015 are mixed. Imports from Asia decreased 10.7 percent in the 12 months ending in Mar 2015 while imports from China decreased 19.6 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

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

Mar 2015	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,927,379	8.5	6,698,119	-14.5
Asia	3,677,463 % Total 53.1	6.7	3,074,462 % Total 45.9	-10.7
China	1,201,176 % Total 17.3	3.9	1,375,355 % Total 20.5	-19.6
USA	1,377,789 % Total 19.9	21.3	774,670 % Total 11.6	23.9
Canada	94,159	35.7	99,652	-2.6
Brazil	50,729	9.0	86,588	13.9
Mexico	119,275	38.9	45,965	26.1
Western Europe	716,847 % Total 10.3	7.0	782,157 % Total 11.7	-4.5
Germany	173,178	-3.6	243,929	2.1
France	54,809	-0.1	87,960	-35.5
UK	96,536	12.7	64,488	15.4
Middle East	309,463	15.4	919,821	-42.6
Australia	123,384	-10.5	370,137	-14.8

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

World trade projections of the IMF are in Table V-6. There is increasing growth of the volume of world trade of goods and services from 3.5 percent in 2013 to 3.7 percent in 2015 and 5.0 percent on average from 2016 to 2019. World trade would be slower for advanced economies while emerging and developing economies (EMDE) experience faster growth. World economic slowdown would be more challenging with lower growth of world trade.

Table I-10, IMF, Projections of World Trade, USD Billions, USD/Barrel and Annual ∆%

	2013	2014	2015	Average ∆% 2016-2019
World Trade Volume (Goods and Services)	3.5	3.4	3.7	5.0
Exports Goods & Services	3.7	3.3	4.0	5.0
Imports Goods & Services	3.3	3.4	3.4	5.1
World Trade Value of Exports Goods & Services USD Billion	23,117	23,476	21,818	Average ∆% 2007-2016 20,724
Value of Exports of Goods USD Billion	18,632	18,817	17,285	Average ∆% 2007-2016 16,612
Average Oil Price USD/Barrel	104.07	96.25	58.14	Average ∆% 2007-2016 84.21
Average Annual ∆% Export Unit Value of Manufactures	-1.4	-0.8	-3.3	Average ∆% 2007-2016 0.9
Exports of Goods & Services	2013	2014	2015	Average ∆% 2016-2019
Euro Area	2.1	4.2	4.4	4.4
EMDE	4.6	3.4	5.3	6.0
G7	2.0	3.7	4.1	4.1
Imports Goods & Services
Euro Area	1.0	4.3	4.3	4.3
EMDE	5.5	3.7	3.5	6.0
G7	1.6	3.7	4.1	4.6
Terms of Trade of Goods & Services
Euro Area	0.9	0.8	1.4	-0.5
EMDE	-0.3	-0.6	-3.7	-0.1
G7	0.9	0.5	1.4	0.05
Terms of Trade of Goods
Euro Area	1.2	1.0	1.7	-0.6
EMDE	-0.1	0.2	-4.0	0.3
G7	0.8	0.2	1.0	0.1

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

Source: International Monetary Fund World Economic Outlook databank

http://www.imf.org/external/pubs/ft/weo/2015/01/weodata/index.aspx

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, increased to 54.8 in Mar from 53.9 in Feb, indicating expansion at higher rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/29a6f1bcf0bd43358458fd301141a6d1). This index has remained above the contraction territory of 50.0 during 68 consecutive months. The employment index increased from 51.8 in Feb to 52.0 in Mar with input prices rising at faster rate, new orders increasing at faster rate and output increasing at faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/29a6f1bcf0bd43358458fd301141a6d1). David Hensley, Director of Global Economic Coordination at JP Morgan, finds acceleration of world economic growth in IQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/29a6f1bcf0bd43358458fd301141a6d1). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, decreased to 51.8 in Mar from 51.9 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/667a34f2b7664124b9bacd22a85f00d9). New export orders expanded for the twentieth consecutive month. David Hensley, Director of Global Economics Coordination at JP Morgan Chase, finds continuing growth in global manufacturing with output increasing at rates around those in past months (http://www.markiteconomics.com/Survey/PressRelease.mvc/667a34f2b7664124b9bacd22a85f00d9). The HSBC Brazil Composite Output Index, compiled by Markit, decreased from 51.3 in Feb to 47.0 in Mar, indicating contraction in activity of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/98cdf9074e5e4da68b6de8f3bbf1dd75). The HSBC Brazil Services Business Activity index, compiled by Markit, decreased from 52.3 in Feb to 47.9 in Mar, indicating contracting services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/98cdf9074e5e4da68b6de8f3bbf1dd75). Pollyana De Lima, Economist at Markit, finds weaker private sector activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/98cdf9074e5e4da68b6de8f3bbf1dd75). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) decreased from 49.6 in Feb to 46.2 in Mar, indicating deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/a7a09c9443da4a7b91e8017781be1fd3). Pollyanna De Lima, Economist at Markit, finds the fastest contraction of manufacturing output in three and a half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/a7a09c9443da4a7b91e8017781be1fd3).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted decreased to 54.2 in Apr from 55.7 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/2981f1d7493e4d95ae88cb7a2dd6bc34). New export orders declined with weakness in Europe partly because of dollar revaluation. Chris Williamson, Chief Economist at Markit, finds that manufacturing expanding with challenges to competitiveness from the strong dollar (http://www.markiteconomics.com/Survey/PressRelease.mvc/2981f1d7493e4d95ae88cb7a2dd6bc34). The Markit Flash US Services PMI™ Business Activity Index decreased from 59.2 in Mar to 57.8 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/abca94e77ba4442fa8a7a7549544852d). The Markit Flash US Composite PMI™ Output Index decreased from 59.2 in Mar to 57.4 in Apr. Chris Williamson, Chief Economist at Markit, finds that the surveys are consistent with slowing GDP growth that may accelerate to about 3.0 percent in the second quarter (http://www.markiteconomics.com/Survey/PressRelease.mvc/abca94e77ba4442fa8a7a7549544852d). The Markit US Composite PMI™ Output Index of Manufacturing and Services increased to 59.2 in Mar from 57.2 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/8bf81bec1dc54c04acb6fec388744e9f). The Markit US Services PMI™ Business Activity Index increased from 57.1 in Feb to 59.2 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/8bf81bec1dc54c04acb6fec388744e9f). Tim Moore, Senior Economist at Markit, finds the indexes consistent with US growth in IIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/8bf81bec1dc54c04acb6fec388744e9f). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) decreased to 54.1 in Apr from 55.7 in Mar, which indicates expansion at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/53537500330a406db888ccdfe834f91b). New foreign orders decreased. Chris Williamson, Chief Economist at Markit, finds that the index suggests restrain of foreign orders because of dollar appreciation (http://www.markiteconomics.com/Survey/PressRelease.mvc/53537500330a406db888ccdfe834f91b). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® changed 0.0 percentage points from 51.5 in Mar to 51.5 in Apr, which indicates growth at the same rate (https://www.instituteforsupplymanagement.org/ISMReport/MfgROB.cfm?navItemNumber=29317). The index of new orders increased 1.7 percentage points from 51.8 in Mar to 53.5 in Apr. The index of new export orders increased 4.0 percentage points from 47.5 in Mar to 51.5 in Apr, expanding at faster rate. The Non-Manufacturing ISM Report on Business^® PMI decreased 0.4 percentage points from 56.9 in Feb to 56.5 in Mar, indicating growth of business activity/production during 68 consecutive months, while the index of new orders increased 1.1 percentage points from 56.7 in Feb to 57.8 in Mar (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=29259). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Mar 12 months NSA ∆%: minus 0.1; ex food and energy ∆%: 1.8 Mar month SA ∆%: 0.2; ex food and energy ∆%: 0.2 Blog 4/19/15
Producer Price Index	Finished Goods Mar 12-month NSA ∆%: -3.3; ex food and energy ∆% 2.0 Mar month SA ∆% = 0.5; ex food and energy ∆%: 0.5 Final Demand Mar 12-month NSA ∆%: -0.8; ex food and energy ∆% 0.9 Mar month SA ∆% = 0.2; ex food and energy ∆%: 0.2 Blog 4/19/15
PCE Inflation	Mar 12-month NSA ∆%: headline 0.3; ex food and energy ∆% 1.3 Blog 5/3/15
Employment Situation	Household Survey: Mar Unemployment Rate SA 5.5% Blog calculation People in Job Stress Mar: 26.7 million NSA, 16.1% of Labor Force Establishment Survey: Mar Nonfarm Jobs +126,000; Private +129,000 jobs created  Feb 12-month Average Hourly Earnings Inflation Adjusted ∆%: 2.0 Blog 4/5/15
Nonfarm Hiring	Nonfarm Hiring fell from 63.3 million in 2006 to 54.2 million in 2013 or by 9.1 million and to 58.7 million in 2014 or by 4.6 million Private-Sector Hiring Feb 2015 3.998 million lower by 0.395 million than 4.393 million in Feb 2006 Blog 4/12/15
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.6 IIQ2012/IIQ2011 2.3 IIIQ2012/IIIQ2011 2.7 IVQ2012/IVQ2011 1.6 IQ2013/IQ2012 1.7 IIQ2013/IIQ2012 1.8 IIIQ2013/IIIQ2012 2.3 IVQ2013/IVQ2012 3.1 IQ2014/IQ2013 1.9 IIQ2014/IIQ2013 2.6 IIIQ2014/IIIQ2013 2.7 IVQ2014/IVQ2013 2.4 IQ2015/IVQ2014 3.0 IQ2012 SAAR 2.3 IIQ2012 SAAR 1.6 IIIQ2012 SAAR 2.5 IVQ2012 SAAR 0.1 IQ2013 SAAR 2.7 IIQ2013 SAAR 1.8 IIIQ2013 SAAR 4.5 IVQ2013 SAAR 3.5 IQ2014 SAAR -2.1 IIQ2014 SAAR 4.6 IIIQ2014 SAAR 5.0 IVQ2014 SAAR 2.2 IQ2015 SAAR 0.2 Blog 5/3/15
Real Private Fixed Investment	SAAR IQ2015 ∆% minus 2.5 IVQ2007 to IQ2015: 2.7% Blog 5/3/15
Corporate Profits	IVQ2014 SAAR: Corporate Profits -1.4; Undistributed Profits -6.6 Blog 3/29/15
Personal Income and Consumption	Mar month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% -0.2 Real Personal Consumption Expenditures (RPCE): 0.3 12-month Mar NSA ∆%: RDPI: 3.3; RPCE ∆%: 2.7 Blog 5/3/15
Quarterly Services Report	IVQ14/IVQ13 NSA ∆%: Information 4.6 Financial & Insurance 5.2 Blog 3/22/15
Employment Cost Index	Compensation Private IVQ2014 SA ∆%: 0.6 Dec 12 months ∆%: 2.3 Blog 2/1/15
Industrial Production	Mar month SA ∆%: -0.6 Mar 12 months SA ∆%: 2.0 Manufacturing Mar SA 0.1 ∆% Mar 12 months SA ∆% 2.4, NSA 2.4 Capacity Utilization: 78.9 Blog 4/19/15
Productivity and Costs	Nonfarm Business Productivity IVQ2014∆% SAAE -2.2; IVQ2014/IVQ2013 ∆% -0.1; Unit Labor Costs SAAE IVQ2014 ∆% 4.1; IVQ2014/IVQ2013 ∆%: 2.6 Blog 3/8/15
New York Fed Manufacturing Index	General Business Conditions From Mar 6.90 to Apr minus 1.19 New Orders: From Mar minus 2.39 to Apr minus 6.0 Blog 4/19/15
Philadelphia Fed Business Outlook Index	General Index from Mar 5.0 to Apr 7.5 New Orders from Mar 3.9 to Apr 0.7 Blog 4/19/15
Manufacturing Shipments and Orders	New Orders SA Feb ∆% 0.2 Ex Transport 0.8 Jan-Feb NSA New Orders ∆% minus 5.4 Ex transport minus 5.9 Blog 4/5/15
Durable Goods	Mar New Orders SA ∆%: 4.0; ex transport ∆%: minus 0.2 Jan-Mar 15/Jan-Mar 14 New Orders NSA ∆%: 0.1; ex transport ∆% -0.7 Blog 4/26/15
Sales of New Motor Vehicles	Apr 2015 5,409,495; Apr 2014 5,134,255. Apr 15 SAAR 16.50 million, Mar 15 SAAR 17.15 million, Apr 2014 SAAR 16.05 million Blog 5/3/15
Sales of Merchant Wholesalers	Jan-Feb 2015/Jan-Feb 2014 NSA ∆%: Total -2.6; Durable Goods: 3.4; Nondurable Goods: -7.6 Blog 4/12/15
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Feb 15 12-M NSA ∆%: Sales Total Business -1.6; Manufacturers -3.1 Retailers 0.6; Merchant Wholesalers -1.8 Blog 4/19/15
Sales for Retail and Food Services	Jan-Mar 2015/Jan-Mar 2014 ∆%: Retail and Food Services 2.1; Retail ∆% 1.3 Blog 4/19/15
Value of Construction Put in Place	Feb SAAR month SA ∆%: minus 0.1 Feb 12-month NSA:3.1 Blog 4/5/15
Case-Shiller Home Prices	Feb 2015/ Feb 2014 ∆% NSA: 10 Cities 4.8; 20 Cities: 5.0; National: 4.2 ∆% Feb SA: 10 Cities 0.9 ; 20 Cities: 0.9 Blog 5/3/15
FHFA House Price Index Purchases Only	Feb SA ∆% 0.7; 12 month NSA ∆%: 5.4 Blog 4/26/15
New House Sales	Mar 2015 month SAAR ∆%: minus 11.4 Jan-Mar 2015/Jan-Mar 2014 NSA ∆%: 20.6 Blog 4/26/15
Housing Starts and Permits	Mar Starts month SA ∆% 2.0; Permits ∆%: -5.7 Jan-Mar 2015/Jan-Mar 2014 NSA ∆% Starts 4.0; Permits  ∆% 7.2 Blog 4/19/15
Trade Balance	Balance Feb SA -$35,444 million versus Jan -$42,676 million Exports Feb SA ∆%: -1.6 Imports Feb SA ∆%: -4.4 Goods Exports Jan-Feb 2015/Feb 2014 NSA ∆%: -4.6 Goods Imports Jan-Feb 2015/Jan 2014 NSA ∆%: -3.5 Blog 4/5/15
Export and Import Prices	Mar 12-month NSA ∆%: Imports -10.5; Exports -6.7 Blog 4/12/15
Consumer Credit	Feb ∆% annual rate: Total 5.6; Revolving 5.6; Nonrevolving 9.4 Blog 4/12/15
Net Foreign Purchases of Long-term Treasury Securities	Feb Net Foreign Purchases of Long-term US Securities: minus $10.6 billion Major Holders of Treasury Securities: Japan $1224.4 billion; China $1223.7 billion; Total Foreign US Treasury Holdings Jan $6163 billion Blog 4/19/15
Treasury Budget	Fiscal Year 2015/2014 ∆% Mar: Receipts 7.3; Outlays 7.1; Individual Income Taxes 8.1 Deficit Fiscal Year 2011 $1,300 billion Deficit Fiscal Year 2012 $1,087 billion Deficit Fiscal Year 2013 $680 billion Deficit Fiscal Year 2014 $483 billion Blog 4/19/2015
CBO Budget and Economic Outlook	2012 Deficit $1087 B 6.8% GDP Debt $11,281 B 70.4% GDP 2013 Deficit $680 B, 4.1% GDP Debt $11,983 B 72.3% GDP 2014 Deficit $483 B 2.8% GDP Debt $12,779 B 74.1% GDP 2025 Deficit $1,088B, 4.0% GDP Debt $21,605B 78.7% GDP 2039: Long-term Debt/GDP 106% Blog 8/26/12 11/18/12 2/10/13 9/22/13 2/16/14 8/24/14 9/14/14 3/1/15
Commercial Banks Assets and Liabilities	Mar 2015 SAAR ∆%: Securities 0.2 Loans 10.9 Cash Assets 6.9 Deposits 4.8 Blog 4/26/15
Flow of Funds Net Worth of Families and Nonprofits	IVQ2014 ∆ since 2007 Assets +$15,921.0 BN Nonfinancial $898.5 BN Real estate $172.1 BN Financial +15,022.4 BN Net Worth +$16,162.4 BN Blog 3/29/15
Current Account Balance of Payments	IVQ2014 -111,222 MM % GDP 2.6 Blog 3/22/15
Collapse of United States Dynamism of Income Growth and Employment Creation	Blog 4/12/15
IMF View	World Real Economic Growth 2015 ∆% 3.5 Blog 4/26/15

Links to blog comments in Table USA:

4/26/2015 http://cmpassocregulationblog.blogspot.com/2015/04/imf-view-of-economy-and-finance-united.html

4/19/2015 http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html

4/12/15 http://cmpassocregulationblog.blogspot.com/2015/04/dollar-revaluation-recovery-without.html

4/5/15 http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html

3/29/15 http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html

3/22/15 http://cmpassocregulationblog.blogspot.com/2015/03/impatience-with-monetary-policy-of.html

3/8/15 http://cmpassocregulationblog.blogspot.com/2015/03/global-competitive-devaluation-rules.html

3/1/15 http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html

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

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

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

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

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

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

Motor vehicle sales and production in the US have been in long-term structural change. Table VA-1 provides the data on new motor vehicle sales and domestic car production in the US from 1990 to 2010. New motor vehicle sales grew from 14,137 thousand in 1990 to the peak of 17,806 thousand in 2000 or 29.5 percent. In that same period, domestic car production fell from 6,231 thousand in 1990 to 5,542 thousand in 2000 or -11.1 percent. New motor vehicle sales fell from 17,445 thousand in 2005 to 11,772 in 2010 or 32.5 percent while domestic car production fell from 4,321 thousand in 2005 to 2,840 thousand in 2010 or 34.3 percent. In Apr 2015, light vehicle sales accumulated to 5,409,495, which is higher by 5.4 percent relative to 5,134,255 a year earlier (http://motorintelligence.com/m_frameset.html). The seasonally adjusted annual rate of light vehicle sales in the US reached 16.50 million in Apr 2015, lower than 17.15 million in Mar 2015 and higher than 16.05 million in Apr 2014 (http://motorintelligence.com/m_frameset.html).

Table VA-1, US, New Motor Vehicle Sales and Car Production, Thousand Units

	New Motor Vehicle Sales	New Car Sales and Leases	New Truck Sales and Leases	Domestic Car Production
1990	14,137	9,300	4,837	6,231
1991	12,725	8,589	4,136	5,454
1992	13,093	8,215	4,878	5,979
1993	14,172	8,518	5,654	5,979
1994	15,397	8,990	6,407	6,614
1995	15,106	8,536	6,470	6,340
1996	15,449	8,527	6,922	6,081
1997	15,490	8,273	7,218	5,934
1998	15,958	8,142	7,816	5,554
1999	17,401	8,697	8,704	5,638
2000	17,806	8,852	8,954	5,542
2001	17,468	8,422	9,046	4,878
2002	17,144	8,109	9,036	5,019
2003	16,968	7,611	9,357	4,510
2004	17,298	7,545	9,753	4,230
2005	17,445	7,720	9,725	4,321
2006	17,049	7,821	9,228	4,367
2007	16,460	7,618	8,683	3,924
2008	13,494	6,814	6.680	3,777
2009	10,601	5,456	5,154	2,247
2010	11,772	5,729	6,044	2,840

Source: US Census Bureau

http://www.census.gov/compendia/statab/cats/wholesale_retail_trade/motor_vehicle_sales.html

Chart VA-1 of the Board of Governors of the Federal Reserve provides output of motor vehicles and parts in the United States from 1972 to 2015. Output virtually stagnated since the late 1990s.

Chart VA-1, US, Motor Vehicles and Parts Output, 1972-2015

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/Current/default.htm

Table IIA-4 summarizes the brutal drops in assets and net worth of US households and nonprofit organizations from 2007 to 2008 and 2009. Total assets fell $10.4 trillion or 12.7 percent from 2007 to 2008 and $8.8 trillion or 10.9 percent to 2009. Net worth fell $10.2 trillion from 2007 to 2008 or 15.3 percent and $8.5 trillion to 2009 or 12.7 percent. Subsidies to housing prolonged over decades together with interest rates at 1.0 percent from Jun 2003 to Jun 2004 inflated valuations of real estate and risk financial assets such as equities. The increase of fed funds rates by 25 basis points until 5.25 percent in Jun 2006 reversed carry trades through exotic vehicles such as subprime adjustable rate mortgages (ARM) and world financial markets. Short-term zero interest rates encourage financing of everything with short-dated funds, explaining the SIVs created off-balance sheet to issue short-term commercial paper to purchase default-prone mortgages that were financed in overnight or short-dated sale and repurchase agreements (Pelaez and Pelaez, Financial Regulation after the Global Recession, 50-1, Regulation of Banks and Finance, 59-60, Globalization and the State Vol. I, 89-92, Globalization and the State Vol. II, 198-9, Government Intervention in Globalization, 62-3, International Financial Architecture, 144-9).

Table IIA-4, Difference of Balance Sheet of Households and Nonprofit Organizations, Billions of Dollars from 2007 to 2008 and 2009

	2007	2008	Change to 2008	2009	Change to 2009
A	81,145.7	70,788.9	-10,356.8	72,314.1	-8,831.6
Non FIN	28,176.0	24,791.0	-3,385.0	23,699.6	-4,476.4
RE	23,366.5	19,856.8	-3,509.7	18,743.2	-4,623.3
FIN	52,969.8	45,997.8	-6,972.0	48,614.4	-4,355.4
LIAB	14,395.9	14,279.9	-116.0	14,063.4	-332.5
NW	66,749.8	56,508.9	-10,240.9	58,250.7	-8,499.1

A: Assets; Non FIN: Nonfinancial Assets; RE: Real Estate; FIN: Financial Assets; LIAB: Liabilities; NW: Net Worth

Source: Board of Governors of the Federal Reserve System. 2014. Flow of funds, balance sheets and integrated macroeconomic accounts: fourth quarter 2014. Washington, DC, Federal Reserve System, Mar 12. http://www.federalreserve.gov/releases/z1/.

The explanation of the sharp contraction of household wealth can probably be found in the origins of the financial crisis and global recession. Let V(T) represent the value of the firm’s equity at time T and B stand for the promised debt of the firm to bondholders and assume that corporate management, elected by equity owners, is acting on the interests of equity owners. Robert C. Merton (1974, 453) states:

“On the maturity date T, the firm must either pay the promised payment of B to the debtholders or else the current equity will be valueless. Clearly, if at time T, V(T) > B, the firm should pay the bondholders because the value of equity will be V(T) – B > 0 whereas if they do not, the value of equity would be zero. If V(T) ≤ B, then the firm will not make the payment and default the firm to the bondholders because otherwise the equity holders would have to pay in additional money and the (formal) value of equity prior to such payments would be (V(T)- B) < 0.”

Pelaez and Pelaez (The Global Recession Risk (2007), 208-9) apply this analysis to the US housing market in 2005-2006 concluding:

“The house market [in 2006] is probably operating with low historical levels of individual equity. There is an application of structural models [Duffie and Singleton 2003] to the individual decisions on whether or not to continue paying a mortgage. The costs of sale would include realtor and legal fees. There could be a point where the expected net sale value of the real estate may be just lower than the value of the mortgage. At that point, there would be an incentive to default. The default vulnerability of securitization is unknown.”

There are multiple important determinants of the interest rate: “aggregate wealth, the distribution of wealth among investors, expected rate of return on physical investment, taxes, government policy and inflation” (Ingersoll 1987, 405). Aggregate wealth is a major driver of interest rates (Ibid, 406). Unconventional monetary policy, with zero fed funds rates and flattening of long-term yields by quantitative easing, causes uncontrollable effects on risk taking that can have profound undesirable effects on financial stability. Excessively aggressive and exotic monetary policy is the main culprit and not the inadequacy of financial management and risk controls.

The net worth of the economy depends on interest rates. In theory, “income is generally defined as the amount a consumer unit could consume (or believe that it could) while maintaining its wealth intact” (Friedman 1957, 10). Income, Y, is a flow that is obtained by applying a rate of return, r, to a stock of wealth, W, or Y = rW (Ibid). According to a subsequent restatement: “The basic idea is simply that individuals live for many years and that therefore the appropriate constraint for consumption decisions is the long-run expected yield from wealth r*W. This yield was named permanent income: Y* = r*W” (Darby 1974, 229), where * denotes permanent. The simplified relation of income and wealth can be restated as:

W = Y/r (1)

Equation (1) shows that as r goes to zero, r →0, W grows without bound, W→∞.

Lowering the interest rate near the zero bound in 2003-2004 caused the illusion of permanent increases in wealth or net worth in the balance sheets of borrowers and also of lending institutions, securitized banking and every financial institution and investor in the world. The discipline of calculating risks and returns was seriously impaired. The objective of monetary policy was to encourage borrowing, consumption and investment but the exaggerated stimulus resulted in a financial crisis of major proportions as the securitization that had worked for a long period was shocked with policy-induced excessive risk, imprudent credit, high leverage and low liquidity by the incentive to finance everything overnight at close to zero interest rates, from adjustable rate mortgages (ARMS) to asset-backed commercial paper of structured investment vehicles (SIV).

The consequences of inflating liquidity and net worth of borrowers were a global hunt for yields to protect own investments and money under management from the zero interest rates and unattractive long-term yields of Treasuries and other securities. Monetary policy distorted the calculations of risks and returns by households, business and government by providing central bank cheap money. Short-term zero interest rates encourage financing of everything with short-dated funds, explaining the SIVs created off-balance sheet to issue short-term commercial paper to purchase default-prone mortgages that were financed in overnight or short-dated sale and repurchase agreements (Pelaez and Pelaez, Financial Regulation after the Global Recession, 50-1, Regulation of Banks and Finance, 59-60, Globalization and the State Vol. I, 89-92, Globalization and the State Vol. II, 198-9, Government Intervention in Globalization, 62-3, International Financial Architecture, 144-9). ARMS were created to lower monthly mortgage payments by benefitting from lower short-dated reference rates. Financial institutions economized in liquidity that was penalized with near zero interest rates. There was no perception of risk because the monetary authority guaranteed a minimum or floor price of all assets by maintaining low interest rates forever or equivalent to writing an illusory put option on wealth. Subprime mortgages were part of the put on wealth by an illusory put on house prices. The housing subsidy of $221 billion per year created the impression of ever increasing house prices. The suspension of auctions of 30-year Treasuries was designed to increase demand for mortgage-backed securities, lowering their yield, which was equivalent to lowering the costs of housing finance and refinancing. Fannie and Freddie purchased or guaranteed $1.6 trillion of nonprime mortgages and worked with leverage of 75:1 under Congress-provided charters and lax oversight. The combination of these policies resulted in high risks because of the put option on wealth by near zero interest rates, excessive leverage because of cheap rates, low liquidity because of the penalty in the form of low interest rates and unsound credit decisions because the put option on wealth by monetary policy created the illusion that nothing could ever go wrong, causing the credit/dollar crisis and global recession (Pelaez and Pelaez, Financial Regulation after the Global Recession, 157-66, Regulation of Banks, and Finance, 217-27, International Financial Architecture, 15-18, The Global Recession Risk, 221-5, Globalization and the State Vol. II, 197-213, Government Intervention in Globalization, 182-4).

There are significant elements of the theory of bank financial fragility of Diamond and Dybvig (1983) and Diamond and Rajan (2000, 2001a, 2001b) that help to explain the financial fragility of banks during the credit/dollar crisis (see also Diamond 2007). The theory of Diamond and Dybvig (1983) as exposed by Diamond (2007) is that banks funding with demand deposits have a mismatch of liquidity (see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 58-66). A run occurs when too many depositors attempt to withdraw cash at the same time. All that is needed is an expectation of failure of the bank. Three important functions of banks are providing evaluation, monitoring and liquidity transformation. Banks invest in human capital to evaluate projects of borrowers in deciding if they merit credit. The evaluation function reduces adverse selection or financing projects with low present value. Banks also provide important monitoring services of following the implementation of projects, avoiding moral hazard that funds be used for, say, real estate speculation instead of the original project of factory construction. The transformation function of banks involves both assets and liabilities of bank balance sheets. Banks convert an illiquid asset or loan for a project with cash flows in the distant future into a liquid liability in the form of demand deposits that can be withdrawn immediately.

In the theory of banking of Diamond and Rajan (2000, 2001a, 2001b), the bank creates liquidity by tying human assets to capital. The collection skills of the relationship banker convert an illiquid project of an entrepreneur into liquid demand deposits that are immediately available for withdrawal. The deposit/capital structure is fragile because of the threat of bank runs. In these days of online banking, the run on Washington Mutual was through withdrawals online. A bank run can be triggered by the decline of the value of bank assets below the value of demand deposits.

Pelaez and Pelaez (Regulation of Banks and Finance 2009b, 60, 64-5) find immediate application of the theories of banking of Diamond, Dybvig and Rajan to the credit/dollar crisis after 2007. It is a credit crisis because the main issue was the deterioration of the credit portfolios of securitized banks as a result of default of subprime mortgages. It is a dollar crisis because of the weakening dollar resulting from relatively low interest rate policies of the US. It caused systemic effects that converted into a global recession not only because of the huge weight of the US economy in the world economy but also because the credit crisis transferred to the UK and Europe. Management skills or human capital of banks are illustrated by the financial engineering of complex products. The increasing importance of human relative to inanimate capital (Rajan and Zingales 2000) is revolutionizing the theory of the firm (Zingales 2000) and corporate governance (Rajan and Zingales 2001). Finance is one of the most important examples of this transformation. Profits were derived from the charter in the original banking institution. Pricing and structuring financial instruments was revolutionized with option pricing formulas developed by Black and Scholes (1973) and Merton (1973, 1974, 1998) that permitted the development of complex products with fair pricing. The successful financial company must attract and retain finance professionals who have invested in human capital, which is a sunk cost to them and not of the institution where they work.

The complex financial products created for securitized banking with high investments in human capital are based on houses, which are as illiquid as the projects of entrepreneurs in the theory of banking. The liquidity fragility of the securitized bank is equivalent to that of the commercial bank in the theory of banking (Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 65). Banks created off-balance sheet structured investment vehicles (SIV) that issued commercial paper receiving AAA rating because of letters of liquidity guarantee by the banks. The commercial paper was converted into liquidity by its use as collateral in SRPs at the lowest rates and minimal haircuts because of the AAA rating of the guarantor bank. In the theory of banking, default can be triggered when the value of assets is perceived as lower than the value of the deposits. Commercial paper issued by SIVs, securitized mortgages and derivatives all obtained SRP liquidity on the basis of illiquid home mortgage loans at the bottom of the pyramid. The run on the securitized bank had a clear origin (Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 65):

“The increasing default of mortgages resulted in an increase in counterparty risk. Banks were hit by the liquidity demands of their counterparties. The liquidity shock extended to many segments of the financial markets—interbank loans, asset-backed commercial paper (ABCP), high-yield bonds and many others—when counterparties preferred lower returns of highly liquid safe havens, such as Treasury securities, than the risk of having to sell the collateral in SRPs at deep discounts or holding an illiquid asset. The price of an illiquid asset is near zero.”

Gorton and Metrick (2010H, 507) provide a revealing quote to the work in 1908 of Edwin R. A. Seligman, professor of political economy at Columbia University, founding member of the American Economic Association and one of its presidents and successful advocate of progressive income taxation. The intention of the quote is to bring forth the important argument that financial crises are explained in terms of “confidence” but as Professor Seligman states in reference to historical banking crises in the US the important task is to explain what caused the lack of confidence. It is instructive to repeat the more extended quote of Seligman (1908, xi) on the explanations of banking crises:

“The current explanations may be divided into two categories. Of these the first includes what might be termed the superficial theories. Thus it is commonly stated that the outbreak of a crisis is due to lack of confidence,--as if the lack of confidence was not in itself the very thing which needs to be explained. Of still slighter value is the attempt to associate a crisis with some particular governmental policy, or with some action of a country’s executive. Such puerile interpretations have commonly been confined to countries like the United States, where the political passions of democracy have had the fullest way. Thus the crisis of 1893 was ascribed by the Republicans to the impending Democratic tariff of 1894; and the crisis of 1907 has by some been termed the ‘[Theodore] Roosevelt panic,” utterly oblivious of the fact that from the time of President Jackson, who was held responsible for the troubles of 1837, every successive crisis had had its presidential scapegoat, and has been followed by a political revulsion. Opposed to these popular, but wholly unfounded interpretations, is the second class of explanations, which seek to burrow beneath the surface and to discover the more occult and fundamental causes of the periodicity of crises.”

Scholars ignore superficial explanations in the effort to seek good and truth. The problem of economic analysis of the credit/dollar crisis is the lack of a structural model with which to attempt empirical determination of causes (Gorton and Metrick 2010SB). There would still be doubts even with a well-specified structural model because samples of economic events do not typically permit separating causes and effects. There is also confusion is separating the why of the crisis and how it started and propagated, all of which are extremely important.

In true heritage of the principles of Seligman (1908), Gorton (2009EFM) discovers a prime causal driver of the credit/dollar crisis. The objective of subprime and Alt-A mortgages was to facilitate loans to populations with modest means so that they could acquire a home. These borrowers would not receive credit because of (1) lack of funds for down payments; (2) low credit rating and information; (3) lack of information on income; and (4) errors or lack of other information. Subprime mortgage “engineering” was based on the belief that both lender and borrower could benefit from increases in house prices over the short run. The initial mortgage would be refinanced in two or three years depending on the increase of the price of the house. According to Gorton (2009EFM, 13, 16):

“The outstanding amounts of Subprime and Alt-A [mortgages] combined amounted to about one quarter of the $6 trillion mortgage market in 2004-2007Q1. Over the period 2000-2007, the outstanding amount of agency mortgages doubled, but subprime grew 800%! Issuance in 2005 and 2006 of Subprime and Alt-A mortgages was almost 30% of the mortgage market. Since 2000 the Subprime and Alt-A segments of the market grew at the expense of the Agency (i.e., the government sponsored entities of Fannie Mae and Freddie Mac) share, which fell from almost 80% (by outstanding or issuance) to about half by issuance and 67% by outstanding amount. The lender’s option to rollover the mortgage after an initial period is implicit in the subprime mortgage. The key design features of a subprime mortgage are: (1) it is short term, making refinancing important; (2) there is a step-up mortgage rate that applies at the end of the first period, creating a strong incentive to refinance; and (3) there is a prepayment penalty, creating an incentive not to refinance early.”

The prime objective of successive administrations in the US during the past 20 years and actually since the times of Roosevelt in the 1930s has been to provide “affordable” financing for the “American dream” of home ownership. The US housing finance system is mixed with public, public/private and purely private entities. The Federal Home Loan Bank (FHLB) system was established by Congress in 1932 that also created the Federal Housing Administration in 1934 with the objective of insuring homes against default. In 1938, the government created the Federal National Mortgage Association, or Fannie Mae, to foster a market for FHA-insured mortgages. Government-insured mortgages were transferred from Fannie Mae to the Government National Mortgage Association, or Ginnie Mae, to permit Fannie Mae to become a publicly-owned company. Securitization of mortgages began in 1970 with the government charter to the Federal Home Loan Mortgage Corporation, or Freddie Mac, with the objective of bundling mortgages created by thrift institutions that would be marketed as bonds with guarantees by Freddie Mac (see Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 42-8). In the third quarter of 2008, total mortgages in the US were $12,057 billion of which 43.5 percent, or $5423 billion, were retained or guaranteed by Fannie Mae and Freddie Mac (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 45). In 1990, Fannie Mae and Freddie Mac had a share of only 25.4 percent of total mortgages in the US. Mortgages in the US increased from $6922 billion in 2002 to $12,088 billion in 2007, or by 74.6 percent, while the retained or guaranteed portfolio of Fannie and Freddie rose from $3180 billion in 2002 to $4934 billion in 2007, or by 55.2 percent.

According to Pinto (2008) in testimony to Congress:

“There are approximately 25 million subprime and Alt-A loans outstanding, with an unpaid principal amount of over $4.5 trillion, about half of them held or guaranteed by Fannie and Freddie. Their high risk activities were allowed to operate at 75:1 leverage ratio. While they may deny it, there can be no doubt that Fannie and Freddie now own or guarantee $1.6 trillion in subprime, Alt-A and other default prone loans and securities. This comprises over 1/3 of their risk portfolios and amounts to 34% of all the subprime loans and 60% of all Alt-A loans outstanding. These 10.5 million unsustainable, nonprime loans are experiencing a default rate 8 times the level of the GSEs’ 20 million traditional quality loans. The GSEs will be responsible for a large percentage of an estimated 8.8 million foreclosures expected over the next 4 years, accounting for the failure of about 1 in 6 home mortgages. Fannie and Freddie have subprimed America.”

In perceptive analysis of growth and macroeconomics in the past six decades, Rajan (2012FA) argues that “the West can’t borrow and spend its way to recovery.” The Keynesian paradigm is not applicable in current conditions. Advanced economies in the West could be divided into those that reformed regulatory structures to encourage productivity and others that retained older structures. In the period from 1950 to 2000, Cobet and Wilson (2002) find that US productivity, measured as output/hour, grew at the average yearly rate of 2.9 percent while Japan grew at 6.3 percent and Germany at 4.7 percent (see Pelaez and Pelaez, The Global Recession Risk (2007), 135-44). In the period from 1995 to 2000, output/hour grew at the average yearly rate of 4.6 percent in the US but at lower rates of 3.9 percent in Japan and 2.6 percent in the US. Rajan (2012FA) argues that the differential in productivity growth was accomplished by deregulation in the US at the end of the 1970s and during the 1980s. In contrast, Europe did not engage in reform with the exception of Germany in the early 2000s that empowered the German economy with significant productivity advantage. At the same time, technology and globalization increased relative remunerations in highly-skilled, educated workers relative to those without skills for the new economy. It was then politically appealing to improve the fortunes of those left behind by the technological revolution by means of increasing cheap credit. As Rajan (2012FA) argues:

“In 1992, Congress passed the Federal Housing Enterprises Financial Safety and Soundness Act, partly to gain more control over Fannie Mae and Freddie Mac, the giant private mortgage agencies, and partly to promote affordable homeownership for low-income groups. Such policies helped money flow to lower-middle-class households and raised their spending—so much so that consumption inequality rose much less than income inequality in the years before the crisis. These policies were also politically popular. Unlike when it came to an expansion in government welfare transfers, few groups opposed expanding credit to the lower-middle class—not the politicians who wanted more growth and happy constituents, not the bankers and brokers who profited from the mortgage fees, not the borrowers who could now buy their dream houses with virtually no money down, and not the laissez-faire bank regulators who thought they could pick up the pieces if the housing market collapsed. The Federal Reserve abetted these shortsighted policies. In 2001, in response to the dot-com bust, the Fed cut short-term interest rates to the bone. Even though the overstretched corporations that were meant to be stimulated were not interested in investing, artificially low interest rates acted as a tremendous subsidy to the parts of the economy that relied on debt, such as housing and finance. This led to an expansion in housing construction (and related services, such as real estate brokerage and mortgage lending), which created jobs, especially for the unskilled. Progressive economists applauded this process, arguing that the housing boom would lift the economy out of the doldrums. But the Fed-supported bubble proved unsustainable. Many construction workers have lost their jobs and are now in deeper trouble than before, having also borrowed to buy unaffordable houses. Bankers obviously deserve a large share of the blame for the crisis. Some of the financial sector’s activities were clearly predatory, if not outright criminal. But the role that the politically induced expansion of credit played cannot be ignored; it is the main reason the usual checks and balances on financial risk taking broke down.”

In fact, Raghuram G. Rajan (2005) anticipated low liquidity in financial markets resulting from low interest rates before the financial crisis that caused distortions of risk/return decisions provoking the credit/dollar crisis and global recession from IVQ2007 to IIQ2009. Near zero interest rates of unconventional monetary policy induced excessive risks and low liquidity in financial decisions that were critical as a cause of the credit/dollar crisis after 2007. Rajan (2012FA) argues that it is not feasible to return to the employment and income levels before the credit/dollar crisis because of the bloated construction sector, financial system and government budgets.

There are two approaches in theory considered by Bordo (2012Nov20) and Bordo and Lane (2013). The first approach is in the classical works of Milton Friedman and Anna Jacobson Schwartz (1963a, 1987) and Karl Brunner and Allan H. Meltzer (1973). There is a similar approach in Tobin (1969). Friedman and Schwartz (1963a, 66) trace the effects of expansionary monetary policy into increasing initially financial asset prices: “It seems plausible that both nonbank and bank holders of redundant balances will turn first to securities comparable to those they have sold, say, fixed-interest coupon, low-risk obligations. But as they seek to purchase these they will tend to bid up the prices of those issues. Hence they, and also other holders not involved in the initial central bank open-market transactions, will look farther afield: the banks, to their loans; the nonbank holders, to other categories of securities-higher risk fixed-coupon obligations, equities, real property, and so forth.”

The second approach is by the Austrian School arguing that increases in asset prices can become bubbles if monetary policy allows their financing with bank credit. Professor Michael D. Bordo provides clear thought and empirical evidence on the role of “expansionary monetary policy” in inflating asset prices (Bordo2012Nov20, Bordo and Lane 2013). Bordo and Lane (2013) provide revealing narrative of historical episodes of expansionary monetary policy. Bordo and Lane (2013) conclude that policies of depressing interest rates below the target rate or growth of money above the target influences higher asset prices, using a panel of 18 OECD countries from 1920 to 2011. Bordo (2012Nov20) concludes: “that expansionary money is a significant trigger” and “central banks should follow stable monetary policies…based on well understood and credible monetary rules.” Taylor (2007, 2009) explains the housing boom and financial crisis in terms of expansionary monetary policy.

Another hurdle of exit from zero interest rates is “competitive easing” that Professor Raghuram Rajan, governor of the Reserve Bank of India, characterizes as disguised “competitive devaluation” (http://www.centralbanking.com/central-banking-journal/interview/2358995/raghuram-rajan-on-the-dangers-of-asset-prices-policy-spillovers-and-finance-in-india). The fed has been considering increasing interest rates. The European Central Bank (ECB) announced, on Mar 5, 2015, the beginning on Mar 9, 2015 of its quantitative easing program denominated as Public Sector Purchase Program (PSPP), consisting of “combined monthly purchases of EUR 60 bn [billion] in public and private sector securities” (http://www.ecb.europa.eu/mopo/liq/html/pspp.en.html). Expectation of increasing interest rates in the US together with euro rates close to zero or negative cause revaluation of the dollar (or devaluation of the euro and of most currencies worldwide). US corporations suffer currency translation losses of their foreign transactions and investments (http://www.fasb.org/jsp/FASB/Pronouncement_C/SummaryPage&cid=900000010318) while the US becomes less competitive in world trade (Pelaez and Pelaez, Globalization and the State, Vol. I (2008a), Government Intervention in Globalization (2008c)). The DJIA fell 1.5 percent on Mar 6, 2015 and the dollar revalued 2.2 percent from Mar 5 to Mar 6, 2015. The euro has devalued 42.0 percent relative to the dollar from the high on Jul 15, 2008 to May 1, 2015.

Fri 27 Feb	Mon 3/2	Tue 3/3	Wed 3/4	Thu 3/5	Fri 3/6
USD/ EUR 1.1197 1.6% 0.0%	1.1185 0.1% 0.1%	1.1176 0.2% 0.1%	1.1081 1.0% 0.9%	1.1030 1.5% 0.5%	1.0843 3.2% 1.7%

Chair Yellen explained the removal of the word “patience” from the advanced guidance at the press conference following the FOMC meeting on Mar 18, 2015(http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20150318.pdf):

“In other words, just because we removed the word “patient” from the statement doesn’t mean we are going to be impatient. Moreover, even after the initial increase in the target funds rate, our policy is likely to remain highly accommodative to support continued progress toward our objectives of maximum employment and 2 percent inflation.”

Exchange rate volatility is increasing in response of “impatience” in financial markets with monetary policy guidance and measures:

Fri Mar 6	Mon 9	Tue 10	Wed 11	Thu 12	Fri 13
USD/ EUR 1.0843 3.2% 1.7%	1.0853 -0.1% -0.1%	1.0700 1.3% 1.4%	1.0548 2.7% 1.4%	1.0637 1.9% -0.8%	1.0497 3.2% 1.3%

Fri Mar 13	Mon 16	Tue 17	Wed 18	Thu 19	Fri 20
USD/ EUR 1.0497 3.2% 1.3%	1.0570 -0.7% -0.7%	1.0598 -1.0% -0.3%	1.0864 -3.5% -2.5%	1.0661 -1.6% 1.9%	1.0821 -3.1% -1.5%

Fri Apr 24	Mon 27	Tue 28	Wed 29	Thu 30	May Fri 1
USD/ EUR 1.0874 -0.6% -0.4%	1.0891 -0.2% -0.2%	1.0983 -1.0% -0.8%	1.1130 -2.4% -1.3%	1.1223 -3.2% -0.8%	1.1199 -3.0% 0.2%

The apparent improvement in Table IIA-4A is mostly because of increases in valuations of risk financial assets by the carry trade from zero interest rates to leveraged exposures in risk financial assets such as stocks, high-yield bonds, emerging markets, commodities and so on. Zero interest rates also act to increase net worth by reducing debt or liabilities. The net worth of households has become an instrument of unconventional monetary policy by zero interest rates in the theory that increases in net worth increase consumption that accounts for 68.5 percent of GDP in IVQ2014 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html), generating demand to increase aggregate economic activity and employment. There are neglected and counterproductive risks in unconventional monetary policy. Between 2007 and IVQ2014, real estate increased in value by $898.5 billion and financial assets increased $15,022.4 billion for net gain of real estate and financial assets of $15,920.9 billion, explaining most of the increase in net worth of $16,162.4 billion obtained by adding the decrease in liabilities of $241.4 billion to the increase of assets of $15,921.0 billion. Net worth increased from $66,749.8 billion in 2007 to $82,912.2 billion in IVQ2014 by $16,162.4 billion or 24.2 percent. The US consumer price index for all items increased from 210.036 in Dec 2007 to 234.812 in Dec 2014 (http://www.bls.gov/cpi/data.htm) or 11.8 percent. Net worth adjusted by CPI inflation increased 11.1 percent from 2007 to IVQ2014. Real estate assets adjusted for CPI inflation fell 9.9 percent from 2007 to IVQ2014. There are multiple complaints that unconventional monetary policy concentrates income on wealthier individuals because of their holdings of financial assets while the middle class has gained less because of fewer holdings of financial assets and higher share of real estate in family wealth. There is nothing new in these arguments. Interest rate ceilings on deposits and loans have been commonly used. The Banking Act of 1933 imposed prohibition of payment of interest on demand deposits and ceilings on interest rates on time deposits. These measures were justified by arguments that the banking panic of the 1930s was caused by competitive rates on bank deposits that led banks to engage in high-risk loans (Friedman, 1970, 18; see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 74-5). The objective of policy was to prevent unsound loans in banks. Savings and loan institutions complained of unfair competition from commercial banks that led to continuing controls with the objective of directing savings toward residential construction. Friedman (1970, 15) argues that controls were passive during periods when rates implied on demand deposit were zero or lower and when Regulation Q ceilings on time deposits were above market rates on time deposits. The Great Inflation or stagflation of the 1960s and 1970s changed the relevance of Regulation Q. Friedman (1970, 26-7) predicted the future:

“The banks have been forced into costly structural readjustments, the European banking system has been given an unnecessary competitive advantage, and London has been artificially strengthened as a financial center at the expense of New York.”

In short, Depression regulation exported the US financial system to London and offshore centers. What is vividly relevant currently from this experience is the argument by Friedman (1970, 27) that the controls affected the most people with lower incomes and wealth who were forced into accepting controlled-rates on their savings that were lower than those that would be obtained under freer markets. As Friedman (1970, 27) argues:

“These are the people who have the fewest alternative ways to invest their limited assets and are least sophisticated about the alternatives.” US economic growth has been at only 2.3 percent on average in the cyclical expansion in the 23 quarters from IIIQ2009 to IQ2015. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the first estimate of GDP for IQ2015 (http://www.bea.gov/newsreleases/national/gdp/2015/pdf/gdp1q15_adv.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,745.9 billion in IIQ2010 by GDP of $14,355.6 billion in IIQ2009 {[$14,745.9/$14,355.6 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.9 percent, 5.4 percent from IQ1983 to IIIQ1986, 5.2 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988 and at 7.8 percent from IQ1983 to IVQ1983 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2015 would have accumulated to 23.9 percent. GDP in IQ2015 would be $18,574.8 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,270.0 billion than actual $16,304.8 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.7 million unemployed or underemployed equivalent to actual unemployment/underemployment of 16.1 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/03/global-competitive-devaluation-rules.html). US GDP in IQ2015 is 12.2 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,304.8 billion in IQ2015 or 8.8 percent at the average annual equivalent rate of 1.2 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth at average 3.3 percent per year from Mar 1919 to Mar 2015. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 125.5771 in Mar 2015. The actual index NSA in Mar 2015 is 101.8045, which is 18.9 percent below trend. Manufacturing output grew at average 2.4 percent between Dec 1986 and Dec 2014, raising the index at trend to 117.2305 in Mar 2015. The output of manufacturing at 101.8045 in Mar 2015 is 13.2 percent below trend under this alternative calculation.

Table IIA-4A, US, Difference of Balance Sheet of Households and Nonprofit Organizations Billions of Dollars from 2007 to 2011, 2013 and IVQ2014

	Value 2007	Change to 2011	Change to 2013	Change to IVQ2014
Assets	81,145.7	-3,904.2	11,489.9	15,921.0
Nonfinancial	28,176.0	-4,800.9	-487.5	898.5
Real Estate	23,366.5	-5,117.0	-1,051.3	172.1
Financial	52,969.8	896.5	11,977.4	15,022.4
Liabilities	14,395.9	-822.1	-604.5	-241.4
Net Worth	66,749.8	-3,082.1	12,094.4	16,162.4

Net Worth = Assets – Liabilities

Source: Net Worth = Assets – Liabilities

Source: Board of Governors of the Federal Reserve System.

Source: Board of Governors of the Federal Reserve System. 2014. Flow of funds, balance sheets and integrated macroeconomic accounts: fourth quarter 2014. Washington, DC, Federal Reserve System, Mar 12. http://www.federalreserve.gov/releases/z1/.

The comparison of net worth of households and nonprofit organizations in the entire economic cycle from IQ1980 (and from IVQ1979) to IIQ1988 and from IVQ2007 to IVQ2014 is provided in Table IIA-5. The data reveal the following facts for the cycles in the 1980s:

• IVQ1979 to IIQ1988. Net worth increased 108.9 percent from IVQ1979 to IIQ1988, the all items CPI index increased 53.8 percent from 76.7 in Dec 1979 to 118.0 in Jun 1988 and real net worth increased 35.8 percent.
• IQ1980 to IVQ1985. Net worth increased 65.4 percent, the all items CPI index increased 36.5 percent from 80.1 in Mar 1980 to 109.3 in Dec 1985 and real net worth increased 21.2 percent.
• IVQ1979 to IVQ1985. Net worth increased 68.8 percent, the all items CPI index increased 42.5 percent from 76.7 in Dec 1979 to 109.3 in Dec 1985 and real net worth increased 18.5 percent.
• IQ1980 to IIQ1988. Net worth increased 104.6 percent, the all items CPI index increased 47.3 percent from 80.1 in Mar 1980 to 118.0 in Jun 1988 and real net worth increased 38.9 percent.

There is disastrous performance in the current economic cycle:

• IVQ2007 to IVQ2014. Net worth increased 24.2 percent, the all items CPI increased 11.8 percent from 210.036 in Dec 2007 to 234.812 in Dec 2014 and real or inflation adjusted net worth increased 11.1 percent. Real estate assets adjusted for inflation fell 9.9 percent.

The explanation is partly in the sharp decline of wealth of households and nonprofit organizations and partly in the mediocre growth rates of the cyclical expansion beginning in IIIQ2009. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.3 percent on average in the cyclical expansion in the 23 quarters from IIIQ2009 to IQ2015. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the first estimate of GDP for IQ2015 (http://www.bea.gov/newsreleases/national/gdp/2015/pdf/gdp1q15_adv.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,745.9 billion in IIQ2010 by GDP of $14,355.6 billion in IIQ2009 {[$14,745.9/$14,355.6 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.9 percent, 5.4 percent from IQ1983 to IIIQ1986, 5.2 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988 and at 7.8 percent from IQ1983 to IVQ1983 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2015 would have accumulated to 23.9 percent. GDP in IQ2015 would be $18,574.8 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,270.0 billion than actual $16,304.8 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.7 million unemployed or underemployed equivalent to actual unemployment/underemployment of 16.1 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/03/global-competitive-devaluation-rules.html). US GDP in IQ2015 is 12.2 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,304.8 billion in IQ2015 or 8.8 percent at the average annual equivalent rate of 1.2 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth at average 3.3 percent per year from Mar 1919 to Mar 2015. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 125.5771 in Mar 2015. The actual index NSA in Mar 2015 is 101.8045, which is 18.9 percent below trend. Manufacturing output grew at average 2.4 percent between Dec 1986 and Dec 2014, raising the index at trend to 117.2305 in Mar 2015. The output of manufacturing at 101.8045 in Mar 2015 is 13.2 percent below trend under this alternative calculation.

Table IIA-5, Net Worth of Households and Nonprofit Organizations in Billions of Dollars, IVQ1979 to IVQ1985 and IVQ2007 to IVQ2012

Period IQ1980 to IIQ1988
Net Worth of Households and Nonprofit Organizations USD Millions
IVQ1979 IQ1980	9,047.8 9,238.6
IVQ1985 IIIQ1986 IVQ1986 IQ1987 IIQ1987 IIIQ1987 IVQ1987 IQ1988 II1988	15,277.2 16,290.7 16,840.3 17,494.6 17,784.0 18,195.2 18,021.9 18,459.2 18,900.2
∆ USD Billions IVQ1985 IVQ1979 to IIQ1988 IQ1980-IVQ1985 IQ1980-IIIQ1986 IQ1980-IVQ1986 IQ1980-IQ1987 IQ1980-IIQ1987 IQ1980-IIIQ1987 IQ1980-IVQ1987 IQ1980-IQ1988 IQ1980-IIQ1988	+6,229.4  ∆%68.8 R∆%18.5 +9852.4  ∆%108.9 R∆%35.8 +6,038.6 ∆%65.4 R∆%21.2 +7,052.1 ∆%76.3 R∆%28.2 +7,601.7 ∆%82.3 R∆%32.1 +8,256.0 ∆%89.4 R∆%35.3 +8,545.4 ∆%92.5 R∆%35.9 +8,956.6 ∆%96.9 R∆%37.2 +8783.3 ∆%95.1 R∆%35.4 +9226.6 ∆%100.2 R∆%37.6 +9661.6 ∆%104.6 R∆38.9
Period IVQ2007 to IVQ2014
Net Worth of Households and Nonprofit Organizations USD Millions
IVQ2007	66,749.8
IVQ2014	82,912.2
∆ USD Billions	+16,162.4 ∆%24.2 R∆%11.1

Net Worth = Assets – Liabilities. R∆% real percentage change or adjusted for CPI percentage change.

Source: Board of Governors of the Federal Reserve System. 2014. Flow of funds, balance sheets and integrated macroeconomic accounts: fourth quarter 2014. Washington, DC, Federal Reserve System, Mar 12. http://www.federalreserve.gov/releases/z1/.

Chart IIA-1 of the Board of Governors of the Federal Reserve System provides US wealth of households and nonprofit organizations from IVQ2007 to IIIQ2014. There is remarkable stop and go behavior in this series with two sharp declines and two standstills in the 22 quarters of expansion of the economy beginning in IIIQ2009. The increase in net worth of households and nonprofit organizations is the result of increases in valuations of risk financial assets and compressed liabilities resulting from zero interest rates. Wealth of households and nonprofits organization increased 11.1 percent from IVQ2007 to IVQ2014 when adjusting for consumer price inflation.

Chart IIA-1, Net Worth of Households and Nonprofit Organizations in Millions of Dollars, IVQ2007 to IVQ2014

Source: Board of Governors of the Federal Reserve System. 2014. Flow of funds, balance sheets and integrated macroeconomic accounts: fourth quarter 2014. Washington, DC, Federal Reserve System, Mar 12. http://www.federalreserve.gov/releases/z1/.

Chart IIA-2 of the Board of Governors of the Federal Reserve System provides US wealth of households and nonprofit organizations from IVQ1979 to IIQ1988. There are changes in the rates of growth of wealth suggested by the changing slopes but there is smooth upward trend. There was significant financial turmoil during the 1980s. Benston and Kaufman (1997, 139) find that there was failure of 1150 US commercial and savings banks between 1983 and 1990, or about 8 percent of the industry in 1980, which is nearly twice more than between the establishment of the Federal Deposit Insurance Corporation in 1934 through 1983. More than 900 savings and loans associations, representing 25 percent of the industry, were closed, merged or placed in conservatorships (see Pelaez and Pelaez, Regulation of Banks and Finance (2008b), 74-7). The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) created the Resolution Trust Corporation (RTC) and the Savings Association Insurance Fund (SAIF) that received $150 billion of taxpayer funds to resolve insolvent savings and loans. The GDP of the US in 1989 was $5657.7 billion (http://www.bea.gov/iTable/index_nipa.cfm), such that the partial cost to taxpayers of that bailout was around 2.65 percent of GDP in a year. US GDP in 2014 is estimated at $17,418.9 billion, such that the bailout would be equivalent to cost to taxpayers of about $461.6 billion in current GDP terms. A major difference with the Troubled Asset Relief Program (TARP) for private-sector banks is that most of the costs were recovered with interest gains whereas in the case of savings and loans there was no recovery. Money center banks were under extraordinary pressure from the default of sovereign debt by various emerging nations that represented a large share of their net worth (see Pelaez 1986). Net worth of households and nonprofit organizations increased 108.9 percent from IVQ1979 to IIQ1988 and 35.8 percent when adjusting for consumer price inflation. Net worth of households and nonprofit organizations increased 104.6 percent from IQ1980 to IIQ1988 and 38.9 percent when adjusting for consumer price inflation.

Chart IIA-2, Net Worth of Households and Nonprofit Organizations in Millions of Dollars, IVQ1979 to IIQ1988

Source: Board of Governors of the Federal Reserve System. 2014. Flow of funds, balance sheets and integrated macroeconomic accounts: fourth quarter 2014. Washington, DC, Federal Reserve System, Mar 12. http://www.federalreserve.gov/releases/z1/.

Chart IIA-3 of the Board of Governors of the Federal Reserve System provides US wealth of households and nonprofit organizations from IVQ1945 at $767.3 billion to IVQ2014 at $82,912.2 billion or increase of 10,705.7 percent. The consumer price index not seasonally adjusted was 18.2 in Dec 1945 jumping to 234.812 in Dec 2014 or increase of 1,190.2 percent. There was a gigantic increase of US net worth of households and nonprofit organizations over 69 years with inflation-adjusted increase from $42.159 in dollars of 1945 to $353.100 in IVQ2014 or 737.5 percent. In a simple formula: {[($82,912.2/$767.3)/(234.812/18.2)-1]100 = 737.5%}. Wealth of households and nonprofit organizations increased from $767.3 billion at year-end 1945 to $82,912.2 billion at the end of IVQ2014 or 10,705.7 percent. The consumer price index increased from 18.2 in Dec 1945 to 234.812 in Dec 2014 or 1190.2 percent. Net wealth of households and nonprofit organizations in dollars of 1945 increased from $42.159 in 1945 to $353.100 in IVQ2014 or 737.5 percent at the average yearly rate of 3.1 percent. US real GDP grew at the average rate of 2.9 percent from 1945 to 2014 (http://www.bea.gov/iTable/index_nipa.cfm). The combination of collapse of values of real estate and financial assets during the global recession of IVQ2007 to IIQ2009 caused sharp contraction of net worth of US households and nonprofit organizations. Recovery has been in stop-and-go fashion during the worst cyclical expansion in the 68 years when US GDP grew at 2.2 percent on average in the twenty-three quarters between IIIQ2009 and IQ2015 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html). US GDP was $228.2 billion in 1945 and net worth of households and nonprofit organizations $767.3 billion for ratio of wealth to GDP of 3.36. The ratio of net worth of households and nonprofits of $66,749.8 billion in 2007 to GDP of $14,477.6 billion was 4.61. The ratio of net worth of households and nonprofits of $82,912.2 billion in 2014 to GDP of 17,418.9 billion was 4.75. The final data point in Chart IIA-3 is net worth of household and nonprofit institutions at $82,912.2 billion in IVQ2014 for increase of 10,705.7 percent relative to $767.3 billion in IVQ1945. CPI adjusted net worth of household and nonprofit institutions increased from $42.159 in IVQ1945 to $353.100 in IVQ2014 or 737.5 percent at the annual equivalent rate of 3.1 percent.

Chart IIA-3, Net Worth of Households and Nonprofit Organizations in Millions of Dollars, IVQ1945 to IVQ2014

Source: Board of Governors of the Federal Reserve System. 2014. Flow of funds, balance sheets and integrated macroeconomic accounts: fourth quarter 2014. Washington, DC, Federal Reserve System, Mar 12. http://www.federalreserve.gov/releases/z1/

Table IIA-6 shows the euphoria of prices during the housing boom and the subsequent decline. House prices rose 94.3 percent in the 10-city composite of the Case-Shiller home price index, 77.2 percent in the 20-city composite and 61.0 percent in the US national home price index between Feb 2000 and Feb 2005. Prices rose around 100 percent from Feb 2000 to Feb 2006, increasing 121.6 percent for the 10-city composite, 101.7 percent for the 20-city composite and 80.5 percent in the US national index. House prices rose 36.4 percent between Feb 2003 and Feb 2005 for the 10-city composite, 31.1 percent for the 20-city composite and 26.2 percent for the US national propelled by low fed funds rates of 1.0 percent between Jun 2003 and Jun 2004. Fed funds rates increased by 0.25 basis points at every meeting of the Federal Open Market Committee (FOMC) from Jun 2004 until Jun 2006, reaching 5.25 percent. Simultaneously, the suspension of auctions of the 30-year Treasury bond caused decline of yields of mortgage-backed securities with intended decrease in mortgage rates. Similarly, between Feb 2003 and Feb 2006, the 10-city index gained 55.6 percent, the 20-city index increased 49.2 percent and the US national 41.4 percent. House prices have fallen from Feb 2006 to Feb 2015 by 15.6 percent for the 10-city composite, 14.5 percent for the 20-city composite and 8.1 percent for the US national. Measuring house prices is quite difficult because of the lack of homogeneity that is typical of standardized commodities. In the 12 months ending in Feb 2015, house prices increased 4.8 percent in the 10-city composite, increased 5.0 percent in the 20-city composite and 4.2 percent in the US national. Table IIA-6 also shows that house prices increased 87.1 percent between Feb 2000 and Feb 2015 for the 10-city composite and increased 72.4 percent for the 20-city composite and 65.9 percent for the US national. House prices are close to the lowest level since peaks during the boom before the financial crisis and global recession. The 10-city composite fell 16.6 percent from the peak in Jun 2006 to Feb 2015 and the 20-city composite fell 15.9 percent from the peak in Jul 2006 to Feb 2015. The US national fell 9.6 percent from the peaks of the 10-city to Feb 2015 and 9.7 percent from the peak of the 20-city composite to Feb 2015. The final part of Table II-2 provides average annual percentage rates of growth of the house price indexes of Standard & Poor’s Case-Shiller. The average annual growth rate between Dec 1987 and Dec 2014 for the 10-city composite was 3.7 percent and 3.4 percent for the US national. Data for the 20-city composite are available only beginning in Jan 2000. House prices accelerated in the 1990s with the average rate of the 10-city composite of 5.0 percent between Dec 1992 and Dec 2000 while the average rate for the period Dec 1987 to Dec 2000 was 3.8 percent. The average rate for the US national was 3.4 percent from Dec 1987 to Dec 2014 and 3.6 percent from Dec 1987 to Dec 2000. Although the global recession affecting the US between IVQ2007 (Dec) and IIQ2009 (Jun) caused decline of house prices of slightly above 30 percent, the average annual growth rate of the 10-city composite between Dec 2000 and Dec 2014 was 3.7 percent while the rate of the 20-city composite was 3.2 percent and 3.1 percent for the US national.

Table IIA-1, US, Percentage Changes of Standard & Poor’s Case-Shiller Home Price Indices, Not Seasonally Adjusted, ∆%

	10-City Composite	20-City Composite	US National
∆% Feb 2000 to Feb 2003	42.4	35.2	27.6
∆% Feb 2000 to Feb 2005	94.3	77.2	61.0
∆% Feb 2003 to Feb 2005	36.4	31.1	26.2
∆% Feb 2000 to Feb 2006	121.6	101.7	80.5
∆% Feb 2003 to Feb 2006	55.6	49.2	41.4
∆% Feb 2005 to Feb 2015	-3.7	-2.7	3.0
∆% Feb 2006 to Feb 2015	-15.6	-14.5	-8.1
∆% Feb 2009 to Feb 2015	22.0	21.4	13.0
∆% Feb 2010 to Feb 2015	20.3	20.6	16.6
∆% Feb 2011 to Feb 2015	23.8	24.9	21.1
∆% Feb 2012 to Feb 2015	28.6	29.5	24.4
∆% Feb 2013 to Feb 2015	18.6	18.5	14.9
∆% Feb 2014 to Feb 2015	4.8	5.0	4.2
∆% Feb 2000 to Feb 2015	87.1	72.4	65.9
∆% Peak Jun 2006 Feb 2015	-16.6		-9.6
∆% Peak Jul 2006 Feb 2015		-15.9	-9.7
Average ∆% Dec 1987-Dec 2014	3.7	NA	3.4
Average ∆% Dec 1987-Dec 2000	3.8	NA	3.6
Average ∆% Dec 1992-Dec 2000	5.0	NA	4.5
Average ∆% Dec 2000-Dec 2014	3.7	3.2	3.1

Source: http://us.spindices.com/index-family/real-estate/sp-case-shiller

Price increases measured by the Case-Shiller house price indices show “larger year-over-year increases” throughout the US with increases in prices in fourteen cities in the 12 months ending in Jan 2015 (https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/173348_cshomeprice-release-0428.pdf?force_download=true). Monthly house prices increased sharply from Feb 2013 to Jan 2014 for both the 10- and 20-city composites, as shown in Table IIA-7. In Jan 2013, the seasonally adjusted 10-city composite increased 0.9 percent and the 20-city increased 1.0 percent while the 10-city not seasonally adjusted changed 0.0 percent and the 20-city changed 0.0 percent. House prices increased at high monthly percentage rates from Feb to Nov 2013. With the exception of Mar through Apr 2012, house prices seasonally adjusted declined in every month for both the 10-city and 20-city Case-Shiller composites from Dec 2010 to Jan 2012, as shown in Table I-6. The most important seasonal factor in house prices is school changes for wealthier homeowners with more expensive houses. Without seasonal adjustment, house prices fell from Dec 2010 throughout Mar 2011 and then increased in every month from Apr to Aug 2011 but fell in every month from Sep 2011 to Feb 2012. The not seasonally adjusted index registers decline in Mar 2012 of 0.1 percent for the 10-city composite and is flat for the 20-city composite. Not seasonally adjusted house prices increased 1.4 percent in Apr 2012 and at high monthly percentage rates until Sep 2012. House prices not seasonally adjusted stalled from Oct 2012 to Jan 2013 and surged from Feb to Sep 2013, decelerating in Oct 2013-Feb 2014. House prices grew at fast rates in Mar 2014. The 10-city NSA index increased 0.5 percent in Feb 2015 and the 20-city increased 0.5 percent. The 10-city SA increased 0.9 percent in Feb 2015 and the 20-city composite SA increased 0.9 percent. Declining house prices cause multiple adverse effects of which two are quite evident. (1) There is a disincentive to buy houses in continuing price declines. (2) More mortgages could be losing fair market value relative to mortgage debt. Another possibility is a wealth effect that consumers restrain purchases because of the decline of their net worth in houses.

Table IIA-2, US, Monthly Percentage Change of S&P Case-Shiller Home Price Indices, Seasonally Adjusted and Not Seasonally Adjusted, ∆%

	10-City Composite SA	10-City Composite NSA	20-City Composite SA	20-City Composite NSA
Feb 2015	0.9	0.5	0.9	0.5
Jan	0.9	-0.1	0.9	-0.1
Dec 2014	0.9	0.1	0.9	0.1
Nov	0.7	-0.3	0.8	-0.2
Oct	0.6	-0.2	0.7	-0.1
Sep	0.2	-0.1	0.3	-0.1
Aug	-0.1	0.1	-0.1	0.2
Jul	-0.4	0.6	-0.4	0.6
Jun	-0.1	1.0	-0.2	1.0
May	-0.4	1.1	-0.4	1.1
Apr	0.1	1.1	0.1	1.2
Mar	1.3	0.8	1.3	0.9
Feb	0.5	0.0	0.5	0.0
Jan	0.9	-0.1	0.8	-0.1
Dec 2013	0.8	-0.1	0.7	-0.1
Nov	0.9	0.0	0.9	-0.1
Oct	1.0	0.2	1.0	0.2
Sep	1.0	0.7	1.0	0.7
Aug	1.0	1.3	1.0	1.3
Jul	0.9	1.9	0.8	1.8
Jun	1.0	2.2	1.0	2.2
May	1.0	2.5	1.0	2.5
Apr	1.7	2.6	1.5	2.6
Mar	1.8	1.3	1.8	1.3
Feb	0.9	0.3	0.8	0.2
Jan	0.9	0.0	1.0	0.0
Dec 2012	1.0	0.2	1.0	0.2
Nov	0.7	-0.3	0.8	-0.2
Oct	0.6	-0.2	0.7	-0.1
Sep	0.5	0.3	0.6	0.3
Aug	0.5	0.8	0.6	0.9
Jul	0.4	1.5	0.5	1.6
Jun	0.9	2.1	1.1	2.3
May	0.8	2.2	0.9	2.4
Apr	0.5	1.4	0.5	1.4
Mar	0.4	-0.1	0.5	0.0
Feb	-0.3	-0.9	-0.1	-0.8
Jan	-0.2	-1.1	-0.1	-1.0
Dec 2011	-0.4	-1.2	-0.3	-1.1
Nov	-0.5	-1.4	-0.5	-1.3
Oct	-0.6	-1.3	-0.6	-1.4
Sep	-0.4	-0.6	-0.5	-0.7
Aug	-0.3	0.1	-0.3	0.1
Jul	-0.1	0.9	-0.1	1.0
Jun	-0.1	1.0	0.0	1.2
May	-0.3	1.0	-0.3	1.0
Apr	-0.2	0.6	-0.3	0.6
Mar	-0.4	-1.0	-0.5	-1.0
Feb	-0.5	-1.3	-0.4	-1.2
Jan	-0.2	-1.1	-0.2	-1.1
Dec 2010	-0.2	-0.9	-0.2	-1.0

Source: http://us.spindices.com/index-family/real-estate/sp-case-shiller

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/mopo/outlook/gor1504b.pdf) with changes on Jul 21, 2015 (https://www.boj.or.jp/en/announcements/release_2015/k150121a.pdf). For fiscal 2015, the forecast is of growth of GDP between 1.5 to 2.1 percent, with the all items CPI less fresh food 0.2 to 1.2 to 3.3 percent (https://www.boj.or.jp/en/mopo/outlook/gor1504b.pdf). The critical difference is forecast of the CPI excluding fresh food of 0.2 to 1.2 percent in 2015 and 1.2 to 2.2 percent in 2016 (https://www.boj.or.jp/en/mopo/outlook/gor1504b.pdf). Consumer price inflation in Japan excluding fresh food was minus 0.4 percent in Mar 2014 and 2.2 percent in 12 months (http://www.stat.go.jp/english/data/cpi/1581.htm), significantly because of the increase of the tax on value added of consumption in Apr 2014. The new monetary policy of the Bank of Japan aims to increase inflation to 2 percent. These forecasts are biannual in Apr and Oct. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:

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

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

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

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

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

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

Table VB-BOJF 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:

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

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

Fiscal Year Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2013
Apr 2014	+2.2 to +2.3 [+2.2]	+0.8
Jan 2014	+2.5 to +2.9 [+2.7]	+0.7 to +0.9 [+0.7]
Oct 2013	+2.6 to +3.0 [+2.7]	+0.6 to +1.0 [+0.7]
Jul 2013	+2.5 to +3.0 [+2.8]	+0.5 to +0.8 [+0.6]
2014
Apr 2015	-1.0 to -0.8 [-0.9]	+2.8	+0.8
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
Apr 2015	+1.5 to +2.1 [+2.0]	+0.2 to 1.2 [+0.8]	+0.2 to 1.2 [+0.8]
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
Apr 2015	+1.4 to +1.8 [+1.5]	+1.2 to +2.2 [+2.0]	+1.2 to +2.2 [+2.0]
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]
2017
Apr 2015	+0.1 to +0.5 [+0.2]	+2.7 to +3.4 [+3.2]	+1.4 to +2.1 [+1.9]

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

Source: Policy Board, Bank of Japan

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

https://www.boj.or.jp/en/mopo/outlook/gor1504b.pdf

The Markit/JMMA Flash Japan Manufacturing PMI Index™ with the Flash Japan Manufacturing PMI™ decreased from 50.3 in Mar to 49.7 in Apr and the Flash Japan Manufacturing Output Index™ decreased from 52.0 in Mar to 49.7 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/2c56e9c9e3ad4210be7839132c683da4). New export orders increased at slower pace. Amy Brownbill, Economist at Markit, finds weaker improvement in Japan’s manufacturing with devaluation of the yen relative to the dollar enhancing competitiveness (http://www.markiteconomics.com/Survey/PressRelease.mvc/2c56e9c9e3ad4210be7839132c683da4). The Markit Composite Output PMI Index decreased from 50.0 in Feb to 48.4 in Mar, indicating mildly deteriorating business activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/74103110a2a2461e922e8e3112487235). The Markit Business Activity Index of Services decreased to 48.4 in Mar from 48.5 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/74103110a2a2461e922e8e3112487235). Amy Brownbill, Ecoomist at Markit and author of the report, finds weak current conditions with positive business expectations (http://www.markiteconomics.com/Survey/PressRelease.mvc/74103110a2a2461e922e8e3112487235). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 50.3 in Mar to 49.9 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/5d78d5dab2e248818c2dd7292148740a). New orders declined while growth of foreign orders slowed. Amy Brownbill, Economist at Markit, finds manufacturing contracting with slowing growth foreign orders even with devaluation of the yen (http://www.markiteconomics.com/Survey/PressRelease.mvc/5d78d5dab2e248818c2dd7292148740a).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	Mar ∆% 0.3 12 months ∆% 0.7 Blog 4/19/15
Consumer Price Index	Mar NSA ∆% 0.4; Mar 12 months NSA ∆% 2.3 Blog 5/3/15
Real GDP Growth	IVQ2014 ∆%: 0.4 on IIIQ2014;  IVQ2014 SAAR 1.5; ∆% from quarter a year earlier: -0.8 % 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 3/15/15
Employment Report	Mar Unemployed 2.28 million Change in unemployed since last year: minus 180 thousand Unemployment rate: 3.4 % Blog 5/3/15
All Industry Indices	Feb month SA ∆% 0.1 12-month NSA ∆% -1.2 Blog 4/26/15
Industrial Production	Feb SA month ∆%: -3.4 12-month NSA ∆% -2.6 Blog 3/29/15
Machine Orders	Total Feb ∆% -1.4 Private ∆%: -10.4 Feb ∆% Excluding Volatile Orders minus 0.4 Blog 4/19/15
Tertiary Index	Feb month SA ∆% 0.3 Feb 12 months NSA ∆% minus -0.4 Blog 4/26/15
Wholesale and Retail Sales	Feb 12 months: Total ∆%: -3.1 Wholesale ∆%: -3.7 Retail ∆%: -1.8 Blog 3/29/15
Family Income and Expenditure Survey	Feb 12-month ∆% total nominal consumption -0.4, real -2.9 Blog 3/29/15
Trade Balance	Exports Mar 12 months ∆%: 8.5 Imports Mar 12 months ∆% -14.5 Blog 4/26/15

Links to blog comments in Table JPY:

4/26/2015 http://cmpassocregulationblog.blogspot.com/2015/04/imf-view-of-economy-and-finance-united.html

4/19/2015 http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html

3/29/15 http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html

3/15/15 http://cmpassocregulationblog.blogspot.com/2015/03/global-exchange-rate-struggle-recovery.html

2/22/15 http://cmpassocregulationblog.blogspot.com/2015/02/world-financial-turbulence-squeeze-of.html

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

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

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

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

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

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

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

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

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

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

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

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

The employment report for Japan in Mar 2015 is in Table VB-1. The number unemployed reached 2.28 million in Mar 2015, declining 180 thousand from a year earlier or 7.3 percent. The rate of unemployment not seasonally adjusted reached 3.5 percent, decreasing 0.3 percentage points from a year earlier. Population decreased 0.1 percent from a year earlier. The labor force changed 0.0 percentage points from a year earlier and the labor participation rate stood at 59.1, changing 0.0 percentage points from a year earlier. The employment rate moved to 57.1 percent, which is higher by 0.3 percentage points relative to a year earlier.

Table VB-1, Japan, Employment Report Mar 2015 

Mar 2015 Unemployed	2.28 million
Change since last year	-180 thousand; ∆% –7.3
Unemployment rate	SA 3.4%, -0.1 from earlier month; NSA 3.5%, -0.3 from earlier year
Population ≥ 15 years	110.74 million
Change since last year	∆% -0.1
Labor Force	65.47 million
Change since last year	∆% 0.0
Employed	63.19 million
Change since last year	∆% 0.3
Labor force participation rate	59.1
Change since last year	0.0
Employment rate	57.1%
Change since last year	0.3

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

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

Table VB-2 provides the rate of unemployment of Japan seasonally adjusted that decreased to 3.4 percent in Jan 2014 from 4.4 percent in May 2012. The rate of unemployment SA fell 0.1 percentage points from 3.5 percent in Feb 2014 to 3.4 percent in Mar 2015.

Table VB-2, Japan, Unemployment Rate, SA

	Unemployment Rate SA
Mar 2015	3.4
Feb	3.5
Jan	3.6
Dec 2014	3.4
Nov	3.5
Oct	3.5
Sep	3.6
Aug	3.5
Jul	3.7
Jun	3.7
May	3.6
Apr	3.6
Mar	3.6
Feb	3.6
Jan	3.7
Dec 2013	3.7
Nov	3.9
Oct	4.0
Sep	4.0
Aug	4.1
Jul	3.8
Jun	3.9
May	4.1
Apr	4.1
Mar	4.1
Feb	4.3
Jan	4.2
Dec 2012	4.3
Nov	4.1
Oct	4.1
Sep	4.3
Aug	4.2
Jul	4.4
Jun	4.3
May	4.4

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

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

Chart VB-1 of Japan’s Statistics Bureau at the Ministry of Internal Affairs and Communications provides the unemployment rate of Japan from 2012 to 2014. There is clear trend of decline with multiple oscillations and increase in Jun-Jul 2014. The rate increased in Sep 2014 and fell in Oct 2014, stabilizing in Nov 2014 and declining in Dec 2014. The rate decreased in Feb-Mar 2015.

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

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

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

During the “lost decade” of the 1990s from 1991 to 2002 (Pelaez and Pelaez, The Global Recession Risk (2007), 82-3), Japan’s GDP grew at the average yearly rate of 1.0 percent, the CPI at 0.1 percent and the implicit deflator at minus 0.8 percent. Japan’s growth rate from the mid-1970s to 1992 was 4 percent (Ito 2004). Table VB-3 provides Japan’s rates of unemployment, participation in labor force and employment for selected years from 1953 to 1985 and yearly from 1990 to 2015. The rate of unemployment jumped from 2.1 percent in 1991 to 5.4 percent in 2002, which was a year of global economic weakness. The participation rate dropped from 64.0 percent in 1992 to 61.2 percent in 2002 and the employment rate fell from 62.6 percent in 1992 to 57.9 percent in 2002. The rate of unemployment rose from 3.9 percent in 2007 to 5.1 percent in 2010, falling to 4.6 percent in 2011, 4.3 percent in 2012 and 3.6 percent in 2014. The participation rate fell from 60.4 percent in 2007 to 59.6 percent in 2010, falling to 59.3 percent in 2011 and 59.1 in 2012 and increasing to 59.4 percent in 2014. The employment rate fell from 58.1 in percent in 2007 to 56.6 percent in 2010 and 56.5 percent in 2011 and 2012, increasing to 57.3 percent in 2014. The global recession adversely affected labor markets in advanced economies.

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

	Participation Rate	Employment Rate	Unemployment Rate
1953	70.0	68.6	1.9
1960	69.2	68.0	1.7
1965	65.7	64.9	1.2
1970	65.4	64.6	1.1
1975	63.0	61.9	1.9
1980	63.3	62.0	2.0
1985	63.0	61.4	2.6
1990	63.3	61.9	2.1
1991	63.8	62.4	2.1
1992	64.0	62.6	2.2
1993	63.8	62.2	2.5
1994	63.6	61.8	2.9
1995	63.4	61.4	3.2
1996	63.5	61.4	3.4
1997	63.7	61.5	3.4
1998	63.3	60.7	4.1
1999	62.9	59.9	4.7
2000	62.4	59.5	4.7
2001	62.0	58.9	5.0
2002	61.2	57.9	5.4
2003	60.8	57.6	5.3
2004	60.4	57.6	4.7
2005	60.4	57.7	4.4
2006	60.4	57.9	4.1
2007	60.4	58.1	3.9
2008	60.2	57.8	4.0
2009	59.9	56.9	5.1
2010	59.6	56.6	5.1
2011	59.3	56.5	4.6
2012	59.1	56.5	4.3
2013	59.3	56.9	4.0
2014	59.4	57.3	3.6

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

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

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 Mar 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 50.3 in Mar 2015.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Mar 2015	53.7	50.3	50.0	48.4	58.8
Feb	53.9	51.2	52.5	51.2	58.7
Jan	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 Mar 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 50.1 in Mar 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 Mar 2015.

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

	IPM	PI	NOI	INV	EMP	SDEL
2015
Mar	50.1	52.1	50.2	48.0	48.4	50.1
Feb	49.9	51.4	50.4	48.2	47.8	49.9
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 50.1 in Mar 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 IQ2015 relative to the same period in 2014 was 7.0 percent, as shown in Table VC-GDP. Secondary industry accounts for 42.9 percent of cumulative GDP in IQ2015. In cumulative IQ2015, industry accounts for 38.0 percent of GDP and construction for 5.1 percent. Tertiary industry accounts for 51.6 percent of cumulative GDP in IQ2015 and primary industry for 5.5 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 8.2 percent in IIQ2014. Annual equivalent growth slowed to 7.8 percent in IIIQ2014 and 6.1 percent in IVQ2014. Growth slowed to annual equivalent 5.3 percent in IQ2015.

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

Cumulative GDP IVQ2014	Value Current CNY Billion	IQ2015 Year-on-Year Constant Prices ∆%
GDP	14,066.7	7.0
Primary Industry	777.0	3.2
Farming	807.9	3.3
Secondary Industry	6,029.2	6.4
Industry	5,345.2	6.1
Construction	715.0	8.8
Tertiary Industry	7,260.5	7.9
Transport, Storage, Post	707.2	5.5
Wholesale, Retail Trades	1,346.0	5.8
Accommodation and Restaurants	255.9	5.3
Finance	1,366.9	15.9
Real Estate	970.3	2.0
Other	2,552.4	9.0
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2015
IQ2015	1.3	5.3
2014
IVQ2014	1.5	6.1
IIIQ2014	1.9	7.8
IIQ2014	2.0	8.2
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/

Cumulative growth of China’s GDP in IQ2015 relative to the same period in 2014 was 7.0 percent, as shown in Table VC-GDPA. Secondary industry accounts for 42.6 percent of cumulative GDP in IVQ2014. Secondary industry accounts for 42.9 percent of cumulative GDP in IQ2015. In cumulative IQ2015, industry accounts for 38.0 percent of GDP and construction for 5.1 percent. Tertiary industry accounts for 51.6 percent of cumulative GDP in IQ2015 and primary industry for 5.5 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. 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 2.0 percent relative to the prior quarter, which is equivalent 8.2 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. In IQ2015, GDP grew 1.3 percent, which is equivalent in a year to a year earlier.

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

	IQ2015
GDP	7.0
Primary Industry	3.2
Secondary Industry	6.4
Tertiary Industry	7.9
GDP ∆% Relative to a Prior Quarter	1.3
	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	2.0	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/42e219843597406983d9e4633c324d53) is weakening. The overall Flash HSBC China Manufacturing PMI^™ decreased from 49.6 in Mar to 49.2 in Apr, while the Flash HSBC China Manufacturing Output Index decreased from 51.3 in Mar to 50.4 in Apr, indicating moderate growth. Exports orders indicate expansion. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds moderate deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/42e219843597406983d9e4633c324d53). The HSBC China Services PMI^™, compiled by Markit, shows the HSBC Composite Output, combining manufacturing and services, unchanged from 51.8 in Feb to 51.8 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/9a0545fb09ca43af984c9e78444837d5). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds modest output growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/9a0545fb09ca43af984c9e78444837d5). The HSBC China Services Business Activity index increased from 52.0 in Feb to 52.3 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/9a0545fb09ca43af984c9e78444837d5). Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds that the services PMI shows sustained activity at modest pace (http://www.markiteconomics.com/Survey/PressRelease.mvc/9a0545fb09ca43af984c9e78444837d5). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, decreased to 49.6 in Mar from 50.7 in Feb, indicating moderate deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/2c31cfa7df914ac09be4c0b5d1da2988). New export orders declined modestly. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds weak internal and external demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/2c31cfa7df914ac09be4c0b5d1da2988). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Mar 12-month ∆%: minus 4.6 Mar month ∆%: -0.1 Blog 4/12/15
Consumer Price Index	Mar 12-month ∆%: 1.4 Feb month ∆%: -0.5 Blog 4/12/15
Value Added of Industry	Mar month ∆%: 0.25 Jan-Mar 2015/Jan-Mar 2014 ∆%: 6.4 Blog 4/19/15
GDP Growth Rate	Year IQ2015 ∆%: 7.0 First Quarter 2015 ∆%: 7.0 Quarter IQ2015 AE ∆%: 5.3 Blog 4/26/15
Investment in Fixed Assets	Total Jan-Mar 2015 ∆%: 13.5 Real estate development: 8.5 Blog 4/19/15
Retail Sales	Mar month ∆%: 0.71 Jan-Mar 12 month ∆%: NA Jan-Mar ∆%: 10.6 Blog 4/19/15
Trade Balance	Mar balance $3.08 billion Exports 12M ∆% -15.0 Imports 12M ∆% -12.7 Cumulative Mar 2015: $124.03 billion Blog 4/19/15

Links to blog comments in Table CNY:

4/26/2015 http://cmpassocregulationblog.blogspot.com/2015/04/imf-view-of-economy-and-finance-united.html

4/19/2015 http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html

4/12/15 http://cmpassocregulationblog.blogspot.com/2015/04/dollar-revaluation-recovery-without.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 1999. Growth was very strong at 3.3 percent in 2006 and 3.1 percent in 2007. The global recession had strong impact with growth of only 0.5 percent in 2008 and decline of 4.5 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 0.8 percent in 2012 and minus 0.4 percent in 2013 but 0.9 percent in 2014.

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

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	9.7	2.9
2000	2.2	8.9	3.8
2001	2.4	8.3	2.1
2002	2.3	8.6	0.9
2003	2.1	9.1	0.7
2004	2.2	9.3	2.2
2005	2.2	9.1	1.7
2006	2.2	8.4	3.3
2007	2.2	7.5	3.1
2008	3.3	7.6	0.5
2009	0.3	9.6	-4.5
2010	1.6	10.2	2.0
2011	2.7	10.2	1.6
2012	2.5	11.4	-0.8
2013	1.3	12.0	-0.4
2014	0.4	11.6	0.9

http://ec.europa.eu/eurostat

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

The GDP of the euro area in 2013 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $12,753.7 billion or 17.1 percent of world GDP of $74,699.3 billion (http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/weoselgr.aspx). The sum of the GDP of France $2807.3 billion with the GDP of Germany of $3635.9 billion, Italy of $2071.9 billion and Spain $1358.7 billion is $9873.8 billion or 77.4 percent of total euro area GDP and 13.2 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 2014. 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
2014	0.9	1.6	0.4	-0.4	1.4
2013	-0.4	0.1	0.3	-1.7	-1.2
2012	-0.8	0.4	0.3	-2.8	-2.1
2011	1.6	3.6	2.1	0.6	-0.6
2010	2.0	4.1	2.0	1.7	0.0
2009	-4.5	-5.6	-2.9	-5.5	-3.6
2008	0.5	1.1	0.2	-1.0	1.1
2007	3.1	3.3	2.4	1.5	3.8
2006	3.3	3.7	2.4	2.0	4.2
2005	1.7	0.7	1.6	0.9	3.7
2004	2.2	1.2	2.8	1.6	3.2
2003	0.7	-0.7	0.8	0.2	3.2
2002	0.9	0.0	1.1	0.3	2.9
2001	2.1	1.7	2.0	1.8	4.0
2000	3.8	3.0	3.9	3.7	5.3
1999	2.9	2.0	3.4	1.6	4.5
1998	2.9	2.0	3.6	1.4	4.3
1997	2.6	1.8	2.3	1.8	3.7
1996	1.6	0.8	1.4	1.3	2.7

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, decreased from 54.0 in Mar to 53.5 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/8a6a0f50febb4223a82a464ad147e9fd). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests GDP growth at around 0.4 percent in IIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/8a6a0f50febb4223a82a464ad147e9fd). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP increased from 53.3 in Feb to 54.0 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/3de234401ab34b9fa89ccae8af205624). Chris Williamson, Chief Economist at Markit, finds slowing growth of GDP at around 0.3 percent in IQ2015 with improved prospects in coming months (http://www.markiteconomics.com/Survey/PressRelease.mvc/3de234401ab34b9fa89ccae8af205624). The Markit Eurozone Services Business Activity Index increased from 53.7 in Feb to 54.2 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/3de234401ab34b9fa89ccae8af205624). The Markit Eurozone Manufacturing PMI^® increased from 51.0 in Feb to 51.9 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/75a84292bf394732a98dc4a53cad080c). New export orders increased. Chris Williamson, Chief Economist at Markit, finds improvement of industrial growth in the euro area (http://www.markiteconomics.com/Survey/PressRelease.mvc/75a84292bf394732a98dc4a53cad080c). 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 3/15/15
Unemployment	Mar 2015: 11.3 % unemployment rate; Mar 2015: 18.105 million unemployed Blog 5/3/15
HICP	Mar month ∆%: 1.1 12 months Mar ∆%: -0.1 Blog 4/19/15
Producer Prices	Euro Zone industrial producer prices Feb ∆%: 0.5 Feb 12-month ∆%: -2.8 Blog 4/12/15
Industrial Production	Feb month ∆%: 1.1; Feb 12 months ∆%: 1.6 Blog 4/19/15
Retail Sales	Jan month ∆%: 1.1 Jan 12 months ∆%: 3.7 Blog 3/15/15
Confidence and Economic Sentiment Indicator	Sentiment 103.9 Mar 2015 Consumer minus 3.7 Mar 2015 Blog 4/5/15
Trade	Jan-Feb 2015/Jan-Feb 2014 Exports ∆%: 1.8 Imports ∆%: -2.8 Feb 2015 12-month Exports ∆% 4.1 Imports ∆% 0.4 Blog 4/19/15

Links to blog comments in Table EUR:

4/19/2015 http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html

4/12/15 http://cmpassocregulationblog.blogspot.com/2015/04/dollar-revaluation-recovery-without.html

4/5/15 http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html

3/15/15 http://cmpassocregulationblog.blogspot.com/2015/03/global-exchange-rate-struggle-recovery.html

EUROSTAT estimates the rate of unemployment in the euro area at 11.3 percent in

Mar 2015, as shown in Table VD-1. The number of unemployed in Mar 2015 was 18.105 million, which was 0.679 million lower than 18.784 million in Mar 2014. The rate of unemployment fell from 11.7 percent in Mar 2014 to 11.3 percent in Mar 2015.

Table VD-1, Euro Area, Unemployment Rate and Number of Unemployed, % and Millions, SA 

	Unemployment Rate %	Number Unemployed Millions
Mar 2015	11.3	18.105
Feb	11.3	18.141
Jan	11.3	18.219
Dec 2014	11.4	18.330
Nov	11.5	18.523
Oct	11.5	18.522
Sep	11.5	18.524
Aug	11.5	18.503
Jul	11.6	18.626
Jun	11.6	18.553
May	11.6	18.654
Apr	11.7	18.658
Mar	11.7	18.784
Feb	11.8	18.865
Jan	11.9	18.969
Dec 2013	11.9	18.971
Nov	11.9	19.059
Oct	11.9	19.117
Sep	12.0	19.254
Aug	12.0	19.255
Jul	12.0	19.266
Jun	12.1	19.322
May	12.1	19.343
Apr	12.1	19.332
Mar	12.1	19.286
Feb	12.0	19.275
Jan	12.0	19.226
Dec 2012	11.9	19.010
Nov	11.8	18.902
Oct	11.7	18.779
Sep	11.6	18.512
Aug	11.5	18.379
Jul	11.5	18.353
Jun	11.4	18.281
May	11.3	18.062
Apr	11.2	17.905
Mar	11.1	17.639
Feb	10.9	17.360
Jan	10.7	17.117
Dec 2011	10.7	17.076
Nov	10.6	16.943
Oct	10.5	16.663
Sep	10.4	16.499
Aug	10.2	16.259
Jul	10.1	16.092
Jun	10.0	15.884
May	10.0	15.827
Apr	9.9	15.685
Mar	10.0	15.773
Feb	10.0	15.792
Jan	10.1	15.912
Dec 2010	10.1	16.008

Source: EUROSTAT

http://ec.europa.eu/eurostat

Table VD-2 shows the disparity in rates of unemployment in the euro area with 11.3 percent for the region as a whole and 18.105 million unemployed but 4.7 percent in Germany and 1.970 million unemployed. At the other extreme is Spain with rate of unemployment of 23.0 percent and 5.241 million unemployed. The rate of unemployment of the European Union in Mar 2015 is 9.8 percent with 23.748 million unemployed.

Table VD-2, Unemployed and Unemployment Rate in Countries and Regions, Millions and %

Mar 2015	Unemployment Rate %	Unemployed Millions
Euro Zone	11.3	18.105
Germany	4.7	1.970
France	10.6	3.115
Netherlands	7.0	0.626
Finland	9.1	0.246
Portugal	13.5	0.693
Ireland	9.8	0.209
Italy	13.0	3.302
Greece	25.7*	1.221*
Spain	23.0	5.241
Belgium	8.5	0.429
European Union	9.8	23.748

*Jan 2015

Source: EUROSTAT

http://ec.europa.eu/eurostat

Chart VD-1 of EUROSTAT illustrates the wide difference in rates of unemployment in countries and regions.

Chart VD-1, Unemployment Rate in Various Countries and Regions

Source: EUROSTAT

http://ec.europa.eu/eurostat

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 1.6 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-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	1.6	1.6
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

https://www.destatis.de/EN/PressServices/Press/pr/2015/02/PE15_61_811.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, decreased from 55.4 in Mar to 54.2 in Apr. The index of manufacturing output reached 53.9 in Apr, decreasing from 55.5 in Mar, while the index of services decreased to 54.4 in Apr from 55.4 in Mar. The overall Flash Germany Manufacturing PMI^® decreased from 52.8 in Mar to 51.9 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/70eb1bd5cc374ea99998072b6f324c02). New orders in manufacturing expanded moderately. Oliver Kolodseike, Economist at Markit, finds continuing GDP growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/70eb1bd5cc374ea99998072b6f324c02). 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 53.8 in Feb to 55.4 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/126dd4b9c0244796bf59910d40f88ef8). Oliver Kolodseike, Senior Economist at Markit and author of the report, finds improvement in 2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/126dd4b9c0244796bf59910d40f88ef8). The Germany Services Business Activity Index increased from 54.7 in Feb to 55.4 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/126dd4b9c0244796bf59910d40f88ef8). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 51.1 in Feb to 52.8 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/d6d0b52b742b427f9b808a09fd84eb80). New export orders increased. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds improvement of manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/d6d0b52b742b427f9b808a09fd84eb80).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IVQ2014 0.7 ∆%; IV/Q2014/IVQ2013 ∆% 1.6 2014/2013: 1.6% GDP ∆% 1970-2014 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 3/1/15
Consumer Price Index	Mar month NSA ∆%: 0.5 Mar 12-month NSA ∆%: 0.3 Blog 4/19/15
Producer Price Index	Mar month ∆%: 0.1 NSA, 0.1 CSA 12-month NSA ∆%: -1.7 Blog 4/26/15
Industrial Production	MFG Feb month CSA ∆%: 0.6 12-month NSA: -1.2 Blog 4/12/15
Machine Orders	MFG Feb month ∆%: -0.9 Feb 12-month ∆%: -2.4 Blog 4/12/15
Retail Sales	Feb Month ∆% -0.5 12-Month ∆% 3.6 Blog 4/5/15
Employment Report	Unemployment Rate SA Mar 4.7% Blog 5/3/15
Trade Balance	Exports Feb 12-month NSA ∆%: 3.9 Imports Feb 12 months NSA ∆%: 0.8 Exports Feb month CSA ∆%: 1.5; Imports Feb month CSA 1.8 Blog 4/12/15

Links to blog comments in Table DE:

4/26/2015 http://cmpassocregulationblog.blogspot.com/2015/04/imf-view-of-economy-and-finance-united.html

4/19/2015 http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html

4/12/15 http://cmpassocregulationblog.blogspot.com/2015/04/dollar-revaluation-recovery-without.html

4/5/15 http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html

3/1/15 http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html

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

Germany’s labor market continues to show strength not found in most of the advanced economies, as shown in Table VE-1A. The number unemployed, not seasonally adjusted, decreased from 2.23 million in Mar 2014 to 2.02 million in Mar 2015, or 9.4 percent, while the unemployment rate decreased from 5.4 percent in Mar 2014 to 4.8 percent in Mar 2015. The number of persons in employment, not seasonally adjusted, increased from 39.13 million in Mar 2014 to 39.73 million in Mar 2015, or 0.3 percent, while the employment rate increased from 63.8 percent in Mar 2014 to 64.6 percent in Mar 2015. The number unemployed, seasonally adjusted, decreased from 1.99 million in Feb 2015 to 1.97 million in Mar 2015, while the unemployment rate fell did not change 4.7 percent in Feb 2015 to 4.7 percent in Mar 2015. The number of persons in employment, seasonally adjusted, increased from 40.04 million in Feb 2015 to 40.06 million in Mar 2015, or change of 0.0 percent. The employment rate seasonally adjusted did not change from 65.2 in Feb 2015 to 65.2 in Mar 2015.

Table VE-1A, Germany, Unemployment Labor Force Survey

	Mar 2015	Feb 2015	Mar 2014
NSA
Number Unemployed Millions	2.02 ∆% Mar 2015 /Feb 2015: -8.6 ∆% Mar 2015/Mar 2014: -9.4	2.21	2.23
% Rate Unemployed	4.8	5.3	5.4
Persons in Employment Millions	39.73 ∆% Mar 2015/ Feb 2015: 0.3 ∆% Mar 2015/Mar 2014: 1.5	39.62	39.13
Employment Rate	64.6	64.5	63.8
SA
Number Unemployed Millions	1.97 ∆% Mar 2015/ Feb  2015: -1.0 ∆% Mar 2015/Mar 2014: –6.6	1.99	2.11
% Rate Unemployed	4.7	4.7	5.0
Persons in Employment Millions	40.06 ∆% Mar 2015/ Feb 2015: 0.0 ∆% Mar 2015/Mar 2014: 1.1	40.04	39.63
Employment Rate	65.2	65.2	64.7

NSA: not seasonally adjusted; SA: seasonally adjusted

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2015/04/PE15_157_132.html

The unemployment rate in Germany as percent of the labor force in Table VE-2A stood at 6.5 percent in Sep, Oct and Nov 2012, increasing to 6.7 percent in Dec 2012, 7.4 percent in Jan 2013, 7.3 in Mar 2013 and 7.1 percent in Apr 2013. The unemployment rate fell to 6.8 percent in May 2013 and 6.6 percent in Jun 2013 and rose to 6.8 percent in Jul-Aug 2013. The rate fell to 6.6 percent in Sep 2013 and 6.5 percent in Oct 2013 and Nov 2013. The unemployment rate increased to 6.7 percent in Dec 2013 and 7.3 percent in Jan 2013. The unemployment rate reached 7.3 percent in Feb 2014 and 7.1 percent in Mar 2014. The unemployment rate fell to 6.8 percent in Apr 2014 and 6.6 percent in May 2014. The unemployment rate fell to 6.5 percent in Jun 2014, increasing to 6.6 percent in Jun 2014 and 6.7 percent in Aug 2014. The unemployment rate fell to 6.5 percent in Sep 2014 and 6.3 percent in Oct 2014 and Nov 2014. The unemployment rate increase to 6.4 percent in Dec 2014 and 7.0 percent in Jan 2015, falling to 6.9 percent in Feb 2015 and 6.8 percent in Mar 2015. The unemployment rate fell to 6.5 percent in Apr 2015. The rate is much lower than 11.1 percent in 2005 and 9.6 percent in 2006.

Table VE-2A, Germany, Unemployment Rate in Percent of Labor Force

Apr 2015	6.5
Mar	6.8
Feb	6.9
Jan	7.0
Dec 2014	6.4
Nov	6.3
Oct	6.3
Sep	6.5
Aug	6.7
Jul	6.6
Jun	6.5
May	6.6
Apr	6.8
Mar	7.1
Feb	7.3
Jan	7.3
Dec 2013	6.7
Nov	6.5
Oct	6.5
Sep	6.6
Aug	6.8
Jul	6.8
Jun	6.6
May	6.8
Apr	7.1
Mar	7.3
Feb	7.4
Jan	7.4
Dec 2012	6.7
Nov	6.5
Oct	6.5
Sep	6.5
Aug	6.8
Jul	6.8
Jun	6.6
May	6.7
Apr	7.0
Mar	7.2
Feb	7.4
Jan	7.3
Dec 2011	6.6
Nov	6.4
Oct	6.5
Sep	6.6
Aug	7.0
Jul	7.0
Jun	6.9
May	7.0
Apr	7.3
Mar	7.6
Feb	7.9
Jan	7.9
Dec 2010	7.1
Dec 2009	7.8
Dec 2008	7.4
Dec 2007	8.1
Dec 2006	9.6
Dec 2005	11.1

Source: Statistisches Bundesamt Deutschland

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

Chart VE-1A of Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, shows the long-term decline of the rate of unemployment in Germany from more than 12 percent in early 2005 to 6.6 percent in Dec 2011, increasing to 6.7 percent in Dec 2012, 6.8 percent in Apr 2013 and 6.6 percent in May 2013. The unemployment rate rose slightly to 6.8 percent in Aug 2013, falling to 6.6 percent in Sep 2013 and 6.5 percent in Oct 2013. The rate remained at 6.5 percent in Nov 2013, increasing to 6.7 percent in Dec 2013 and 7.3 in Jan 2014. The rate remained at 7.3 percent in Feb 2014, declining to 7.1 percent in Mar 2014. The rate fell to 6.8 percent in Apr 2014, 6.6 percent in May 2014 and 6.5 percent in Jun 2014. The rate increased to 6.6 percent in Jul 2014 and 6.7 percent in Aug 2014, falling to 6.5 percent in Sep 2014. The rate fell to 6.3 percent in Oct 2014 and 6.3 percent in Nov 2014, increasing to 6.4 percent in Dec 2014. The rate increased to 7.0 percent in Jan 2015, falling to 6.9 percent in Feb 2015 and 6.8 percent in Mar 2015. The unemployment rate fell to 6.5 percent in Apr 2015.

Chart VE-1A, Germany, Unemployment Rate, Unadjusted, Percent

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.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=28&date=20150326

The Markit Flash France Composite Output Index decreased from 51.5 in Mar to 50.2 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/56aafaccd22143ffbf3442285bf568f4). Jack Kennedy, Senior Economist at Markit and author of the report, finds stalling growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/56aafaccd22143ffbf3442285bf568f4). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, decreased from 52.2 in Feb to 51.5 in Mar, indicating expansion at slower pace (http://www.markiteconomics.com/Survey/PressRelease.mvc/49268c6ccda04350a1a73584cd782a22). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds continuing improvement (http://www.markiteconomics.com/Survey/PressRelease.mvc/49268c6ccda04350a1a73584cd782a22). The Markit France Services Activity index decreased from 53.4 in Feb to 52.4 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/49268c6ccda04350a1a73584cd782a22). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 48.8 in Mar from 47.6 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/c04a6a98761641fa94caae56d7a4b327). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds slower deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/c04a6a98761641fa94caae56d7a4b327). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Mar month ∆% 0.7 12 months ∆%: -0.1 4/19/15
PPI	Mar month ∆%: 0.0 Mar 12 months ∆%: -2.1 Blog 5/3/15
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 3/29/15
Industrial Production	Feb ∆%: Manufacturing 0.0 12-Month ∆%: Manufacturing -0.8 Blog 4/12/15
Consumer Spending	Manufactured Goods Feb ∆%: -0.1 Feb 12-Month Manufactured Goods ∆%: 2.4 Blog 4/5/15
Employment	Unemployment Rate: IVQ2014 10.0% Blog 3/15/15
Trade Balance	Feb Exports ∆%: month 1.4, 12 months 3.0 Feb Imports ∆%: month 0.6, 12 months 1.5 Blog 4/12/15
Confidence Indicators	Historical average 100 Apr Mfg Business Climate 101.0 Blog 3/29/15

Links to blog comments in Table FR:

4/19/2015 http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html

4/12/15 http://cmpassocregulationblog.blogspot.com/2015/04/dollar-revaluation-recovery-without.html

4/5/15 http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html

3/29/15 http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html

3/15/15 http://cmpassocregulationblog.blogspot.com/2015/03/global-exchange-rate-struggle-recovery.html

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

12/28/14 http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.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 1.0 percent in IVQ2011 to minus 2.7 percent in IVQ2012, minus 2.6 percent in IQ2013, minus 2.0 percent in IIQ2013 and minus 1.4 percent in IIIQ2013. GDP fell 0.8 percent in IVQ2013 relative to a year earlier. GDP fell 0.1 percent in IQ2014 relative to a year earlier and decreased 0.3 percent in IIQ2014 relative to a year earlier. GDP fell 0.5 percent in IIIQ2014 relative to a year earlier and fell 0.5 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 0.4 percent in IQ2014 and GFCF fell 2.5 percent. In IIQ2014, consumption decreased 0.1 percent relative to a year earlier and GFCF fell 3.3 percent. GDP fell 0.5 percent in IIIQ2014 relative to a year earlier while consumption increased 0.2 percent and GFCF fell 4.2 percent. GDP fell 0.5 percent in IVQ2014 relative to a year earlier while consumption increased 0.3 percent and GFCF fell 3.0 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	-0.5	2.0	0.3	-3.0	3.8
IIIQ	-0.5	1.3	0.2	-4.2	1.7
IIQ	-0.3	2.8	-0.1	-3.3	2.6
IQ	-0.1	0.4	-0.4	-2.5	3.8
2013
IVQ	-0.8	0.8	-1.2	-4.1	1.2
IIIQ	-1.4	-1.5	-2.1	-4.2	0.0
IIQ	-2.0	-3.7	-2.5	-6.4	0.2
IQ	-2.6	-4.3	-2.7	-8.4	1.5
2012
IVQ	-2.7	-7.5	-3.3	-9.6	1.7
IIIQ	-3.1	-8.2	-3.5	-10.2	3.0
IIQ	-3.1	-8.9	-3.5	-9.6	1.6
IQ	-2.3	-8.7	-3.1	-8.1	1.8
2011
IVQ	-1.0	-7.1	-2.0	-4.5	2.5
IIIQ	0.4	0.3	-0.8	-2.3	4.6
IIQ	1.4	3.8	0.3	-0.6	7.5
IQ	2.0	8.4	0.7	0.7	10.2
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/151830

The Markit/ADACI Business Activity Index increased from 50.0 in Feb to 51.6 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/a6109b353f314494a0b5c5ffab4f1bde). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds signs of expansion of private sector activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/a6109b353f314494a0b5c5ffab4f1bde). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 51.9 in Feb to 53.3 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/f6e9a5d5010446dc928834dcb0c58152). New export orders continued to increase. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds strengthening conditions in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/f6e9a5d5010446dc928834dcb0c58152). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Apr month ∆%: 0.3 Apr 12-month ∆%: 0.0 Blog 5/3/15
Producer Price Index	Mar month ∆%: -0.1 Mar 12-month ∆%: -3.1 Blog 5/3/15
GDP Growth	IVQ2014/IIIQ2014 SA ∆%: 0.0 IVQ2014/IVQ2013 NSA ∆%: minus 0.5 Blog 3/17/13 6/16/13 8/11/13 9/15/13 11/17/13 12/15/13 2/16/14 3/16/14 5/18/14 6/15/14 8/10/14 8/31/14 10/19/14 11/16/14 12/7/14 2/15/15 3/15/15
Labor Report	Mar 2015 Participation rate 64.0% Employment ratio 55.5% Unemployment rate 13.0% Youth Unemployment 43.1% Blog 5/3/15
Industrial Production	Feb month ∆%: 0.6 12 months CA ∆%: minus 0.2 Blog 4/19/15
Retail Sales	Feb month ∆%: -0.2 Feb 12-month ∆%: 0.1 Blog 4/26/15
Business Confidence	Mfg Mar 103.7, Nov 99.5 Construction Mar 116.0, Nov 103.7 Blog 4/5/15
Trade Balance	Balance Feb SA €4576 million versus Jan €3914 Exports Feb month SA ∆%: 2.5; Imports month ∆%: 0.6 Exports 12 months Feb NSA ∆%: 3.7 Imports 12 months NSA ∆%: 1.0 Blog 4/19/15

Links to blog comments in Table IT:

4/26/2015 http://cmpassocregulationblog.blogspot.com/2015/04/imf-view-of-economy-and-finance-united.html

4/19/2015 http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html

4/5/15 http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html

3/15/15 http://cmpassocregulationblog.blogspot.com/2015/03/global-exchange-rate-struggle-recovery.html

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

Data on Italy’s labor market since 2004 are provided in Table VG-1. The unemployment rate has risen from 6.2 percent in Dec 2006 to 13.0 percent in Mar 2015. The rate of youth unemployment for ages 15 to 24 years increased from 21.0 percent in Dec 2006 to 43.1 percent in Mar 2015. As in other advanced economies, unemployment has reached high levels.

Table VG-1, Italy, Labor Report

	Participation Rate %	Employment Ratio %	Unemployment Rate %	Unemployment Rate 15-24 Years %
Mar 2015	64.0	55.5	13.0	43.1
Feb	64.0	55.7	12.7	42.8
Jan	64.0	55.8	12.6	41.4
Dec 2014	64.0	55.7	12.7	41.3
Nov	64.3	55.6	13.2	43.0
Oct	64.3	55.8	13.0	42.6
Sep	64.3	55.9	12.9	41.7
Aug	63.9	55.6	12.7	43.5
Jul	64.0	55.7	12.8	43.0
Jun	63.8	55.8	12.4	42.5
May	63.8	55.6	12.5	42.4
Apr	63.5	55.5	12.4	42.8
Mar	63.7	55.7	12.4	43.5
Feb	63.5	55.5	12.6	42.5
Jan	63.6	55.4	12.7	43.4
Dec 2013	63.6	55.5	12.5	42.6
Dec 2012	63.5	56.1	11.4	38.2
Dec 2011	62.8	56.7	9.6	31.5
Dec 2010	61.9	56.8	8.1	28.4
Dec 2009	62.2	56.9	8.4	26.6
Dec 2008	62.4	58.1	6.8	23.2
Dec 2007	63.0	58.8	6.5	22.3
Dec 2006	62.4	58.5	6.2	21.0
Dec 2005	62.6	57.8	7.6	23.2
Dec 2004	62.4	57.5	7.8	23.8

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/158591

Table VG-2 provides more detail on the labor report for Italy in Mar 2015. The level of employment decreased 0.3 percent from Feb 2015 to Mar 2015 and decreased 70,000 from Mar 2014 to Mar 2015. Unemployment increased 52,000 in Mar 2015 and increased 138,000 from a year earlier. A dramatic aspect found in most advanced economies is the high rate of unemployment of youth at 43.1 percent in Mar 2015 for ages 15 to 24 years.

Table VG-2, Italy, Labor Report, NSA

Mar 2015	1000s	Change from Prior Month 1000s	∆% from Prior Month	Change from Prior Year 1000s	∆% from Prior Year
EMP	22,195	-59	-0.3	-70	-0.3
UNE	3,302	52	1.6	138	4.4
INA   15-64	14,072	-13	-0.1	-140	-1.0
EMP 15-24	863	-1	-0.1	-50	-5.5
UNE 15-24	655	8	1.2	-49	-6.9
INA 15-24	4,431	-11	-0.3	66	1.5
EMP %	55.5		-0.1		-0.1
UNE %	13.0		0.2		-0.2
Youth UNE %  15-24	43.1		0.3		0.0
INA % 15-64	36.0		0.0		0.2

Notes: EMP: Employed; UNE: Unemployed; INA 15-64: Inactive aged 15 to 64; EMP %: Employment Rate; UNE %: Unemployment Rate; Youth UNE % 15-24: Youth Unemployment Rate aged 15 to 24; INA % 15-64: Inactive Rate aged 15 to 64.

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/158591

Chart VG-1 provides the rate of unemployment in Italy that increased from 12.4 percent in Mar 2014 to 13.0 percent in Mar 2015.

Chart VG-1, Italy, Rate of Unemployment, %

Source: Istituto Nazionale di Statistica

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

Chart VG-2 of the Istituto Nazionale di Statistica provides the total number of employed persons in Italy. The level of employment increased from 22.125 million in Mar 2014 to 22.195 million in Mar 2015.

Chart VG-2, Italy, Total Number of Employed Persons, Millions, SA

Source: Istituto Nazionale di Statistica

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

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 2.8 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 2014, 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 4.0 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	2.8
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*	4.0
2000-2014	1.7

*Absolute change from 2007 to 2013 and from 2007 to 2014

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q1-2015/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from 56.7 in Feb to 58.9 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/eea7d1909f424b1183ca33dba0220983). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at around 0.7 percent in IQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/eea7d1909f424b1183ca33dba0220983). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) decreased to 51.9 in Apr from 54.0 in Mar (http://www.markiteconomics.com/Survey/PressRelease.mvc/c50aafd1040e4bdc939cf991d1a696df). New export orders decreased. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds weakening manufacturing conditions (http://www.markiteconomics.com/Survey/PressRelease.mvc/c50aafd1040e4bdc939cf991d1a696df). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Mar month ∆%: 0.2 Mar 12-month ∆%: 0.0 Blog 4/19/15
Output/Input Prices	Output Prices: Mar 12-month NSA ∆%: -1.7; excluding food, petroleum ∆%: 0.1 Input Prices: Mar 12-month NSA ∆%: -13.0 Excluding ∆%: -4.1 Blog 4/19/15
GDP Growth	IQ2015 prior quarter ∆% 0.3; year earlier same quarter ∆%: 2.4 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 3/1/15 4/5/15 5/3/15
Industrial Production	Feb 2015/Feb 2014 ∆%: Production Industries 0.1; Manufacturing 1.1 Blog 4/12/15
Retail Sales	Mar month ∆%: -0.5 Mar 12-month ∆%: 4.2 Blog 4/26/15
Labor Market	Dec-Feb Unemployment Rate: 5.6%; Claimant Count 2.3%; Earnings Growth 1.7% Blog 4/19/15 LMGDP 3/22/15
GDP and the Labor Market	IVQ2014 Employment 102.6 IQ2008 =100 GDP IIIQ14 103.4 IQ2008=100 Blog 3/22/14
Trade Balance	Balance SA Feb minus ₤2859 million Exports Feb ∆%: -2.4; Dec-Feb ∆%: 0.5 Imports Feb ∆%: 0.7 Dec-Feb ∆%: -1.8 Blog 4/12/15

Links to blog comments in Table UK:

4/26/2015 http://cmpassocregulationblog.blogspot.com/2015/04/imf-view-of-economy-and-finance-united.html

4/19/2015 http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html

4/12/15 http://cmpassocregulationblog.blogspot.com/2015/04/dollar-revaluation-recovery-without.html

4/5/15 http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html

3/22/15 http://cmpassocregulationblog.blogspot.com/2015/03/impatience-with-monetary-policy-of.html

3/1/15 http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.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

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-1 provides quarter on quarter chained value measures of GDP since 1998 in the third estimate for IQ2015 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q1-2015/index.html). The UK Office for National Statistics provides revision of the national accounts in accordance with the European System of Accounts 2010 (ESA 2010) (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2014/index.html). GDP grew 0.3 percent in IQ2015 relative to IVQ2014. Growth of 0.8 percent in IIIQ2012 interrupted three consecutive quarters of weakness in GDP growth. Most advanced economies are underperforming relative to the period before the global recession. The UK Office for National Statistics analyzes that the decline in the impulse of growth in the UK originated in weakness in markets in the UK and worldwide. The UK Office for National Statistics estimates that GDP in IQ2015 is higher by 4.0 percent relative to the peak in IQ2008 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q1-2015/index.html). UK GDP in chained value measures is ₤414,424 million in IQ2008 and ₤429,673 million in IVQ2014 or increase of 3.7 percent. Growth at trend of 2.9 percent per year would bring GDP to ₤502,630 million in 2014. UK GDP in IVQ2014 at ₤429,673 million is lower by ₤72,957 million relative to trend at ₤502,630 million or lower by 14.5 percent compared with trend. The UK Office for National Statistics estimates the contraction of 6.0 percent from peak to trough (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q1-2015/index.html), which is roughly equal at 6.1 percent to compounding the quarterly rates except for rounding in Table VH-1 from IIQ2008 to IIQ2009. UK GDP is ₤414,424 million in IQ2008 declining 6.0 percent to ₤389,388 million in IIQ2009. GDP increased 10.7 percent from IIQ2009 to ₤430,962 million in IQ2015 or at the annual equivalent rate of 1.8 percent. GDP increased 4.0 percent from IQ2008 to IQ2015 or at the annual equivalent rate of 0.6 percent.

Table VH-1, UK, Percentage Change of GDP from Prior Quarter, Chained Value Measures ∆%

	IQ	IIQ	IIIQ	IV
2015	0.3
2014	0.9	0.8	0.6	0.6
2013	0.6	0.6	0.7	0.4
2012	0.1	-0.2	0.8	-0.3
2011	0.5	0.2	0.7	0.0
2010	0.5	1.0	0.6	0.0
2009	-1.8	-0.3	0.2	0.4
2008	0.3	-0.2	-1.7	-2.2
2007	0.8	0.6	0.8	0.5
2006	0.6	0.5	0.2	0.8
2005	0.7	1.0	1.0	1.3
2004	0.3	0.3	0.1	0.4
2003	1.0	1.4	1.3	1.0
2002	0.5	0.8	0.9	0.9
2001	1.1	0.8	0.5	0.3
2000	1.0	0.7	0.4	0.3
1999	0.5	0.2	1.6	1.3
1998	0.6	0.8	0.7	1.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q1-2015/index.html

There are four periods in growth of GDP in a quarter relative to the same quarter a year earlier in the UK in the years from 2000 to the present as shown in Table VH-2. (1) Growth rates were quite high from 2000 to 2007. (2) There were six consecutive quarters of contraction of GDP from IIIQ2008 to IVQ2009. Contractions relative to the quarter a year earlier were quite sharp with the highest of 3.8 percent in IVQ2008, 5.8 percent in IQ2009, 5.8 percent in IIQ2009 and 4.0 percent in IIIQ2009. (3) The economy bounced strongly with 2.1 percent in IIQ2010, 2.5 percent in IIIQ2010 and 2.2 percent in IVQ2010. (4) Recovery in 2011 did not continue at rates comparable to those in 2000 to 2007 and even relative to those in the final three quarters of 2010. Growth relative to the same quarter a year earlier fell from 2.2 percent in IVQ2010 to 1.4 percent in IIQ2011, 1.5 percent in IIIQ2011, 1.5 percent in IVQ2011 but only 1.0 percent in IQ2012, increase of 0.6 percent in IIQ2012 relative to IIQ2011, increase of 0.7 percent in IIIQ2012 and 0.4 percent in IVQ2012. In IQ2012, GDP increased 0.1 percent and increased 1.0 percent relative to a year earlier. In IIQ2012, GDP fell 0.2 percent relative to IQ2012 and increased 0.6 percent relative to a year earlier. In IIIQ2012, GDP increased 0.8 percent and increased 0.7 percent relative to the same quarter a year earlier. In IVQ2012, GDP fell 0.3 percent and increased 0.4 percent relative to a year earlier. Fiscal consolidation in an environment of weakening economic growth is much more challenging. Growth increased to 0.9 percent in IQ2013 relative to a year earlier and 0.6 percent in IQ2013 relative to IVQ2012. In IIQ2013, GDP increased 0.6 percent and 1.7 percent relative to a year earlier. GDP increased 0.7 percent in IIIQ2013 and 1.6 percent relative to a year earlier. GDP increased 0.4 percent in IVQ2013 and 2.4 percent relative to a year earlier. In IQ2014, GDP increased 0.9 percent and 2.7 percent relative to a year earlier. GDP increased 0.8 percent in IQ2014 and 2.9 percent relative to a year earlier. GDP increased 0.6 percent in IIIQ2013 and 2.8 percent relative to a year earlier. In IVQ2014, GDP increased 0.6 percent and 3.0 percent relative to a year earlier. GDP increased 0.3 percent in IQ2015 and increased 2.4 percent relative to a year earlier.

Table VH-2, UK, Percentage Change of GDP from Same Quarter a Year Earlier, Chained Value Measures ∆%

	IQ	IIQ	IIIQ	IV
2015	2.4
2014	2.7	2.9	2.8	3.0
2013	0.9	1.7	1.6	2.4
2012	1.0	0.6	0.7	0.4
2011	2.2	1.4	1.5	1.5
2010	0.8	2.1	2.5	2.2
2009	-5.8	-5.8	-4.0	-1.5
2008	2.2	1.4	-1.1	-3.8
2007	2.2	2.3	3.0	2.7
2006	4.0	3.5	2.6	2.0
2005	1.6	2.3	3.2	4.2
2004	4.0	2.9	1.8	1.2
2003	3.6	4.2	4.6	4.7
2002	2.1	2.1	2.5	3.1
2001	2.5	2.6	2.8	2.8
2000	4.3	4.8	3.5	2.5
1999	3.0	2.5	3.4	3.7
1998	3.9	3.5	3.5	3.2

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q1-2015/index.html

Table VH-3 provides annual percentage changes of gross value added and key components. Production fell 8.8 percent in 2009 and its most important component manufacturing fell 9.4 percent. Services fell 2.9 percent in 2009. Services grew in all years from 2010 to 2014 while manufacturing fell 1.3 percent in 2012 and 0.7 percent in 2013. Manufacturing resumed growth with 2.9 percent in 2014.

Table VH-3, UK, Gross Value Added by Components, ∆% on Prior Year

	TP	MFG	CONS	SERV	GVA	GVA EX
2011 Weights	146	101	64	784	1000	981
2010	3.1	4.7	8.5	1.4	1.9	2.3
2011	-0.8	1.8	2.2	2.1	1.6	2.2
2012	-2.7	-1.3	-7.5	2.0	0.7	1.0
2013	-0.5	-0.7	1.4	1.9	1.7	1.7
2014	1.6	2.9	7.4	3.0	2.8	2.9

TP: Total Production; MFG: Manufacturing; CONS: Construction; SERV: Services; GVA EX: GVA Excluding Oil and Gas

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q1-2015/index.html

Percentage changes of gross value added and components in a quarter relative to prior quarter are in Table VH-4B. Gross value added increased 0.4 percent in IQ2015 relative to IVQ2014. Services increased 0.5 percent in IQ2015. Production decreased 0.1 percent with manufacturing increasing 0.1 percent.

Table VH-4B, UK, Gross Value Added by Components, ∆% on Previous Quarter

		TP	MFG	CONS	SERV	GDP Market Prices	GVA EX
2011 Weights		146	101	64	784	1000	981
2011	Q3	-0.4	-0.4	-0.3	1.1	0.7	0.8
	Q4	-0.5	-0.4	-1.4	0.2	-	-
2012	Q1	-0.8	0.1	-3.5	0.6	0.1	0.2
	Q2	-0.9	-1.2	-3.5	0.1	-0.2	-0.2
	Q3	0.1	0.5	-1.1	1.0	0.8	0.8
	Q4	-2.0	-1.4	0.3	-0.2	-0.3	-0.3
2013	Q1	0.1	-0.3	-0.7	0.7	0.6	0.6
	Q2	0.7	0.5	2.4	0.5	0.6	0.6
	Q3	0.8	0.5	3.0	0.6	0.7	0.6
	Q4	0.3	0.6	0.3	0.6	0.4	0.4
2014	Q1	0.5	1.4	3.7	0.8	0.9	0.9
	Q2	0.3	0.6	1.3	1.0	0.8	0.9
	Q3	0.1	0.4	1.7	0.7	0.6	0.7
	Q4	0.2	0.2	-2.2	0.9	0.6	0.6
2015	Q1	-0.1	0.1	-1.6	0.5	0.3	0.4

TP: Total Production; MFG: Manufacturing; CONS: Construction; SERV: Services; GVA EX: GVA Excluding Oil and Gas

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q1-2015/index.html

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