Sunday, July 19, 2015

Fluctuating Risk Financial Assets, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, World Inflation Waves, United States Industrial Production, Collapse of United States Dynamism of Income Growth and Employment Creation, World Cyclical Slow Growth and Global Recession Risk: Part VII

 

Fluctuating Risk Financial Assets, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, World Inflation Waves, United States Industrial Production, Collapse of United States Dynamism of Income Growth and Employment Creation, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

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

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IB1 Theory

IB2 Policy

IB3 Evidence

IB4 Unwinding Strategy

IC United States Inflation

IC Long-term US Inflation

ID Current US Inflation

IE Theory and Reality of Economic History, Cyclical Slow Growth Not Secular

II United States Industrial Production

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

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 IQ2015 available now for all countries. There are preliminary estimates for most countries for IQ2015. Growth is weak throughout most of the world.

  • Japan. The GDP of Japan increased 1.0 percent in IQ2012, 4.1 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 0.5 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 1.8 percent, which is much lower than 4.1 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 0.4 percent in IIIQ2012 at the SAAR of minus 1.8 percent and increased 0.2 percent relative to a year earlier. Japan’s GDP decreased 0.1 percent in IVQ2012 at the SAAR of minus 0.6 percent and changed 0.0 percent relative to a year earlier. Japan grew 1.3 percent in IQ2013 at the SAAR of 5.3 percent and increased 0.4 percent relative to a year earlier. Japan’s GDP increased 0.7 percent in IIQ2013 at the SAAR of 2.9 percent and increased 1.4 percent relative to a year earlier. Japan’s GDP grew 0.5 percent in IIIQ2013 at the SAAR of 2.0 percent and increased 2.2 percent relative to a year earlier. In IVQ2013, Japan’s GDP decreased 0.2 percent at the SAAR of minus 0.9 percent, increasing 2.3 percent relative to a year earlier. Japan’s GDP increased 1.1 percent in IQ2014 at the SAAR of 4.4 percent and increased 2.4 percent relative to a year earlier. In IIQ2014, Japan’s GDP fell 1.7 percent at the SAAR of minus 6.8 percent and fell 0.4 percent relative to a year earlier. Japan’s GDP contracted 0.5 percent in IIIQ2014 at the SAAR of minus 2.0 percent and fell 1.4 percent relative to a year earlier. In IVQ2014, Japan’s GDP grew 0.3 percent, at the SAAR of 1.2 percent, decreasing 1.0 percent relative to a year earlier. The GDP of Japan increased 1.0 percent in IQ2015 at the SAAR of 3.9 percent and decreased 0.9 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 0.2 percent in the euro area in IQ2012 and decreased 0.5 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 0.9 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.3 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 1.1 percent relative to a year earlier. The GDP of the euro area increased 0.4 percent in IIQ2013 and fell 0.5 percent relative to a year earlier. In IIIQ2013, euro area GDP increased 0.2 percent and fell 0.2 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IVQ2013 and increased 0.5 percent relative to a year earlier. In IQ2014, the GDP of the euro area increased 0.2 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 0.4 percent in IVQ2014 and increased 0.9 percent relative to a year earlier. Euro are GDP increased 0.4 percent in IQ2015 and increased 1.0 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. The GDP of Germany increased 0.3 percent in IQ2015 and increased 1.1 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/2015/06/dollar-revaluation-squeezing-corporate.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/dollar-devaluation-and-carry-trade.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 changed 0.0 percent in IQ2015 at SAAR of minus 0.2 percent and grew 2.9 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 0.9 percent in IIQ2014 and 3.0 percent relative to a year earlier. In IIIQ2014, UK GDP increased 0.7 percent and increased 3.0 percent relative to a year earlier. UK GDP increased 0.8 percent in IVQ2014 and increased 3.4 percent relative to a year earlier. In IQ2015, GDP increased 0.4 percent and 2.9 percent relative to a year earlier.
  • Italy. Italy has experienced decline of GDP in seven consecutive quarters from IIIQ2011 to IQ2013 and in IQ2014, IIQ2014 and IIIQ2014. Italy’s GDP fell 1.0 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 0.5 percent and declined 3.1 percent relative to a year earlier. The GDP of Italy contracted 0.5 percent in IVQ2012 and fell 2.7 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.9 percent and fell 2.6 percent relative to a year earlier. Italy’s GDP changed 0.0 percent in IIQ2013 and fell 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 0.9 percent relative to a year earlier. In IQ2014, Italy’s GDP decreased 0.2 percent and fell 0.2 percent relative to a year earlier. The GDP of Italy fell 0.1 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 0.4 percent relative to a year earlier. In IQ2015, Italy’s GDP increased 0.3 percent and increased 0.1 percent relative to a year earlier
  • France. France’s GDP changed 0.0 percent in IQ2012 and increased 0.4 percent relative to a year earlier. France’s GDP decreased 0.3 percent in IIQ2012 and increased 0.2 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.3 percent and increased 0.3 percent relative to a year earlier. France’s GDP changed 0.0 percent in IVQ2012 and changed 0.0 percent relative to a year earlier. In IQ2013, France’s GDP increased 0.1 percent and increased 0.1 percent relative to a year earlier. The GDP of France increased 0.8 percent in IIQ2013 and increased 1.2 percent relative to a year earlier. France’s GDP decreased 0.1 percent in IIIQ2013 and increased 0.8 percent relative to a year earlier. The GDP of France increased 0.2 percent in IVQ2013 and increased 1.0 percent relative to a year earlier. In IQ2014, France’s GDP decreased 0.2 percent and increased 0.7 percent relative to a year earlier. In IIQ2014, France’s GDP contracted 0.1 percent and decreased 0.2 percent relative to a year earlier. France’s GDP increased 0.2 percent in IIIQ2014 and increased 0.2 percent relative to a year earlier. The GDP of France increased 0.1 percent in IVQ2014 and changed 0.0 percent relative to a year earlier. France’s GDP increased 0.6 percent in IQ2015 and increased 0.8 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: 1.0

SAAR: 4.1

3.5

China

1.4

8.1

Euro Area

-0.2

-0.5

Germany

0.3

1.5

France

0.0

0.4

Italy

-1.0

-2.3

United Kingdom

0.1

1.0

 

IIQ2012/IQ2012

IIQ2012/IIQ2011

United States

QOQ: 0.4        

SAAR: 1.6

2.3

Japan

QOQ: -0.5
SAAR: -1.8

3.5

China

2.1

7.6

Euro Area

-0.3

-0.8

Germany

0.1

0.3 0.8 CA

France

-0.3

0.2

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: –0.4
SAAR: –1.8

0.2

China

2.0

7.4

Euro Area

-0.1

-0.9

Germany

0.1

0.1

France

0.3

0.3

Italy

-0.5

-3.1

United Kingdom

0.8

0.7

 

IVQ2012/IIIQ2012

IVQ2012/IVQ2011

United States

QOQ: 0.0
SAAR: 0.1

1.6

Japan

QOQ: -0.1

SAAR: -0.6

0.0

China

1.9

7.9

Euro Area

-0.3

-0.9

Germany

-0.4

-0.3

France

0.0

0.0

Italy

-0.5

-2.7

United Kingdom

-0.3

0.4

 

IQ2013/IVQ2012

IQ2013/IQ2012

United States

QOQ: 0.7
SAAR: 2.7

1.7

Japan

QOQ: 1.3

SAAR: 5.3

0.4

China

1.7

7.8

Euro Area

-0.4

-1.1

Germany

-0.4

-1.8

France

0.1

0.1

Italy

-0.9

-2.6

UK

0.6

0.9

 

IIQ2013/IQ2013

IIQ2013/IIQ2012

United States

QOQ: 0.4

SAAR: 1.8

1.8

Japan

QOQ: 0.7

SAAR: 2.9

1.4

China

1.8

7.5

Euro Area

0.4

-0.5

Germany

0.8

0.5

France

0.8

1.2

Italy

0.0

-2.0

UK

0.6

1.7

 

IIIQ2013/IIQ2013

III/Q2013/  IIIQ2012

USA

QOQ: 1.1
SAAR: 4.5

2.3

Japan

QOQ: 0.5

SAAR: 2.0

2.2

China

2.3

7.9

Euro Area

0.2

-0.2

Germany

0.3

0.8

France

-0.1

0.8

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: -0.2

SAAR: -0.9

2.3

China

1.8

7.6

Euro Area

0.3

0.5

Germany

0.4

1.0

France

0.2

1.0

Italy

0.0

-0.9

UK

0.4

2.4

 

IQ2014/IVQ2013

IQ2014/IQ2013

USA

QOQ -0.5

SAAR -2.1

1.9

Japan

QOQ: 1.1

SAAR: 4.4

2.4

China

1.6

7.4

Euro Area

0.2

1.1

Germany

0.8

2.6

France

-0.2

0.7

Italy

-0.2

-0.2

UK

0.9

2.7

 

IIQ2014/IQ2014

IIQ2014/IIQ2013

USA

QOQ 1.1

SAAR 4.6

2.6

Japan

QOQ: -1.7

SAAR: -6.8

-0.4

China

2.0

7.5

Euro Area

0.1

0.8

Germany

-0.1

1.0

France

-0.1

-0.2

Italy

-0.1

-0.3

UK

0.9

3.0

 

IIIQ2014/IIQ2014

IIIQ2014/IIIQ2013

USA

QOQ: 1.2

SAAR: 5.0

2.7

Japan

QOQ: -0.5

SAAR: -2.0

-1.4

China

1.9

7.3

Euro Area

0.2

0.8

Germany

0.1

1.2

France

0.2

0.2

Italy

-0.1

-0.5

UK

0.7

3.0

 

IVQ2014/IIIQ2014

IVQ2014/IVQ2013

USA

QOQ: 0.5

SAAR: 2.2

2.4

Japan

QOQ: 0.3

SAAR: 1.2

-1.0

China

1.5

7.3

Euro Area

0.4

0.9

Germany

0.7

1.6

France

0.1

0.0

Italy

0.0

-0.4

UK

0.8

3.4

 

IQ2015/IVQ2014

IQ2015/IQ2014

USA

QOQ: 0.0

SAAR: -0.2

2.9

Japan

QOQ: 1.0

SAAR: 3.9

-0.9

China

1.3

7.0

Euro Area

0.4

1.0

Germany

0.3

1.1

France

0.6

0.8

Italy

0.3

0.1

UK

0.4

2.9

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.

  • China. In Jun 2015, China exports decreased 2.5 percent relative to a year earlier and imports decreased 17.6 percent.
  • Germany. Germany’s exports increased 1.7 percent in the month of May 2015 and increased 4.6 percent in the 12 months ending in May 2015. Germany’s imports decreased 0.4 percent in the month of May 2015 and increased 3.0 percent in the 12 months ending in May. 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 0.2 percentage points to GDP growth in IIQ2014 and added 0.4 percentage points in IIIQ2014. Net trade deducted 0.3 percentage points to GDP growth in IVQ2014 and deducted 0.2 percentage points in IQ2015.
  • 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 0.2 percentage points to UK value added in IQ2014 and 0.1 percentage points in IIQ2014. Net trade deducted 0.7 percentage points to GDP growth in IIIQ2014 and added 0.8 percentage points in IVQ2014. Net traded deducted 0.6 percentage points from growth in IQ2015.
  • France. France’s exports decreased 0.6 percent in May 2015 while imports increased 1.2 percent. France’s exports increased 5.2 percent in the 12 months ending in May 2015 and imports increased 2.7 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 0.3 percentage points in IIIQ2014. Net trade added 0.2 percentage points to France’s GDP growth in IVQ2014 and deducted 0.5 percentage points in IQ2015
  • United States. US exports decreased 0.8 percent in May 2015 and goods exports decreased 5.1 percent in Jan-May 2015 relative to a year earlier. Imports decreased 0.1 percent in May 2015 and goods imports decreased 3.9 percent in Jan-May 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 1.90 percentage points from GDP growth in IQ2015. 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). Industrial production increased 0.3 percent in Jun 2015 and decreased 0.2 percent in May 2015 after decreasing 0.5 percent in Jun 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 increased 0.3 percent in June but fell at an annual rate of 1.4 percent for the second quarter of 2015. In June, manufacturing output was unchanged: The output of motor vehicles and parts fell 3.7 percent, but production elsewhere in manufacturing rose 0.3 percent. The indexes for mining and utilities advanced 1.0 percent and 1.5 percent, respectively. At 105.7 percent of its 2007 average, total industrial production in June was 1.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.2 percentage point in June 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 Jun 2015, United States national industrial production accumulated change of minus 0.6 percent at the annual equivalent rate of minus 1.2 percent, which is lower than growth of 1.5 percent in the 12 months ending in Jun 2015. Excluding growth of 0.3 percent in Dec 2014, growth in the remaining five months from Jan 2014 to Jun 2015 accumulated to minus 0.9 percent or minus 2.1 percent annual equivalent. Industrial production declined in three of the past six months and changed 0.0 percent in one months. Industrial production contracted at annual equivalent 1.6 percent in the most recent quarter from Apr 2015 to Jun 2015 and contracted at 0.8 percent in the prior quarter Jan 2015 to Mar 2015. Business equipment accumulated increase of 0.9 percent in the six months from Jan 2015 to Jun 2015 at the annual equivalent rate of 1.8 percent, which is higher than growth of 3.0 percent in the 12 months ending in Jun 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 increased 0.2 percentage point in June 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 weakening 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 29.3 percent from the trough in Apr 2009 to Jun 2015. Manufacturing output in Jun 2015 is 1.0 percent above 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 $2,287.1 billion than actual $16,287.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 25.0 million unemployed or underemployed equivalent to actual unemployment/underemployment of 15.1 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/higher-volatility-of-asset-prices-at.html). US GDP in IQ2015 is 12.3 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,287.7 billion in IQ2015 or 8.6 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 Jun 1919 to Jun 2015. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 126.6006 in Jun 2015. The actual index NSA in Jun 2015 is 104.0319, which is 17.8 percent below trend. Manufacturing output grew at average 2.4 percent between Dec 1986 and Dec 2014. Using trend growth of 2.4 percent per year, the index would increase to 118.5586 in Jun 2015. The output of manufacturing at 104.0319 in Jun 2015 is 12.3 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

-0.8 May

-5.1

Jan-May

-0.1 May

-3.9

Jan-May

Japan

 

May 2015

2.4

Apr

8.0

Mar

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

 

May 2015

-8.7

Apr

-4.2

Mar

-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

-2.5 May

-6.4 Apr

-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

-17.6 May

-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

2.6 12 M-May

5.3 Jan-May

0.1 12-M May

0.9 Jan-May

Germany

1.7 May CSA

4.6 May

-0.4 May CSA

3.0 May

France

May

-0.6

5.2

1.2

2.7

Italy May

1.5

2.0

-0.3

0.5

UK

0.0 May

-0.3 Feb 15-May 15 /Feb 14-May 14

-3.2 May

-1.3 Feb 15-May 15 /Feb 14-May 14

Net Trade % Points GDP Growth

Points

     

USA

IQ2015

-1.90

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

-1.5 IIQ2012

-1.9 IIIQ2012

-0.6 IVQ2012

1.6

IQ2013

0.1

IIQ2013

-1.5

IIIQ2013

-2.1

IVQ2013

-1.3

IQ2014

4.3

IIQ2014

0.2

IIIQ2014

1.1

IVQ2014

-0.7

IQ2015

     

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

0.2

IIIQ2014

0.4

IVQ2014

-0.3

IQ2015

-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

-0.3

IIIQ2014

0.2

IVQ2014

-0.5

IQ2015

     

UK

0.7

IIQ2013

-1.7

IIIQ2013

0.1

IVQ2013

0.2

IQ2014

0.1

IIQ2214

-0.7

IIIQ2014

0.8

IVQ2014

-0.6

IQ2015

     

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 V-5 for May 2015. The share of Asia in Japan’s trade is close to one-half for 55.5 percent of exports and 48.0 percent of imports. Within Asia, exports to China are 18.5 percent of total exports and imports from China 24.2 percent of total imports. While exports to China increased 1.1 percent in the 12 months ending in May 2015, imports from China increased 1.5 percent. The largest export market for Japan in May 2015 is the US with share of 18.9 percent of total exports, which is close to that of China, and share of imports from the US of 11.5 percent in total imports. Japan’s exports to the US increased 7.4 percent in the 12 months ending in May 2015 and imports from the US increased 11.5 percent. Western Europe has share of 10.6 percent in Japan’s exports and of 12.2 percent in imports. Rates of growth of exports of Japan in May 2015 are 7.4 percent for exports to the US, minus 17.0 percent for exports to Brazil and minus 9.9 percent for exports to Germany. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity. Growth rates of imports in the 12 months ending in May 2015 are mixed. Imports from Asia decreased 3.0 percent in the 12 months ending in May 2015 while imports from China increased 1.5 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

May 2015

Exports
Millions Yen

12 months ∆%

Imports Millions Yen

12 months ∆%

Total

5,740,473

2.4

5,956,447

-8.7

Asia

3,186,813

% Total 55.5

3.3

2,857,793 % Total 48.0

-3.0

China

1,060,662

% Total 18.5

1.1

1,442,301 % Total 24.2

1.5

USA

1,086,085

% Total 18.9

7.4

682,351 % Total

11.5

11.5

Canada

70,987

19.5

85,017

-16.3

Brazil

34,331

-17.0

63,961

-14.9

Mexico

81,544

-0.6

41,526

-12.8

Western Europe

609,376 % Total 10.6

-2.1

725,632 % Total 12.2

2.1

Germany

149,118

-9.9

178,411

-7.6

France

49,445

3.7

96,643

8.7

UK

109,575

19.1

56,900

8.8

Middle East

201,464

-6.3

715,497

-35.1

Australia

125,847

20.6

302,066

-22.9

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 V-6, IMF, Projections of World Trade, USD Billions, USD/Barrel and Annual ∆%

 

2013

2014

2015

Average ∆% 2016-2019

World Trade Volume (Goods and Services)

3.5

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, decreased to 53.1 in Jun from 53.6 in May, indicating expansion at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/46cc432485614a6c8d02a4e302c39e95). This index has remained above the contraction territory of 50.0 during 33 consecutive months. The employment index decreased from 52.9 in May to 52.1 in Jun with input prices rising at faster rate, new orders increasing at the same rate and output increasing at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/46cc432485614a6c8d02a4e302c39e95). David Hensley, Director of Global Economic Coordination at JP Morgan, finds slowing world growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/46cc432485614a6c8d02a4e302c39e95). The JP Morgan Global Manufacturing PMI, produced by JP Morgan and Markit in association with ISM and IFPSM, decreased to 51.0 in Jun from 51.3 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/189b1000739a404d9f423941fa328347). New export orders changed to expanding from falling. David Hensley, Director of Global Economic Coordination at JP Morgan Chase, finds mild growth in global manufacturing that could recover in the second half (http://www.markiteconomics.com/Survey/PressRelease.mvc/189b1000739a404d9f423941fa328347). The HSBC Brazil Composite Output Index, compiled by Markit, decreased from 42.9 in May to 41.0 in Jun, indicating contraction in activity of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/f57ab317b67c43f283938cce9e852131). The HSBC Brazil Services Business Activity index, compiled by Markit, decreased from 42.5 in May to 39.9 in Jun, indicating contracting services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/f57ab317b67c43f283938cce9e852131). Pollyana De Lima, Economist at Markit, finds probable contraction of GDP in IIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/f57ab317b67c43f283938cce9e852131). The HSBC Brazil Purchasing Managers’ IndexTM (PMI) increased from 45.9 in May to 46.5 in Jun, indicating deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/bb072eebf7294ac0a3e61d08f127c78a). Pollyanna De Lima, Economist at Markit, finds decline in output and new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/bb072eebf7294ac0a3e61d08f127c78a).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index (PMI) seasonally adjusted decreased to 53.4 in Jun from 54.0 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/1e3df27e44c443bfbef289b16452bc4d). New export orders stabilized partly under pressure 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/1e3df27e44c443bfbef289b16452bc4d). The Markit Flash US Services PMI™ Business Activity Index decreased from 56.2 in May to 54.8 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/bf7741e29e5a427f9717073c9b72d185). The Markit Flash US Composite PMI™ Output Index decreased from 56.0 in May to 54.6 in Jun. 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/bf7741e29e5a427f9717073c9b72d185). The Markit US Composite PMI™ Output Index of Manufacturing and Services decreased to 54.6 in Jun from 56.2 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/89a3a2dccd434401a7aaf686861e9b8d). The Markit US Services PMI™ Business Activity Index decreased from 56.2 in May to 54.8 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/89a3a2dccd434401a7aaf686861e9b8d). Chris Williamson, Chief Economist at Markit, finds the indexes suggesting growth in IIQ2015 at an annual rate of 3 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/89a3a2dccd434401a7aaf686861e9b8d). The Markit US Manufacturing Purchasing Managers’ Index (PMI) decreased to 53.6 in Jun from 54.0 in May, which indicates expansion at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/25ce0a99fabb4e0c90907a2a5b7ef6b3). New foreign orders decreased. Chris Williamson, Chief Economist at Markit, finds that the index suggests restrain of foreign orders and corporate profits because of dollar appreciation (http://www.markiteconomics.com/Survey/PressRelease.mvc/25ce0a99fabb4e0c90907a2a5b7ef6b3). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business® increased 0.7 percentage points from 52.8 in May to 53.5 in Jun, which indicates growth at the faster rate (https://www.instituteforsupplymanagement.org/ISMReport/MfgROB.cfm?navItemNumber=29393). The index of new orders increased 0.2 percentage points from 55.8 in May to 56.0 in Jun. The index of new exports decreased 0.5 percentage points from 50.0 in May to 49.5 in Jun, contracting from unchanged. The Non-Manufacturing ISM Report on Business® PMI increased 0.3 percentage points from 55.7 in May to 56.0 in Jun, indicating growth of business activity/production during 71 consecutive months, while the index of new orders increased 0.4 percentage points from 57.9 in May to 58.3 in Jun (https://www.instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm?navItemNumber=29348). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index

Jun 12 months NSA ∆%: 0.1; ex food and energy ∆%: 1.8 Jun month SA ∆%: 0.3; ex food and energy ∆%: 0.2
Blog 7/19/15

Producer Price Index

Finished Goods

Jun 12-month NSA ∆%: -2.5; ex food and energy ∆% 2.3
Jun month SA ∆% = 0.9; ex food and energy ∆%: 0.4

Final Demand

Jun 12-month NSA ∆%: -0.7; ex food and energy ∆% 0.8
Jun month SA ∆% = 0.4; ex food and energy ∆%: 0.3
Blog 7/19/15

PCE Inflation

May 12-month NSA ∆%: headline 0.2; ex food and energy ∆% 1.2
Blog 6/28/15

Employment Situation

Household Survey: Jun Unemployment Rate SA 5.3%
Blog calculation People in Job Stress Jun: 25.0 million NSA, 15.1% of Labor Force
Establishment Survey:
May Nonfarm Jobs +223,000; Private +223,000 jobs created 
May 12-month Average Hourly Earnings Inflation Adjusted ∆%: 2.3
Blog 7/5/15

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 May 2015 5.241 million lower by 0.358 million than 5.599 million in May 2006
Blog 7/12/15

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 2.9

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 6/28/15

Real Private Fixed Investment

SAAR IQ2015 ∆% minus 0.3 IVQ2007 to IQ2015: 3.3% Blog 6/28/15

Corporate Profits

IQ2015 SAAR: Corporate Profits -5.2; Undistributed Profits -22.7 Blog 6/28/15

Personal Income and Consumption

May month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.2
Real Personal Consumption Expenditures (RPCE): 0.6
12-month May NSA ∆%:
RDPI: 3.5; RPCE ∆%: 2.8
Blog 6/28/15

Quarterly Services Report

IQ15/IQ14 NSA ∆%:
Information 3.0

Financial & Insurance 3.7

Earlier Data:
Blog 3/22/15

Employment Cost Index

Compensation Private IVQ2014 SA ∆%: 0.6
Dec 12 months ∆%: 2.3
Blog 2/1/15

Industrial Production

Jun month SA ∆%: 0.3
Jun 12 months SA ∆%: 1.5

Manufacturing Jun SA 0.0 ∆% Jun 12 months SA ∆% 1.8, NSA 1.8
Capacity Utilization: 78.4
Blog 7/19/15

Productivity and Costs

Nonfarm Business Productivity IQ2015∆% SAAE -3.1; IQ2015/IQ2014 ∆% 0.3; Unit Labor Costs SAAE IQ2015 ∆% 6.7; IQ2015/IQ2014 ∆%: 1.8

Blog 6/7/15

New York Fed Manufacturing Index

General Business Conditions From Jun -1.98 to Jul 3.86
New Orders: From Jun minus 2.12 to Jul -3.50
Blog 7/19/15

Philadelphia Fed Business Outlook Index

General Index from Jun 15.2 to Jul 5.7
New Orders from Jun 15.2 to Jul 7.1
Blog 7/19/15

Manufacturing Shipments and Orders

New Orders SA May ∆% -1.0 Ex Transport 0.1

Jan-May NSA New Orders ∆% minus 6.1 Ex transport minus 6.5

Earlier data:
Blog 4/5/15

Durable Goods

May New Orders SA ∆%: -1.8; ex transport ∆%: 0.5
Jan-May 15/Jan-May 14 New Orders NSA ∆%: -2.2; ex transport ∆% -1.3

Earlier Data:
Blog 4/26/15

Sales of New Motor Vehicles

Jun 2015 8,521,260; Jun 2014 8,163,942. Jun 15 SAAR 17.16 million, May 15 SAAR 17.79 million, Jun 2014 SAAR 16.90 million

Blog 7/5/15

Sales of Merchant Wholesalers

Jan-May 2015/Jan-May 2014 NSA ∆%: Total -3.6; Durable Goods: 2.3; Nondurable
Goods: -8.5

EARLIER DATA:
Blog 4/12/15

Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers

May 15 12-M NSA ∆%: Sales Total Business -4.3; Manufacturers -5.2
Retailers -0.3; Merchant Wholesalers -6.8
Blog 7/19/15

Sales for Retail and Food Services

Jan-Jun 2015/Jan-Jun 2014 ∆%: Retail and Food Services 2.0; Retail ∆% 1.1
Blog 7/19/15

Value of Construction Put in Place

May SAAR month SA ∆%: 0.8 Jan-May NSA: 5.9

Earlier Data:
Blog 4/5/15

Case-Shiller Home Prices

Apr 2015/ Apr 2014 ∆% NSA: 10 Cities 4.6; 20 Cities: 4.9; National: 4.2
∆% Apr SA: 10 Cities 0.4 ; 20 Cities: 0.3
Blog 7/5/15

FHFA House Price Index Purchases Only

Apr SA ∆% 0.3;
12 month NSA ∆%: 5.4
Blog 6/28/15

New House Sales

May 2015 month SAAR ∆%: 2.2
Jan-May 2015/Jan-Apr 2014 NSA ∆%: 22.8
Blog 6/28/15

Housing Starts and Permits

Jun Starts month SA ∆% 9.8; Permits ∆%: 7.4
Jan-Jun 2015/Jan-Jun 2014 NSA ∆% Starts 10.9; Permits  ∆% 16.2

Earlier Data:
Blog 4/19/15

Trade Balance

Balance May SA -$41,871 million versus Apr -$40,698 million
Exports May SA ∆%: -0.8 Imports May SA ∆%: -0.1
Goods Exports Jan-May 2015/Jan-May 2014 NSA ∆%: -5.1
Goods Imports Jan-May 2015/Jan-May 2014 NSA ∆%: -3.9
Blog 7/12/15

Export and Import Prices

Jun 12-month NSA ∆%: Imports -10.0; Exports -5.7

Earlier Data:
Blog 4/12/15

Consumer Credit

May ∆% annual rate: Total 5.7; Revolving 2.1; Nonrevolving 7.0

Earlier Data:
Blog 5/10/15

Net Foreign Purchases of Long-term Treasury Securities

May Net Foreign Purchases of Long-term US Securities: $76.5 billion
Major Holders of Treasury Securities: China $1270.3 billion; Japan $1214.9 billion; Total Foreign US Treasury Holdings Apr $6134.8 billion
Blog 7/19/15

Treasury Budget

Fiscal Year 2015/2014 ∆% Jun: Receipts 8.3; Outlays 5.1; Individual Income Taxes 11.6
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 7/19/2015

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

2040: Long-term Debt/GDP 103%

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 6/21/14

Commercial Banks Assets and Liabilities

May 2015 SAAR ∆%: Securities 12.8 Loans 3.3 Cash Assets minus 39.0 Deposits minus 4.3

Blog 6/14/15

Flow of Funds Net Worth of Families and Nonprofits

IQ2015 ∆ since 2007

Assets +$17,964.6 BN

Nonfinancial 1544 BN

Real estate $778.5 BN

Financial +16,415.2 BN

Net Worth +$18,202.8 BN

Blog 6/21/15

Current Account Balance of Payments

IQ2015 -88,648 MM

% GDP 2.6

Blog 6/21/15

Collapse of United States Dynamism of Income Growth and Employment Creation

Blog 7/12/15

IMF View

World Real Economic Growth 2015 ∆% 3.5 Blog 4/26/15

Links to blog comments in Table USA: 7/12/2015 http://cmpassocregulationblog.blogspot.com/2015/07/oscillating-valuations-of-risk.html

7/5/15 http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html

6/28/2015 http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial.html

6/21/15 http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html

6/14/15 http://cmpassocregulationblog.blogspot.com/2015/06/volatility-of-financial-asset.html

6/7/15 http://cmpassocregulationblog.blogspot.com/2015/06/higher-volatility-of-asset-prices-at.html

5/10/15 http://cmpassocregulationblog.blogspot.com/2015/05/quite-high-equity-valuations-and.html

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

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

Sales of manufacturers decreased 0.1 percent in May 2015 after changing 0.0 percent in Apr and decreasing 5.2 percent in the 12 months ending in May 2015, as shown in Table VA-1. Retailers’ sales increased 1.1 percent in May 2015 after decreasing 0.1 percent in Apr and decreased 0.3 percent in 12 months ending in May 2015. Sales of merchant wholesalers increased 0.3 percent in May, increased 1.7 percent in Apr and decreased 6.8 percent in 12 months ending in May. Sales of total business increased 0.4 percent in May 2015 after increasing 0.5 percent in Apr and decreased 4.3 percent in 12 months.

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

 

May 15/Apr 15
∆% SA

May 2015
Millions of Dollars NSA

Apr 15/ Mar 15  ∆% SA

May 15/ May 14
∆% NSA

Total Business

0.4

1,340,002

0.5

-4.3

Manufacturers

-0.1

487,440

0.0

-5.2

Retailers

1.1

406,608

-0.1

-0.3

Merchant Wholesalers

0.3

445,954

1.7

-6.8

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

Chart VA-1 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers seasonally adjusted (SA) in millions of dollars. The series with adjustment evens fluctuations following seasonal patterns. There is sharp recovery from the global recession in a robust trend, which is mixture of price and quantity effects because data are not adjusted for price changes. There is stability in the final segment with subdued prices with data not adjusted for price changes.

clip_image001

Chart VA-1, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-May 2015

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

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

clip_image002

Chart VA-2, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-May 2015

US Census Bureau

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

Businesses added cautiously to inventories to replenish stocks. Retailers’ inventories changed 0.0 percent in May 2015 and increased 0.6 percent in Apr with growth of 3.3 percent in 12 months, as shown in Table VA-2. Total business increased inventories by 0.3 percent in May, 0.4 percent in Apr and increased 2.4 percent in 12 months. Inventories sales/ratios of total business continued at a level close to 1.30 under careful management to avoid costs and risks, increasing to 1.36 in May 2015. Inventory/sales ratios of manufacturers and retailers are higher than for merchant wholesalers. There is stability in inventory/sales ratios in individual months and relative to a year earlier with increase at the margin.

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

Inventory Change

May 15
Millions of Dollars NSA

May 15/ Apr 15 ∆% SA

Apr 15/  Mar 15 ∆% SA

May 15/May 14 ∆% NSA

Total Business

1,793,303

0.3

0.4

2.4

Manufacturers

654,672

0.0

0.2

-0.7

Retailers

560,721

0.0

0.6

3.3

Merchant
Wholesalers

577,910

0.8

0.4

5.1

Inventory/
Sales Ratio

May 15
Millions of Dollars NSA

May 2015 SA

Apr 2015 SA

May 2014 SA

Total Business

1,793,303

1.36

1.36

1.30

Manufacturers

654,672

1.35

1.35

1.31

Retailers

560,721

1.45

1.46

1.42

Merchant Wholesalers

577,910

1.29

1.29

1.19

US Census Bureau

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

Chart VA-3 of the US Census Bureau provides total business inventories of manufacturers, retailers and merchant wholesalers seasonally adjusted (SA) in millions of dollars from Jan 1992 to May 2015. The impact of the two recessions of 2001 and IVQ2007 to IIQ2009 is evident in the form of sharp reductions in inventories. Inventories have surpassed the peak before the global recession. Data are not adjusted for price changes.

clip_image003

Chart VA-3, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-May 2015

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

Chart VA-4 provides total business inventories of manufacturers, retailers and merchant wholesalers not seasonally adjusted (NSA) from Jan 1992 to May 2015 in millions of dollars. The recessions of 2001 and IVQ2007 to IIQ2009 are evident in the form of sharp reductions of inventories. There is sharp upward trend of inventory accumulation after both recessions. Total business inventories are higher than in the peak before the global recession.

clip_image004

Chart VA-4, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-May 2015

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

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

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

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

This is the pure inventory cycle.

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

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

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

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

Chart VA-5 shows the increase in the inventory/sales ratios during the recession of 2007-2009. The inventory/sales ratio fell during the expansions. The inventory/sales ratio declined to a trough in 2011, climbed and then stabilized at current levels in 2012, 2013, 2014 and 2015 with increase into 2015.

clip_image006

Chart VA-5, Total Business Inventories/Sales Ratios 2006 to 2015

Source: US Census Bureau

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

Sales of retail and food services decreased 0.3 percent in Jun 2015 after increasing 1.0 percent in May 2015 seasonally adjusted (SA), growing 2.0 percent in Jan-Jun 2015 relative to Jan-Jun 2014 not seasonally adjusted (NSA), as shown in Table VA-3. Excluding motor vehicles and parts, retail sales decreased 0.1 percent in Jun 2015, increasing 0.8 percent in May 2015 SA and increasing 0.6 percent NSA in Jan-May 2015 relative to a year earlier. Sales of motor vehicles and parts decreased 1.1 percent in Jun 2015 after increasing 1.8 percent in May 2015 SA and increasing 7.6 percent NSA in Jan-Jun 2015 relative to a year earlier. Gasoline station sales increased 0.8 percent SA in Jun 2015 after increasing 3.7 percent in May 2015 in oscillating prices of gasoline that are moderating, decreasing 20.8 percent in Jan-Jun 2015 relative to a year earlier.

Table VA-3, US, Percentage Change in Monthly Sales for Retail and Food Services, ∆%

 

Jun/May ∆% SA

May/Apr ∆% SA

Jan-Jun 2015 Million Dollars NSA

Jan-Jun 2015 from Jan-Jun 2014 ∆% NSA

Retail and Food Services

-0.3

1.0

2,569,992

2.0

Excluding Motor Vehicles and Parts

-0.1

0.8

2,022,024

0.6

Motor Vehicles & Parts Dealers

-1.1

1.8

547,968

7.6

Retail

-0.3

1.1

2,263,372

1.1

Building Materials

-1.3

-0.4

163,944

3.5

Food and Beverage

0.0

0.5

333,317

3.2

Grocery

-0.2

0.6

298,604

2.9

Health & Personal Care Stores

0.2

-0.4

153,343

4.3

Clothing & Clothing Accessories Stores

-1.5

1.4

115,599

2.3

Gasoline Stations

0.8

3.7

215,950

-20.8

General Merchandise Stores

0.7

1.4

314,828

0.3

Food Services & Drinking Places

-0.2

0.2

306,620

8.8

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

Chart VA-6 provides monthly percentage changes of sales of retail and food services. There is significant monthly volatility that prevents identification of clear trends.

clip_image007

Chart VA-6, US, Monthly Percentage Change of Retail and Food Services Sales, Jan 1992-Jun 2015

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

Chart VA-7 of the US Census Bureau provides total sales of retail trade and food services seasonally adjusted (SA) from Jan 1992 to Jun 2015 in millions of dollars. The impact on sales of the shallow recession of 2001 was much milder than the sharp contraction in the global recession from IVQ2007 to IIQ2009. There is flattening in the final segment of the series followed by another increase/decrease. Data are not adjusted for price changes.

clip_image008

Chart VA-7, US, Total Sales of Retail Trade and Food Services, SA, Jan 1992-Jun 2015, Millions of Dollars

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

Chart VA-8 of the US Census Bureau provides total sales of retail trade and food services not seasonally adjusted (NSA) in millions of dollars from Jan 1992 to Jun 2015. Data are not adjusted for seasonality, which explains sharp jagged behavior, or price changes. There was contraction during the global recession from IVQ2007 to IIQ2009 with strong rebound to a higher level and stability followed by strong increase in the final segment. Sales decline in the last observation.

clip_image009

Chart VA-8, US, Total Sales of Retail Trade and Food Services, NSA, Jan 1992-Jun 2015, Millions of Dollars

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

Risk aversion channels funds toward US long-term and short-term securities that finance the US balance of payments and fiscal deficits benefitting from risk flight to US dollar denominated assets. There are now temporary interruptions because of fear of rising interest rates that erode prices of US government securities because of mixed signals on monetary policy and exit from the Fed balance sheet of four trillion dollars of securities held outright. Net foreign purchases of US long-term securities (row C in Table VA-1) improved from $38.7 billion in Apr 2015 to $76.5 billion in May 2015. Foreign (residents) purchases minus sales of US long-term securities (row A in Table VA-1) in Apr 2015 of $41.6 billion increased to $77.8 billion in May 2015. Net US (residents) purchases of long-term foreign securities (row B in Table VA-1) increased from minus $12.8 billion in Apr 2015 to $15.2 billion in May 2015. Other transactions (row C2 in Table VA-1) decreased from minus $15.7 billion in Apr 2015 to minus $16.5 billion in May 2015. In May 2015,

C = A + B + C2 = $77.8 billion + $15.2 billion -$16.5 = $76.5 billion

There are minor rounding errors. There is strengthening demand in Table VA-1 in Mar in A1 private purchases by residents overseas of US long-term securities of $74.2 billion of which improvement in A11 Treasury securities of $58.0 billion, weakening in A12 of 10.0 billion in agency securities, improvement of $20.7 billion of corporate bonds and deterioration of minus $14.5 billion in equities. Worldwide risk aversion causes flight into US Treasury obligations with significant oscillations. Official purchases of securities in row A2 increased $3.7 billion with decrease of Treasury securities of $4.6 billion in May 2015. Official purchases of agency securities increased $4.9 billion in May 2015. Row D shows increase in May 2015 of $1.8 billion in purchases of short-term dollar denominated obligations. Foreign private holdings of US Treasury bills decreased $16.0 billion (row D11) with foreign official holdings increasing $3.1 billion while the category “other” increased $10.8 billion. Foreign private holdings of US Treasury bills increased $2.0 billion in what could be arbitrage of duration exposures. Risk aversion of default losses in foreign securities dominates decisions to accept zero interest rates in Treasury securities with no perception of principal losses. In the case of long-term securities, investors prefer to sacrifice inflation and possible duration risk to avoid principal losses with significant oscillations in risk perceptions.

Table VA-1, Net Cross-Borders Flows of US Long-Term Securities, Billion Dollars, NSA

 

Apr 2014 12 Months

Apr 2015 12 Months

Apr 2015

May 2015

A Foreign Purchases less Sales of
US LT Securities

138.5

263.8

41.6

77.8

A1 Private

110.6

289.8

58.7

74.2

A11 Treasury

182.6

116.5

26.5

58.0

A12 Agency

-1.6

115.9

23.7

10.0

A13 Corporate Bonds

-30.0

96.6

4.6

20.7

A14 Equities

-40.4

-39.2

3.8

-14.5

A2 Official

27.9

-26.0

-17.1

3.7

A21 Treasury

-3.6

-77.5

-20.1

-4.6

A22 Agency

40.0

45.2

6.5

4.9

A23 Corporate Bonds

8.9

8.6

-0.4

2.8

A24 Equities

-17.4

-2.3

-3.1

0.5

B Net US Purchases of LT Foreign Securities

-186.2

149.4

12.8

15.2

B1 Foreign Bonds

3.4

204.6

33.5

26.6

B2 Foreign Equities

-189.6

-55.2

-20.7

-11.4

C1 Net Transactions

-47.7

413.2

54.4

93.0

C2 Other

-119.0

-280.2

-15.7

-16.5

C Net Foreign Purchases of US LT Securities

-166.8

133.06

38.7

76.5

D Increase in Foreign Holdings of Dollar Denominated Short-term 

-31.4

56.5

-2.1

1.8

D1 US Treasury Bills

-24.7

57.8

-12.8

11.3

D11 Private

-6.1

42.1

-16.0

2.0

D12 Official

-18.6

15.7

3.1

9.3

D2 Other

-6.7

-1.3

10.7

-9.5

C1 = A + B; C = C1+C2

A = A1 + A2

A1 = A11 + A12 + A13 + A14

A2 = A21 + A22 + A23 + A24

B = B1 + B2

D = D1 + D2

Sources: United States Treasury

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

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

Table VA-5 provides major foreign holders of US Treasury securities. China is the largest holder with $1270.3 billion in May 2015, decreasing 0.05 percent from $1270.9 billion in May 2015 while decreasing $6.9 billion from Apr 2014 or 0.5 percent. The United States Treasury estimates US government debt held by private investors at $10,043 billion in Dec 2014. China’s holding of US Treasury securities represent 12.6 percent of US government marketable interest-bearing debt held by private investors (http://www.fms.treas.gov/bulletin/index.html). Min Zeng, writing on “China plays a big role as US Treasury yields fall,” on Jul 16, 2004, published in the Wall Street Journal (http://online.wsj.com/articles/china-plays-a-big-role-as-u-s-treasury-yields-fall-1405545034?tesla=y&mg=reno64-wsj), finds that acceleration in purchases of US Treasury securities by China has been an important factor in the decline of Treasury yields in 2014. Japan decreased its holdings from $1220.1 billion in May 2014 to $1214.9 billion in May 2015 or 0.4 percent. The combined holdings of China and Japan in May 2015 add to $2485.2 billion, which is equivalent to 24.7 percent of US government marketable interest-bearing securities held by investors of $10,043 billion in Dec 2014 (http://www.fms.treas.gov/bulletin/index.html). Total foreign holdings of Treasury securities rose from $5974.5 billion in May 2014 to $6134.8 billion in May 2015, or 2.7 percent. The US continues to finance its fiscal and balance of payments deficits with foreign savings (see Pelaez and Pelaez, The Global Recession Risk (2007)). A point of saturation of holdings of US Treasury debt may be reached as foreign holders evaluate the threat of reduction of principal by dollar devaluation and reduction of prices by increases in yield, including possibly risk premium. Shultz et al (2012) find that the Fed financed three-quarters of the US deficit in fiscal year 2011, with foreign governments financing significant part of the remainder of the US deficit while the Fed owns one in six dollars of US national debt. Concentrations of debt in few holders are perilous because of sudden exodus in fear of devaluation and yield increases and the limit of refinancing old debt and placing new debt. In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):

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

Table VA-5, US, Major Foreign Holders of Treasury Securities $ Billions at End of Period

 

May 2015

Apr 2015

May 2014

Total

6134.8

6138.4

5974.5

China

1270.3

1263.4

1270.9

Japan

1214.9

1215.9

1220.1

Caribbean Banking Centers

311.5

295.6

248.1

Oil Exporters

296.8

292.9

257.9

Brazil

258.5

262.7

250.1

Switzerland

222.7

215.8

174.0

Ireland

209.0

215.7

170.0

Belgium

202.8

228.9

362.4

United Kingdom

199.5

195.6

179.8

Hong Kong

186.3

183.1

155.2

Luxembourg

177.0

171.0

141.5

Taiwan

174.2

170.3

174.4

India

114.0

110.3

70.1

Foreign Official Holdings

4160.5

4132.2

4092.2

A. Treasury Bills

376.9

367.6

361.2

B. Treasury Bonds and Notes

3783.5

3764.6

3731.0

Source: United States Treasury

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

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

Table IIAI-2 provides additional information required for understanding the deficit/debt situation of the United States. The table is divided into four parts: Treasury budget in the 2015 fiscal year beginning on Oct 1, 2014 and ending on Sep 30, 2015; federal fiscal data for the years from 2009 to 2014; federal fiscal data for the years from 2005 to 2008; and Treasury debt held by the public from 2005 to 2014. Receipts increased 8.3 percent in the cumulative fiscal year 2015 ending in Jun 2015 relative to the cumulative in fiscal year 2014. Individual income taxes increased 11.6 percent relative to the same fiscal period a year earlier. Outlays increased 5.1 percent relative to a year earlier. There are also receipts, outlays, deficit and debt for fiscal years 2013 and 2014. Total revenues of the US from 2009 to 2012 accumulate to $9021 billion, or $9.0 trillion, while expenditures or outlays accumulate to $14,109 billion, or $14.1 trillion, with the deficit accumulating to $5090 billion, or $5.1 trillion. Revenues decreased 6.5 percent from $9653 billion in the four years from 2005 to 2008 to $9021 billion in the years from 2009 to 2012. Decreasing revenues were caused by the global recession from IVQ2007 (Dec) to IIQ2009 (Jun) and also by growth of only 2.2 percent on average in the cyclical expansion from IIIQ2009 to IQ2015. In contrast, the expansion from IQ1983 to IIIQ1988 was at the average annual growth rate of 4.8 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial.html). Because of mediocre GDP growth, there are 25.0 million unemployed or underemployed in the United States for an effective unemployment/underemployment rate of 15.1 percent (http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html). Weakness of growth and employment creation is analyzed in II Collapse of United States Dynamism of Income Growth and Employment Creation (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/07/oscillating-valuations-of-risk.html). In contrast with the decline of revenue, outlays or expenditures increased 30.2 percent from $10,839 billion, or $10.8 trillion, in the four years from 2005 to 2008, to $14,109 billion, or $14.1 trillion, in the four years from 2009 to 2012. Increase in expenditures by 30.2 percent while revenue declined by 6.5 percent caused the increase in the federal deficit from $1186 billion in 2005-2008 to $5090 billion in 2009-2012. Federal revenue was 14.9 percent of GDP on average in the years from 2009 to 2012, which is well below 17.4 percent of GDP on average from 1965 to 2014. Federal outlays were 23.3 percent of GDP on average from 2009 to 2012, which is well above 20.1 percent of GDP on average from 1965 to 2014. The lower part of Table IIA1-2 shows that debt held by the public swelled from $5803 billion in 2008 to $12,779 billion in 2014, by $6976 billion or 120.2 percent. Debt held by the public as percent of GDP or economic activity jumped from 39.3 percent in 2008 to 74.1 percent in 2014, which is well above the average of 38.2 percent from 1965 to 2014. The United States faces tough adjustment because growth is unlikely to recover, creating limits on what can be obtained by increasing revenues, while continuing stress of social programs restricts what can be obtained by reducing expenditures.

Table IIA1-6, US, Treasury Budget in Fiscal Year to Date Million Dollars

Jun

Fiscal Year 2015

Fiscal Year 2014

∆%

Receipts

2,446,920

2,260,385

8.3

Outlays

2,760,301

2,626,250

5.1

Deficit

-313,381

-365,865

 

Individual Income Tax

1,167,500

1,045,759

11.6

Corporation Income Tax

255,453

235,018

8.7

Social Insurance

588,659

562,041

4.7

 

Receipts

Outlays

Deficit (-), Surplus (+)

$ Billions

     

Fiscal Year 2014

3,021

3,504

-483

% GDP

17.5

20.3

2.8

Fiscal Year 2013

2,775

3,455

-680

% GDP

16.7

20.8

-4.1

Fiscal Year 2012

2,450

3,537

-1,087

% GDP

15.2

22.0

-6.8

Fiscal Year 2011

2,304

3,603

-1,300

% GDP

15.0

23.4

-8.4

Fiscal Year 2010

2,163

3,457

-1,294

% GDP

14.6

23.4

-8.8

Fiscal Year 2009

2,105

3,518

-1,413

% GDP

14.6

24.4

-9.8

Total 2009-2012

9,021

14,109

-5,090

Average % GDP 2009-2012

14.9

23.3

-8.4

Fiscal Year 2008

2,524

2,983

-459

% GDP

17.1

20.2

-3.1

Fiscal Year 2007

2,568

2,729

-161

% GDP

17.9

19.0

-1.1

Fiscal Year 2006

2,407

2,655

-248

% GDP

17.6

19.4

-1.8

Fiscal Year 2005

2,154

2,472

-318

% GDP

16.7

19.2

-2.5

Total 2005-2008

9,653

10,839

-1,186

Average % GDP 2005-2008

17.3

19.5

-2.1

Debt Held by the Public

Billions of Dollars

Percent of GDP

 

2005

4,592

35.6

 

2006

4,829

35.3

 

2007

5,035

35.1

 

2008

5,803

39.3

 

2009

7,545

52.3

 

2010

9,019

61.0

 

2011

10,128

65.8

 

2012

11,281

70.1

 

2013

11,982

72.0

 

2014

12,779

74.1

 

Source: http://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/mthTreasStmt_home.htm CBO (2012NovMBR). CBO (2011AugBEO); Office of Management and Budget 2011. Historical Tables. Budget of the US Government Fiscal Year 2011. Washington, DC: OMB; CBO. 2011JanBEO. Budget and Economic Outlook. Washington, DC, Jan. CBO. 2012AugBEO. Budget and Economic Outlook. Washington, DC, Aug 22. CBO. 2012Jan31. Historical budget data. Washington, DC, Jan 31. CBO. 2012NovCDR. Choices for deficit reduction. Washington, DC. Nov. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO (2013Aug12). 2013AugHBD. Historical budget data—August 2013. Washington, DC, Congressional Budget Office, Aug. CBO, Historical Budget Data—February 2014, Washington, DC, Congressional Budget Office, Feb. CBO, Historical budget data—April 2014 release. Washington, DC, Congressional Budget Office, Apr. Congressional Budget Office, August 2014 baseline: an update to the budget and economic outlook: 2014 to 2024. Washington, DC, CBO, Aug 27, 2014. CBO, Monthly budget review: summary of fiscal year 2014. Washington, DC, Congressional Budget Office, Nov 10, 2014. CBO, The budget and economic outlook: 2015 to 2025. Washington, DC, Congressional Budget Office, Jan 26, 2015.

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 1.7 percent in 2012. Japan’s GDP grew 1.6 percent in 2013 and stagnated in 2014 at minus 0.1. 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 0.6 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

1.7

2013

1.6

2014

-0.1

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 Jan 21, 2015 (https://www.boj.or.jp/en/announcements/release_2015/k150121a.pdf). On Jun 19, 2015, the Bank of Japan announced a “New Framework for Monetary Policy Meetings,” which provides for quarterly release of the forecasts of the economy and prices beginning in Jan 2016 (https://www.boj.or.jp/en/announcements/release_2015/rel150619a.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 50.9 in May to 49.9 in Jun and the Flash Japan

Manufacturing Output Index™ decreased from 51.9 in May to 50.5 in Jun

(http://www.markiteconomics.com/Survey/PressRelease.mvc/045fa40d96bc4a1785747ed6601

cf1). New export orders increased at faster pace. Amy Brownbill, Economist at

Markit, finds slightly weaker conditions in Japan’s manufacturing with exports responding to

exchange rate depreciation

(http://www.markiteconomics.com/Survey/PressRelease.mvc/045fa40d96bc4a1785747ed6601

cf1).

The Nikkei Composite Output PMI Index decreased from 51.6 in May to 51.5 in Jun, indicating

improving business activity

(http://www.markiteconomics.com/Survey/PressRelease.mvc/459a8f600cce4436b7a5e71073543df1).

The Nikkei Business Activity Index of Services increased to 51.8 in Jun from 51.5 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/459a8f600cce4436b7a5e71073543df1). Amy Brownbill, Ecoomist at Markit and author of the report, finds improved conditions with strengthening business expectations (http://www.markiteconomics.com/Survey/PressRelease.mvc/459a8f600cce4436b7a5e71073543df1). The Nikkei Purchasing Managers’ Index (PMI™), seasonally adjusted, decreased from 50.9 in May to 50.1 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/fcead8f7fe0f464391e3bcf2e748f75d). New orders decreased while growth of foreign orders continued. Amy Brownbill, Economist at Markit, finds manufacturing benefitting from strong growth of foreign orders with devaluation of the yen (http://www.markiteconomics.com/Survey/PressRelease.mvc/fcead8f7fe0f464391e3bcf2e748f75d).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

Jun ∆% -0.2
12 months ∆% -2.4
Blog 7/12/15

Consumer Price Index

May NSA ∆% 0.3; May 12 months NSA ∆% 0.5
Blog 6/28/15

Real GDP Growth

IQ2015 ∆%: 1.0 on IVQ2014;  IVQ2014 SAAR 3.9;
∆% from quarter a year earlier: -0.9 %
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 5/24/15 6/14/15

Employment Report

May Unemployed 2.24 million

Change in unemployed since last year: minus 180 thousand
Unemployment rate: 3.3 %
Blog 6/28/15

All Industry Indices

Apr month SA ∆% 0.1
12-month NSA ∆% 1.3

Earlier Data:

Blog 4/26/15

Industrial Production

May SA month ∆%: -2.2 Apr 1.2
May 12-month NSA ∆% -4.0 Apr 0.1

Earlier Data:
Blog 3/29/15

Machine Orders

Total May ∆% -6.2

Private ∆%: -5.5 Apr ∆% Excluding Volatile Orders 0.6

Earlier Data:
Blog 4/19/15

Tertiary Index

May month SA ∆% -0.7
May 12 months NSA ∆% 0.2

Earlier Data:
Blog 4/26/15

Wholesale and Retail Sales

May 12 months:
Total ∆%: -2.0
Wholesale ∆%: -4.2
Retail ∆%: 3.0

Earlier Data:
Blog 3/29/15

Family Income and Expenditure Survey

May 12-month ∆% total nominal consumption 5.5, real -4.8

Earlier Data:

Blog 3/29/15

Trade Balance

Exports May 12 months ∆%: 2.4 Imports May 12 months ∆% -8.7

Earlier Data:

Blog 4/26/15

Links to blog comments in Table JPY:

7/12/2015 http://cmpassocregulationblog.blogspot.com/2015/07/oscillating-valuations-of-risk.html

6/28/2015 http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial.html

6/14/15 http://cmpassocregulationblog.blogspot.com/2015/06/volatility-of-financial-asset.html

5/24/15 http://cmpassocregulationblog.blogspot.com/2015/05/interest-rate-policy-and-dollar.html

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

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 53.8 in Jun 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 51.3 in Jun 2015.

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

 

Total Index

New Orders

Interm.
Input Prices

Subs Prices

Exp

Jun 2015

53.8

51.3

50.6

48.7

59.7

May

53.2

49.5

52.8

50.4

60.1

Apr

53.4

49.1

50.8

48.9

60.0

Mar

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 53.8 in Jun 2015.

Chart CIPMNMW020150701529448881921_r75

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 50.2 in Jun 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 50.1 in Jun 2015.

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

 

IPM

PI

NOI

INV

EMP

SDEL

2015

           

Jun

50.2

52.9

50.1

48.7

48.1

50.3

May

50.2

52.9

50.6

48.2

48.2

50.9

Apr

50.1

52.6

50.2

48.2

48.0

50.4

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 50.2 in Jun 2015.

Chart CIPMMFGW020150701526190813034_r75

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.

ChVC-GDPW020140224376367229279

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.

ChVC-FXRW020140224376367389226

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.

ChVC-TradeW020140224376367380700

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/842ea43078214d80b7e3752f2d6d9dfb) is mixed. The overall Flash HSBC China Manufacturing PMI increased from 49.2 in May to 49.6 in Jun, while the Flash HSBC China Manufacturing Output Index increased from 49.3 in May to 50.0 in Jun, indicating moderate conditions. Exports orders indicate contraction. Annabel Fiddes, Economist at Markit, finds moderate expectations in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/842ea43078214d80b7e3752f2d6d9dfb). The HSBC China Services PMI, compiled by Markit, shows the HSBC Composite Output, combining manufacturing and services, decreasing from 51.2 in May to 50.6 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/bd989d97f17c4938a20544de2ee6e995). Annabel Fiddes, Economist at Markit, finds challenging growth conditions (http://www.markiteconomics.com/Survey/PressRelease.mvc/bd989d97f17c4938a20544de2ee6e995). The HSBC China Services Business Activity index decreased from 53.5 in May to 51.8 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/bd989d97f17c4938a20544de2ee6e995). The HSBC Purchasing Managers’ Index (PMI), compiled by Markit, increased to 49.4 in Jun from 49.2 in May, indicating moderate deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/7927d2e0c3304a4593285c6db50f3c21). New export orders increased. Annabel Fiddes, Economist at Markit, finds weak manufacturing in China. (http://www.markiteconomics.com/Survey/PressRelease.mvc/7927d2e0c3304a4593285c6db50f3c21). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry

Jun 12-month ∆%: minus 4.8

Jun month ∆%: -0.4
Blog 7/12/15

Consumer Price Index

Jun 12-month ∆%: 1.4 Jun month ∆%: 0.0
Blog 7/12/15

Value Added of Industry

Jun month ∆%: 0.64

Jan-Jun 2015/Jan-Jun 2014 ∆%: 6.3

Earlier Data
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-Jun 2015 ∆%: 11.4

Real estate development: 4.6

Earlier Data:
Blog 4/19/15

Retail Sales

Jun month ∆%: 0.96
Jan-Jun 12 month ∆%: NA : 10.4

Earlier Data:
Blog 4/19/15

Trade Balance

Jun balance $46.54 billion
Exports 12M ∆% 2.8
Imports 12M ∆% -6.1

Cumulative Jun 2015: $263.70 billion

Earlier Data:
Blog 4/19/15

Links to blog comments in Table CNY:

7/12/2015 http://cmpassocregulationblog.blogspot.com/2015/07/oscillating-valuations-of-risk.html

6/14/15 http://cmpassocregulationblog.blogspot.com/2015/06/volatility-of-financial-asset.html

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

VD Euro Area. Using calendar and seasonally adjusted data (http://ec.europa.eu/eurostat), the GDP of the euro area (18 countries) fell 5.8 percent from the high pre-recession date on IQ2008 to the trough in IIQ2009 while the GDP of the euro area (19 countries) fell 5.8 percent. The GDP of the euro area (18 countries) increased 4.5 percent from IIIQ2009 to IQ2015 at the annual equivalent rate of 0.8 percent while that of the euro area (19 countries) increased 4.5 percent at the annual equivalent rate of 0.8 percent. The GDP of the euro area (18) countries in IQ2015 is lower by 1.5 percent relative to the pre-recession peak in IQ2008 and that of the euro area (19 countries) is lower by 1.5 percent relative to the pre-recession peak in IQ2008. The GDP of the euro area (18) countries increased at the average yearly rate of 2.3 percent from IQ1999 to IQ2008 while that of the euro area (19 countries) increased at 2.3 percent. 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, increased from 53.6 in May to 54.1 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/e190997dfc504ddd8e0c0461a283a6f2). 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/e190997dfc504ddd8e0c0461a283a6f2). The Markit Eurozone PMI® Composite Output Index, combining services and manufacturing activity with close association with GDP increased from 53.6 in May to 54.2 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/922091d4bc964115b6f6329575019744). Chris Williamson, Chief Economist at Markit, finds potential for growth of 0.4 percent in IIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/922091d4bc964115b6f6329575019744). The Markit Eurozone Services Business Activity Index increased from 53.8 in May to 54.4 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/922091d4bc964115b6f6329575019744). The Markit Eurozone Manufacturing PMI® increased from 52.2 in May to 52.5 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/29a9c7cea226408aa040e7e49b430842). New export orders increased. Chris Williamson, Chief Economist at Markit, finds improvement of industrial growth in the euro area at a quarterly rate of 0.3 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/29a9c7cea226408aa040e7e49b430842). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP

IQ2015 ∆% 0.4; IQ2015/IQ2014 ∆% 1.0 Blog 6/14/15

Unemployment 

May 2015: 11.1 % unemployment rate; May 2015: 17.726 million unemployed

Blog 7/5/15

HICP

Jun month ∆%: 0.0

12 months Apr ∆%: 0.2
Blog 7/19/15

Producer Prices

Euro Zone industrial producer prices May ∆%: 0.0
May 12-month ∆%: -2.0
Blog 7/5/15

Industrial Production

May Month ∆%: -0.4; 12 months ∆%: 1.6

Earlier Data:
Blog 4/19/15

Retail Sales

May month ∆%: 0.2
May 12 months ∆%: 2.4

Earlier Data:
Blog 3/15/15

Confidence and Economic Sentiment Indicator

Sentiment 105.5 Jun 2015

Consumer minus 3.3 Jun 2015

Earlier Data:

Blog 4/5/15

Trade

Jan-May 2015/Jan-May 2014 Exports ∆%: 5.3
Imports ∆%: 0.9

May 2015 12-month Exports ∆% 2.6 Imports ∆% 0.1

Earlier Data:
Blog 4/19/15

Links to blog comments in Table EUR:

7/5/15 http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html

6/14/15 http://cmpassocregulationblog.blogspot.com/2015/06/volatility-of-financial-asset.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

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

4.1

1988

3.7

3.4

1987

1.4

1.3

1986

2.3

2.3

1985

2.3

2.6

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

https://www.destatis.de/EN/PressServices/Press/pr/2015/05/PE15_173_811.html

https://www.destatis.de/EN/PressServices/Press/pr/2015/05/PE15_187_811.html

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

The Flash Germany Composite Output Index of the Markit Flash Germany PMI®, combining manufacturing and services, increased from 52.6 in May to 54.0 in Jun. The index of manufacturing output reached 3.5 in Jun, increasing from 53.5 in May, while the index of services increased to 54.2 in Jun from 53.0 in May. The overall Flash Germany Manufacturing PMI® increased from 51.1 in May to 51.9 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/10ba8c8e0d9a4c93ad7d6772cf4b5cdd). New orders in manufacturing expanded. Oliver Kolodseike, Economist at Markit, finds continuing GDP growth at similar rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/10ba8c8e0d9a4c93ad7d6772cf4b5cdd). The Markit Germany Composite Output Index of the Markit Germany Services PMI®, combining manufacturing and services with close association with Germany’s GDP, increased from 52.6 in May to 53.7 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/87e5213c90484f9189266b50fd267b33). Oliver Kolodseike, Economist at Markit and author of the report, finds slowing improvement in 2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/87e5213c90484f9189266b50fd267b33). The Germany Services Business Activity Index increased from 53.0 in May to 53.3 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/87e5213c90484f9189266b50fd267b33). The Markit/BME Germany Purchasing Managers’ Index® (PMI®), showing close association with Germany’s manufacturing conditions, increased from 51.1 in May to 51.9 in

Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/e0f406c95af54c3c9895dc2cd120d783). New export orders increased. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds accelerating growth of manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/e0f406c95af54c3c9895dc2cd120d783).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP

IQ2015 0.3 ∆%; IQ2015/IQ2014 ∆% 1.1

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 5/17/15 5/24/15

Consumer Price Index

Jun month NSA ∆%: -0.1
Jun 12-month NSA ∆%: 0.3
Blog 7/19/15

Producer Price Index

May month ∆%: 0.0 NSA, 0.0 CSA
12-month NSA ∆%: -1.3
Blog 6/21/15

Industrial Production

MFG May month CSA ∆%: 0.3
12-month NSA: -4.9

Earlier Data:
Blog 4/12/15

Machine Orders

MFG May month ∆%: -0.2
May 12-month ∆%: -1.3

Earlier Data:
Blog 4/12/15

Retail Sales

May Month ∆% 0.5 Apr 1.3

12-Month May ∆% -0.4 Apr 1.1

Earlier Data:

Blog 4/5/15

Employment Report

Unemployment Rate SA Apr 4.7%
Blog 7/5/15

Trade Balance

Exports May 12-month NSA ∆%: 4.6
Imports May 12 months NSA ∆%: 3.0
Exports May month CSA ∆%: 1.7; Imports May month CSA -0.4

Earlier Data:

Blog 4/12/15

Links to blog comments in Table DE:

7/5/15 http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html

6/21/15 http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html

5/24/15 http://cmpassocregulationblog.blogspot.com/2015/05/interest-rate-policy-and-dollar.html

5/17/15 http://cmpassocregulationblog.blogspot.com/2015/05/fluctuating-valuations-of-financial.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

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

2007-2015*

0.3

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

*IVQ2007 to IQ2015

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20150624

The Markit Flash France Composite Output Index increased from 52.0 in May to 53.4 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/79afa07f182f43e3a59eb088e424a956). Jack Kennedy, Senior Economist at Markit and author of the report, finds continuing growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/79afa07f182f43e3a59eb088e424a956). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased from 52.0 in May to 53.3 in Jun, indicating expansion at faster pace (http://www.markiteconomics.com/Survey/PressRelease.mvc/33b630575b3d4d50b98a25af3b24b31a). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI®, finds improving business activity and GDP performance (http://www.markiteconomics.com/Survey/PressRelease.mvc/33b630575b3d4d50b98a25af3b24b31a). The Markit France Services Activity index increased from 52.8 in May to 54.1 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/33b630575b3d4d50b98a25af3b24b31a). The Markit France Manufacturing Purchasing Managers’ Index® increased to 50.7 in Jun from 49.4 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/5afa0d2c44ca4c3cbbfc5f2871494740). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI®, finds stabilizing manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/5afa0d2c44ca4c3cbbfc5f2871494740). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI

Jun month ∆% -0.1
12 months ∆%: 0.3
7/19/15

PPI

May month ∆%: -0.6
May 12 months ∆%: -1.7

Blog 7/5/15

GDP Growth

IQ2015/IVQ2014 ∆%: 0.6
IQ2015/IQ2014 ∆%: 0.8
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 5/17/15 6/28/15

Industrial Production

May ∆%:
Manufacturing 0.4 12-Month ∆%: 1.4

Earlier Data:
Blog 4/12/15

Consumer Spending

Manufactured Goods
May ∆%: 0.0 May 12-Month Manufactured Goods
∆%: 2.6

Earlier Data:
Blog 4/5/15

Employment

Unemployment Rate: IQ2014 10.0%
Blog 6/7/15

Trade Balance

May Exports ∆%: month -0.6, 12 months 5.2

Imports ∆%: month 1.2, 12 months 2.7

Earlier Data:

Blog 4/12/15

Confidence Indicators

Historical average 100

Jun Mfg Business Climate 100.0

Earlier Data:

Blog 3/29/15

Links to blog comments in Table FR:

7/5/15 http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html

6/28/2015 http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial.html

6/7/15 http://cmpassocregulationblog.blogspot.com/2015/06/higher-volatility-of-asset-prices-at.html

5/17/15 http://cmpassocregulationblog.blogspot.com/2015/05/fluctuating-valuations-of-financial.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

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 revised percentage changes of GDP in Italy of quarter on prior quarter and quarter on same quarter a year earlier. GDP increased 0.3 percent in IQ2015 and increased 0.1 percent relative to a year earlier. GDP changed 0.0 percent in IVQ2014 and fell 0.4 percent relative to a year earlier. GDP fell 0.1 percent in IIIQ2014 and fell 0.5 percent relative to a year earlier. Italy’s GDP fell 0.1 percent in IIQ2014 and declined 0.3 percent relative to a year earlier. The GDP of Italy decreased 0.2 percent in IQ2014 and fell 0.2 percent relative to a year earlier. Italy’s GDP changed 0.0 percent in IVQ2013 and fell 0.9 percent relative to a year earlier. The GDP of Italy increased 0.1 percent in IIIQ2013 and fell 1.4 percent relative to a year earlier. Italy’s GDP changed 0.0 percent in IIQ2013, interrupting seven consecutive quarterly declines, and fell 2.0 percent relative to a year earlier. Italy’s GDP fell 0.9 percent in IQ2013 and declined 2.6 percent relative to IQ2012. GDP had been growing during six consecutive quarters but at very low rates from IQ2010 to IIQ2011. Italy’s GDP fell in seven consecutive quarters from IIIQ2011 to IQ2013 at increasingly higher rates of contraction from 0.5 percent in IIIQ2011 to 1.0 percent in IVQ2011, 1.0 percent in IQ2012, 0.6 percent in IIQ2012 and 0.5 percent in IIIQ2012. The pace of decline accelerated to minus 0.5 percent in IVQ2012 and minus 0.9 percent in IQ2013. GDP contracted cumulatively 4.9 percent in seven consecutive quarterly contractions from IIIQ2011 to IQ2013 at the annual equivalent rate of minus 2.8 percent. The total contraction in the 12 quarters including IQ2014, IIQ2014 and IIIQ2014 accumulates to 5.3 percent. The yearly rate has fallen from 2.3 percent in IVQ2010 to minus 2.6 percent in IQ2013, minus 2.0 percent in IIQ2013 and minus 1.4 percent in IIIQ2013. GDP fell 0.9 percent in IVQ2013 relative to a year earlier. GDP fell 0.2 percent in IQ2014 relative to a year earlier and fell 0.3 percent in IIQ2014 relative to a year earlier. GDP fell 0.5 percent in IIIQ2014 relative to a year earlier and fell 0.4 percent in IVQ2014 relative to a year earlier. GDP increased 0.1 percent in IQ2015 relative to a year earlier. Using seasonally and calendar adjusted data in the dataset of EUROSTAT (http://ec.europa.eu/eurostat), the GDP of Italy in IQ2015 is lower by 9.3 percent relative to IQ2008. The fiscal adjustment of Italy is significantly more difficult with the economy not growing especially on the prospects of increasing government revenue. The strategy is for reforms to improve productivity, facilitating future fiscal consolidation.

Table VG-IT, Italy, GDP ∆%

 

Quarter ∆% Relative to Preceding Quarter

Quarter ∆% Relative to Same Quarter Year Earlier

IQ2015

0.3

0.1

IVQ2014

0.0

-0.4

IIIQ2014

-0.1

-0.5

IIQ2014

-0.1

-0.3

IQ2014

-0.2

-0.2

IVQ2013

0.0

-0.9

IIIQ2013

0.1

-1.4

IIQ2013

0.0

-2.0

IQ2013

-0.9

-2.6

IVQ2012

-0.5

-2.7

IIIQ2012

-0.5

-3.1

IIQ2012

-0.6

-3.1

IQ2012

-1.0

-2.3

IVQ2011

-1.0

-1.0

IIIQ2011

-0.5

0.4

IIQ2011

0.2

1.4

IQ2011

0.4

2.0

IVQ2010

0.4

2.3

IIIQ2010

0.5

1.8

IIQ2010

0.7

1.9

IQ2010

0.5

0.7

IVQ2009

-0.1

-3.5

IIIQ2009

0.4

-5.0

IIQ2009

-0.3

-6.6

IQ2009

-3.5

-6.9

IVQ2008

-1.6

-3.0

IIIQ2008

-1.3

-1.9

IIQ2008

-0.5

-0.2

IQ2008

0.5

0.5

IV2007

-0.4

0.1

IIIQ2007

0.3

1.7

IIQ2007

0.2

2.0

IQ2007

0.0

2.4

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/161241

The Markit/ADACI Business Activity Index decreased from 52.5 in May to 53.4 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/665f98f60f95426f8d849d33426360c1). Phil Smith, Economist at Markit and author of the Italy Services PMI®, finds signs of expansion of private sector activity with potential for growth higher than 0.3 percent in IIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/665f98f60f95426f8d849d33426360c1). The Markit/ADACI Purchasing Managers’ Index® (PMI®), decreased from 54.8 in May to 54.1 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/28b19e1871e8470d8fd185ae9315393d). 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/28b19e1871e8470d8fd185ae9315393d). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index

Jun month ∆%: 0.2
Jun 12-month ∆%: 0.2
Blog 7/19/15

Producer Price Index

May month ∆%: 0.2
May 12-month ∆%: -2.7

Blog 7/5/15

GDP Growth

IQ2015/IVQ2014 SA ∆%: 0.3
IQ2015/IQ2014 NSA ∆%: 0.1
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 5/17/15 5/31/15

Labor Report

May 2015

Participation rate 64.0%

Employment ratio 55.9%

Unemployment rate 12.4%

Youth Unemployment 41.5%

Blog 7/5/15

Industrial Production

May month ∆%: 0.9
12 months CA ∆%: 3.0

Earlier Data:
Blog 4/19/15

Retail Sales

Apr month ∆%: 0.7

Apr 12-month ∆%: 0.0

Earlier Data:

Blog 4/26/15

Business Confidence

Mfg Jun 103.9, Feb 100.4

Construction Jun 119.7, Feb 108.5

Earlier Data:

Blog 4/5/15

Trade Balance

Balance May SA €4184 million
Exports May month SA ∆%: 1.5; Imports month ∆%: -0.3
Exports 12 months May NSA ∆%: 2.0 Imports 12 months NSA ∆%: 0.5

Earlier Data:
Blog 4/19/15

Links to blog comments in Table IT:

7/5/15 http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html

5/31/15 http://cmpassocregulationblog.blogspot.com/2015/06/dollar-revaluation-squeezing-corporate.html

5/17/15 http://cmpassocregulationblog.blogspot.com/2015/05/fluctuating-valuations-of-financial.html

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

Professors Ricardo Caballero and Francesco Giavazzi (2012Jan15) find that the resolution of the European sovereign crisis with survival of the euro area would require success in the restructuring of Italy. Growth of the Italian economy would ensure that success. A critical problem is that the common euro currency prevents Italy from devaluing the exchange rate to parity or the exchange rate that would permit export growth to promote internal economic activity, which could generate fiscal revenues for primary fiscal surpluses that ensure creditworthiness. Fiscal consolidation and restructuring are important but of long-term gestation. Immediate growth of the Italian economy would consolidate the resolution of the sovereign debt crisis. Caballero and Giavazzi (2012Jan15) argue that 55 percent of the exports of Italy are to countries outside the euro area such that devaluation of 15 percent would be effective in increasing export revenue. Newly available data in Table VG-1 providing Italy’s trade with regions and countries supports the argument of Caballero and Giavazzi (2012Jan15). Italy’s exports to the European Monetary Union (EMU), or euro area, are only 40.3 percent of the total in May 2015. Exports to the non-European Union area with share of 45.3 percent in Italy’s total exports are growing at 6.0 percent in Jan-May 2015 relative to Jan-May 2014 while those to EMU are growing at 1.0 percent.

Table VG-1, Italy, Exports and Imports by Regions and Countries, % Share and 12-Month ∆%

May 2015

Exports
% Share

∆% Jan-May 2015/ Jan-May 2014

Imports
% Share

∆% Jan-May 2015/ Jan-May 2014

EU

54.7

2.5

57.1

5.9

EMU 19

40.3

1.0

45.3

5.0

France

10.6

-1.1

8.6

4.0

Germany

12.6

-1.0

15.4

2.9

Spain

4.5

7.6

4.8

9.1

UK

5.3

9.4

2.8

6.3

Non EU

45.3

6.0

42.9

-0.3

Europe non EU

11.8

-2.9

11.3

-6.8

USA

7.5

28.8

3.5

19.5

China

2.6

0.6

7.1

17.5

OPEC

5.7

6.1

5.8

-14.6

Total

100.0

4.1

100.0

3.2

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/164967

Table VG-2 provides Italy’s trade balance by regions and countries. Italy had trade deficit of €114 million with the 19 countries of the euro zone (EMU 19) in May 2015 and cumulative deficit of €1880 million in Jan-May 2015. Depreciation to parity could permit greater competitiveness in improving the trade surplus of €2009 million in Jan-May 2015 with Europe non-European Union, the trade surplus of €8775 million with the US and the trade surplus with non-European Union of €11,663 million in Jan-May 2015. There is significant rigidity in the trade deficit in Jan-May 2015 of €7196 million with China. There is a trade surplus of €1865 million with members of the Organization of Petroleum Exporting Countries (OPEC). Higher exports could drive economic growth in the economy of Italy that would permit less onerous adjustment of the country’s fiscal imbalances, raising the country’s credit rating.

Table VG-2, Italy, Trade Balance by Regions and Countries, Millions of Euro 

Regions and Countries

Trade Balance May 2015 Millions of Euro

Trade Balance Cumulative Jan-May 2015 Millions of Euro

EU

1,310

4,028

EMU 19

-114

-1,880

France

965

4,468

Germany

-473

-2,372

Spain

104

345

UK

1,042

4,663

Non EU

2,874

11,663

Europe non EU

382

2,009

USA

1,815

8,775

China

-1,261

-7,196

OPEC

360

1,865

Total

4,184

15,691

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/164967

Growth rates of Italy’s trade and major products are in Table VG-3 for the period Jan-May 2015 relative to Jan-May 2014. Growth rates of cumulative imports relative to a year earlier are negative for energy with minus 22.3 percent. Exports of durable goods increased 6.4 percent and exports of capital goods increased 6.9 percent. The rate of growth of exports of 4.1 percent in Jan-May 2015/Jan-May 2014 relative to that of imports of 3.2 percent may reflect weak demand in Italy with GDP declining during seven consecutive quarters from IIIQ2011 through IQ2013 together with softening commodity prices. GDP increased 0.1 percent in IIIQ2013, changed 0.0 percent in IVQ2013, decreased 0.2 percent in IQ2014 and fell 0.1 percent in IIQ2014. Italy’s GDP fell 0.1 percent in IIIQ2014 and changed 0.0 percent in IVQ2014. Italy’s GDP increased 0.3 percent in IQ2015.

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

 

Exports
Share %

Exports
∆% Jan-May 2015/ Jan-May 2014

Imports
Share %

Imports
∆% Jan-May 2015/ Jan-May 2014

Consumer
Goods

31.6

4.9

28.6

6.8

Durable

6.0

6.4

3.2

16.3

Non-Durable

25.6

4.5

25.4

5.6

Capital Goods

33.1

6.9

21.9

14.5

Inter-
mediate Goods

31.7

2.2

33.2

6.0

Energy

3.7

-11.2

16.3

-22.3

Total ex Energy

96.3

4.7

83.7

8.5

Total

100.0

4.1

100.0

3.2

Note: % Share for 2014 total trade.

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/164967

Table VG-4 provides Italy’s trade balance by product categories in May 2015 and cumulative Jan-May 2015. Italy’s trade balance excluding energy, generated surplus of €6833 million in May 2015 and €30,139 million cumulative in Jan-May 2015 but the energy trade balance created deficit of €2649 million in May 2015 and cumulative €14,448 million in Jan-May 2015. The overall surplus in May 2015 was €4184 million with cumulative surplus of €15,691 million in Jan-May 2015. Italy has significant competitiveness in various economic activities in contrast with some other countries with debt difficulties.

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

 

May 2015

Cumulative 2015

Consumer Goods

1,914

8,599

  Durable

1,139

5,057

  Nondurable

776

3,543

Capital Goods

4,488

20,616

Intermediate Goods

430

923

Energy

-2,649

-14,448

Total ex Energy

6,833

30,139

Total

4,184

15,691

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/164967

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 4.1 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

3.0

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*

4.1

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/naa2/quarterly-national-accounts/q1-2015/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI® increased from 56.5 in May to 58.5 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/a8ffc58477b54b92b4b23bb8abb1072a). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at around 0.5 percent in IIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a8ffc58477b54b92b4b23bb8abb1072a). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index® (PMI®) decreased to 51.4 in Jun from 51.9 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/e4122c0d1c284c1282fa2e20d86e566f). 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/e4122c0d1c284c1282fa2e20d86e566f). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI

Jun month ∆%: 0.0
Jun 12-month ∆%: 0.0
Blog 7/19/15

Output/Input Prices

Output Prices: Jun 12-month NSA ∆%: -1.5; excluding food, petroleum ∆%: 0.1
Input Prices: Jun 12-month NSA
∆%: -12.6
Excluding ∆%: -4.0
Blog 7/19/15

GDP Growth

IQ2015 prior quarter ∆% 0.4; year earlier same quarter ∆%: 2.9
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 5/31/15 7/5/15

Industrial Production

May 2015/May 2014 ∆%: Production Industries 2.1; Manufacturing 1.0

Earlier Data:
Blog 4/12/15

Retail Sales

May month ∆%: 0.2
May 12-month ∆%: 4.6

Earlier Data:
Blog 4/26/15

Labor Market

Mar-May Unemployment Rate: 5.6%
Blog 7/19/15 LMGDP 5/17/15

GDP and the Labor Market

IQ2015 Employment 104.8

IQ2008 =100

GDP IQ15=104.0 IQ2008=100

Blog 5/17/14

Trade Balance

Balance SA May minus ₤393 million
Exports Apr%: 1.2; Feb-May ∆%: -0.3
Imports Apr ∆%: -3.1 Feb-May ∆%: -1.3

EARLIER DATA:
Blog 4/12/15

Links to blog comments in Table UK:

7/5/15 http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html

6/21/15 http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html

5/31/15 http://cmpassocregulationblog.blogspot.com/2015/06/dollar-revaluation-squeezing-corporate.html

5/17/15 http://cmpassocregulationblog.blogspot.com/2015/05/fluctuating-valuations-of-financial.html

5/3/15 http://cmpassocregulationblog.blogspot.com/2015/05/dollar-devaluation-and-carry-trade.html

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

2/1/15 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-L3 provides indicators of the labor force survey of the UK for Mar-May 2015 and earlier quarters. There has been improvement in UK labor markets with the rate of unemployment decreasing from 6.5 percent in Mar-May 2014 to 5.6 percent in Mar-May 2015.

Table VH-L3, UK, Labor Force Survey Indicators, Thousands, SA

 

LFHP

EMP

PART

UNE

RATE

Mar-May 2013

40,536

29,856

71.2

2,524

7.8

Mar-May 2014

40,612

30,717

72.9

2,126

6.5

Jun-Aug 2014

40,633

30,763

73.0

1,972

6.0

Sep-Nov 2014

40,657

30,801

73.0

1,914

5.8

Dec-Feb 2015

40,681

31,049

73.4

1,838

5.6

Mar-May 2015

40,705

30,982

73.3

1,853

5.6

∆ on Quarter

23

-67

-0.1

15

0.1

∆%

0.1

-0.2

 

0.8

 

∆ on Year

93

265

0.5

-273

-0.8

∆%

0.2

0.9

 

-12.8

 

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

Source: UK Office for National Statistics

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

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

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