Global Decline of Values of Financial Assets on World Economic Growth Concerns, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induces by Zero Interest Rates, World Cyclical Slow Growth and Global Recession Risk: Part V

 

Global Decline of Values of Financial Assets on World Economic Growth Concerns, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induces by Zero Interest Rates, 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 Squeeze of Economic Activity by Carry Trades Induces by Zero Interest Rates

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 several countries for IIQ2015. Growth is weak throughout most of the world.

• Japan. The GDP of Japan increased 1.0 percent in IQ2012, 4.2 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 2.1 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 1.5 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 0.5 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 0.6 percent in IIQ2013 at the SAAR of 2.4 percent and increased 1.4 percent relative to a year earlier. Japan’s GDP grew 0.6 percent in IIIQ2013 at the SAAR of 2.4 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 0.8 percent, increasing 2.3 percent relative to a year earlier. Japan’s GDP increased 1.1 percent in IQ2014 at the SAAR of 4.5 percent and increased 2.4 percent relative to a year earlier. In IIQ2014, Japan’s GDP fell 1.9 percent at the SAAR of minus 7.5 percent and fell 0.4 percent relative to a year earlier. Japan’s GDP contracted 0.3 percent in IIIQ2014 at the SAAR of minus 1.3 percent and fell 1.4 percent relative to a year earlier. In IVQ2014, Japan’s GDP grew 0.3 percent, at the SAAR of 1.4 percent, decreasing 1.0 percent relative to a year earlier. The GDP of Japan increased 1.1 percent in IQ2015 at the SAAR of 4.5 percent and decreased 0.8 percent relative to a year earlier. Japan’s GDP decreased 0.4 percent in IIQ2015 at the SAAR of minus 1.6 percent and increased 0.7 percent relative to a year earlier
• China. China’s GDP grew 1.4 percent in IQ2012, annualizing to 5.7 percent, and 8.1 percent relative to a year earlier. The GDP of China grew at 2.1 percent in IIQ2012, which annualizes to 8.7 percent and 7.6 percent relative to a year earlier. China grew at 2.0 percent in IIIQ2012, which annualizes at 8.2 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 1.9 percent, which annualizes at 7.8 percent, and 7.9 percent in IVQ2012 relative to IVQ2011. In IQ2013, China grew at 1.7 percent, which annualizes at 7.0 percent and 7.8 percent relative to a year earlier. In IIQ2013, China grew at 1.8 percent, which annualizes at 7.4 percent and 7.5 percent relative to a year earlier. China grew at 2.3 percent in IIIQ2013, which annualizes at 9.5 percent and 7.9 percent relative to a year earlier. China grew at 1.8 percent in IVQ2013, which annualized to 7.4 percent and 7.6 percent relative to a year earlier. China’s GDP grew 1.6 percent in IQ2014, which annualizes to 6.6 percent, and 7.4 percent relative to a year earlier. China’s GDP grew 1.9 percent in IIQ2014, which annualizes at 7.8 percent, and 7.5 percent relative to a year earlier. China’s GDP grew 1.9 percent in IIIQ2014, which is equivalent to 7.8 percent in a year, and 7.3 percent relative to a year earlier. The GDP of China grew 1.5 percent in IVQ2014, which annualizes at 6.1 percent, and 7.3 percent relative to a year earlier. The GDP of China grew at 1.4 percent in IQ2015, which annualizes at 5.7 percent, and 7.0 percent relative to a year earlier. The GDP of China grew 1.7 percent in IIQ2015, which annualizes at 7.0 percent, and increased 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 area GDP increased 0.4 percent in IQ2015 and increased 0.9 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IIQ2015 and increased 1.2 percent relative to a year earlier.
• Germany. The GDP of Germany increased 0.4 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 0.2 percent and 0.1 percent relative to a year earlier. Germany’s GDP contracted 0.5 percent in IVQ2012 and decreased 0.3 percent relative to a year earlier. In IQ2013, Germany’s GDP decreased 0.3 percent and fell 1.7 percent relative to a year earlier. In IIQ2013, Germany’s GDP increased 0.9 percent and 0.7 percent relative to a year earlier. The GDP of Germany increased 0.4 percent in IIIQ2013 and 1.0 percent relative to a year earlier. In IVQ2013, Germany’s GDP increased 0.3 percent and 1.2 percent relative to a year earlier. The GDP of Germany increased 0.7 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 0.2 percent in IIIQ2014 and increased 1.2 percent relative to a year earlier. Germany’s GDP increased 0.6 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 1.2 percent relative to a year earlier. Germany’s GDP increased 0.4 percent in IIQ2015 and 1.6 percent relative to a year earlier.
• United States. Growth of US GDP in IQ2012 was 0.7 percent, at SAAR of 2.7 percent and higher by 2.8 percent relative to IQ2011. US GDP increased 0.5 percent in IIQ2012, 1.9 percent at SAAR and 2.5 percent relative to a year earlier. In IIIQ2012, US GDP grew 0.1 percent, 0.5 percent at SAAR and 2.4 percent relative to IIIQ2011. In IVQ2012, US GDP grew 0.0 percent, 0.1 percent at SAAR and 1.3 percent relative to IVQ2011. In IQ2013, US GDP grew at 1.9 percent SAAR, 0.5 percent relative to the prior quarter and 1.1 percent relative to the same quarter in 2013. In IIQ2013, US GDP grew at 1.1 percent in SAAR, 0.3 percent relative to the prior quarter and 0.9 percent relative to IIQ2012. US GDP grew at 3.0 percent in SAAR in IIIQ2013, 0.7 percent relative to the prior quarter and 1.5 percent relative to the same quarter a year earlier (http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial.html). In IVQ2013, US GDP grew 0.9 percent at 3.8 percent SAAR and 2.5 percent relative to a year earlier. In IQ2014, US GDP decreased 0.2 percent, increased 1.7 percent relative to a year earlier and fell 0.9 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 1.1 percent in IIIQ2014 at 4.3 percent SAAR and increased 2.9 percent relative to a year earlier. In IVQ2014, US GDP increased 0.5 percent at SAAR of 2.1 percent and increased 2.5 percent relative to a year earlier. GDP increased 0.1 percent in IQ2015 at SAAR of 0.6 percent and grew 2.9 percent relative to a year earlier. US GDP grew at SAAR 2.3 percent in IIQ2015, increasing 0.6 percent in the quarter and 2.3 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. UK GDP increased 0.7 percent in IIQ2015 and 2.6 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 2.6 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.9 percent and fell 2.5 percent relative to a year earlier. Italy’s GDP contracted 0.1 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 0.2 percent in IIQ2014 and declined 0.3 percent relative to a year earlier. In IIIQ2014, Italy’s GDP contracted 0.1 percent and fell 0.5 percent relative to a year earlier. The GDP of Italy changed 0.0 percent in IVQ20214 and declined 0.4 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. The GDP of Italy increased 0.2 percent in IIQ2015 and increased 0.5 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 1.1 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 increased 0.1 percent relative to a year earlier. France’s GDP increased 0.7 percent in IQ2015 and increased 0.9 percent relative to a year earlier. In IIQ2015, France’s GDP changed 0.0 percent and increased 1.0 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: 0.7        SAAR: 2.7	2.8
Japan	QOQ: 1.0 SAAR: 4.2	3.5
China	1.4	8.1
Euro Area	-0.2	-0.5
Germany	0.4	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: 0.5         SAAR: 1.9	2.5
Japan	QOQ: -0.5 SAAR: -2.1	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: 0.1  SAAR: 0.5	2.4
Japan	QOQ: –0.4 SAAR: –1.5	0.2
China	2.0	7.4
Euro Area	-0.1	-0.9
Germany	0.2	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	1.3
Japan	QOQ: -0.1 SAAR: -0.5	0.0
China	1.9	7.9
Euro Area	-0.3	-0.9
Germany	-0.5	-0.3
France	0.0	0.0
Italy	-0.5	-2.6
United Kingdom	-0.3	0.4
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.5 SAAR: 1.9	1.1
Japan	QOQ: 1.3 SAAR: 5.3	0.4
China	1.7	7.8
Euro Area	-0.4	-1.1
Germany	-0.3	-1.7
France	0.1	0.1
Italy	-0.9	-2.5
UK	0.6	0.9
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.3 SAAR: 1.1	0.9
Japan	QOQ: 0.6 SAAR: 2.4	1.4
China	1.8	7.5
Euro Area	0.4	-0.5
Germany	0.9	0.7
France	0.8	1.1
Italy	-0.1	-2.0
UK	0.6	1.7
	IIIQ2013/IIQ2013	III/Q2013/  IIIQ2012
USA	QOQ: 0.7 SAAR: 3.0	1.5
Japan	QOQ: 0.6 SAAR: 2.4	2.2
China	2.3	7.9
Euro Area	0.2	-0.2
Germany	0.4	1.0
France	-0.1	0.8
Italy	0.1	-1.4
UK	0.7	1.6
	IVQ2013/IIIQ2013	IVQ2013/IVQ2012
USA	QOQ: 0.9 SAAR: 3.8	2.5
Japan	QOQ: -0.2 SAAR: -0.8	2.3
China	1.8	7.6
Euro Area	0.3	0.5
Germany	0.3	1.2
France	0.2	1.0
Italy	0.0	-0.9
UK	0.4	2.4
	IQ2014/IVQ2013	IQ2014/IQ2013
USA	QOQ -0.2 SAAR -0.9	1.7
Japan	QOQ: 1.1 SAAR: 4.5	2.4
China	1.6	7.4
Euro Area	0.2	1.1
Germany	0.7	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: -1.9 SAAR: -7.5	-0.4
China	1.9	7.5
Euro Area	0.1	0.8
Germany	-0.1	1.0
France	-0.1	-0.2
Italy	-0.2	-0.3
UK	0.9	3.0
	IIIQ2014/IIQ2014	IIIQ2014/IIIQ2013
USA	QOQ: 1.1 SAAR: 4.3	2.9
Japan	QOQ: -0.3 SAAR: -1.3	-1.4
China	1.9	7.3
Euro Area	0.2	0.8
Germany	0.2	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: 2.1	2.5
Japan	QOQ: 0.3 SAAR: 1.4	-1.0
China	1.5	7.3
Euro Area	0.4	0.9
Germany	0.6	1.6
France	0.1	0.1
Italy	0.0	-0.4
UK	0.8	3.4
	IQ2015/IVQ2014	IQ2015/IQ2014
USA	QOQ: 0.2 SAAR: 0.6	2.9
Japan	QOQ: 1.1 SAAR: 4.5	-0.8
China	1.4	7.0
Euro Area	0.4	1.0
Germany	0.3	1.2
France	0.7	0.9
Italy	0.3	0.1
UK	0.4	2.9
	IIQ2015/IQ2015	IIQ2015/IIQ2014
USA	QOQ: 0.6 SAAR: 2.3	2.3
Japan	QOQ: -0.4 SAAR: -1.6	0.7
China	1.7	7.0
Euro Area	0.3	1.2
Germany	0.4	1.6
France	0.0	1.0
Italy	0.2	0.5
UK	0.7	2.6

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

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

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

• Japan. Japan provides the most worrisome data (Section VB and earlier http://cmpassocregulationblog.blogspot.com/2015/07/valuation-of-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/dollar-revaluation-squeezing-corporate.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/imf-view-of-economy-and-finance-united.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/impatience-with-monetary-policy-of.html and earlier http://cmpassocregulationblog.blogspot.com/2015/02/world-financial-turbulence-squeeze-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/interest-rate-risks-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html and earlier http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html and earlier http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-zero-interest-rates-world.html http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations_8763.html http://cmpass ocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html and earlier http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and_4699.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and for GDP http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html and earlier http://cmpassocreulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html). In Jul 2015, Japan’s exports increased 7.6 percent in 12 months while imports decreased 3.2 percent. The second part of Table V-4 shows that net trade deducted 1.7 percentage points from Japan’s growth of GDP in IIQ2012, deducted 1.8 percentage points from GDP growth in IIIQ2012 and deducted 0.5 percentage points from GDP growth in IVQ2012. Net trade added 0.3 percentage points to GDP growth in IQ2012, 1.7 percentage points in IQ2013 and deducted 0.3 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.3 percentage points from GDP growth in Japan. Net trade ducted 2.0 percentage points from GDP growth in Japan in IVQ2013. Net trade deducted 1.0 percentage points from GDP growth of Japan in IQ2014. Net trade added 3.6 percentage points to GDP growth in IIQ2014. Net trade added 0.5 percentage points to GDP growth in IIIQ2014 and added 1.3 percentage points in IVQ2014. Net trade deducted 0.3 percentage points from GDP growth in IQ2015 and deducted 1.1 percentage points in IIQ2015

• China. In Jul 2015, China exports decreased 8.3 percent relative to a year earlier and imports decreased 8.1 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 increased 3.9 percent in Jun 2015 while imports increased 0.4 percent. France’s exports increased 8.8 percent in the 12 months ending in Jun 2015 and imports increased 0.8 percent relative to a year earlier. Net traded added 0.1 percentage points to France’s GDP in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.1 percentage points from France’s GDP growth in IQ2013 and added 0.3 percentage points in IIQ2013, deducting 1.7 percentage points in IIIQ2013. Net trade added 0.1 percentage points to France’s GDP in IVQ2013 and deducted 0.1 percentage points in IQ2014. Net trade deducted 0.2 percentage points from France’s GDP growth in IIQ2014 and deducted 0.2 percentage points in IIIQ2014. Net trade added 0.2 percentage points to France’s GDP growth in IVQ2014 and deducted 0.3 percentage points in IQ2015. Net trade added 0.3 percentage points to GDP growth in IIQ2015
• United States. US exports decreased 0.1 percent in Jun 2015 and goods exports decreased 5.2 percent in Jan-Jun 2015 relative to a year earlier. Imports increased 1.2 percent in Jun 2015 and goods imports decreased 3.4 percent in Jan-Jun 2015 relative to a year earlier. Net trade added 0.28 percentage points to GDP growth in IIQ2012 and added 0.16 percentage points in IIIQ2012 and 0.58 percentage points in IVQ2012. Net trade deducted 0.01 percentage points from US GDP growth in IQ2013 and deducted 0.24 percentage points in IIQ2013. Net traded added 0.16 percentage points to US GDP growth in IIIQ2013. Net trade added 1.26 percentage points to US GDP growth in IVQ2013. Net trade deducted 1.39 percentage points from US GDP growth in IQ2014 and deducted 0.24 percentage points in IIQ2014. Net trade added 0.39 percentage points to GDP growth in IIIQ2014. Net trade deducted 0.89 percentage points from GDP growth in IVQ2014 and deducted 1.92 percentage points from GDP growth in IQ2015. Net trade added 0.13 percentage points to GDP growth in IIQ2015. Industrial production increased 0.6 percent in Jul 2015 and increased 0.1 percent in Jun 2015 after decreasing 0.3 percent in May 2015, with all data seasonally adjusted, as shown in Table I-1. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Jul 21, 2015 (http://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm):

“The Federal Reserve has revised its index of industrial production (IP) and the related measures of capacity and capacity utilization. Total IP is now reported to have increased slightly less than 2 1/2 percent per year, on average, from 2011 through 2013 before advancing about 4 1/2 percent in 2014 and falling back somewhat in the first half of 2015. Relative to earlier reports, the current rates of change are lower---especially for 2012 and 2013. For the most recent recession, total IP still shows a peak-to-trough decline of about 17 percent, and the dates for the peak and trough are unaltered. However, the lower rates of change for recent years indicate that the recovery in the industrial sector since the trough has been slower than reported earlier. Total IP is now estimated to have returned to its pre-recession peak in May 2014, seven months later than previously estimated.”

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 0.6 percent in July after moving up 0.1 percent in June. In July, manufacturing output advanced 0.8 percent primarily because of an increase in motor vehicle assemblies. The output of motor vehicles and parts jumped 10.6 percent, and production elsewhere in manufacturing edged up 0.1 percent. The index for mining rose 0.2 percent, while the index for utilities fell 1.0 percent. At 107.5 percent of its 2012 average, total industrial production in July was 1.3 percent above its year-earlier level. (The comparison base year for industrial production was advanced to 2012 in the annual revision to the statistics published on July 21, 2015.) Capacity utilization for the industrial sector increased 0.3 percentage point in July to 78.0 percent, a rate that is 2.1 percentage points below its long-run (1972–2014) average.” In the six months ending in Jul 2015, United States national industrial production accumulated change of minus 0.2 percent at the annual equivalent rate of minus 0.4 percent, which is lower than growth of 1.3 percent in the 12 months ending in Jul 2015. Excluding growth of 0.6 percent in Jul 2015, growth in the remaining five months from Feb 2014 to Jul 2015 accumulated to minus 0.8 percent or minus 1.9 percent annual equivalent. Industrial production declined in four of the past six months and changed 0.1 percent in one month. Industrial production expanded at annual equivalent 1.6 percent in the most recent quarter from May 2015 to Jul 2015 and contracted at 2.4 percent in the prior quarter Feb 2015 to Apr 2015. Business equipment accumulated increase of 0.4 percent in the six months from Feb 2015 to Jul 2015 at the annual equivalent rate of 0.8 percent, which is lower than growth of 1.1 percent in the 12 months ending in Jul 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 0.3 percentage point in July to 78.0 percent, a rate that is 2.1 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 22.2 from the peak in Jun 2007 to the trough in Apr 2009 and increased by 19.2 percent from the trough in Apr 2009 to Dec 2014. Manufacturing grew 19.2 percent from the trough in Apr 2009 to Jul 2015. Manufacturing output in Jul 2015 is 7.2 percent below the peak in Jun 2007. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIQ2015 would have accumulated to 24.8 percent. GDP in IIQ2015 would be $18,712.5 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,442.1 billion than actual $16,270.4 billion. There are about two trillion dollars of GDP less than at trend, explaining the 24.7 million unemployed or underemployed equivalent to actual unemployment/underemployment of 14.8 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2015/08/fluctuating-risk-financial-assets.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html). US GDP in IIQ2015 is 13.1 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,270.4 billion in IIQ2015 or 8.5 percent at the average annual equivalent rate of 1.1 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. 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 of manufacturing at average 3.2 percent per year from Jul 1919 to Jul 2015. Growth at 3.2 percent per year would raise the NSA index of manufacturing output from 107.6075 in Dec 2007 to 136.6407 in Jul 2015. The actual index NSA in Jul 2015 is 103.7999, which is 24.0 percent below trend. Manufacturing output grew at average 2.2 percent between Dec 1986 and Dec 2014. Using trend growth of 2.2 percent per year, the index would increase to 126.9147 in Jul 2015. The output of manufacturing at 103.7999 in Jul 2015 is 18.2 percent below trend under this alternative calculation.

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

	Exports M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	-0.1 Jun	-5.2 Jan-Jun	1.2 Jun	-3.4 Jan-Jun
Japan		Jul 2015 7.6 Jun 2015 9.5 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		Jul 2015 -3.2 Jun 2015 -2.9 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 -8.3 Jul 2.8 Jun -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 -8.1 Jul -6.1 Jun -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	12.3 12 M-Jun	6.5 Jan-Jun	6.6 12-M Jun	2.6 Jan-Jun
Germany	1.0 Jun CSA	13.7 Jun	-0.5 Jun CSA	6.4 Jun
France Jun	3.9	8.8	0.4	0.8
Italy Jun	-0.6	9.4	4.3	12.2
UK	-0.6 Jun	2.7 Apr 15Jun 15 /Apr 14-Jun 14	1.1 Jun	-0.6 Apr 15-Jun 15 /Apr 14-Jun 14
Net Trade % Points GDP Growth	Points
USA	IIQ2015 0.13 IQ2015 -1.92 IVQ2014 -0.89 IIIQ2014 0.39 IIQ2014 -0.24 IQ2014 -1.39 IVQ2013 1.26 IIIQ2013 0.16 IIQ2013 -0.24 IQ2013 -0.01 IVQ2012 +0.58 IIIQ2012 0.16 IIQ2012 0.28 IQ2012 -0.02
Japan	0.3 IQ2012 -1.7 IIQ2012 -1.8 IIIQ2012 -0.5 IVQ2012 1.7 IQ2013 -0.3 IIQ2013 -1.3 IIIQ2013 -2.0 IVQ2013 -1.0 IQ2014 3.6 IIQ2014 0.5 IIIQ2014 1.3 IVQ2014 -0.3 IQ2015 -1.1 IIQ2015
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 -0.2 IIIQ2014 0.2 IVQ2014 -0.3 IQ2015 0.3 IIQ2015
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 Jun 2015. The share of Asia in Japan’s trade is close to one-half for 53.0 percent of exports and 47.9 percent of imports. Within Asia, exports to China are 17.7 percent of total exports and imports from China 23.8 percent of total imports. While exports to China increased 4.2 percent in the 12 months ending in Jul 2015, imports from China increased 13.5 percent. The largest export market for Japan in Jul 2015 is the US with share of 20.1 percent of total exports, which is close to that of China, and share of imports from the US of 10.0 percent in total imports. Japan’s exports to the US increased 18.8 percent in the 12 months ending in Jul 2015 and imports from the US increased 7.5 percent. Western Europe has share of 10.7 percent in Japan’s exports and of 12.4 percent in imports. Rates of growth of exports of Japan in Jul 2015 are 18.8 percent for exports to the US, minus 11.0 percent for exports to Brazil and 4.2 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 Jul 2015 are mixed. Imports from Asia increased 6.1 percent in the 12 months ending in Jul 2015 while imports from China increased 13.5 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

Jul 2015	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,663,762	7.6	6,931,817	-3.2
Asia	3,534,606 % Total 53.0	6.1	3,318,573 % Total 47.9	7.4
China	1,179,739 % Total 17.7	4.2	1,652,602 % Total 23.8	13.5
USA	1,340,785 % Total 20.1	18.8	693,886 % Total 10.0	7.5
Canada	75,532	5.6	93,255	-27.5
Brazil	42,546	-11.0	70,057	-18.3
Mexico	112,270	12.6	59,595	65.7
Western Europe	714,662 % Total 10.7	7.8	860,453 % Total 12.4	14.5
Germany	176,244	4.2	199,236	-4.5
France	55,019	-0.9	98,305	-2.6
UK	124,127	7.9	85,644	40.7
Middle East	268,842	5.4	933,965	-31.9
Australia	136,412	-6.7	361,295	-22.4

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, increased to 53.4 in Jul from 53.1 in Jun, indicating expansion at faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/6661ca05eebf4ab9977d4b8eeaa3c981). This index has remained above the contraction territory of 50.0 during 34 consecutive months. The employment index increased from 52.0 in Jun to 52.2 in Jul with input prices rising at slower rate, new orders increasing faster rate and output increasing faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/6661ca05eebf4ab9977d4b8eeaa3c981). Joseph Lupton, Senior Economist at JP Morgan, finds modest acceleration of global growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/6661ca05eebf4ab9977d4b8eeaa3c981). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, did not change to 51.0 in Jul from 51.0 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/79d4327a3ee941c68f15342152c6745f). New export orders changed to falling from expanding. Joseph Lupton, Senior Economist at JP Morgan, finds mild growth in global manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/79d4327a3ee941c68f15342152c6745f). The Markit Brazil Composite Output Index decreased from 41.0 in Jun to 40.8 in Jul, indicating contraction in activity of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/2a9254f390d84e069293b21ac9e646bc). The Markit Brazil Services Business Activity index, compiled by Markit, decreased from 39.9 in Jun to 39.1 in Jul, indicating contracting services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/2a9254f390d84e069293b21ac9e646bc). Pollyana De Lima, Economist at Markit, finds challenging conditions (http://www.markiteconomics.com/Survey/PressRelease.mvc/2a9254f390d84e069293b21ac9e646bc). The Markit Brazil Purchasing Managers’ Index^TM (PMI^™) increased from 46.5 in Jun to 47.2 in Juk, indicating deterioration in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/919957d3b0ab4842a5d71e98c9951a08). Pollyanna De Lima, Economist at Markit, finds slower deterioration of output and new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/919957d3b0ab4842a5d71e98c9951a08).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted decreased to 52.9 in Aug from 53.8 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/40e0964ee7024a42b2526e063c7851ff). New export orders decreased. Chris Williamson, Chief Economist at Markit, finds weak conditions in US manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/40e0964ee7024a42b2526e063c7851ff). 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 increased to 55.7 in Jul from 54.6 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ca04bc90b2449ec95b97668f6dad95c). The Markit US Services PMI™ Business Activity Index increased from 54.8 in Jun to 55.7 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ca04bc90b2449ec95b97668f6dad95c). Chris Williamson, Chief Economist at Markit, finds the indexes suggesting growth at an annual rate similar to 2.3 percent in IIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ca04bc90b2449ec95b97668f6dad95c). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) increased to 53.8 in Jul from 53.6 in Jun, which indicates expansion at faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/05be87ef335442c3948d53ddc02c8c23). New foreign orders increased. 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/05be87ef335442c3948d53ddc02c8c23). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® decreased 0.8 percentage points from 53.5 in Jun to 52.7 in Jul, which indicates growth at slower rate (https://www.instituteforsupplymanagement.org/ISMReport/MfgROB.cfm?navItemNumber=29562). The index of new orders increased 0.5 percentage points from 56.0 in Jun to 56.5 in Jul. The index of new exports decreased 1.5 percentage points from 49.5 in Jun to 48.0 in Jul, contracting at faster rate. The Non-Manufacturing ISM Report on Business^® PMI increased 4.3 percentage points from 56.0 in Jun to 60.3 in Jul, indicating growth of business activity/production during 72 consecutive months, while the index of new orders increased 5.5 percentage points from 58.3 in Jun to 63.8 in Jul (https://www.instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm?navItemNumber=29571). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Jul 12 months NSA ∆%: 0.2; ex food and energy ∆%: 1.8 Jul month SA ∆%: 0.1; ex food and energy ∆%: 0.1 Blog 8/23/15
Producer Price Index	Finished Goods Jul 12-month NSA ∆%: -2.6; ex food and energy ∆% 2.3 Jul month SA ∆% = -0.1; ex food and energy ∆%: 0.1 Final Demand Jul 12-month NSA ∆%: -0.8; ex food and energy ∆% 0.6 Jul month SA ∆% = 0.2; ex food and energy ∆%: 0.3 Blog 8/16/15
PCE Inflation	Jun 12-month NSA ∆%: headline 0.3; ex food and energy ∆% 1.3 Blog 8/9/15
Employment Situation	Household Survey: Jul Unemployment Rate SA 5.3% Blog calculation People in Job Stress Jul: 24.7 million NSA, 14.8% of Labor Force Establishment Survey: Jul Nonfarm Jobs +215,000; Private +210,000 jobs created  Jul 12-month Average Hourly Earnings Inflation Adjusted ∆%: 2.3 Blog 8/9/15
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 Jun 2015 5.501 million lower by 1.2 percent than 5.567 million in Jun 2006 Blog 8/16/15
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.8 IIQ2012/IIQ2011 2.5 IIIQ2012/IIIQ2011 2.4 IVQ2012/IVQ2011 1.3 IQ2013/IQ2012 1.1 IIQ2013/IIQ2012 0.9 IIIQ2013/IIIQ2012 1.5 IVQ2013/IVQ2012 2.5 IQ2014/IQ2013 1.7 IIQ2014/IIQ2013 2.6 IIIQ2014/IIIQ2013 2.9 IVQ2014/IVQ2013 2.5 IQ2015/IQ2014 2.9 IIQ2015/IIQ2014 2.3 IQ2012 SAAR 2.7 IIQ2012 SAAR 1.9 IIIQ2012 SAAR 0.5 IVQ2012 SAAR 0.1 IQ2013 SAAR 1.9 IIQ2013 SAAR 1.1 IIIQ2013 SAAR 3.0 IVQ2013 SAAR 3.8 IQ2014 SAAR -0.9 IIQ2014 SAAR 4.6 IIIQ2014 SAAR 4.3 IVQ2014 SAAR 2.1 IQ2015 SAAR 0.6 IIQ2015 SAAR: 2.3 Blog 8/2/2015
Real Private Fixed Investment	SAAR IIQ2015 ∆% 0.8 IVQ2007 to IIQ2015: 4.7% Blog 8/2/15
Corporate Profits	IQ2015 SAAR: Corporate Profits -5.2; Undistributed Profits -22.7 Blog 6/28/15
Personal Income and Consumption	Jun month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.2 Real Personal Consumption Expenditures (RPCE): 0.0 12-month Jun NSA ∆%: RDPI: 3.0; RPCE ∆%: 2.8 Blog 8/9/15
Quarterly Services Report	IQ15/IQ14 NSA ∆%: Information 3.0 Financial & Insurance 3.7 Earlier Data: Blog 3/22/15
Employment Cost Index	Compensation Private IIQ2014 SA ∆%: 0.0 Jun 12 months ∆%: 1.9 Earlier Data: Blog 2/1/15
Industrial Production	Jul month SA ∆%: 0.6 Jul 12 months SA ∆%: 1.3 Manufacturing Jul SA 0.8 ∆% Jul 12 months SA ∆% 1.5, NSA 1.5 Capacity Utilization: 78.0 Blog 8/16/15
Productivity and Costs	Nonfarm Business Productivity IIQ2015∆% SAAE 1.3; IIQ2015/IIQ2014 ∆% 0.3; Unit Labor Costs SAAE IIQ2015 ∆% 0.5; IIQ2015/IIQ2014 ∆%: 2.1 Blog 8/16/15
New York Fed Manufacturing Index	General Business Conditions From Jul 3.86 to Aug -14.92 New Orders: From Jul minus 3.5 to Aug -15.7 Blog 8/23/15
Philadelphia Fed Business Outlook Index	General Index from Jul 5.7 to Aug 8.3 New Orders from Jul 7.1 to Aug 5.8 7.1 Blog 8/23/15
Manufacturing Shipments and Orders	New Orders SA Jun ∆% 1.8 Ex Transport 0.5 Jan-Jun NSA New Orders ∆% minus 5.9 Ex transport minus 6.5 Earlier data: Blog 4/5/15
Durable Goods	Jun New Orders SA ∆%: 3.4 ; ex transport ∆%: 0.8 Jan-Jun 15/Jan-Jun 14 New Orders NSA ∆%: -2.0; ex transport ∆% -1.8 Earlier Data: Blog 4/26/15
Sales of New Motor Vehicles	Jul 2015 10,032,521; Jul 2014 9,599,284. Jul 15 SAAR 17.55 million, Jun 15 SAAR 17.00 million, Jun 2014 SAAR 16.53 million Blog 8/9/15
Sales of Merchant Wholesalers	Jan-Jun 2015/Jan-Jun 2014 NSA ∆%: Total -3.1; Durable Goods: 2.2; Nondurable Goods: -7.5 EARLIER DATA: Blog 4/12/15
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Jun 15 12-M NSA ∆%: Sales Total Business -0.4; Manufacturers -2.5 Retailers 2.6; Merchant Wholesalers -0.5 Blog 8/16/15
Sales for Retail and Food Services	Jan-Jul 2015/Jan-Jul 2014 ∆%: Retail and Food Services 2.2; Retail ∆% 1.3 Blog 8/16/15
Value of Construction Put in Place	SAAR month SA ∆%: 0.1 Jan-Jun NSA: 8.0 Earlier Data: Blog 4/5/15
Case-Shiller Home Prices	May 2015/ May 2014 ∆% NSA: 10 Cities 4.7; 20 Cities: 4.9; National: 4.4 ∆% May SA: 10 Cities -0.2 ; 20 Cities: -0.2 Blog 8/2/15
FHFA House Price Index Purchases Only	May SA ∆% 0.4; 12 month NSA ∆%: 5.7 Blog 7/26/15
New House Sales	May 2015 month SAAR ∆%: 2.2 Jan-May 2015/Jan-Apr 2014 NSA ∆%: 22.8 Blog 7/26/15
Housing Starts and Permits	Jul Starts month SA ∆% 0.2; Permits ∆%: -16.3 Jan-Jul 2015/Jan-Jul 2014 NSA ∆% Starts 11.3; Permits  ∆% 16.2 Earlier Data: Blog 4/19/15
Rate of Homeownership	IIQ2015: 63.4 Blog 8/2/15
Trade Balance	Balance Jun SA -$43,839 million versus May -$40,940 million Exports Jun SA ∆%: -0.1 Imports Jun SA ∆%: 1.2 Goods Exports Jan-Jun 2015/Jan-Jun 2014 NSA ∆%: -5.2 Goods Imports Jan-Jun 2015/Jan-Jun 2014 NSA ∆%: -3.4 Blog 8/9/15
Export and Import Prices	Jul 12-month NSA ∆%: Imports -10.4; Exports -6.1 Earlier Data: Blog 4/12/15
Consumer Credit	Jun ∆% annual rate: Total 7.3; Revolving 7.4; Nonrevolving 7.3 Earlier Data: Blog 5/10/15
Net Foreign Purchases of Long-term Treasury Securities	Jun Net Foreign Purchases of Long-term US Securities: $86.7 billion Major Holders of Treasury Securities: China $1271.2 billion; Japan $1197.1 billion; Total Foreign US Treasury Holdings Jun $6175.2 billion Blog 8/23/15
Treasury Budget	Fiscal Year 2015/2014 ∆% Jul: Receipts 8.0; Outlays 6.9; 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 8/16/2015
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	Jun 2015 SAAR ∆%: Securities 0.2 Loans 3.3 Cash Assets minus 23.6 Deposits 5.1 Blog 7/26/15
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: 08/16/15 http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

08/9/15 http://cmpassocregulationblog.blogspot.com/2015/08/fluctuating-risk-financial-assets.html

08/02/15 http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.html

7/26/15 http://cmpassocregulationblog.blogspot.com/2015/07/valuation-of-risk-financial-assets.html

7/19/2015 http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html

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

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

The Empire State Manufacturing Survey Index in Table VA-1 provides continuing deterioration that started in Jun 2012 well before Hurricane Sandy in Oct 2012. The current general index has been in negative contraction territory from minus 3.84 in Aug 2012 to minus 9.56 in Jan 2013 and minus 1.72 in May 2013. The current general index changed to minus 14.92 in Aug 2015. The index of current orders has also been in negative contraction territory from minus 3.51 in Aug 2012 to minus 10.59 in Jan 2013 and minus 5.39 in Jun 2013. The index of current new orders changed to minus 15.7 in Aug 2015. Number of workers and hours worked have registered negative or declining readings since Sep 2012 with 1.82 for number of workers in Aug 2015 and weakness of minus 1.82 for average workweek. There is improvement in the general index for the next six months at 33.64 in Aug 2015 and new orders at 29.36.

Table VA-1, US, New York Federal Reserve Bank Empire State Manufacturing Survey Index SA

Current	General Index	New Orders	Shipments	Number of Workers	Average Workweek
Sep-11	-4.87	-4.51	-7.19	-5.43	-2.17
Oct-11	-4.97	1.2	1.96	3.37	-4.49
Nov-11	4.11	0.62	12.66	-3.66	2.44
Dec-11	12.74	9.64	22.81	2.33	-2.33
Jan-12	10.2	8.82	18.4	12.09	6.59
Feb-12	16.5	5.94	17.74	11.76	7.06
Mar-12	16.35	4.79	15.02	13.58	18.52
Apr-12	7.43	5.69	6.7	19.28	6.02
May-12	14.05	9.04	22.5	20.48	12.05
Jun-12	2.82	3.57	12.34	12.37	3.09
Jul-12	4.48	-3.04	9.5	18.52	0
Aug-12	-3.84	-3.51	7.08	16.47	3.53
Sep-12	-7.69	-10.68	4.21	4.26	-1.06
Oct-12	-3.31	-7.63	-6.55	-1.08	-4.3
Nov-12	-1.65	4.94	16.2	-14.61	-7.87
Dec-12	-4.71	-0.38	11.22	-9.68	-10.75
Jan-13	-9.56	-10.59	-4.09	-4.3	-5.38
Feb-13	7.47	10.8	10.55	8.08	-4.04
Mar-13	6.94	5.89	7	3.23	0
Apr-13	4.1	3.05	3.94	6.82	5.68
May-13	-1.72	-0.98	-1.16	5.68	-1.14
Jun-13	6.25	-5.39	-5.14	0	-11.29
Jul-13	6.63	3.09	6.26	3.26	-7.61
Aug-13	8.58	1.76	2.16	10.84	4.82
Sep-13	6.47	2.1	12.64	7.53	1.08
Oct-13	5.36	7.3	14.26	3.61	3.61
Nov-13	1.08	-3.42	0.75	0	-5.26
Dec-13	4.79	0.35	7.05	0	-10.84
Jan-14	10.35	8.33	13.9	12.2	1.22
Feb-14	4.34	0.37	2.74	11.25	3.75
Mar-14	5.92	3.38	6.1	5.88	4.71
Apr-14	3.49	-0.94	7.72	8.16	2.04
May-14	16.95	10.03	16.99	20.88	2.2
Jun-14	18.16	16.63	15.57	10.75	9.68
Jul-14	22.6	17.79	21.01	17.05	2.27
Aug-14	15.1	14.24	21.93	13.64	7.95
Sep-14	27.41	16.35	23.24	3.26	3.26
Oct-14	8.55	-1.01	2.67	10.23	-1.14
Nov-14	10.33	9.12	10.61	8.51	-7.45
Dec-14	-1.23	0.39	2.55	8.33	-11.46
Jan-15	9.95	6.09	9.59	13.68	-8.42
Feb-15	7.78	1.22	14.12	10.11	-1.12
Mar-15	6.9	-2.39	7.93	18.56	5.15
Apr-15	-1.19	-6	15.23	9.57	-4.26
May-15	3.09	3.85	14.94	5.21	-2.08
Jun-15	-1.98	-2.12	12.01	8.65	3.85
Jul-15	3.86	-3.5	7.88	3.19	4.26
Aug-15	-14.92	-15.7	-13.79	1.82	-1.82

Six Months	General Index	New Orders	Shipments	Number of Workers	Average Workweek
Sep-11	22.52	23.48	22.26	0.00	-6.52
Oct-11	14.63	19.77	23.69	6.74	-2.25
Nov-11	34.92	30.37	32.68	14.63	8.54
Dec-11	47.29	45.32	41.27	24.42	22.09
Jan-12	51.87	44.86	44.7	28.57	17.58
Feb-12	45.13	36.76	40.64	29.41	18.82
Mar-12	43.69	37.41	40.12	32.1	20.99
Apr-12	40.45	38.12	38.18	27.71	10.84
May-12	32.16	31.96	26.64	12.05	8.43
Jun-12	27.38	27.87	22.38	16.49	2.06
Jul-12	23.72	21.6	22.55	6.17	-4.94
Aug-12	19.26	13.72	22.16	3.53	-8.24
Sep-12	26.79	27.84	22.63	8.51	2.13
Oct-12	20.45	22.91	18.62	0	-11.83
Nov-12	16.88	15.44	25.48	-1.12	0
Dec-12	21.88	21.56	23.6	10.75	5.38
Jan-13	22.71	23.85	24.95	7.53	3.23
Feb-13	30.18	25.88	26.77	15.15	11.11
Mar-13	34.81	32.92	39.94	19.35	2.15
Apr-13	30.41	35.35	36.47	25	7.95
May-13	25.85	29.83	26.15	11.36	1.14
Jun-13	27.55	21.89	20.71	1.61	-9.68
Jul-13	33.4	32.86	35.14	1.09	-1.09
Aug-13	36.26	29.58	31.54	8.43	-6.02
Sep-13	39.9	37.87	37.13	4.3	-2.15
Oct-13	41.54	37.86	34.08	7.23	2.41
Nov-13	36.96	39.6	37.16	22.37	-3.95
Dec-13	39.77	30.57	33.15	9.64	1.2
Jan-14	37.32	37.85	31.07	20.73	9.76
Feb-14	38.17	43.16	42.43	25	7.5
Mar-14	34.84	36.29	35.24	17.65	9.41
Apr-14	38.43	34.08	38.3	22.45	1.02
May-14	42.49	37.99	35.63	17.58	-3.3
Jun-14	41.06	43.81	44.05	20.43	0
Jul-14	29.53	26.85	25.61	17.05	-4.55
Aug-14	46.1	48.9	54.67	22.73	0
Sep-14	46.08	45.35	46.64	14.13	5.43
Oct-14	42.39	43.24	43.07	12.5	-2.27
Nov-14	46.84	47.69	44.78	24.47	8.51
Dec-14	39.31	38.85	37.75	20.83	12.5
Jan-15	48.35	41.44	40.57	31.58	11.58
Feb-15	25.58	28.61	30.34	24.72	1.12
Mar-15	30.72	26.31	28.71	28.87	3.09
Apr-15	37.06	33.57	32.38	22.34	-1.06
May-15	29.81	33.94	31.75	16.67	-1.04
Jun-15	25.84	26.1	22.11	13.46	0
Jul-15	27.04	32.22	25.44	9.57	-3.19
Aug-15	33.64	29.36	32.97	3.64	1.82

Source: Federal Reserve Bank of New York

http://www.ny.frb.org/survey/empire/empiresurvey_overview.html

Chart VA-1 of the Federal Reserve Bank of New York provides indexes of current and expected economic activity. There were multiple contractions in current activity after the global recession shown in shade. Current activity is weakening relative to strong recovery in the initial expansion in 2010 and 2011.

Chart VA-1, US, US, Federal Reserve Bank of New York, Diffusion Index of Current and Expected Activity, Seasonally Adjusted

Source: Federal Reserve Bank of New York

http://www.ny.frb.org/survey/empire/empiresurvey_overview.html

Table VA-1 shows improvement after prior deterioration followed by current soft improvement of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia. The general index moved out of contraction at 7.9 in Feb 2013 to 8.3 in Aug 2015 together with minus 1.1 for new orders in Feb 2013 moving to 5.8 in Aug 2015. Expectations for the next six months are brighter with the general index at 43.1 in Aug 2015 and the index of new orders at 46.4

Table VA-2, US, Federal Reserve Bank of Philadelphia Business Outlook Survey, SA

	Current General Index	Current New Orders	Current Shipments	Future General Index	Future New Orders	Future Shipments
11-Jan	15.8	20	10.8	43.6	36.5	37.6
11-Feb	28.7	19.2	24.1	41.4	38.4	43.4
11-Mar	35.4	33.4	28.1	55.8	54.6	53.5
11-Apr	13.2	13.5	20.8	34.6	30.1	35.9
11-May	6.4	8.6	8.6	25.6	25	28.3
11-Jun	0.4	-3.9	7.6	7.5	8.2	9.3
11-Jul	7.7	4.2	8	28.4	32.7	28
11-Aug	-18.9	-16.7	-1.7	13.1	27.3	24.4
11-Sep	-13.4	-5.7	-8.9	22.4	20.6	23.2
11-Oct	7	5.6	9.2	26.6	29.2	29.9
11-Nov	6	1.7	6.8	37.2	36.5	34.1
11-Dec	3.3	4.3	5.8	34.1	38.4	32
12-Jan	5.6	10.2	3.7	43.6	44.1	42.9
12-Feb	9.1	10.6	8.5	28.8	31.6	27.2
12-Mar	7.3	-0.6	-0.1	28.3	35.6	28.9
12-Apr	5.8	-0.1	-3.9	38	40.7	33.6
12-May	-0.6	2.4	7.6	23.6	34.5	29.8
12-Jun	-10.9	-15.8	-10.5	24.4	33.6	37.7
12-Jul	-11.7	-3.1	-9.8	21.6	26.9	20.4
12-Aug	-1.1	2.4	-0.7	21.8	27.2	19.8
12-Sep	-3.1	0.7	-12.1	36.6	44.6	36.9
12-Oct	0	-5.7	-6.4	18.2	21.8	21.3
12-Nov	-7.9	-6.7	-6.4	18.5	23.6	25.2
12-Dec	4	2.3	13.6	23.4	28.8	28.4
13-Jan	-4.9	-2.7	-0.7	27.9	31.9	35
13-Feb	-7.9	-1.1	2.2	29.2	37.6	31.5
13-Mar	0.3	0.4	3.2	32.1	35.8	31.1
13-Apr	0.4	-0.7	2.9	28.2	32.2	31.8
13-May	0.2	-4.1	-2.5	37.6	40.5	37.4
13-Jun	15.9	14.6	9.3	35.8	39.1	40
13-Jul	16.9	8.8	10.6	42	54.1	46.1
13-Aug	10.5	9.8	5.9	42.2	41.9	43.5
13-Sep	16.8	19	20.4	54.4	54	50.5
13-Oct	14.7	21.1	16.9	56.8	62.5	52.6
13-Nov	8.1	10.5	5.3	45.2	47.9	43
13-Dec	6.2	11.3	11.5	43.1	44.7	41.7
14-Jan	10	6.7	11.1	36	39.7	34.4
14-Feb	-2	2.5	-6	39.8	37.5	38.7
14-Mar	10.7	8.2	7.6	37.7	35.7	42.4
14-Apr	16	15	21	36	35.9	37.2
14-May	18.3	13.6	16.4	40.8	39.8	41.7
14-Jun	19.6	14.4	17.5	51	53.5	47.7
14-Jul	22.8	31.4	29.9	54.6	50.8	54.3
14-Aug	25.5	15.8	18.9	66	56.2	65.2
14-Sep	18.6	13.1	20	52.4	47.6	53.4
14-Oct	19	13.8	15.9	52.7	51	51.8
14-Nov	40.2	32.4	29.6	55	47.6	50.5
14-Dec	24.3	13.6	15.1	50.4	44.8	47.5
15-Jan	6.3	8.5	-6.9	50.9	44.8	40.8
15-Feb	5.2	5.4	8.1	29.7	42.8	38.2
15-Mar	5	3.9	-7.8	32	34.3	32.3
15-Apr	7.5	0.7	-1.8	35.5	30.8	34
15-May	6.7	4	1	33.9	31.7	32
15-Jun	15.2	15.2	14.3	39.7	44.9	55.8
15-Jul	5.7	7.1	4.4	41.5	46.3	49.7
15-Aug	8.3	5.8	16.7	43.1	46.4	37.6

Source: Federal Reserve Bank of Philadelphia

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

Chart VA-2 of the Federal Reserve Bank of Philadelphia is very useful, providing current and future general activity indexes from Jan 1995 to May 2015. The shaded areas are the recession cycle dates of the National Bureau of Economic Research (NBER) (http://www.nber.org/cycles.html). The Philadelphia Fed index dropped during the initial period of recession and then led the recovery, as industry overall. There was a second decline of the index into 2011 followed now by what appeared as renewed strength from late 2011 into Jan 2012. There is decline to negative territory of the current activity index in Nov 2012 and return to positive territory in Dec 2012 with decline of current conditions into contraction in Jan-Feb 2013 and rebound to mild expansion in Mar-Apr 2013. The index of current activity moved into expansion in Jun-Oct 2013 with weakness in Nov-Dec 2013, improving in Jan 2014. There is renewed deterioration in Feb 2014 with rebound in Apr-Sep 2014 and mild deterioration in Oct 2014 followed by improvement in Nov 2014. The index deteriorated in Jan-Feb 2015, stabilizing in Mar-May 2015 and improving in Jun 2015. The index deteriorated in Jul 2015 and improved in Aug 2015.

Chart VA-2, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Activity Indexes

Source: Federal Reserve Bank of Philadelphia

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

The index of current new orders of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia in Chart VA-3 illustrates the weakness of the cyclical expansion. The index weakened in 2006 and 2007 and then fell sharply into contraction during the global recession. There have been twelve readings into contraction from Jan 2012 to May 2013 and generally weak readings with some exceptions. The index of new orders moved into expansion in Jun-Oct 2013 with moderation in Nov-Dec 2013 and into Jan 2014. The index fell into contraction in Feb 2014, recovering in Mar-Apr 2014 but weaker reading in May 2014. There is marked improvement in Jun-Jul 2014 with slowing in Aug-Oct 2014 followed by acceleration in Nov 2014. New orders deteriorated in Jan-Apr 2015, improving in May-Jun 2015. New orders deteriorated in Jul-Aug 2015.

Chart VA-3, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current New Orders Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

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

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-3) improved from $76.5 billion in May 2015 to $86.7 billion in Jun 2015. Foreign (residents) purchases minus sales of US long-term securities (row A in Table VA-3) in May 2015 of $77.8 billion increased to $87.2 billion in Jun 2015. Net US (residents) purchases of long-term foreign securities (row B in Table VA-3) increased from minus $15.2 billion in May 2015 to $15.9 billion in Jun 2015. Other transactions (row C2 in Table VA-3) decreased from minus $16.5 billion in May 2015 to minus $16.4 billion in Jun 2015. In Jun 2015,

C = A + B + C2 = $87.2 billion + $15.9 billion -$16.4 = $86.7 billion

There are minor rounding errors. There is strengthening demand in Table VA-3 in Jun in A1 private purchases by residents overseas of US long-term securities of $101.0 billion of which improvement in A11 Treasury securities of $89.0 billion, improvement in A12 of 18.0 billion in agency securities, weakening of $16.1 billion of corporate bonds and deterioration of minus $22.0 billion in equities. Worldwide risk aversion causes flight into US Treasury obligations with significant oscillations. Official purchases of securities in row A2 decreased $13.8 billion with decrease of Treasury securities of $19.2 billion in Jun 2015. Official purchases of agency securities increased $7.6 billion in Jun 2015. Row D shows decrease in Jun 2015 of $7.0 billion in purchases of short-term dollar denominated obligations. Foreign private holdings of US Treasury bills increased $8.7 billion (row D11) with foreign official holdings decreasing $8.7 billion while the category “other” decreased $7.0 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-3, Net Cross-Borders Flows of US Long-Term Securities, Billion Dollars, NSA

	Apr 2014 12 Months	Apr 2015 12 Months	May 2015	Jun 2015
A Foreign Purchases less Sales of US LT Securities	198.7	369.4	77.8	87.2
A1 Private	148.4	435.4	74.2	101.0
A11 Treasury	181.9	246.3	58.0	89.0
A12 Agency	2.8	135.5	10.0	18.0
A13 Corporate Bonds	-22.9	116.0	20.7	16.1
A14 Equities	-13.5	-62.4	-14.5	-22.0
A2 Official	50.3	-66.0	3.7	-13.8
A21 Treasury	17.1	-116.7	-4.6	-19.2
A22 Agency	41.1	47.8	4.9	7.6
A23 Corporate Bonds	6.7	6.6	2.8	-2.3
A24 Equities	-14.5	-3.8	0.5	0.0
B Net US Purchases of LT Foreign Securities	-198.6	166.3	15.2	15.9
B1 Foreign Bonds	-25.3	247.8	26.6	29.3
B2 Foreign Equities	-173.3	-81.5	-11.4	-13.4
C1 Net Transactions	0.1	535.7	93.0	103.1
C2 Other	-97.8	-285.6	-16.5	-16.4
C Net Foreign Purchases of US LT Securities	-97.7	250.2	76.5	86.7
D Increase in Foreign Holdings of Dollar Denominated Short-term	-38.7	53.9	1.8	-7.0
D1 US Treasury Bills	-47.8	72.9	11.3	0.0
D11 Private	-26.1	45.7	2.0	8.7
D12 Official	-21.7	27.3	9.3	-8.7
D2 Other	9.0	-19.0	-9.5	-7.0

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-4 provides major foreign holders of US Treasury securities. China is the largest holder with $1271.2 billion in Jun 2015, increasing 0.1 percent from $1270.3 billion in May 2015 while increasing $2.8 billion from Jun 2014 or 0.2 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 12.7 percent of US government marketable interest-bearing debt held by private investors (http://www.fms.treas.gov/bulletin/index.html). Min Zeng, writing on “China plays a big role as US Treasury yields fall,” on Jul 16, 2004, published in the Wall Street Journal (http://online.wsj.com/articles/china-plays-a-big-role-as-u-s-treasury-yields-fall-1405545034?tesla=y&mg=reno64-wsj), finds that acceleration in purchases of US Treasury securities by China has been an important factor in the decline of Treasury yields in 2014. Japan decreased its holdings from $1219.3 billion in Jun 2014 to $1197.1 billion in Jun 2015 or 1.8 percent. The combined holdings of China and Japan in Jun 2015 add to $2468.3 billion, which is equivalent to 24.6 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 $6018.7 billion in Jun 2015 to $6175.2 billion in Jun 2015, or 2.6 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-4, US, Major Foreign Holders of Treasury Securities $ Billions at End of Period

	Jun 2015	May 2015	Jun 2014
Total	6175.2	6134.8	6018.7
China	1271.2	1270.3	1268.4
Japan	1197.1	1214.9	1219.3
Caribbean Banking Centers	318.5	311.5	250.6
Oil Exporters	296.7	296.8	262.1
Brazil	256.3	258.5	253.7
Ireland	217.7	209.0	177.1
Switzerland	217.1	222.7	175.9
United Kingdom	214.7	199.5	173.6
Belgium	207.7	202.8	364.1
Luxembourg	184.0	177.0	145.3
Hong Kong	181.3	186.3	157.6
Taiwan	175.6	174.2	179.4
India	117.0	114.0	72.9
Foreign Official Holdings	4164.3	4160.5	4108.2
A. Treasury Bills	368.3	376.9	341.0
B. Treasury Bonds and Notes	3796.0	3783.5	3767.2

Source: United States Treasury

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

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

VB Japan. The GDP of Japan grew at 1.0 percent per year on average from 1991 to 2002, with the GDP implicit deflator falling at 0.8 percent per year on average. The average growth rate of Japan’s GDP was 4 percent per year on average from the middle of the 1970s to 1992 (Ito 2004). Low growth in Japan in the 1990s is commonly labeled as “the lost decade” (see Pelaez and Pelaez, The Global Recession Risk (2007), 81-115). Table VB-GDP provides yearly growth rates of Japan’s GDP from 1995 to 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 Nikkei Flash Japan Manufacturing PMI Index™ with the Flash Japan

Manufacturing PMI™ decreased from 51.2 in Jul to 51.9 in Aug and the Flash Japan

Manufacturing Output Index™ decreased from 52.2 in Jul to 51.9 in Aug

(http://www.markiteconomics.com/Survey/PressRelease.mvc/147ab9a38c7c4caab7bfde39265e4afa). New export orders increased at slower pace. Amy Brownbill, Economist at

Markit, finds improving conditions in Japan’s manufacturing

(http://www.markiteconomics.com/Survey/PressRelease.mvc/147ab9a38c7c4caab7bfde39265e4afa).The Nikkei Composite Output PMI Index did not change from 51.5 in Jun to 51.6 in Jul, indicating mild increase of business activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/f25845fc0d364ddfb8def34eb5a82fea). The Nikkei Business Activity Index of Services decreased to 51.2 in Jul from 51.8 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/f25845fc0d364ddfb8def34eb5a82fea). Amy Brownbill, Ecoomist at Markit and author of the report, finds improved conditions with strengthening new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/f25845fc0d364ddfb8def34eb5a82fea). The Nikkei Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased from 50.1 in Jun to 51.2 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/7aa707b847f0404f9db8e948ffb13677). New orders increased while growth of foreign orders continued. Amy Brownbill, Economist at Markit, finds manufacturing benefitting from growth of new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/7aa707b847f0404f9db8e948ffb13677).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	Jul ∆% -0.2 12 months ∆% -3.0 Blog 8/16/15
Consumer Price Index	Jun NSA ∆% -0.2; Jun 12 months NSA ∆% 0.4 Blog 8/2/15
Real GDP Growth	IIQ2015 ∆%: -0.4 on IQ2015;  IQ2015 SAAR minus 1.6; ∆% from quarter a year earlier: 0.7 % 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 8/23/15
Employment Report	Jun Unemployed 2.24 million Change in unemployed since last year: minus 210 thousand Unemployment rate: 3.4 % Blog 8/2/15
All Industry Indices	Jun month SA ∆% 0.3 12-month NSA ∆% 1.2 Earlier Data: Blog 4/26/15
Industrial Production	Jun SA month ∆%: 0.8 May -2.1 Jun 12-month NSA ∆% 2.0 May -3.9 Earlier Data: Blog 3/29/15
Machine Orders	Total Jun ∆% 5.0 Private ∆%: 2.6 Apr ∆% Excluding Volatile Orders minus7.9 Earlier Data: Blog 4/19/15
Tertiary Index	Jun month SA ∆% 0.3 Jun 12 months NSA ∆% 1.5 Earlier Data: Blog 4/26/15
Wholesale and Retail Sales	Jun 12 months: Total ∆%: 0.9 Wholesale ∆%: 0.9 Retail ∆%: 0.9 Earlier Data: Blog 3/29/15
Family Income and Expenditure Survey	Jun 12-month ∆% total nominal consumption -1.5, real -2.0 Earlier Data: Blog 3/29/15
Trade Balance	Exports Jun 12 months ∆%: 9.5 Imports Jun 12 months ∆% -2.9 Earlier Data: Blog 4/26/15

Links to blog comments in Table JPY: 08/16/15 http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

08/02/15 http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.html

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

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

Japan’s economy grew 1.1 percent in IQ2014, seasonally adjusted, partly because of anticipation of purchases to avoid the increase in the tax on value added of consumption in Apr 2014, contracting 1.9 percent in IIQ2014, as shown in Table VB-1, incorporating the latest estimates and revisions. Japan’s GDP contracted 0.3 percent in IIIQ2014 and grew 0.3 percent in IVQ2014. The GDP of Japan increased 1.1 percent in IQ2015 and contracted 0.4 percent in IIQ2014. The economy of Japan contracted 0.2 percent in IVQ2013 after growing 0.6 percent in IIIQ2013, 0.6 percent in IIQ2013 and 1.3 percent in IQ2013. Japan’s GDP decreased 0.1 percent in IVQ2012 relative to IIIQ2012. GDP growth in IQ2012 was revised to 1.0 percent; IIQGDP growth was revised to -0.5 percent; and IIIQ2012 growth was revised to -0.4 percent. The economy of Japan had already weakened in IVQ2010 when GDP fell revised 0.5 percent. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell 1.9 percent in IQ2011 and fell again 0.7 percent in IIQ2011 because of the disruption of the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Recovery was robust in the first two quarters of 2010 but GDP grew at 1.5 percent in IIIQ2010 and fell 0.5 percent in IVQ2010. The deepest quarterly contractions in the global recession were 3.3 percent in IVQ2008 and 4.0 percent in IQ2009. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). Using seasonally adjusted and price adjusted data (http://www.esri.cao.go.jp/index-e.html), Japan’s GDP fell 9.2 percent from the pre-downturn peak in IQ2008 to the lowest reading in IQ2009. Japan’s GDP fell 0.2 percent from IQ2008 to IIQ2015. GDP in Japan grew 9.9 percent from IIQ2009 to IIQ2015 at the annual equivalent rate of 1.5 percent, using the latest revision (http://www.esri.cao.go.jp/index-e.html).

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

	IQ	IIQ	IIIQ	IVQ
2015	1.1	-0.4
2014	1.1	-1.9	-0.3	0.3
2013	1.3	0.6	0.6	-0.2
2012	1.0	-0.5	-0.4	-0.1
2011	-1.9	-0.7	2.7	0.2
2010	1.5	1.1	1.5	-0.5
2009	-4.0	1.7	0.1	1.7
2008	0.7	-1.2	-1.1	-3.3
2007	1.0	0.2	-0.4	0.9
2006	0.4	0.4	-0.1	1.3
2005	0.2	1.3	0.3	0.2
2004	0.9	0.1	0.1	-0.3
2003	-0.6	1.3	0.4	1.0
2002	-0.2	1.1	0.6	0.4
2001	0.6	-0.2	-1.1	-0.1
2000	1.6	0.2	-0.3	0.7
1999	-0.9	0.4	-0.2	0.5
1998	-1.9	-0.5	0.3	0.6
1997	0.8	-1.0	0.4	-0.1

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Table VB-2 provides contributions to real GDP at seasonally adjusted annual rates (SAAR). GDP fell at 1.6 percent in IIQ2015 with highest deductions of 1.8 percent by personal consumption expenditures (PC) and 1.1 percent of net exports (Trade). Goss Fixed Capital Formation (GFCF) contributed 0.7 percentage points, government consumption expenditures 0.3 percentage points and inventory investment 0.3 percentage points. GDP grew at 4.5 percent in IQ2015 with highest contributions of 0.8 percent by personal consumption expenditures (PC) and increase in inventory investment (PINV) at 2.1 percent. Gross Fixed Capital Formation increased at 1.5 percent while trade deducted 0.3 percentage points and government consumption expenditures added 0.2 percentage points. GDP expanded at 1.4 percent in IVQ2014 with contribution of 0.7 percent by personal consumption expenditures, 1.3 percent by net trade and 0.3 percent by government consumption expenditures. Gross fixed capital formation deducted 0.1 percent and private inventory divestment deducted 0.9 percent. Trade added 1.3 percentage points. Japan contracted at 1.3 percent in IIIQ2014 with deduction of 0.5 percentage points of GFCF and deduction of 2.4 percentage points of inventory divestment. Traded added 0.5 percentage points and government 0.2 percent. Japan’s GDP contracted at 7.5 percent in IIQ2014 with deductions of 12.1 percent by personal consumption and 4.1 percent by gross fixed capital formation. Trade added 3.6 percentage points and government expenditures 0.1 percent. Inventory investment added 5.0 percent. The GDP of Japan expanded at 4.5 percent in IQ2014 with contributions of 5.0 percent by personal consumption and 3.0 percent of gross fixed capital formation. There were deductions of 1.0 percent by trade, 2.3 percent by inventory divestment and 0.2 percent by government expenditures. The GDP of Japan contracted at 0.8 percent annual equivalent in IVQ2013 with contraction of personal consumption expenditures of 0.6 percent and growth of GFCF at 1.2 percent. Trade deducted 2.0 percentage points. Japan grew at 2.4 percent in IIIQ 2013 with contribution of 0.8 percentage points by personal consumption and 1.9 percentage points by GFCF. Trade deducted 1.3 percentage points. Japan grew at 2.4 percent SAAR in IIQ2013 driven by contribution of 2.4 percent of personal consumption (PC), deduction of 0.3 percent of net trade and contribution of gross fixed capital formation (GFCF) at 2.1 percent. In IQ2013, Japan’s GDP increased at the SAAR of 5.3 percent in large part because of 3.0 percent in personal consumption and 1.7 percent in trade. The SAAR of GDP in IVQ2012 was minus 0.5 percent: 0.0 percentage points from growth of personal consumption expenditures (PC) less 0.5 percentage points of net trade (exports less imports) less 0.5 percentage points of private inventory investment (PINV) plus 0.6 percentage points of government consumption and minus 0.1 percentage points of gross fixed capital formation (GFCF). The SAAR of GDP in IIIQ2011 was revised to a high 11.3 percent. Net trade deducted from GDP growth in three quarters of 2011 and provided the growth impulse of 3.9 percentage points in IIIQ2011. Growth in 2011 and IQ2012 was driven by personal consumption expenditures that deducted 0.8 percentage points from GDP growth in IIIQ2012 but contributed 0.0 percentage points to GDP growth in IVQ2012.

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

	GDP	PC	GFCF	Trade	PINV	GOVC
2015
I	4.5	0.8	1.5	-0.3	2.1	0.2
II	-1.6	-1.8	0.7	-1.1	0.3	0.3
2014
I	4.5	5.0	3.0	-1.0	-2.3	-0.2
II	-7.5	-12.1	-4.1	3.6	5.0	0.1
III	-1.3	0.7	-0.5	0.5	-2.4	0.2
IV	1.4	0.7	-0.1	1.3	-0.9	0.3
2013
I	5.3	3.0	0.2	1.7	-0.2	0.8
II	2.4	2.4	2.1	-0.3	-2.4	0.4
III	2.4	0.8	1.9	-1.3	1.1	0.0
IV	-0.8	-0.6	1.2	-2.0	0.3	0.1
2012
I	4.2	1.3	-0.6	0.3	2.0	1.1
II	-2.1	1.8	0.6	-1.7	-2.4	-0.5
III	-1.5	-0.8	-0.9	-1.8	1.5	0.4
IV	-0.5	0.0	-0.1	-0.5	-0.5	0.6
2011
I	-7.4	-4.0	-0.3	-1.2	-1.8	0.0
II	-2.6	2.7	0.3	-4.5	-1.5	0.3
III	11.3	4.0	1.3	3.9	1.8	0.1
IV	0.9	0.9	3.3	-2.8	-0.7	0.2
2010
I	6.1	1.7	0.1	2.3	2.4	-0.5
II	4.5	0.2	1.2	0.1	1.9	1.2
III	6.0	3.1	0.9	0.5	1.3	0.3
IV	-2.1	-1.1	-1.1	-0.3	0.1	0.3
2009
I	-15.1	-1.9	-2.1	-4.4	-7.4	0.8
II	7.1	4.2	-2.9	7.4	-2.2	0.6
III	0.3	-0.1	-1.4	2.2	-1.4	1.0
IV	7.1	3.4	0.0	2.8	0.6	0.3
2008
I	2.7	1.4	0.3	1.1	-0.3	0.0
II	-4.5	-3.1	-2.2	0.5	1.0	-0.8
III	-4.2	-0.6	-1.0	0.0	-2.6	0.0
IV	-12.5	-2.8	-4.5	-11.4	5.7	0.3
2007
I	4.0	0.9	0.5	1.1	1.3	0.4
II	0.7	0.6	-1.5	0.8	0.0	0.5
III	-1.6	-1.0	-1.7	2.0	-0.6	-0.2
IV	3.5	0.3	0.3	1.4	0.9	0.6

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

Source: Japan Economic and Social Research Institute, Cabinet Office

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

http://www.esri.cao.go.jp/

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 to IQ2012. The only strong contribution of net trade was 3.9 percent in IIIQ2011. Net trade added 1.7 percentage points to GDP growth in IQ2013 but deducted 0.3 percentage points in IIQ2013, 1.3 percentage points in IIIQ2013 and 2.0 percentage points in IVQ2013. Net trade deducted 1.0 percentage points from GDP growth in IQ2014. Net trade added 3.6 percentage points to GDP growth in IIQ2014 and 0.5 percentage points in IIIQ2014. Net trade added 1.3 percentage points to GDP growth in IVQ2014. Net trade deducted 0.3 percentage points from GDP growth in IQ2015 and deducted 1.1 percentage points in IIQ2015. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

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

	Net Trade	Exports	Imports
2015
I	-0.3	1.2	-1.5
II	-1.1	-3.3	2.2
2014
I	-1.0	3.7	-4.6
II	3.6	0.4	3.2
III	0.5	1.2	-0.7
IV	1.3	2.0	-0.7
2013
I	1.7	2.1	-0.4
II	-0.3	1.9	-2.2
III	-1.3	-0.1	-1.2
IV	-2.0	-0.1	-1.9
2012
I	0.3	1.5	-1.1
II	-1.7	-0.1	-1.6
III	-1.8	-2.3	0.5
IV	-0.5	-2.2	1.7
2011
I	-1.2	-0.5	-0.7
II	-4.5	-4.6	0.1
III	3.9	5.8	-1.9
IV	-2.8	-2.0	-0.9
2010
I	2.3	3.6	-1.3
II	0.1	2.7	-2.6
III	0.5	1.4	-0.9
IV	-0.3	0.1	-0.4
2009
I	-4.4	-16.4	12.0
II	7.4	4.7	2.7
III	2.2	5.2	-3.1
IV	2.8	4.1	-1.4
2008
I	1.1	2.1	-1.0
II	0.5	-1.5	2.1
III	0.0	0.1	-0.2
IV	-11.4	-10.2	-1.2
2007
I	1.1	1.7	-0.5
II	0.8	1.6	-0.8
III	2.0	1.4	0.6
IV	1.4	2.0	-0.7

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Japan’s percentage growth of GDP not seasonally adjusted in a quarter relative to the same quarter a year earlier is shown in Table VB-4. Contraction of GDP in a quarter relative to the same quarter a year earlier extended over seven quarters from IIQ2008 through IVQ2009. Contraction was sharpest in IQ2009 with output declining 9.4 percent relative to a year earlier. Yearly quarterly rates of growth of Japan were relatively high for a mature economy through the decade with the exception of the contractions from IVQ2001 to IIQ2002 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused flat GDP in IQ2011 at 0.1 percent relative to the same quarter a year earlier and decline of 1.5 percent in IIQ2011. GDP fell 0.5 percent in IIIQ2011 relative to a year earlier and increased 0.1 percent in IVQ2011 relative to a year earlier. Growth resumed with 3.5 percent in IQ2012 relative to a year earlier. Growth of 3.5 percent in IIQ2012 is largely caused by the low level in IIQ2011 resulting from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP increased 0.2 percent in IIIQ2012 relative to a year earlier and increased 0.1 percent in IVQ2012 relative to a year earlier. GDP increased 0.4 percent in IQ2013 relative to a year earlier and 1.4 percent in IIQ2013. Growth of 2.2 percent in IIIQ2013 relative to a year earlier is partly due to the decline of 0.4 percent in GDP in IIIQ2012.  GDP increased 2.3 percent in IVQ2013 relative to a year earlier. The GDP of Japan increased 2.4 percent in IQ2014 relative to a year earlier. Japan’s GDP contracted 0.4 percent in IIQ2014 relative to a year earlier. GDP contracted 1.4 percent in IIIQ2014 relative to a year earlier. Japan’s GDP contracted 1.0 percent in IVQ2014 relative to a year earlier. GDP fell 0.8 percent relative to a year earlier in IQ2015 and increased 0.7 percent in IIQ2015 relative to a year earlier. Japan faces the challenge of recovery from the devastation of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in an environment of declining world trade and bouts of risk aversion that cause appreciation of the Japanese yen, eroding the country’s competitiveness in world markets. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977).  Using price adjusted but not seasonally adjusted data (http://www.esri.cao.go.jp/index-e.html), Japan’s GDP contracted 11.5 percent from the high in IVQ2007 to the low in IIQ2009. GDP fell 4.1 percent from IVQ2007 to IIQ2015. Japan’s GDP grew 8.3 percent from IIIQ2009 to IIQ2015 at the annual equivalent rate of 1.3 percent.

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

	IQ	IIQ	IIIQ	IVQ
2015	-0.8	0.7
2014	2.4	-0.4	-1.4	-1.0
2013	0.4	1.4	2.2	2.3
2012	3.5	3.5	0.2	0.0
2011	0.1	-1.5	-0.5	0.1
2010	5.0	4.5	6.1	3.4
2009	-9.4	-6.6	-5.6	-0.5
2008	1.4	-0.1	-0.6	-4.7
2007	2.8	2.3	2.0	1.6
2006	2.6	1.3	0.9	2.0
2005	0.4	1.4	1.5	1.9
2004	4.0	2.6	2.2	0.7
2003	1.7	1.8	1.5	1.8
2002	-1.6	-0.2	1.4	1.6
2001	1.6	0.9	0.0	-1.0
2000	2.7	2.4	2.2	1.8
1999	-0.3	0.1	-0.1	-0.5
1998	-2.4	-1.8	-2.3	-1.5
1997	3.5	1.5	1.7	-0.2

Source: Japan Economic and Social Research Institute, Cabinet Office

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

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 to IQ2012. The only strong contribution of net trade was 3.9 percent in IIIQ2011. Net trade added 1.7 percentage points to GDP growth in IQ2013 but deducted 0.3 percentage points in IIQ2013, 1.3 percentage points in IIIQ2013 and 2.0 percentage points in IVQ2013. Net trade deducted 1.0 percentage points from GDP growth in IQ2014. Net trade added 3.6 percentage points to GDP growth in IIQ2014 and 0.5 percentage points in IIIQ2014. Net trade added 1.3 percentage points to GDP growth in IVQ2014. Net trade deducted 0.3 percentage points from GDP growth in IQ2015 and deducted 1.1 percentage points in IIQ2015. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

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

	Net Trade	Exports	Imports
2015
I	-0.3	1.2	-1.5
II	-1.1	-3.3	2.2
2014
I	-1.0	3.7	-4.6
II	3.6	0.4	3.2
III	0.5	1.2	-0.7
IV	1.3	2.0	-0.7
2013
I	1.7	2.1	-0.4
II	-0.3	1.9	-2.2
III	-1.3	-0.1	-1.2
IV	-2.0	-0.1	-1.9
2012
I	0.3	1.5	-1.1
II	-1.7	-0.1	-1.6
III	-1.8	-2.3	0.5
IV	-0.5	-2.2	1.7
2011
I	-1.2	-0.5	-0.7
II	-4.5	-4.6	0.1
III	3.9	5.8	-1.9
IV	-2.8	-2.0	-0.9
2010
I	2.3	3.6	-1.3
II	0.1	2.7	-2.6
III	0.5	1.4	-0.9
IV	-0.3	0.1	-0.4
2009
I	-4.4	-16.4	12.0
II	7.4	4.7	2.7
III	2.2	5.2	-3.1
IV	2.8	4.1	-1.4
2008
I	1.1	2.1	-1.0
II	0.5	-1.5	2.1
III	0.0	0.1	-0.2
IV	-11.4	-10.2	-1.2
2007
I	1.1	1.7	-0.5
II	0.8	1.6	-0.8
III	2.0	1.4	0.6
IV	1.4	2.0	-0.7

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 104.9 in Jun 2009 to 94.0 in Jan 2012 or minus 10.4 percent and increased to 114.0 in Jul 2015 for gain of 21.3 percent relative to Jan 2012 and 8.7 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials. The recovery from the global recession began in the third quarter of 2009.

Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2015

Source: Bank of Japan

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

Chart IV-5A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 93.2 in Jul 2015 or minus 9.6 percent relative to Apr 2012 and fell 4.8 percent to 93.2 in Jul 2015 relative to Jun 2009.

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

Source: Bank of Japan

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

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-6 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan (for the relation of terms of trade and growth see Pelaez 1979, 1976a). The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 113.1 in Apr 2012 or 21.0 percent and to 116.9 in Jul 2015 or gain of 3.4 percent relative to Apr 2012 and 25.0 percent relative to Jun 2009.

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

Source: Bank of Japan

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

Chart IV-6A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 92.0 in Jul 2015 or minus 23.0 percent relative to Apr 2012 and gain of 6.7 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency decreased 4.8 percent from Jun 2009 to Jul 2015 while the import corporate goods price index increased 6.7 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

Chart IV-6A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2015

Source: Bank of Japan

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

Table IV-6B provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Jul 2015. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Jul 2015, the export index on the contract currency basis decreased 6.0 percent and decreased 1.3 percent on the yen basis. For the entire period from Jan 2008 to Jul 2015, the import price index decreased 8.6 percent on the contract currency basis and decreased 1.8 percent on the yen basis. During significant part of the expansion period, prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

Table IV-6B, Japan, Exports and Imports Corporate Goods Price Index, Contract Currency Basis and Yen Basis

	X-CC	X-Y	M-CC	M-Y
2008/01	99.2	115.5	100.7	119.0
2008/02	99.8	116.1	102.4	120.6
2008/03	100.5	112.6	104.5	117.4
2008/04	101.6	115.3	110.1	125.2
2008/05	102.4	117.4	113.4	130.4
2008/06	103.5	120.7	119.5	140.3
2008/07	104.7	122.1	122.6	143.9
2008/08	103.7	122.1	123.1	147.0
2008/09	102.7	118.3	117.1	137.1
2008/10	100.2	109.6	109.1	121.5
2008/11	98.6	104.5	97.8	105.8
2008/12	97.9	100.6	89.3	93.0
2009/01	98.0	99.5	85.6	88.4
2009/02	97.5	100.1	85.7	89.7
2009/03	97.3	104.2	85.2	93.0
2009/04	97.6	105.6	84.4	93.0
2009/05	97.5	103.8	84.0	90.8
2009/06	97.9	104.9	86.2	93.5
2009/07	97.5	103.1	89.2	95.0
2009/08	98.3	104.4	89.6	95.8
2009/09	98.3	102.1	91.0	94.7
2009/10	98.0	101.2	91.0	94.0
2009/11	98.4	100.8	92.8	94.8
2009/12	98.3	100.7	95.4	97.5
2010/01	99.4	102.2	97.0	100.0
2010/02	99.7	101.6	97.6	99.8
2010/03	99.7	101.8	97.0	99.2
2010/04	100.5	104.6	99.9	104.6
2010/05	100.7	102.9	101.7	104.9
2010/06	100.1	101.6	100.0	102.3
2010/07	99.4	99.0	99.9	99.8
2010/08	99.1	97.3	99.5	97.5
2010/09	99.4	97.0	100.0	97.2
2010/10	100.1	96.4	100.5	95.8
2010/11	100.7	97.4	102.6	98.2
2010/12	101.2	98.3	104.4	100.6
2011/01	102.1	98.6	107.2	102.6
2011/02	102.9	99.5	109.0	104.3
2011/03	103.5	99.6	111.8	106.3
2011/04	104.1	101.7	115.9	111.9
2011/05	103.9	99.9	118.8	112.4
2011/06	103.8	99.3	117.5	110.5
2011/07	103.6	98.3	118.3	110.2
2011/08	103.6	96.6	118.6	108.1
2011/09	103.7	96.1	117.0	106.2
2011/10	103.0	95.2	116.6	105.6
2011/11	101.9	94.8	115.4	105.4
2011/12	101.5	94.5	116.1	106.2
2012/01	101.8	94.0	115.0	104.2
2012/02	102.4	95.8	115.8	106.4
2012/03	102.9	99.2	118.3	112.9
2012/04	103.1	98.7	119.5	113.1
2012/05	102.3	96.3	118.1	109.8
2012/06	101.4	95.0	115.2	106.7
2012/07	100.6	94.0	112.0	103.5
2012/08	100.9	94.1	112.4	103.6
2012/09	101.0	94.1	114.7	105.2
2012/10	101.1	94.7	113.8	105.2
2012/11	100.9	95.9	113.2	106.5
2012/12	100.7	98.0	113.4	109.5
2013/01	101.0	102.4	113.8	115.4
2013/02	101.5	105.9	114.8	120.2
2013/03	101.3	106.6	115.1	122.0
2013/04	100.2	107.5	114.1	123.8
2013/05	99.6	109.1	112.6	125.3
2013/06	99.2	106.1	112.0	121.2
2013/07	99.1	107.5	111.6	122.8
2013/08	99.0	106.1	111.8	121.3
2013/09	99.0	107.2	113.0	124.0
2013/10	99.2	106.7	113.1	122.9
2013/11	99.1	108.0	113.1	124.9
2013-12	99.1	110.4	113.8	129.0
2014-01	99.2	110.7	114.4	130.1
2014-02	98.9	109.2	113.8	127.7
2014-03	98.6	109.1	113.4	127.4
2014-04	98.3	109.0	112.7	126.9
2014-05	98.1	108.2	112.4	125.9
2014-06	97.9	108.0	112.5	126.2
2014-07	98.0	107.9	112.5	125.9
2014-08	98.1	108.8	112.3	126.7
2014-09	97.9	111.0	111.5	129.4
2014-10	97.3	110.7	109.6	127.9
2014-11	96.9	115.7	106.9	131.6
2014-12	96.0	116.4	103.3	129.3
2015-01	94.5	113.2	98.3	121.4
2015-02	93.8	112.2	93.1	114.8
2015-03	93.8	113.0	93.8	116.9
2015-04	93.7	112.3	92.3	114.5
2015-05	93.8	113.5	91.6	114.7
2015-06	93.8	115.3	92.9	118.7
2015-07	93.2	114.0	92.0	116.9

Note: X-CC: Exports Contract Currency; X-Y: Exports Yen; M-CC: Imports Contract; M-Y: Imports Yen

Source: Bank of Japan

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

Chart IV-7 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2015. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from policy interest rates rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Chart IV-5A and associated table at http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial_77.html http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial_29.html http://cmpassocregulationblog.blogspot.com/2015/06/dollar-revaluation-squeezing-corporate_97.html http://cmpassocregulationblog.blogspot.com/2015/05/dollar-devaluation-and-carry-trade.html http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html http://cmpassocregulationblog.blogspot.com/2014/09/financial-volatility-mediocre-cyclical.html http://cmpassocregulationblog.blogspot.com/2014/09/geopolitical-and-financial-risks_71.html http://cmpassocregulationblog.blogspot.com/2014/03/financial-uncertainty-mediocre-cyclical_8145.html http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world_1.html and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or_561.html and at http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk_1.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).

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

Source: Bank of Japan

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

The producer price index of the US from 1970 to 2015 in Chart IV-8 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.

Chart IV-8, US, Producer Price Index Finished Goods, Monthly, 1970-2015

Source: US Bureau of Labor Statistics

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

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-7. The increase in the tax on value added of consumption caused sharp increases in prices across all segments. Petroleum and coal with weight of 5.7 percent decreased 2.0 percent in Jul 2015 and decreased 22.8 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, decreased 0.1 percent in Jul 2015 and increased 1.1 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income (for analysis of terms of trade and growth see Pelaez (1979, 1976a). There are now inflation effects of the intentional policy of devaluing the yen and recent collapse of commodity prices.

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

Jul 2015	Weight	Month ∆%	12 Month ∆%
Total	1000.0	-0.2	-3.0
Food, Beverages, Tobacco, Feedstuffs	137.5	0.0	0.7
Petroleum & Coal	57.4	-2.0	-22.8
Production Machinery	30.8	-0.1	1.1
Electronic Components	31.0	0.1	-1.5
Electric Power, Gas & Water	52.7	0.6	-6.1
Iron & Steel	56.6	-0.3	-3.2
Chemicals	92.1	0.0	-7.2
Transport Equipment	136.4	0.0	0.5

Source: Bank of Japan

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

Percentage point contributions to change of the corporate goods price index (CGPI) in May 2015 are provided in Table IV-8 divided into domestic, export and import segments. The final block provides change in the corporate goods price without the effects of the increase in the tax on value added of consumption. In the domestic CGPI, decreasing 0.2 percent in Jul 2015, the energy shock is evident in the deduction of 0.12 percentage points by petroleum and coal products and deduction of 0.09 percentage points by nonferrous metals in renewed reversal of carry trades of exposures in commodity futures. The exports CGPI decreased 0.6 percent on the basis of the contract currency with deduction of 0.34 percentage points by metals and related products and deduction of 0.14 percentage points by chemicals and related products. The imports CGPI decreased 1.0 percent on the contract currency basis. Petroleum, coal and natural gas products deducted 0.30 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide. The final block D shows that the change in the domestic corporate goods price index without the effects of the consumption tax is minus 0.2 percent.

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

Groups Jul 2015	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change:  -0.2%
Petroleum & Coal Products	-0.12
Nonferrous Metals	-0.09
Scrap & Waste	-0.03
Electric Power, Gas & Water	0.04
Agriculture, Forestry & Fishery Products	0.03
B. Export Price Index	Monthly Change:    -0.6% contract currency
Metals & Related Products	-0.34
Chemicals & Related Products	-0.14
Other Primary Products & Manufactured Goods	-0.13
Electric & Electronic Products	-0.06
General Purpose, Production & Business Oriented Machinery	0.07
C. Import Price Index	Monthly Change: -1.0% contract currency basis
Metals & Related Products	-0.57
Petroleum, Coal & Natural Gas	-0.30
Electric & Electronic Products	-0.03
Foodstuffs & Feedstuffs	-0.02
Chemicals & Related Products	-0.02
Textiles	0.02
D. Domestic Corporate Goods Price Index Excluding Consumption Tax	Monthly Change: -0.2%
Petroleum & Coal Products	-0.12
Nonferrous Metals	-0.09
Scrap & Waste	-0.03
Electric Power, Gas & Water	0.04
Agriculture, Forestry & Fishery Products	0.03

Source: Bank of Japan

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

China is experiencing similar inflation behavior as the advanced economies in several prior months in the form of declining commodity prices but differs in decreasing inflation of producer prices relative to a year earlier. As shown in Table IV-9, inflation of the price indexes for industry in Jul 2015 is minus 0.7 percent; 12-month inflation is minus 5.4 percent in Jul; and cumulative inflation in Jan-Jul 2015 relative to Jan-Jul 2014 is minus 4.7 percent. Inflation of segments in Jul 2015 in China is provided in Table IV-9 in column “Month Jul 2015 ∆%.” There were decreases of prices of mining & quarrying of 1.5 percent in Jul and decrease of 19.4 percent in 12 months. Prices of consumer goods changed 0.0 percent in Jul and decreased 0.3 percent in 12 months. Prices of inputs in the purchaser price index decreased 0.6 percent in Jul and declined 6.1 percent in 12 months. Fuel and power decreased 0.8 percent in Jul and declined 11.1 percent in 12 months. An important category of inputs for exports is textile raw materials, increasing 0.2 percent in Jul and decreasing 2.2 percent in 12 months.

Table IV-9, China, Price Indexes for Industry ∆%

	Month Jul 2015 ∆%	12-Month Jul 2015 ∆%	Jan-Jul 2015/Jan-Jul 2014 ∆%
I Producer Price Indexes	-0.7	-5.4	-4.7
Means of Production	-0.9	-6.9	-6.1
Mining & Quarrying	-1.5	-19.4	-19.1
Raw Materials	-1.2	-9.7	-8.6
Processing	-0.7	-4.5	-3.7
Consumer Goods	0.0	-0.3	-0.2
Food	0.1	0.2	0.0
Clothing	0.0	0.5	0.6
Daily Use Articles	-0.2	-1.0	-0.5
Durable Consumer Goods	-0.2	-0.7	-0.8
II Purchaser Price Indexes	-0.6	-6.1	-5.6
Fuel and Power	-0.8	-11.1	-11.0
Ferrous Metals	-1.6	-12.1	-10.9
Nonferrous Metals	-1.5	-7.5	-5.1
Chemical Raw Materials	-0.6	-5.8	-5.5
Wood & Pulp	-0.1	-0.9	-0.8
Building Materials	-0.7	-4.5	-3.6
Other Industrial Raw Materials	-0.3	-2.5	-2.1
Agricultural	0.8	-1.7	-2.1
Textile Raw Materials	0.2	-2.2	-2.3

Source: National Bureau of Statistics of China

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

There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Jan 2011 to Aug 2015. The index of current prices paid or costs of inputs moved from 16.13 in Dec 2012 to 7.27 in Aug 2015 while the index of current prices received or sales prices moved from 1.08 in Dec 2012 to 0.91 in Aug 2015. The farther the index is from the area of no change at zero, the faster the rate of change. Prices paid or costs of inputs at 7.27 in Aug 2015 are expanding at faster pace than prices received or of sales of products at 0.91. The index of future prices paid or expectations of costs of inputs in the next six months fell from 51.61 in Dec 2012 to 34.55 in Aug 2015 while the index of future prices received or expectation of sales prices in the next six months decreased from 25.81 in Dec 2012 to 10.91 in Aug 2015. Priced paid or of inputs are expected to increase at a faster pace in the next six months than prices received or prices of sales products. Prices of sales of finished products are less dynamic than prices of costs of inputs during waves of increases. Prices of costs of costs of inputs fall less rapidly than prices of sales of finished products during waves of price decreases. As a result, margins of prices of sales less costs of inputs oscillate with typical deterioration against producers, forcing companies to manage tightly costs and labor inputs. Instability of sales/costs margins discourages investment and hiring

Table IV-5, US, FRBNY Empire State Manufacturing Survey, Diffusion Indexes, Prices Paid and Prices Received, SA

	Current Prices Paid	Current Prices Received	Six Months Prices Paid	Six Months Prices Received
Jan-11	35.79	15.79	60	42.11
Feb-11	45.78	16.87	55.42	27.71
Mar-11	53.25	20.78	71.43	36.36
Apr-11	57.69	26.92	56.41	38.46
May-11	69.89	27.96	68.82	35.48
Jun-11	56.12	11.22	55.1	19.39
Jul-11	43.33	5.56	51.11	30
Aug-11	28.26	2.17	42.39	15.22
Sep-11	32.61	8.7	53.26	22.83
Oct-11	22.47	4.49	40.45	17.98
Nov-11	18.29	6.1	36.59	25.61
Dec-11	24.42	3.49	56.98	36.05
Jan-12	26.37	23.08	53.85	30.77
Feb-12	25.88	15.29	62.35	34.12
Mar-12	50.62	13.58	66.67	32.1
Apr-12	45.78	19.28	50.6	22.89
May-12	37.35	12.05	57.83	22.89
Jun-12	19.59	1.03	34.02	17.53
Jul-12	7.41	3.7	35.8	16.05
Aug-12	16.47	2.35	31.76	14.12
Sep-12	19.15	5.32	40.43	23.4
Oct-12	17.2	4.3	44.09	24.73
Nov-12	14.61	5.62	39.33	15.73
Dec-12	16.13	1.08	51.61	25.81
Jan-13	22.58	10.75	38.71	21.51
Feb-13	26.26	8.08	44.44	13.13
Mar-13	25.81	2.15	50.54	23.66
Apr-13	28.41	5.68	44.32	14.77
May-13	20.45	4.55	29.55	14.77
Jun-13	20.97	11.29	45.16	17.74
Jul-13	17.39	1.09	28.26	11.96
Aug-13	20.48	3.61	40.96	19.28
Sep-13	21.51	8.6	39.78	24.73
Oct-13	21.69	2.41	45.78	25.3
Nov-13	17.11	-3.95	42.11	17.11
Dec-13	15.66	3.61	48.19	27.71
Jan-14	36.59	13.41	45.12	23.17
Feb-14	25	15	40	23.75
Mar-14	21.18	2.35	43.53	25.88
Apr-14	22.45	10.2	33.67	14.29
May-14	19.78	6.59	31.87	14.29
Jun-14	17.2	4.3	36.56	16.13
Jul-14	25	6.82	37.5	18.18
Aug-14	27.27	7.95	42.05	21.59
Sep-14	23.91	17.39	43.48	32.61
Oct-14	11.36	6.82	42.05	26.14
Nov-14	10.64	0	41.49	25.53
Dec-14	10.42	6.25	40.63	32.29
Jan-15	12.63	12.63	33.68	15.79
Feb-15	14.61	3.37	26.97	5.62
Mar-15	12.37	8.25	31.96	12.37
Apr-15	19.15	4.26	38.3	13.83
May-15	9.38	1.04	26.04	7.29
Jun-15	9.62	0.96	24.04	5.77
Jul-15	7.45	5.32	27.66	6.38
Aug-15	7.27	0.91	34.55	10.91

http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html

Price indexes of the Federal Reserve Bank of Philadelphia Outlook Survey are in Table IV-5A. As inflation waves throughout the world (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html), indexes of both current and expectations of future prices paid and received were quite high until May 2011. Prices paid, or inputs, were more dynamic, reflecting carry trades from zero interest rates to commodity futures. All indexes softened after May 2011 with even decline of prices received in Aug 2011 during the first round of risk aversion. Current and future price indexes have increased again but not back to the intensity in the beginning of 2011 because of risk aversion frustrating carry trades even induced by zero interest rates. The index of prices paid or prices of inputs moved from 20.8 in Dec 2012 to 6.2 in Aug 2015. The index of current prices received was minus 2.4 in Apr 2013, indicating decrease of prices received. The index of current prices received decreased from 9.2 in Dec 2012 to minus 4.9 2015. The farther the index is from the area of no change at zero, the faster the rate of change. The index of current prices paid or costs of inputs at 6.2 in Jul 2015 indicates faster expansion than the index of current prices received or sales prices of production at minus 4.9, showing contraction. Prices paid indicate faster expansion than prices received during most of the history of the index. The index of future prices paid increased to 38.4 in Aug 2015 from 40.6 in Dec 2012 while the index of future prices received decreased from 21.9 in Dec 2012 to 8.7 in Aug 2015. Expectations are incorporating faster increases in prices of inputs or costs of production, 38.4 in Aug 2015, than of sales prices of produced goods, 8.7 in Aug 2015, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages investment and hiring.

Table IV-5A, US, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Prices Paid and Prices Received, SA

	Current Prices Paid	Current Prices Received	Future Prices Paid	Future Prices Received
10-Dec	42.8	5.3	56.0	24.2
11-Jan	48.1	12.3	58.3	34.8
11-Feb	61.1	13.4	67.7	31.5
11-Mar	59	17.6	62.4	33.4
11-Apr	52.1	23.6	56.2	35.7
11-May	49.8	20.6	54.9	28.6
11-Jun	37.4	7.2	41.4	6.9
11-Jul	34.4	5.5	49.3	17.5
11-Aug	23.6	-3.9	43.5	22.8
11-Sep	30.7	6.3	38.3	20.6
11-Oct	23	1.7	41.5	27.9
11-Nov	22.2	5.3	33.3	26.3
11-Dec	25.1	5.8	42	21.1
12-Jan	25.8	8.6	46.9	22.2
12-Feb	32.7	9.9	50.5	26.3
12-Mar	16.6	6.5	38.7	24.3
12-Apr	19.9	10	36.7	23.7
12-May	8.9	0.9	39.9	9.6
12-Jun	3.4	-4.5	34.5	16.9
12-Jul	9	3.5	29.1	21.4
12-Aug	17	6.1	36.8	23.9
12-Sep	14	2.6	39	24.9
12-Oct	18	5.2	44.1	15.4
12-Nov	22.8	5.1	44.6	10.6
12-Dec	20.8	9.2	40.6	21.9
13-Jan	12.3	-0.5	33.2	22.3
13-Feb	11.9	-0.7	33.9	22.5
13-Mar	11.4	0.6	34.3	19.3
13-Apr	7.6	-2.4	31.1	14.7
13-May	11.9	0.5	34.3	19.8
13-Jun	20.8	13.6	33.1	24
13-Jul	20.3	6	42.7	26.9
13-Aug	19.6	12	36.9	23
13-Sep	23.8	11.6	39	27.9
13-Oct	18.5	10.2	41.2	35
13-Nov	24.4	7.6	39.4	36
13-Dec	16.9	8.5	37.9	28.8
14-Jan	18.8	6.3	34.3	14.2
14-Feb	14.8	7.9	27.2	18.1
14-Mar	18.3	6.4	31.8	18.8
14-Apr	14.5	9.6	38.3	18.6
14-May	26.5	18	36.9	29.6
14-Jun	32	13.1	45.1	30.1
14-Jul	32.3	14.7	40.1	25
14-Aug	24.1	5.1	47.5	27.7
14-Sep	24.4	8	41.9	26.6
14-Oct	24.9	18.2	30.5	23
14-Nov	15.8	10	30.5	18.7
14-Dec	14.4	9.8	22.3	20.6
15-Jan	9.8	-0.2	26	20.7
15-Feb	4.7	-0.2	32.2	19.3
15-Mar	-3	-6.4	27.5	7.4
15-Apr	-7.5	-4.1	19.9	10.7
15-May	-14.2	-5.4	20.9	19.4
15-Jun	17.2	4.8	46.3	12.8
15-Jul	20.2	1.7	37.3	20.2
15-Aug	6.2	-4.9	38.4	8.7

Source: Federal Reserve Bank of Philadelphia

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

Chart IV-1 of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices paid or prices of inputs from 2006 to 2015. Recession dates are in shaded areas. In the middle of deep global contraction after IVQ2007, input prices continued to increase in speculative carry trades from central bank policy rates falling toward zero into commodities futures. The index peaked above 70 in the second half of 2008. Inflation of inputs moderated significantly during the shock of risk aversion in late 2008, even falling briefly into contraction territory below zero during several months in 2009 in the flight away from risk financial assets into US government securities (Cochrane and Zingales 2009) that unwound carry trades. Return of risk appetite induced carry trade with significant increase until return of risk aversion in the first round of the European sovereign debt crisis in Apr 2010. Carry trades returned during risk appetite in expectation that the European sovereign debt crisis was resolved. The various inflation waves originating in carry trades induced by zero interest rates with alternating episodes of risk aversion are mirrored in the prices of inputs after 2011, in particular after Aug 2012 with the announcement of the Outright Monetary Transactions Program of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). Subsequent risk aversion and flows of capital away from commodities into stocks and high-yield bonds caused sharp decline in the index of prices paid followed by another recent rebound with marginal decline and new increase. The index falls, rebounds and falls again in the final segment but there are no episodes of contraction after 2009 with exception of minus 3.0 in Mar 2015, minus 7.5 in Apr 2015 and minus 14.2 in May 2015.

Chart IV-1, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

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

Chart IV-2 of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices received from 2006 to 2015. The significant difference between the index of current prices paid in Chart IV-1 and the index of current prices received in Chart IV-2 is that increases in prices paid are significantly sharper than increases in prices received. There were several periods of negative readings of prices received from 2010 to 2015. There were only three contraction of prices paid: 3.0 Mar 2015 with sharper contraction of 6.4 of prices received; minus 7.5 for prices paid in Apr 2015 with minus 4.1 for prices received; and minus 14.2 for prices paid in May 2015 with minus 5.4 for prices received. The index of prices received fell to minus 4.9 in Aug 2015. Prices received relative to prices paid deteriorate most of the time largely because of the carry trades from zero interest rates to commodity futures. Profit margins of business are compressed intermittently by fluctuations of commodity prices induced by unconventional monetary policy of zero interest rates, frustrating production, investment and hiring decisions of business, which is precisely the opposite outcome pursued by unconventional monetary policy.

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

Source: Federal Reserve Bank of Philadelphia

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

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

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Jul 2015	53.9	50.1	48.9	47.4	60.0
Jun	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 53.9 in Jul 2015.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr 2012, falling to 49.2 in Aug 2012, rebounding to 50.6 in Dec 2012. The index fell to 50.1 in Jun 2013, barely above the neutral frontier at 50.0, recovering to 51.4 in Nov 2013 but falling to 51.0 in Dec 2013. The index fell to 50.5 in Jan 2014, 50.1 in Dec 2014 and 50.0 in Jul 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 49.9 in Jul 2015.

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

	IPM	PI	NOI	INV	EMP	SDEL
2015
Jul	50.0	52.4	49.9	48.4	48.0	50.3
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 50.0 in Jul 2015.

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

Source: National Bureau of Statistics of China

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

Cumulative growth of China’s GDP in IIQ2015 relative to the same period in 2014 was 7.0 percent, as shown in Table VC-GDP. Secondary industry accounts for 43.7 percent of cumulative GDP in IIQ2015. In cumulative IIQ2015, industry accounts for 37.6 percent of GDP and construction for 6.3 percent. Tertiary industry accounts for 49.5 percent of cumulative GDP in IIQ2015 and primary industry for 6.8 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The strategy is shifting to lower growth rates with improvement in living standards. The bottom block of Table VC-GDP provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 5.7 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 7.0 percent and to 7.4 percent in IIQ2013, rebounding to 9.5 percent in IIIQ2013. Annual equivalent growth was 7.4 percent in IVQ2013, declining to 6.6 percent in IQ2014 and increasing to 7.8 percent in IIQ2014. Annual equivalent growth slowed to 7.8 percent in IIIQ2014 and 6.1 percent in IVQ2014. Growth slowed to annual equivalent 5.7 percent in IQ2015, increasing to 7.0 percent in IIQ2015.

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

Cumulative GDP IIQ2015	Value Current CNY Billion	IIQ2015 Year-on-Year Constant Prices ∆%
GDP	29,686.8	7.0
Primary Industry	2,025.5	3.5
Farming	2,100.2	3.6
Secondary Industry	12,964.8	6.1
Industry	11,150.0	6.0
Construction	1,879.6	7.0
Tertiary Industry	14,696.5	8.4
Transport, Storage, Post	1,441.6	4.9
Wholesale, Retail Trades	2,712.3	6.1
Accommodation and Restaurants	511.1	5.4
Finance	2,775.7	17.4
Real Estate	1,979.6	3.3
Other	5,136.8	8.9
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2015
IIQ2015	1.7	7.0
IQ2015	1.4	5.7
2014
IVQ2014	1.5	6.1
IIIQ2014	1.9	7.8
IIQ2014	1.9	7.8
IQ2014	1.6	6.6
2013
IVQ2013	1.8	7.4
IIIQ2013	2.3	9.5
IIQ2013	1.8	7.4
IQ2013	1.7	7.0
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.1	8.7
IQ2012	1.4	5.7
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.5	10.4
IQ2011	2.3	9.5

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

Cumulative growth of China’s GDP in IIQ2015 relative to the same period in 2014 was 7.0 percent, as shown in Table VC-GDPA. Secondary industry accounts for 43.7 percent of cumulative GDP in IIQ2015. In cumulative IIQ2015, industry accounts for 37.6 percent of GDP and construction for 6.3 percent. Tertiary industry accounts for 49.5 percent of cumulative GDP in IIQ2015 and primary industry for 6.8 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 1.9 percent relative to the prior quarter, which is equivalent 7.8 percent. In IIIQ2014, GDP grew 7.3 percent relative to a year earlier and 1.9 percent relative to the prior quarter, which is 7.8 percent in annual equivalent. GDP grew 1.5 percent in IVQ2014, which is 6.1 percent in annual equivalent and 7.3 percent relative to a year earlier. In IQ2015, GDP grew 1.4 percent, which is equivalent to 5.7 in a year and 7.0 percent relative to a year earlier. GDP grew 1.7 percent in IIQ2015, which is equivalent to 7.0 percent in a year, and grew 7.0 percent relative to a year earlier.

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

	IQ2015	IIQQ2015
GDP	7.0	7.0
Primary Industry	3.2	3.5
Secondary Industry	6.4	6.1
Tertiary Industry	7.9	8.4
GDP ∆% Relative to a Prior Quarter	1.4	1.7
	IQ 2013	IIQ 2013	IIIQ 2013	IVQ 2013	IQ 2014	IIQ 2014	IIIQ 2014	IVQ 2014
GDP	7.8	7.5	7.9	7.6	7.4	7.5	7.3	7.3
Primary Industry	3.4	3.0	3.4	4.0	3.5	3.9	4.2	4.1
Secondary Industry	7.8	7.6	7.8	7.8	7.3	7.4	7.4	7.3
Tertiary Industry	8.3	8.3	8.4	8.3	7.1	8.0	7.9	8.1
GDP ∆% Relative to a Prior Quarter	1.7	1.8	2.3	1.8	1.6	1.9	1.9	1.5
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ  2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.5	2.2	1.8	1.4	2.1	2.0	1.9
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

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

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

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

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

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

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

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

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

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

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

The Caixin Flash China General Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2215b5e205042329c5aa7ee1aa5abee) is mixed. The overall Flash Caixin China General Manufacturing PMI^™ decreased from 47.8 in Jul to 47.1 in Aug, while the Flash Caixin China General Manufacturing Output Index decreased from 47.1 in Jul to 46.6 in Aug, indicating weaker conditions. He Fan, Chief Economist at Caixin Insight Group finds need of fiscal and monetary policy. The Caixin China General Services PMI^™, compiled by Markit, shows the Caixin Composite Output, combining manufacturing and services, decreasing from 50.6 in Jun to 50.2 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/6dd300881bc5444b8cbdd4dee18e2de2). The Caixin General Manufacturing PMI^™ decreased to 47.8 in Jul from 49.4 in Jun, indicating moderate deterioration in manufacturing (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	Jul 12-month ∆%: minus 5.4 Jul month ∆%: -0.7 Blog 8/16/15
Consumer Price Index	Jul 12-month ∆%: 1.6 Jul month ∆%: 0.3 Blog 8/16/15
Value Added of Industry	Jul month ∆%: 0.32 Jan-Jul 2015/Jan-Jul 2014 ∆%: 6.3 Earlier Data Blog 4/19/15
GDP Growth Rate	Year IIQ2015 ∆%: 7.0 Second Quarter 2015 ∆%: 1.7 Quarter IIQ2015 AE ∆%: 7.0 Blog 7/26/15
Investment in Fixed Assets	Total Jan-Jul 2015 ∆%: 11.2 Real estate development: 4.3 Earlier Data: Blog 4/19/15
Retail Sales	Jul month ∆%: 0.79 Jan-Jul 12 month ∆%: NA : 10.4 Earlier Data: Blog 4/19/15
Trade Balance	Jul balance $43.03 billion Exports 12M ∆% -8.3 Imports 12M ∆% -8.1 Cumulative Jul 2015: $306.73 billion Earlier Data: Blog 4/19/15

Links to blog comments in Table CNY: 08/16/15 http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

7/26/15 http://cmpassocregulationblog.blogspot.com/2015/07/valuation-of-risk-financial-assets.html

7/12/2015 http://cmpassocregulationblog.blogspot.com/2015/07/oscillating-valuations-of-risk.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 (19 countries) fell 5.8 percent from IQ2008 to IIQ2009. The GDP of the euro area (19 countries) increased 4.9 percent from IIIQ2009 to IIQ2015 at the annual equivalent rate of 0.8 percent. The GDP of the euro area (19 countries) is lower by 1.2 percent in IIQ2015 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	0.8	1.6	0.2	-0.4	1.4
2013	-0.4	0.1	0.7	-1.7	-1.2
2012	-0.8	0.4	0.2	-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
Average 1999-2014	1.1	1.2	1.6	1.3	2.4
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 53.9 in Jul to 54.1 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/289226f4ba9b4ef2bc120a01fca21e38). Rob Dobson, Senior Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests GDP growth at around 0.4 percent in IIIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/1a24981b6cca49d080f970a289f9589b). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP decreased from 54.2 in Jun to 53.9 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/641ef8d35af84cc5ba28e26ecb552710). Chris Williamson, Chief Economist at Markit, finds potential for growth of 0.4 percent in IIQ2015 and around that level in the beginning of IIIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/641ef8d35af84cc5ba28e26ecb552710). The Markit Eurozone Services Business Activity Index increased from 54.4 in Jun to 54.0 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/641ef8d35af84cc5ba28e26ecb552710). The Markit Eurozone Manufacturing PMI^® decreased from 52.5 in Jun to 52.4 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/5a20c03b9eb04b41a96b7f7ccd7449cd). New export orders increased at slower rate. Chris Williamson, Chief Economist at Markit, finds improvement of industrial growth in the euro area at an annual rate of 2.0 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/5a20c03b9eb04b41a96b7f7ccd7449cd). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIQ2015 ∆% 0.3; IIQ2015/IIQ2014 ∆% 1.2 Blog 8/16/15
Unemployment	Jun 2015: 11.1 % unemployment rate; Jun 2015: 17.756 million unemployed Blog 8/2/15
HICP	Jul month ∆%: -0.6 12 months Jul ∆%: 0.2 Blog 8/16/15
Producer Prices	Euro Zone industrial producer prices Jun ∆%: -0.1 Jun 12-month ∆%: -2.2 Blog 8/9/15
Industrial Production	Jun Month ∆%: -0.4; 12 months ∆%: 1.2 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 104.0 Jul 2015 Consumer minus 7.1 Jul 2015 Earlier Data: Blog 4/5/15
Trade	Jan-Jun 2015/Jan-Jun 2014 Exports ∆%: 6.5 Imports ∆%: 2.6 Jun 2015 12-month Exports ∆% 12.3 Imports ∆% 6.6 Earlier Data: Blog 4/19/15

Links to blog comments in Table EUR: 08/16/15 http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

08/9/15 http://cmpassocregulationblog.blogspot.com/2015/08/fluctuating-risk-financial-assets.html

08/02/15 http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.html

7/19/2015 http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.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

Table DE, Germany, Economic Indicators

GDP	IIQ2015 0.4 ∆%; IIQ2015/IIQ2014 ∆% 1.6 2014/2013: 1.6% GDP ∆% 1970-2014 Blog 8/26/12 5/27/12 11/25/12 2/24/13 5/19/13 5/26/13 8/18/13 8/25/13 11/17/13 11/24/13 1/26/14 2/16/14 3/2/14 5/18/14 5/25/14 8/17/14 9/7/14 11/16/14 11/30/14 2/15/15 3/1/15 5/17/15 5/24/15 8/16/15
Consumer Price Index	Jul month NSA ∆%: 0.2 Jul 12-month NSA ∆%: 0.2 Blog 8/16/15
Producer Price Index	Jul month ∆%: 0.0 NSA, -0.1 CSA 12-month NSA ∆%: -1.3 Blog 8/23/15
Industrial Production	MFG Jun month CSA ∆%: minus 1.2 12-month NSA: 8.2 Earlier Data: Blog 4/12/15
Machine Orders	MFG Jun month ∆%: 2.0 Jun 12-month ∆%: 13.5 Earlier Data: Blog 4/12/15
Retail Sales	Jun Month ∆% -2.3 May 0.4 12-Month Jun ∆% 5.1 May minus 1.0 Earlier Data: Blog 4/5/15
Employment Report	Unemployment Rate SA Jun 4.7% Blog 8/2/15
Trade Balance	Exports Jun 12-month NSA ∆%: 13.7 Imports Jun 12 months NSA ∆%: 6.4 Exports Jun month CSA ∆%: minus 1.0; Imports Jun month CSA -0.5 Earlier Data: Blog 4/12/15

Links to blog comments in Table DE: 08/16/15 http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

08/02/15 http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.html

7/26/15 http://cmpassocregulationblog.blogspot.com/2015/07/valuation-of-risk-financial-assets.html

7/19/2015 http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.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

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. ermany’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, 3.7 percent in 2011 and 0.4 percent in 2012. Growth in 2013 was 0.3 percent. Germany’s GDP increased 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	0.3	0.4
2012	0.4	0.6
2011	3.7	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/PressServices/Press/pr/2015/08/PE15_293_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 53.7 in Jul to 54.0 in Aug. The index of manufacturing output reached 54.9 in Aug, increasing from 53.5 in Jul, while the index of services decreased to 53.6 in Aug from 53.8 in Jul. The overall Flash Germany Manufacturing PMI^® increased from 51.8 in Jul to 53.2 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/cfe0e9a35bb44ed4a9035197c58221be). New orders in manufacturing expanded. Oliver Kolodseike, Economist at Markit, finds continuing improvement of the private sector of Germany (http://www.markiteconomics.com/Survey/PressRelease.mvc/cfe0e9a35bb44ed4a9035197c58221be). 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/b094ed3facd3478ab5871904411fa3ee). Oliver Kolodseike, Economist at Markit and author of the report, finds continuing growth of the private sector of Germany (http://www.markiteconomics.com/Survey/PressRelease.mvc/b094ed3facd3478ab5871904411fa3ee). The Germany Services Business Activity Index did not change from 53.8 in Jun to 53.8 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/b094ed3facd3478ab5871904411fa3ee). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, decreased from 51.9 in Jun to 51.8 in

Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/ec243a8295fe40228bc9353cc54f5ebd). New export orders decreased. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds moderate growth of manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/ec243a8295fe40228bc9353cc54f5ebd).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIQ2015 0.4 ∆%; IIQ2015/IIQ2014 ∆% 1.6 2014/2013: 1.6% GDP ∆% 1970-2014 Blog 8/26/12 5/27/12 11/25/12 2/24/13 5/19/13 5/26/13 8/18/13 8/25/13 11/17/13 11/24/13 1/26/14 2/16/14 3/2/14 5/18/14 5/25/14 8/17/14 9/7/14 11/16/14 11/30/14 2/15/15 3/1/15 5/17/15 5/24/15 8/16/15
Consumer Price Index	Jul month NSA ∆%: 0.2 Jul 12-month NSA ∆%: 0.2 Blog 8/16/15
Producer Price Index	Jul month ∆%: 0.0 NSA, -0.1 CSA 12-month NSA ∆%: -1.3 Blog 8/23/15
Industrial Production	MFG Jun month CSA ∆%: minus 1.2 12-month NSA: 8.2 Earlier Data: Blog 4/12/15
Machine Orders	MFG Jun month ∆%: 2.0 Jun 12-month ∆%: 13.5 Earlier Data: Blog 4/12/15
Retail Sales	Jun Month ∆% -2.3 May 0.4 12-Month Jun ∆% 5.1 May minus 1.0 Earlier Data: Blog 4/5/15
Employment Report	Unemployment Rate SA Jun 4.7% Blog 8/2/15
Trade Balance	Exports Jun 12-month NSA ∆%: 13.7 Imports Jun 12 months NSA ∆%: 6.4 Exports Jun month CSA ∆%: minus 1.0; Imports Jun month CSA -0.5 Earlier Data: Blog 4/12/15

Links to blog comments in Table DE: 08/16/15 http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

08/02/15 http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.html

7/26/15 http://cmpassocregulationblog.blogspot.com/2015/07/valuation-of-risk-financial-assets.html

7/19/2015 http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.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 IIQ2015

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20150814

The Markit Flash France Composite Output Index decreased from 51.5 in Jul to 51.3 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/7ceb45947dbf4d4f9b56e9d0c7439c41). Jack Kennedy, Senior Economist at Markit and author of the report, finds weakening growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/7ceb45947dbf4d4f9b56e9d0c7439c41). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, decreased from 53.3 in Jun to 51.5 in Jul, indicating expansion at slower pace (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ac45bfb6af34a5b8e128523c2515bad). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds weakening data on business activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ac45bfb6af34a5b8e128523c2515bad). The Markit France Services Activity index decreased from 54.1 in Jun to 52.0 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ac45bfb6af34a5b8e128523c2515bad). The Markit France Manufacturing Purchasing Managers’ Index^® decreased to 50.7 in Jun from 49.6 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/8dd28d3373724c46b910734535a94069). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds declining manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/8dd28d3373724c46b910734535a94069). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Jul month ∆% -0.4 12 months ∆%: 0.2 8/16/15
PPI	Jun month ∆%: -0.2 Jun 12 months ∆%: -1.9 Blog 8/2/15
GDP Growth	IIQ2015/IQ2015 ∆%: 0.0 IIQ2015/IIQ2014 ∆%: 1.0 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 8/16/15
Industrial Production	Jun ∆%: Manufacturing -0.7 12-Month ∆%: 0.8 Earlier Data: Blog 4/12/15
Consumer Spending	Manufactured Goods Jun ∆%: 0.2 Jun 12-Month Manufactured Goods ∆%: 1.7 Earlier Data: Blog 4/5/15
Employment	Unemployment Rate: IQ2014 10.0% Blog 6/7/15
Trade Balance	Jun Exports ∆%: month 3.9, 12 months 8.8 Imports ∆%: month 0.4, 12 months 0.8 Earlier Data: Blog 4/12/15
Confidence Indicators	Historical average 100 Jul Mfg Business Climate 102.0 Earlier Data: Blog 3/29/15

Links to blog comments in Table FR: 08/16/15 http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

08/02/15 http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.html

7/19/2015 http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.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. In IIQ2015, GDP increased 0.2 percent and increased 0.5 percent relative to 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 0.2 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 decreased 0.1 percent in IIQ2013, continuing 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 2.5 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 eight consecutive quarters from IIIQ2011 to IIQ2013 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 5.0 percent in eight consecutive quarterly contractions from IIIQ2011 to IIQ2013 at the annual equivalent rate of minus 2.5 percent. The total contraction in the 12 quarters including IQ2014, IIQ2014 and IIIQ2014 accumulates to 5.5 percent. The yearly rate has fallen from 2.3 percent in IVQ2010 to minus 2.6 percent in IVQ2012, minus 2.5 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 and increased 0.5 percent in IIQ2015 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
IIQ2015	0.2	0.5
IQ2015	0.3	0.1
IVQ2014	0.0	-0.4
IIIQ2014	-0.1	-0.5
IIQ2014	-0.2	-0.3
IQ2014	-0.2	-0.2
IVQ2013	0.0	-0.9
IIIQ2013	0.1	-1.4
IIQ2013	-0.1	-2.0
IQ2013	-0.9	-2.5
IVQ2012	-0.5	-2.6
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/166848

The Markit/ADACI Business Activity Index decreased from 53.4 in Jun to 52.0 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/6b590f9943e74176b7392303d08c74ec). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds signs of expansion of private sector activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/6b590f9943e74176b7392303d08c74ec). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 54.1 in Jun to 55.3 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/4011e2f4a50346969fe2b6a4741ed15d). 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/4011e2f4a50346969fe2b6a4741ed15d). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Jul month ∆%: -0.1 Jul 12-month ∆%: 0.2 Blog 8/16/15
Producer Price Index	Jun month ∆%: -0.3 Jun 12-month ∆%: -3.1 Blog 8/2/15
GDP Growth	IIQ2015/IQ2015 SA ∆%: 0.2 IIQ2015/IIQ2014 NSA ∆%: 0.5 Blog 3/17/13 6/16/13 8/11/13 9/15/13 11/17/13 12/15/13 2/16/14 3/16/14 5/18/14 6/15/14 8/10/14 8/31/14 10/19/14 11/16/14 12/7/14 2/15/15 3/15/15 5/17/15 5/31/15 8/16/15
Labor Report	Jun 2015 Participation rate 64.1% Employment ratio 55.8% Unemployment rate 12.7% Youth Unemployment 44.2% Blog 8/2/15
Industrial Production	Jun month ∆%: -1.1 12 months CA ∆%: 0.3 Earlier Data: Blog 4/19/15
Retail Sales	May month ∆%: -0.1 May 12-month ∆%: 0.3 Earlier Data: Blog 4/26/15
Business Confidence	Mfg Jul 103.6, Mar 103.6 Construction Jul 117.6, Mar 116.0 Earlier Data: Blog 4/5/15
Trade Balance	Balance Jun SA €2566 million Exports Jun month SA ∆%: -0.6; Imports month ∆%: 4.3 Exports 12 months Jun NSA ∆%: 9.4 Imports 12 months NSA ∆%: 12.2 Earlier Data: Blog 4/19/15

Links to blog comments in Table IT: 08/16/15 http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

08/02/15 http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.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

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/gva/gross-domestic-product--preliminary-estimate/q2-2015/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased from 58.5 in Jun to 57.4 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/a5e78a883ee1461dbe78be1b4af1c8c8). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at around 0.6 percent in the beginning of IIIQ2015 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a5e78a883ee1461dbe78be1b4af1c8c8). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased to 51.9 in Jul from 51.4 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/5f136264de264c11ba054d161c6a00ee). 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/5f136264de264c11ba054d161c6a00ee). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Jul month ∆%: -0.2 Jul 12-month ∆%: 0.1 Blog 8/23/15
Output/Input Prices	Output Prices: Jul 12-month NSA ∆%: -1.6; excluding food, petroleum ∆%: 0.3 Input Prices: Jul 12-month NSA ∆%: -12.4 Excluding ∆%: -4.9 Blog 8/23/15
GDP Growth	IIQ2015 prior quarter ∆% 0.7; year earlier same quarter ∆%: 2.6 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13 9/29/13 10/27/13 12/1/13 12/22/13 2/2/14 3/2/14 4/6/14 5/4/14 5/25/14 6/29/14 7/27/14 8/17/14 10/5/14 10/26/14 11/30/14 12/28/14 2/1/15 3/1/15 4/5/15 5/3/15 5/31/15 7/5/15 8/2/15
Industrial Production	Jun 2015/Jun 2014 ∆%: Production Industries 1.5; Manufacturing 0.5 Earlier Data: Blog 4/12/15
Retail Sales	Jul month ∆%: 0.1 Jul 12-month ∆%: 4.2 Earlier Data: Blog 4/26/15
Labor Market	Apr-Jun Unemployment Rate: 5.6% Blog 8/16/15 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 Jun minus ₤1601 million Exports Jun%: -0.6; Apr-Jun ∆%: 2.7 Imports Jun ∆%: 1.1 Apr-Jun ∆%: -0.6 EARLIER DATA: Blog 4/12/15

Links to blog comments in Table UK: 08/02/15 http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.html

7/19/2015 http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html

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

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

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