Monday, October 5, 2015

Labor Market Uncertainty and Interest Rate Policy, Twenty Six Million Unemployed or Underemployed, Stagnating Real Wages, Stagnating Real Disposable Income, Financial Repression, World Cyclical Slow Growth and Global Recession Risk: Part V

 

Labor Market Uncertainty and Interest Rate Policy, Twenty Six Million Unemployed or Underemployed, Stagnating Real Wages, Stagnating Real Disposable Income, Financial Repression, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

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

I Twenty Six Million Unemployed or Underemployed

IA1 Summary of the Employment Situation

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

IB Stagnating Real Wages

II Stagnating Real Disposable Income and Consumption Expenditures

IB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

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

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

 

GDP USD 2013

Real GDP ∆%
2014

Real GDP ∆%
2015

Real GDP ∆%
2016

Real GDP ∆%
2017

World

75,471

3.4

3.5

3.8

3.8

G7

34,883

1.7

2.3

2.3

2.0

Canada

1,839

2.5

2.2

2.0

2.0

France

2,807

0.4

1.2

1.5

1.7

DE

3,731

1.6

1.6

1.7

1.5

Italy

2,138

-0.4

0.5

1.1

1.1

Japan

4,920

-0.1

1.0

1.2

0.4

UK

2,680

2.6

2.7

2.3

2.2

US

16,768

2.4

3.1

3.1

2.7

Euro Area

13,143

0.9

1.5

1.7

1.6

DE

3,731

1.6

1.6

1.7

1.5

France

2,807

0.4

1.2

1.5

1.7

Italy

2,138

-0.4

0.5

1.1

1.1

POT

225

0.9

1.6

1.5

1.4

Ireland

232

4.8

3.9

3.3

2.8

Greece

242

0.7

2.5

3.7

3.2

Spain

1,393

1.4

2.5

2.0

1.8

EMDE

29,358

4.6

4.3

4.7

5.0

Brazil

2,391

0.1

-1.0

1.0

2.3

Russia

2,079

0.6

-3.8

-1.1

1.0

India

1,875

7.2

7.5

7.5

7.6

China

9,469

7.4

6.8

6.3

6.0

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

Source: IMF World Economic Outlook databank

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

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

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

 

% Labor Force 2013

% Labor Force 2014

% Labor Force 2015

% Labor Force 2016

% Labor Force 2017

World

NA

NA

NA

NA

NA

G7

7.1

6.4

6.0

5.8

5.8

Canada

7.1

6.9

7.0

6.9

6.8

France

10.3

10.2

10.1

9.9

9.7

DE

5.2

5.0

4.9

4.8

4.8

Italy

12.2

12.8

12.6

12.3

12.0

Japan

4.0

3.6

3.7

3.7

3.8

UK

7.6

6.2

5.4

5.4

5.4

US

7.4

6.2

5.5

5.2

5.0

Euro Area

12.0

11.6

11.1

10.6

10.3

DE

5.2

5.0

4.9

4.8

4.8

France

10.3

10.2

10.1

9.9

9.7

Italy

12.2

12.8

12.6

12.3

12.0

POT

16.2

13.9

13.1

12.6

12.1

Ireland

13.0

11.3

9.8

8.8

8.3

Greece

27.5

26.5

24.8

22.1

20.0

Spain

26.1

24.5

22.6

21.1

19.9

EMDE

NA

NA

NA

NA

NA

Brazil

5.4

4.8

5.9

6.3

5.9

Russia

5.5

5.1

6.5

6.5

6.0

India

NA

NA

NA

NA

NA

China

4.1

4.1

4.1

4.1

4.1

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

Source: IMF World Economic Outlook

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

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog from IQ2012 to 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 4.2 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 0.6 percent and changed 0.0 percent relative to a year earlier. Japan grew 1.3 percent in IQ2013 at the SAAR of 5.4 percent and increased 0.4 percent relative to a year earlier. Japan’s GDP increased 0.6 percent in IIQ2013 at the SAAR of 2.3 percent and increased 1.4 percent relative to a year earlier. Japan’s GDP grew 0.6 percent in IIIQ2013 at the SAAR of 2.5 percent and increased 2.2 percent relative to a year earlier. In IVQ2013, Japan’s GDP decreased 0.2 percent at the SAAR of minus 0.9 percent, increasing 2.3 percent relative to a year earlier. Japan’s GDP increased 1.1 percent in IQ2014 at the SAAR of 4.5 percent and increased 2.4 percent relative to a year earlier. In IIQ2014, Japan’s GDP fell 2.0 percent at the SAAR of minus 7.6 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 1.1 percent and fell 1.4 percent relative to a year earlier. In IVQ2014, Japan’s GDP grew 0.3 percent, at the SAAR of 1.3 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 0.3 percent in IIQ2015 at the SAAR of minus 1.2 percent and increased 0.8 percent relative to a year earlier

· China. China’s GDP grew 1.4 percent in IQ2012, annualizing to 5.7 percent, and 8.1 percent relative to a year earlier. The GDP of China grew at 2.1 percent in IIQ2012, which annualizes to 8.7 percent and 7.6 percent relative to a year earlier. China grew at 2.0 percent in IIIQ2012, which annualizes at 8.2 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 1.9 percent, which annualizes at 7.8 percent, and 7.9 percent in IVQ2012 relative to IVQ2011. In IQ2013, China grew at 1.7 percent, which annualizes at 7.0 percent and 7.8 percent relative to a year earlier. In IIQ2013, China grew at 1.8 percent, which annualizes at 7.4 percent and 7.5 percent relative to a year earlier. China grew at 2.3 percent in IIIQ2013, which annualizes at 9.5 percent and 7.9 percent relative to a year earlier. China grew at 1.8 percent in IVQ2013, which annualized to 7.4 percent and 7.6 percent relative to a year earlier. China’s GDP grew 1.6 percent in IQ2014, which annualizes to 6.6 percent, and 7.4 percent relative to a year earlier. China’s GDP grew 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 0.4 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.3 percent IIQ2012 and fell 0.8 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.1 percent and declined 0.8 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.4 percent relative to the prior quarter and fell 1.0 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.2 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 0.4 percent relative to a year earlier. In IIIQ2013, euro area GDP increased 0.2 percent and fell 0.1 percent relative to a year earlier. The GDP of the euro area increased 0.2 percent in IVQ2013 and increased 0.6 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 0.7 percent relative to a year earlier. The euro area’s GDP increased 0.3 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 0.5 percent in IQ2015 and increased 1.2 percent relative to a year earlier. The GDP of the euro area increased 0.4 percent in IIQ2015 and increased 1.5 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/2015/09/monetary-policy-designed-on-measurable.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/fluctuations-of-global-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 0.2 percent in IQ2015 at SAAR of 0.6 percent and grew 2.9 percent relative to a year earlier. US GDP grew at SAAR 3.9 percent in IIQ2015, increasing 1.0 percent in the quarter and 2.7 percent relative to a year earlier.

· United Kingdom. In IQ2012, GDP increased 0.2 percent in the UK and increased 1.5 percent relative to a year earlier. In IIQ2012, GDP fell 0.2 percent relative to IQ2012 and increased 1.0 percent relative to a year earlier. In IIIQ2012, GDP increased 1.0 percent and increased 1.2 percent relative to the same quarter a year earlier. In IVQ2012, GDP fell 0.1 percent and increased 1.0 percent relative to a year earlier. Growth increased to 1.4 percent in IQ2013 relative to a year earlier and 0.7 percent in IQ2013 relative to IVQ2012. In IIQ2013, GDP increased 0.6 percent and 1.0 percent relative to a year earlier. GDP increased 0.9 percent in IIIQ2013 and 2.1 percent relative to a year earlier. GDP increased 0.6 percent in IVQ2013 and 2.8 percent relative to a year earlier. In IQ2014, GDP increased 0.6 percent and 2.8 percent relative to a year earlier. GDP increased 0.9 percent in IIQ2014 and 3.1 percent relative to a year earlier. GDP increased 0.6 percent in IIIQ2013 and 2.9 percent relative to a year earlier. In IVQ2014, GDP increased 0.8 percent and 3.0 percent relative to a year earlier. GDP increased 0.4 percent in IQ2015 and increased 2.7 percent relative to a year earlier. GDP increased 0.7 percent in IIQ2015 and increased 2.4 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 0.7 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 0.4 percent and increased 0.1 percent relative to a year earlier. The GDP of Italy increased 0.3 percent in IIQ2015 and increased 0.7 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 0.7 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 0.3 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 1.1 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

-0.4

Germany

0.4

1.5

France

0.0

0.4

Italy

-1.0

-2.3

United Kingdom

0.2

1.5
 

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

-0.7

-3.1

United Kingdom

-0.2

1.0
 

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

-0.8

Germany

0.2

0.1

France

0.3

0.3

Italy

-0.5

-3.1

United Kingdom

1.0

1.2
 

IVQ2012/IIIQ2012

IVQ2012/IVQ2011

United States

QOQ: 0.0
SAAR: 0.1

1.3

Japan

QOQ: -0.1

SAAR: -0.6

0.0

China

1.9

7.9

Euro Area

-0.4

-1.0

Germany

-0.5

-0.3

France

0.0

0.0

Italy

-0.5

-2.6

United Kingdom

-0.1

1.0
 

IQ2013/IVQ2012

IQ2013/IQ2012

United States

QOQ: 0.5
SAAR: 1.9

1.1

Japan

QOQ: 1.3

SAAR: 5.4

0.4

China

1.7

7.8

Euro Area

-0.2

-1.1

Germany

-0.3

-1.7

France

0.1

0.1

Italy

-0.9

-2.5

UK

0.7

1.4
 

IIQ2013/IQ2013

IIQ2013/IIQ2012

United States

QOQ: 0.3

SAAR: 1.1

0.9

Japan

QOQ: 0.6

SAAR: 2.3

1.4

China

1.8

7.5

Euro Area

0.4

-0.4

Germany

0.9

0.7

France

0.7

1.1

Italy

-0.1

-2.0

UK

0.6

2.2
 

IIIQ2013/IIQ2013

III/Q2013/  IIIQ2012

USA

QOQ: 0.7
SAAR: 3.0

1.5

Japan

QOQ: 0.6

SAAR: 2.5

2.2

China

2.3

7.9

Euro Area

0.2

-0.1

Germany

0.4

1.0

France

-0.1

0.8

Italy

0.1

-1.4

UK

0.9

2.1
 

IVQ2013/IIIQ2013

IVQ2013/IVQ2012

USA

QOQ: 0.9

SAAR: 3.8

2.5

Japan

QOQ: -0.2

SAAR: -0.9

2.3

China

1.8

7.6

Euro Area

0.2

0.6

Germany

0.3

1.2

France

0.2

1.0

Italy

0.0

-0.9

UK

0.6

2.8
 

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

0.6

2.8
 

IIQ2014/IQ2014

IIQ2014/IIQ2013

USA

QOQ 1.1

SAAR 4.6

2.6

Japan

QOQ: -2.0

SAAR: -7.6

-0.4

China

1.9

7.5

Euro Area

0.1

0.7

Germany

-0.1

1.0

France

-0.1

-0.2

Italy

-0.2

-0.3

UK

0.9

3.1
 

IIIQ2014/IIQ2014

IIIQ2014/IIIQ2013

USA

QOQ: 1.1

SAAR: 4.3

2.9

Japan

QOQ: -0.3

SAAR: -1.1

-1.4

China

1.9

7.3

Euro Area

0.3

0.8

Germany

0.2

1.2

France

0.3

0.2

Italy

-0.1

-0.5

UK

0.6

2.9
 

IVQ2014/IIIQ2014

IVQ2014/IVQ2013

USA

QOQ: 0.5

SAAR: 2.1

2.5

Japan

QOQ: 0.3

SAAR: 1.3

-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

3.0
 

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

0.5

1.2

Germany

0.3

1.2

France

0.7

0.9

Italy

0.4

0.1

UK

0.4

2.7
 

IIQ2015/IQ2015

IIQ2015/IIQ2014

USA

QOQ: 1.0

SAAR: 3.9

2.7

Japan

QOQ: -0.3

SAAR: -1.2

0.8

China

1.7

7.0

Euro Area

0.4

1.5

Germany

0.4

1.6

France

0.0

1.1

Italy

0.3

0.7

UK

0.7

2.4

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

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

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

  • China. In Aug 2015, China exports decreased 5.5 percent relative to a year earlier and imports decreased 13.8 percent.
  • Germany. Germany’s exports increased 2.4 percent in the month of Aug 2015 and increased 6.2 percent in the 12 months ending in Aug 2015. Germany’s imports increased 2.2 percent in the month of Aug 2015 and increased 6.1 percent in the 12 months ending in Aug. Net trade contributed 0.8 percentage points to growth of GDP in IQ2012, contributed 0.4 percentage points in IIQ2012, contributed 0.3 percentage points in IIIQ2012, deducted 0.5 percentage points in IVQ2012, deducted 0.3 percentage points in IQ2013 and added 0.1 percentage points in IIQ2013. Net traded deducted 0.5 percentage points from Germany’s GDP growth in IIIQ2013 and added 0.5 percentage points to GDP growth in IVQ2013. Net trade deducted 0.1 percentage points from GDP growth in IQ2014. Net trade added 0.2 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 1.3 percentage points in IIQ2014. Net trade deducted 0.7 percentage points to GDP growth in IIIQ2014 and added 0.2 percentage points in IVQ2014. Net traded deducted 0.6 percentage points from growth in IQ2015. Net trade added 1.4 percentage points to GDP growth in IIQ2015
  • France. France’s exports decreased 1.7 percent in Jul 2015 while imports decreased 0.3 percent. France’s exports increased 8.0 percent in the 12 months ending in Jul 2015 and imports increased 1.5 percent relative to a year earlier. Net traded added 0.1 percentage points to France’s GDP in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.1 percentage points from France’s GDP growth in IQ2013 and added 0.3 percentage points in IIQ2013, deducting 1.7 percentage points in IIIQ2013. Net trade added 0.1 percentage points to France’s GDP in IVQ2013 and deducted 0.1 percentage points in IQ2014. Net trade deducted 0.2 percentage points from France’s GDP growth in IIQ2014 and deducted 0.2 percentage points in IIIQ2014. Net trade added 0.3 percentage points to France’s GDP growth in IVQ2014 and deducted 0.2 percentage points in IQ2015. Net trade added 0.4 percentage points to GDP growth in IIQ2015
  • United States. US exports increased 0.4 percent in Jul 2015 and goods exports decreased 5.4 percent in Jan-Jul 2015 relative to a year earlier. Imports decreased 1.1 percent in Jul 2015 and goods imports decreased 3.8 percent in Jan-Jul 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 0.18 percentage points to GDP growth in IIQ2015. Industrial production decreased 0.4 percent in Aug 2015 and increased 0.9 percent in Jul 2015, with all data seasonally adjusted. 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 decreased 0.4 percent in August after increasing 0.9 percent in July. The increase in July is now estimated to be greater than originally reported last month, largely as a result of upward revisions for mining and utilities. Manufacturing output fell 0.5 percent in August primarily because of a large drop in motor vehicles and parts that reversed a substantial portion of its jump in July; production elsewhere in manufacturing was unchanged. The index for mining fell 0.6 percent in August, while the index for utilities rose 0.6 percent. At 107.1 percent of its 2012 average, total industrial production in August was 0.9 percent above its year-earlier level. Capacity utilization for the industrial sector fell 0.4 percentage point in August to 77.6 percent, a rate that is 2.5 percentage points below its long-run (1972–2014) average.” In the six months ending in Aug 2015, United States national industrial production accumulated change of minus 0.3 percent at the annual equivalent rate of minus 0.6 percent, which is lower than growth of 0.9 percent in the 12 months ending in Aug 2015. Excluding growth of 0.9 percent in Jul 2015, growth in the remaining five months from Mar 2014 to Aug 2015 accumulated to minus 1.2 percent or minus 2.8 percent annual equivalent. Industrial production declined in four of the past six months and changed 0.0 percent in one month. Industrial production expanded at annual equivalent 2.0 percent in the most recent quarter from Jun 2015 to Aug 2015 and contracted at 3.2 percent in the prior quarter Mar 2015 to May 2015. Business equipment accumulated increase of 0.6 percent in the six months from Mar 2015 to Aug 2015 at the annual equivalent rate of 1.2 percent, which is lower than growth of 1.1 percent in the 12 months ending in Aug 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 fell 0.4 percentage point in August to 77.6 percent, a rate that is 2.5 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 increase by 19.2 percent from the trough in Apr 2009 to Dec 2014. Manufacturing grew 22.8 percent from the trough in Apr 2009 to Aug 2015. Manufacturing output in Aug 2015 is 4.5 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 $2,378.9 billion than actual $16,333.6 billion. There are about two trillion dollars of GDP less than at trend, explaining the 25.6 million unemployed or underemployed equivalent to actual unemployment/underemployment of 15.4 percent of the effective labor force (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/fluctuating-risk-financial-assets.html). US GDP in IIQ2015 is 12.7 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,333.6 billion in IIQ2015 or 9.0 percent at the average annual equivalent rate of 1.2 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.2 percent per year from Aug 1919 to Aug 2015. Growth at 3.2 percent per year would raise the NSA index of manufacturing output from 107.6075 in Dec 2007 to 136.9996 in Aug 2015. The actual index NSA in Aug 2015 is 106.9035, which is 22.0 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 127.1432 in Aug 2015. The output of manufacturing at 106.9035 in Aug 2015 is 15.9 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

0.4 Jul

-5.4

Jan-Jul

-1.1 Jul

-3.8

Jan-Jul

Japan

 

Aug 2015

3.1

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

  

Aug 2015

-3.1

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

-5.5 Aug

-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

-13.8

-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

6.6 12 M-Jul

6.6 Jan-Jul

0.9 12-M Jul

2.4 Jan-Jul

Germany

2.4 Jul CSA

6.2 Jul

2.2 Jul CSA

6.1 Jul

France

Jul

-1.7

8.0

-0.3

1.5

Italy Jul

-0.4

6.3

-3.7

4.2

UK

-5.2 Jul

2.5 May 15 Jul 15 /May 14-Jul 14

0.6 Jul

-2.1 May 15-Jul 15 /May 14-Jul 14

Net Trade % Points GDP Growth

Points

      

USA

IIQ2015

0.18

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

0.0

IIQ2014

0.2

IIIQ2014

0.5

IVQ2014

-0.3

IQ2015

-0.2

IIQ2015

0.7

      

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

0.3

IVQ2014

-0.2

IQ2015

0.4

IIQ2015

      

UK

0.7

IIQ2013

-1.7

IIIQ2013

0.1

IVQ2013

0.2

IQ2014

1.3

IIQ2214

-0.7

IIIQ2014

0.2

IVQ2014

-0.6

IQ2015

1.4

IIQ2015

      

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 Aug 2015. The share of Asia in Japan’s trade is close to one-half for 55.0 percent of exports and 47.2 percent of imports. Within Asia, exports to China are 18.1 percent of total exports and imports from China 24.0 percent of total imports. While exports to China decreased 4.6 percent in the 12 months ending in Aug 2015, imports from China increased 14.6 percent. The largest export market for Japan in Aug 2015 is the US with share of 19.3 percent of total exports, which is close to that of China, and share of imports from the US of 10.4 percent in total imports. Japan’s exports to the US increased 11.1 percent in the 12 months ending in Aug 2015 and imports from the US increased 10.4 percent. Western Europe has share of 10.3 percent in Japan’s exports and of 12.6 percent in imports. Rates of growth of exports of Japan in Aug 2015 are 11.1 percent for exports to the US, minus 15.0 percent for exports to Brazil and minus 4.3 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 Aug 2015 are mixed. Imports from Asia increased 7.4 percent in the 12 months ending in Aug 2015 while imports from China increased 14.6 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

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

Aug 2015

Exports
Millions Yen

12 months ∆%

Imports Millions Yen

12 months ∆%

Total

5,881,478

3.1

6,451,137

-3.1

Asia

3,233,256

% Total 55.0

1.1

3,046,792 % Total 47.2

7.4

China

1,064,060

% Total 18.1

-4.6

1,549,531 % Total 24.0

14.6

USA

1,135,755

% Total 19.3

11.1

672,182 % Total

10.4

5.4

Canada

66,383

9.5

95,372

-2.8

Brazil

38,507

-5.0

71,080

-15.1

Mexico

103,296

16.1

44,051

14.6

Western Europe

603,823 % Total 10.3

0.1

811,230 % Total 12.6

20.2

Germany

155,713

-4.3

223,760

12.9

France

41,842

-5.4

82,088

3.2

UK

97,619

2.5

66,366

19.1

Middle East

226,726

13.7

832,723

-37.9

Australia

140,131

23.2

348,442

-16.5

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, did not change to 53.7 in Aug from 53.7 in Jul, indicating expansion at the same rate (http://www.markiteconomics.com/Survey//PressRelease.mvc/8ae9460470fc42aa85ed4b394308f420). This index has remained above the contraction territory of 50.0 during 34 consecutive months. The employment index did not change from 52.0 in Jul to 52.2 in Aug with input prices rising at slower rate, new orders increasing at slower rate and output increasing at the same rate (http://www.markiteconomics.com/Survey//PressRelease.mvc/8ae9460470fc42aa85ed4b394308f420). David Hensley, Director of Global Economic Coordination at JP Morgan, finds unchanged rate of global growth with higher strength in advanced countries and weakness in developing ecoomies (http://www.markiteconomics.com/Survey//PressRelease.mvc/8ae9460470fc42aa85ed4b394308f420). The JP Morgan Global Manufacturing PMI™, produced by JP Morgan and Markit in association with ISM and IFPSM, decreased to 50.6 in Sep from 50.7 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/8580ebed59a7402ba6cc0e93a1905c90). New export orders fell at faster rate. David Hensley, Director of Global Economic Coordination at JP Morgan, finds low growth in global manufacturing (http://www.markiteconomics.com/Survey//PressRelease.mvc/8580ebed59a7402ba6cc0e93a1905c90). The Markit Brazil Composite Output Index increased from 40.8 in Jul to 44.8 in Aug, indicating contraction in activity of Brazil’s private sector (http://www.markiteconomics.com/Survey//PressRelease.mvc/a2f96aa9e56d43abbb3ed12c13c83fc1). The Markit Brazil Services Business Activity index, compiled by Markit, increased from 39.1 in Jul to 44.8 in Aug, indicating contracting services activity (http://www.markiteconomics.com/Survey//PressRelease.mvc/a2f96aa9e56d43abbb3ed12c13c83fc1). Pollyana De Lima, Economist at Markit, finds challenging conditions (http://www.markiteconomics.com/Survey//PressRelease.mvc/a2f96aa9e56d43abbb3ed12c13c83fc1). The Markit Brazil Purchasing Managers’ IndexTM (PMI™) increased from 45.8 in Aug to 47.0 in Sep, indicating deterioration in manufacturing (http://www.markiteconomics.com/Survey//PressRelease.mvc/887e4ac1744644e681c186a6435353f9). Pollyanna De Lima, Economist at Markit, finds slower decline of output and new orders (http://www.markiteconomics.com/Survey//PressRelease.mvc/887e4ac1744644e681c186a6435353f9).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index™ (PMI™) seasonally adjusted did not change to 53.0 in Sep from 53.0 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/0eed351d56f7488a831f7b4fb21fdf1b). New export orders increased. Chris Williamson, Chief Economist at Markit, finds weak conditions in US manufacturing because of the strong dollar and slow world trade (http://www.markiteconomics.com/Survey//PressRelease.mvc/0eed351d56f7488a831f7b4fb21fdf1b). The Markit Flash US Services PMI™ Business Activity Index decreased from 55.7 in Jul to 55.2 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/fa7ab5d2e7aa4a41bb8ab13bae0abee7). The Markit Flash US Composite PMI™ Output Index decreased from 55.7 in Jul to 55.0 in Aug. Chris Williamson, Chief Economist at Markit, finds that the surveys are consistent with slowing services and manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/fa7ab5d2e7aa4a41bb8ab13bae0abee7). The Markit US Composite PMI™ Output Index of Manufacturing and Services did not change to 55.7 in Aug from 55.7 in Jul (http://www.markiteconomics.com/Survey//PressRelease.mvc/80604a192fb9420c8e3d587bcf1ce6df). The Markit US Services PMI™ Business Activity Index increased from 55.7 in Jul to 56.1 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/80604a192fb9420c8e3d587bcf1ce6df). Chris Williamson, Chief Economist at Markit, finds the indexes suggesting growth at an annual rate of 2.5 percent in IIIQ2015 (http://www.markiteconomics.com/Survey//PressRelease.mvc/80604a192fb9420c8e3d587bcf1ce6df). The Markit US Manufacturing Purchasing Managers’ Index™ (PMI™) increased to 53.1 in Sep from 53.0 in Aug, which indicates expansion at faster rate (http://www.markiteconomics.com/Survey//PressRelease.mvc/0a4d5420b9ef4c36bae0dea4ef0d7e38). New foreign orders increased. Chris Williamson, Chief Economist at Markit, finds that the index suggests restrain of foreign orders because of dollar appreciation (http://www.markiteconomics.com/Survey//PressRelease.mvc/0a4d5420b9ef4c36bae0dea4ef0d7e38). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business® decreased 0.9 percentage points from 51.1 in Aug to 50.2 in Sep, which indicates growth at slower rate (https://www.instituteforsupplymanagement.org/ISMReport/MfgROB.cfm?navItemNumber=30004). The index of new orders decreased 1.6 percentage points from 51.7 in Aug to 50.1 in Sep. The index of new exports changed 0.0 percentage points from 46.5 in Aug to 46.5 in Sep, contracting at the same rate. The Non-Manufacturing ISM Report on Business® PMI decreased 1.3 percentage points from 60.3 in Jul to 59.0 in Aug, indicating growth of business activity/production during 73 consecutive months, while the index of new orders decreased 0.4 percentage points from 63.8 in Jul to 63.4 in Aug (https://www.instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm?navItemNumber=29956). Table USA provides the country economic indicators for the US.

TABLE COUNTRY AND REGIONAL DATA

Table USA, US Economic Indicators

Consumer Price Index

Aug 12 months NSA ∆%: 0.2; ex food and energy ∆%: 1.8 Aug month SA ∆%: -0.1; ex food and energy ∆%: 0.1
Blog 9/20/15

Producer Price Index

Finished Goods

Aug 12-month NSA ∆%: -2.9; ex food and energy ∆% 2.1
Aug month SA ∆% = -0.5; ex food and energy ∆%: -0.1

Final Demand

Aug 12-month NSA ∆%: -0.8; ex food and energy ∆% 0.9
Aug month SA ∆% = -0.8; ex food and energy ∆%: 0.3
Blog 9/13/15 9/20/15

PCE Inflation

Aug 12-month NSA ∆%: headline 0.3; ex food and energy ∆% 1.3
Blog 10/4/15

Employment Situation

Household Survey: Sep Unemployment Rate SA 5.1%
Blog calculation People in Job Stress Sep: 25.6 million NSA, 15.4% of Labor Force
Establishment Survey:
Sep Nonfarm Jobs +142; Private +118,000 jobs created 
Aug 12-month Average Hourly Earnings Inflation Adjusted ∆%: 2.7
Blog 10/4/15

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 Jul 2015 5.056 million lower by 8.1 percent than 5.501 million in Jul 2006
Blog 9/13/15

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 2.7

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: 3.9
Blog 9/27/2015

Real Private Fixed Investment

SAAR IIQ2015 ∆% 5.2 IVQ2007 to IIQ2015: 5.8% Blog 9/27/15

Corporate Profits

IIQ2015 SAAR: Corporate Profits 3.5; Undistributed Profits 6.2 Blog 9/27/15

Personal Income and Consumption

Aug month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.3
Real Personal Consumption Expenditures (RPCE): 0.4
12-month Aug NSA ∆%:
RDPI: 3.2; RPCE ∆%: 2.8
Blog 10/4/15

Quarterly Services Report

IIQ15/IIQ14 NSA ∆%:
Information 3.8

Financial & Insurance 3.0

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

Aug month SA ∆%: -0.4
Aug 12 months SA ∆%: 0..9

Manufacturing Aug SA -0.5 ∆% Aug 12 months SA ∆% 1.4, NSA 1.2
Capacity Utilization: 77,6
Blog 9/20/15

Productivity and Costs

Nonfarm Business Productivity IIQ2015∆% SAAE 3.3; IIQ2015/IIQ2014 ∆% 0.7; Unit Labor Costs SAAE IIQ2015 ∆% -1.4; IIQ2015/IIQ2014 ∆%: 1.7

Blog 9/6/15

New York Fed Manufacturing Index

General Business Conditions From Aug -14.92 to Sep minus 14.67
New Orders: From Aug minus 15.7 to Sep -12.91
Blog 9/20/15

Philadelphia Fed Business Outlook Index

General Index from Aug 8.3 to Sep -6.0
New Orders from Aug 5.8 to Sep 9.4
Blog 9/20/15

Manufacturing Shipments and Orders

New Orders SA Aug ∆% -1.7 Ex Transport -0.8

Jan-Jul NSA New Orders ∆% minus 7.2 Ex transport minus 6.7

Earlier data:
Blog 4/5/15

Durable Goods

Aug New Orders SA ∆%: minus 2.0 ; ex transport ∆%: 0.0
Jan-Aug 15/Jan-Aug 14 New Orders NSA ∆%: -4.6; ex transport ∆% -2.1

Earlier Data:
Blog 4/26/15

Sales of New Motor Vehicles

Sep 2015 13,052,388; Sep 2014 12,431,305. Sep 15 SAAR 18.17 million, Aug 15 SAAR 17.81 million, Sep 2014 SAAR 16.52 million

Blog 10/4/15

Sales of Merchant Wholesalers

Jan-Jul 2015/Jan-Jul 2014 NSA ∆%: Total -3.2; Durable Goods: 2.0; Nondurable
Goods: -7.6

EARLIER DATA:
Blog 4/12/15

Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers

Jul 15 12-M NSA ∆%: Sales Total Business -2.9; Manufacturers -5.5
Retailers 2.3; Merchant Wholesalers -4.5
Blog 9/20/15

Sales for Retail and Food Services

Jan-Aug 2015/Jan-Aug 2014 ∆%: Retail and Food Services 2.1; Retail ∆% 1.3
Blog 9/20/15

Value of Construction Put in Place

SAAR month SA Aug ∆%: 0.7 Jan-Aug NSA: 9.8

Earlier Data:
Blog 4/5/15

Case-Shiller Home Prices

Jul 2015/ Jul 2014 ∆% NSA: 10 Cities 4.5; 20 Cities: 5.0; National: 4.7
∆% Jul SA: 10 Cities -0.2 ; 20 Cities: -0.2
Blog 10/4/15

FHFA House Price Index Purchases Only

Jul SA ∆% 0.6;
12 month NSA ∆%: 5.8
Blog 9/27/15

New House Sales

Aug 2015 month SAAR ∆%: 5.7
Jan-Aug 2015/Jan-Aug 2014 NSA ∆%: 19.8
Blog 9/27/15

Housing Starts and Permits

Aug Starts month SA ∆% -3.0; Permits ∆%: 3.5
Jan-Aug 2015/Jan-Aug 2014 NSA ∆% Starts 11.3; Permits  ∆% 13.8

Earlier Data:
Blog 4/19/15

Rate of Homeownership

IIQ2015: 63.4

Blog 8/2/15

Trade Balance

Balance Jul SA -$41,863 million versus Jun -$45,205 million
Exports Jul SA ∆%: 0.4 Imports Jul SA ∆%: -1.1
Goods Exports Jan-Jul 2015/Jan-Jul 2014 NSA ∆%: minus 5.4
Goods Imports Jan-Jul 2015/Jan-Jul 2014 NSA ∆%: minus 3.8
Blog 9/13/15

Export and Import Prices

Aug 12-month NSA ∆%: Imports -11.4; Exports -7.0

Earlier Data:
Blog 4/12/15

Consumer Credit

Jul ∆% annual rate: Total 6.7; Revolving 5.7; Nonrevolving 7.0

Earlier Data:
Blog 5/10/15

Net Foreign Purchases of Long-term Treasury Securities

Jul Net Foreign Purchases of Long-term US Securities: minus $7.9 billion
Major Holders of Treasury Securities: China $1240.8 billion; Japan $1197.5 billion; Total Foreign US Treasury Holdings Jun $6076.6 billion
Blog 9/20/15

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

IIQ2015 ∆ since 2007

Assets +$18,757.3 BN

Nonfinancial 2058.2 BN

Real estate $1269.1 BN

Financial +16,699.2 BN

Net Worth +$18,874.4 BN

Blog 9/27/15

Current Account Balance of Payments

IIQ2015 -117,258 MM

% GDP 2.5

Blog 9/27/15

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: 9/27/15 http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html

9/20/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-increase-on-hold-because.html

9/13/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what_13.html

9/6/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html

08/30/15 http://cmpassocregulationblog.blogspot.com/2015/08/fluctuations-of-global-financial.html

08/23/15 http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html

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

Motor vehicle sales and production in the US have been in long-term structural change. Table VA-1 provides the data on new motor vehicle sales and domestic car production in the US from 1990 to 2010. New motor vehicle sales grew from 14,137 thousand in 1990 to the peak of 17,806 thousand in 2000 or 29.5 percent. In that same period, domestic car production fell from 6,231 thousand in 1990 to 5,542 thousand in 2000 or -11.1 percent. New motor vehicle sales fell from 17,445 thousand in 2005 to 11,772 in 2010 or 32.5 percent while domestic car production fell from 4,321 thousand in 2005 to 2,840 thousand in 2010 or 34.3 percent. In Sep 2015, light vehicle sales accumulated to 13,052,388, which is higher by 5.0 percent relative to 12,431,305 a year earlier (http://motorintelligence.com/m_frameset.html). The seasonally adjusted annual rate of light vehicle sales in the US reached 18.17 million in Sep 2015, higher than 17.81 million in Aug 2015 and higher than 16.52 million in Sep 2014 (http://motorintelligence.com/m_frameset.html).

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

 

New Motor Vehicle Sales

New Car Sales and Leases

New Truck Sales and Leases

Domestic Car Production

1990

14,137

9,300

4,837

6,231

1991

12,725

8,589

4,136

5,454

1992

13,093

8,215

4,878

5,979

1993

14,172

8,518

5,654

5,979

1994

15,397

8,990

6,407

6,614

1995

15,106

8,536

6,470

6,340

1996

15,449

8,527

6,922

6,081

1997

15,490

8,273

7,218

5,934

1998

15,958

8,142

7,816

5,554

1999

17,401

8,697

8,704

5,638

2000

17,806

8,852

8,954

5,542

2001

17,468

8,422

9,046

4,878

2002

17,144

8,109

9,036

5,019

2003

16,968

7,611

9,357

4,510

2004

17,298

7,545

9,753

4,230

2005

17,445

7,720

9,725

4,321

2006

17,049

7,821

9,228

4,367

2007

16,460

7,618

8,683

3,924

2008

13,494

6,814

6.680

3,777

2009

10,601

5,456

5,154

2,247

2010

11,772

5,729

6,044

2,840

Source: US Census Bureau

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

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

clip_image001

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

Source: Board of Governors of the Federal Reserve System

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

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

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

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

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

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

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

W = Y/r (1)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

According to Pinto (2008) in testimony to Congress:

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

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

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

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

Table IIA-1 shows the euphoria of prices during the housing boom and the subsequent decline. House prices rose 94.1 percent in the 10-city composite of the Case-Shiller home price index, 78.8 percent in the 20-city composite and 64.7 percent in the US national home price index between Jul 2000 and Jul 2005. Prices rose around 100 percent from Jul 2000 to Jul 2006, increasing 107.5 percent for the 10-city composite, 91.6 percent for the 20-city composite and 74.6 percent in the US national index. House prices rose 39.6 percent between Jul 2003 and Jul 2005 for the 10-city composite, 34.7 percent for the 20-city composite and 29.3 percent for the US national propelled by low fed funds rates of 1.0 percent between Jul 2003 and Jul 2004. Fed funds rates increased by 0.25 basis points at every meeting of the Federal Open Market Committee (FOMC) from Jun 2004 until Jun 2006, reaching 5.25 percent. Simultaneously, the suspension of auctions of the 30-year Treasury bond caused decline of yields of mortgage-backed securities with intended decrease in mortgage rates. Similarly, between Jul 2003 and Jul 2006, the 10-city index gained 49.1 percent, the 20-city index increased 44.4 percent and the US national 37.1 percent. House prices have fallen from Jul 2006 to Jul 2015 by 13.0 percent for the 10-city composite, 11.9 percent for the 20-city composite and 5.2 percent for the US national. Measuring house prices is quite difficult because of the lack of homogeneity that is typical of standardized commodities. In the 12 months ending in Jul 2015, house prices increased 4.5 percent in the 10-city composite, increased 5.0 percent in the 20-city composite and 4.7 percent in the US national. Table IIA-6 also shows that house prices increased 80.6 percent between Jul 2000 and Jul 2015 for the 10-city composite, increased 68.8 percent for the 20-city composite and 65.6 percent for the US national. House prices are close to the lowest level since peaks during the boom before the financial crisis and global recession. The 10-city composite fell 13.0 percent from the peak in Jun 2006 to Jul 2015 and the 20-city composite fell 11.9 percent from the peak in Jul 2006 to Jul 2015. The US national fell 5.1 percent from the peak of the 10-city composite to Jul 2015 and 5.2 percent from the peak of the 20-city composite to Jul 2015. The final part of Table II-2 provides average annual percentage rates of growth of the house price indexes of Standard & Poor’s Case-Shiller. The average annual growth rate between Dec 1987 and Dec 2014 for the 10-city composite was 3.7 percent and 3.4 percent for the US national. Data for the 20-city composite are available only beginning in Jan 2000. House prices accelerated in the 1990s with the average rate of the 10-city composite of 5.0 percent between Dec 1992 and Dec 2000 while the average rate for the period Dec 1987 to Dec 2000 was 3.8 percent. The average rate for the US national was 3.4 percent from Dec 1987 to Dec 2014 and 3.6 percent from Dec 1987 to Dec 2000. Although the global recession affecting the US between IVQ2007 (Dec) and IIQ2009 (Jun) caused decline of house prices of slightly above 30 percent, the average annual growth rate of the 10-city composite between Dec 2000 and Dec 2014 was 3.7 percent while the rate of the 20-city composite was 3.2 percent and 3.1 percent for the US national.

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

 

10-City Composite

20-City Composite

US National

∆% Jul 2000 to Jul 2003

39.1

32.7

27.4

∆% Jul 2000 to Jul 2005

94.1

78.8

64.7

∆% Jul 2003 to Jul 2005

39.6

34.7

29.3

∆% Jul 2000 to Jul 2006

107.5

91.6

74.6

∆% Jul 2003 to Jul 2006

49.1

44.4

37.1

∆% Jul 2005 to Jul 2015

-7.0

-5.6

0.6

∆% Jul 2006 to Jul 2015

-13.0

-11.9

-5.2

∆% Jul 2009 to Jul 2015

26.2

26.0

16.1

∆% Jul 2010 to Jul 2015

21.3

22.2

18.7

∆% Jul 2011 to Jul 2015

25.9

27.3

23.0

∆% Jul 2012 to Jul 2015

25.2

25.8

21.3

∆% Jul 2013 to Jul 2015

11.6

12.0

10.6

∆% Jul 2014 to Jul 2015

4.5

5.0

4.7

∆% Jul 2000 to Jul 2015

80.6

68.8

65.6

∆% Peak Jun 2006 Jul 2015

-13.0

  

-5.1

∆% Peak Jul 2006 Jul 2015

  

-11.9

-5.2

Average ∆% Dec 1987-Dec 2014

3.7

NA

3.4

Average ∆% Dec 1987-Dec 2000

3.8

NA

3.6

Average ∆% Dec 1992-Dec 2000

5.0

NA

4.5

Average ∆% Dec 2000-Dec 2014

3.7

3.2

3.1

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

Price increases measured by the Case-Shiller house price indices show that “home prices continued their rise across the country over the last 12 months” (https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/240750_cshomeprice-release-0929.pdf?force_download=true). Monthly house prices increased sharply from Feb 2013 to Jan 2014 for both the 10- and 20-city composites, as shown in Table IIA-2. In Jan 2013, the seasonally adjusted 10-city composite increased 0.9 percent and the 20-city increased 1.0 percent while the 10-city not seasonally adjusted changed 0.0 percent and the 20-city changed 0.0 percent. House prices increased at high monthly percentage rates from Feb to Nov 2013. With the exception of Mar through Apr 2012, house prices seasonally adjusted declined in most month for both the 10-city and 20-city Case-Shiller composites from Dec 2010 to Jan 2012, as shown in Table IIA-2. The most important seasonal factor in house prices is school changes for wealthier homeowners with more expensive houses. Without seasonal adjustment, house prices fell from Dec 2010 throughout Mar 2011 and then increased in every month from Apr to Aug 2011 but fell in every month from Sep 2011 to Feb 2012. The not seasonally adjusted index registers decline in Mar 2012 of 0.1 percent for the 10-city composite and is flat for the 20-city composite. Not seasonally adjusted house prices increased 1.4 percent in Apr 2012 and at high monthly percentage rates until Sep 2012. House prices not seasonally adjusted stalled from Oct 2012 to Jan 2013 and surged from Feb to Sep 2013, decelerating in Oct 2013-Feb 2014. House prices grew at fast rates in Mar 2014. The 10-city NSA index increased 0.6 percent in Jul 2015 and the 20-city increased 0.6 percent. The 10-city SA decreased 0.2 percent in Jul 2015 and the 20-city composite SA decreased 0.2 percent. Declining house prices cause multiple adverse effects of which two are quite evident. (1) There is a disincentive to buy houses in continuing price declines. (2) More mortgages could be losing fair market value relative to mortgage debt. Another possibility is a wealth effect that consumers restrain purchases because of the decline of their net worth in houses.

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

 

10-City Composite SA

10-City Composite NSA

20-City Composite SA

20-City Composite NSA

Jul 2015

-0.2

0.6

-0.2

0.6

Jun

-0.2

0.9

-0.2

0.9

May

-0.2

1.1

-0.2

1.1

Apr

0.2

1.1

0.1

1.2

Mar

0.7

0.8

0.9

0.9

Feb

1.2

0.5

1.2

0.5

Jan

0.8

-0.1

0.8

-0.1

Dec 2014

0.8

0.0

0.8

0.0

Nov

0.7

-0.3

0.7

-0.2

Oct

0.6

-0.1

0.7

-0.1

Sep

0.2

-0.1

0.3

-0.1

Aug

-0.1

0.2

0.0

0.2

Jul

-0.3

0.6

-0.3

0.6

Jun

-0.1

1.0

-0.1

1.0

May

-0.2

1.1

-0.2

1.1

Apr

0.1

1.1

0.1

1.2

Mar

0.8

0.8

0.9

0.9

Feb

0.8

0.0

0.7

0.0

Jan

0.8

-0.1

0.8

-0.1

Dec 2013

0.7

-0.1

0.7

-0.1

Nov

0.9

0.0

0.9

-0.1

Oct

1.0

0.2

1.0

0.2

Sep

1.0

0.7

1.1

0.7

Aug

1.1

1.3

1.1

1.3

Jul

0.9

1.9

0.9

1.8

Jun

1.0

2.2

1.0

2.2

May

1.1

2.5

1.1

2.5

Apr

1.7

2.6

1.5

2.6

Mar

1.4

1.3

1.4

1.3

Feb

1.1

0.3

1.1

0.2

Jan

0.9

0.0

1.0

0.0

Dec 2012

1.0

0.2

1.0

0.2

Nov

0.7

-0.3

0.7

-0.2

Oct

0.6

-0.2

0.7

-0.1

Sep

0.5

0.3

0.6

0.3

Aug

0.5

0.8

0.6

0.9

Jul

0.4

1.5

0.5

1.6

Jun

1.0

2.1

1.1

2.3

May

0.9

2.2

1.0

2.4

Apr

0.5

1.4

0.5

1.4

Mar

0.1

-0.1

0.2

0.0

Feb

-0.1

-0.9

0.0

-0.8

Jan

-0.2

-1.1

-0.1

-1.0

Dec 2011

-0.5

-1.2

-0.4

-1.1

Nov

-0.6

-1.4

-0.5

-1.3

Oct

-0.6

-1.3

-0.5

-1.4

Sep

-0.4

-0.6

-0.4

-0.7

Aug

-0.2

0.1

-0.3

0.1

Jul

-0.1

0.9

-0.1

1.0

Jun

-0.1

1.0

0.0

1.2

May

-0.3

1.0

-0.3

1.0

Apr

-0.1

0.6

-0.2

0.6

Mar

-0.6

-1.0

-0.7

-1.0

Feb

-0.4

-1.3

-0.3

-1.2

Jan

-0.2

-1.1

-0.2

-1.1

Dec 2010

-0.2

-0.9

-0.2

-1.0

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

Table IIA-4 summarizes the brutal drops in assets and net worth of US households and nonprofit organizations from 2007 to 2008 and 2009. Total assets fell $10.4 trillion or 12.8 percent from 2007 to 2008 and $8.8 trillion or 10.8 percent to 2009. Net worth fell $10.2 trillion from 2007 to 2008 or 15.3 percent and $8.5 trillion to 2009 or 12.6 percent. Subsidies to housing prolonged over decades together with interest rates at 1.0 percent from Jun 2003 to Jun 2004 inflated valuations of real estate and risk financial assets such as equities. The increase of fed funds rates by 25 basis points until 5.25 percent in Jun 2006 reversed carry trades through exotic vehicles such as subprime adjustable rate mortgages (ARM) and world financial markets. Short-term zero interest rates encourage financing of everything with short-dated funds, explaining the SIVs created off-balance sheet to issue short-term commercial paper to purchase default-prone mortgages that were financed in overnight or short-dated sale and repurchase agreements (Pelaez and Pelaez, Financial Regulation after the Global Recession, 50-1, Regulation of Banks and Finance, 59-60, Globalization and the State Vol. I, 89-92, Globalization and the State Vol. II, 198-9, Government Intervention in Globalization, 62-3, International Financial Architecture, 144-9).

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

 

2007

2008

Change to 2008

2009

Change to 2009

A

81,232.7

70,868.9

-10,363.8

72,453.5

-8,779.2

Non
FIN

28,158.3

24,796.1

-3,362.2

23,727.4

-4,430.9

RE

23,348.9

19,861.9

-3,487.0

18,771.1

-4,577.8

FIN

53,074.3

46,072.8

-7,001.5

48,726.1

-4,348.2

LIAB

14,395.0

14,278.7

-116.3

14,062.8

-332.2

NW

66,837.6

56,590.1

-10,247.5

58,390.8

-8,446.8

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

Source: Board of Governors of the Federal Reserve System. 2015. Flow of funds, balance sheets and integrated macroeconomic accounts: second quarter 2015. Washington, DC, Federal Reserve System, Sep 18. http://www.federalreserve.gov/releases/z1/.

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 51.7 in Aug to 50.9 in Sep and the Flash Japan

Manufacturing Output Index™ increased from 51.1 in Aug to 51.4 in Sep

(http://www.markiteconomics.com/Survey//PressRelease.mvc/714eca0658084f16aa8e1ae495cdbbae). New export orders decreased in change of direction. Amy Brownbill, Economist at

Markit, finds slowing conditions in Japan’s manufacturing

(http://www.markiteconomics.com/Survey//PressRelease.mvc/714eca0658084f16aa8e1ae495cdbbae).The Nikkei Composite Output PMI Index increased from 51.5 in Jul to 52.9 in Aug, indicating increase of business activity (http://www.markiteconomics.com/Survey//PressRelease.mvc/a1ebb2cbce2c4dd8b67f71046b43579e). The Nikkei Business Activity Index of Services increased to 53.7 in Aug from 51.2 in Jul (http://www.markiteconomics.com/Survey//PressRelease.mvc/a1ebb2cbce2c4dd8b67f71046b43579e). Amy Brownbill, Ecoomist at Markit and author of the report, finds improved conditions with strengthening new orders (http://www.markiteconomics.com/Survey//PressRelease.mvc/a1ebb2cbce2c4dd8b67f71046b43579e). The Nikkei Purchasing Managers’ Index™ (PMI™), seasonally adjusted, decreased from 51.7 in Aug to 51.0 in Sep (http://www.markiteconomics.com/Survey//PressRelease.mvc/4045cbaf350c42bb86769056765f2d58). New orders increased while foreign orders contracted. Amy Brownbill, Economist at Markit, finds manufacturing slowing (http://www.markiteconomics.com/Survey//PressRelease.mvc/4045cbaf350c42bb86769056765f2d58).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

Aug ∆% -0.6
12 months ∆% -3.6
Blog 9/13/15

Consumer Price Index

Aug NSA ∆% 0.2; Aug 12 months NSA ∆% 0.2
Blog 9/27/15

Real GDP Growth

IIQ2015 ∆%: -0.3 on IQ2015;  IQ2015 SAAR minus 1.2;
∆% from quarter a year earlier: 0.8 %
Blog 6/16/13 8/18/13 9/15/13 11/17/13 12/15/13 2/23/14 3/16/14 5/18/14 6/15/14 8/17/14 9/14/14 11/23/14 12/14/14 2/22/15 3/15/15 5/24/15 6/14/15 8/23/15 9/13/15

Employment Report

Aug Unemployed 2.25 million

Change in unemployed since last year: minus 60 thousand
Unemployment rate: 3.4 %
Blog 10/4/15

All Industry Indices

Jul month SA ∆% 0.2
12-month NSA ∆% 1.7

Earlier Data:

Blog 4/26/15

Industrial Production

Aug SA month ∆%: -0.5 Jul minus 0.8
Aug 12-month NSA ∆% 0.2 Jul 0.0

Earlier Data:
Blog 3/29/15

Machine Orders

Total Jul ∆% 2.2

Private ∆%: -3.3 Jul ∆% Excluding Volatile Orders minus 3.6

Earlier Data:
Blog 4/19/15

Tertiary Index

Jul month SA ∆% 0.3
Jul 12 months NSA ∆% 1.1

Earlier Data:
Blog 4/26/15

Wholesale and Retail Sales

Aug 12 months:
Total ∆%: -0.3
Wholesale ∆%: -0.8
Retail ∆%: 0.8

Earlier Data:
Blog 3/29/15

Family Income and Expenditure Survey

Aug 12-month ∆% total nominal consumption 3.2, real 2.9

Earlier Data:

Blog 3/29/15

Trade Balance

Exports Jul 12 months ∆%: 3.1 Imports Jul 12 months ∆% -3.1

Earlier Data:

Blog 4/26/15

Links to blog comments in Table JPY: 9/27/15 http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html

9/13/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what_13.html

08/30/15 http://cmpassocregulationblog.blogspot.com/2015/08/fluctuations-of-global-financial.html

08/23/15 http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html

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

The employment report for Japan in Aug 2015 is in Table VB-1. The number unemployed reached 2.25 million in Aug 2015, declining 60 thousand from a year earlier or 2.6 percent. The rate of unemployment not seasonally adjusted reached 3.4 percent, decreasing 0.1 percentage points from a year earlier. Population changed 0.0 percent from a year earlier. The labor force increased 0.1 percentage points from a year earlier and the labor participation rate stood at 59.6, increasing 0.1 percentage points from a year earlier. The employment rate moved to 57.6 percent, which changed 0.0 percentage points relative to a year earlier.

Table VB-1, Japan, Employment Report Jul 2015 

Aug 2015 Unemployed

2.25 million

Change since last year

-60 thousand; ∆% –2.6

Unemployment rate

SA 3.4%, 0.1 from earlier month;

NSA 3.4%, -0.1 from earlier year

Population ≥ 15 years

110.75 million

Change since last year

∆% 0.0

Labor Force

66.03 million

Change since last year

∆% 0.1

Employed

63.79 million

Change since last year

∆% 0.3

Labor force participation rate

59.6

Change since last year

0.1

Employment rate

57.6%

Change since last year

0.0

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

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

Table VB-2 provides the rate of unemployment of Japan seasonally adjusted that decreased to 3.4 percent in Jun 2014 from 4.3 percent in Jul 2012. The rate of unemployment SA fell 0.1 percentage points from 3.5 percent in Aug 2014 to 3.4 percent in Aug 2015.

Table VB-2, Japan, Unemployment Rate, SA

 

Unemployment Rate SA

Aug 2015

3.4

Jul

3.3

Jun

3.4

May

3.3

Apr

3.3

Mar

3.4

Feb

3.5

Jan

3.6

Dec 2014

3.4

Nov

3.5

Oct

3.5

Sep

3.6

Aug

3.5

Jul

3.7

Jun

3.7

May

3.6

Apr

3.6

Mar

3.6

Feb

3.6

Jan

3.7

Dec 2013

3.7

Nov

3.9

Oct

4.0

Sep

4.0

Aug

4.1

Jul

3.8

Jun

3.9

May

4.1

Apr

4.1

Mar

4.1

Feb

4.3

Jan

4.2

Dec 2012

4.3

Nov

4.1

Oct

4.1

Sep

4.3

Aug

4.2

Jul

4.4

Jun

4.3

May

4.4

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

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

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

clip_image002

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

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

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

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

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

 

Participation
Rate

Employment Rate

Unemployment Rate

1953

70.0

68.6

1.9

1960

69.2

68.0

1.7

1965

65.7

64.9

1.2

1970

65.4

64.6

1.1

1975

63.0

61.9

1.9

1980

63.3

62.0

2.0

1985

63.0

61.4

2.6

1990

63.3

61.9

2.1

1991

63.8

62.4

2.1

1992

64.0

62.6

2.2

1993

63.8

62.2

2.5

1994

63.6

61.8

2.9

1995

63.4

61.4

3.2

1996

63.5

61.4

3.4

1997

63.7

61.5

3.4

1998

63.3

60.7

4.1

1999

62.9

59.9

4.7

2000

62.4

59.5

4.7

2001

62.0

58.9

5.0

2002

61.2

57.9

5.4

2003

60.8

57.6

5.3

2004

60.4

57.6

4.7

2005

60.4

57.7

4.4

2006

60.4

57.9

4.1

2007

60.4

58.1

3.9

2008

60.2

57.8

4.0

2009

59.9

56.9

5.1

2010

59.6

56.6

5.1

2011

59.3

56.5

4.6

2012

59.1

56.5

4.3

2013

59.3

56.9

4.0

2014

59.4

57.3

3.6

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

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

VC China. China estimates an index of nonmanufacturing purchasing managers based on a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. The total index increased from 55.7 in Jan 2011 to 58.0 in Mar 2012, decreasing to 53.9 in Aug 2013. The index decreased from 56.0 in Nov 2013 to 54.6 in Dec 2013, easing to 53.4 in Jan 2014. The index moved to 53.4 in Aug 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 49.6 in Aug 2015.

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

 

Total Index

New Orders

Interm.
Input Prices

Subs Prices

Exp

Aug 2015

53.4

49.6

49.6

47.8

59.7

Jul

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 53.4 in Aug 2015.

Chart CIPMNMW020150906349515100874_r75

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr 2012, falling to 49.2 in Aug 2012, rebounding to 50.6 in Dec 2012. The index fell to 50.1 in Jun 2013, barely above the neutral frontier at 50.0, recovering to 51.4 in Nov 2013 but falling to 51.0 in Dec 2013. The index fell to 50.5 in Jan 2014, 50.1 in Dec 2014 and 49.7 in Aug 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 49.7 in Aug 2015.

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

 

IPM

PI

NOI

INV

EMP

SDEL

2015

            

Aug

49.7

51.7

49.7

48.3

47.9

50.6

Jul

50.0

52.4

49.9

48.4

48.0

50.4

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 49.7  in Aug 2015.

Chart CIPMMFGW020150906348905305977_r75

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

Source: National Bureau of Statistics of China

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

Cumulative growth of China’s GDP in 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.

ChVC-GDPW020140224376367229279

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

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

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

ChVC-FXRW020140224376367389226

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

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

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

ChVC-TradeW020140224376367380700

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

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

The Caixin Flash China General Manufacturing Purchasing Managers’ Index™ (PMI™) compiled by Markit (http://www.markiteconomics.com/Survey//PressRelease.mvc/883014a121534f51bc42e5060845f727) is mixed. The overall Flash Caixin China General Manufacturing PMI™ decreased from 47.3 in Aug to 47.0 in Sep, while the Flash Caixin China General Manufacturing Output Index decreased from 46.4 in Aug to 45.7 in Aug, indicating weaker conditions. He Fan, Chief Economist at Caixin Insight Group finds need of fiscal and monetary policy (http://www.markiteconomics.com/Survey//PressRelease.mvc/883014a121534f51bc42e5060845f727). The Caixin China General Services PMI™, compiled by Markit, shows the Caixin Composite Output, combining manufacturing and services, decreasing from 50.2 in Jul to 48.8 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/fae5a57888ec43a7866beba6839db2ef). He Fan, Chief Economist at Caixin Insight Group, finds need of policy measures (http://www.markiteconomics.com/Survey//PressRelease.mvc/fae5a57888ec43a7866beba6839db2ef). The Caixin General Manufacturing PMI™ decreased to 47.2 in Sep from 47.3 in Aug, indicating moderate deterioration in manufacturing (http://www.markiteconomics.com/Survey//PressRelease.mvc/c97ccaadbdd3427ab0d727c8dd3c1494). He Fan, Chief Economist at Caixin Insight Group, finds weak demand (http://www.markiteconomics.com/Survey//PressRelease.mvc/c97ccaadbdd3427ab0d727c8dd3c1494). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry

Aug 12-month ∆%: minus 5.9

Aug month ∆%: -0.8
Blog 9/13/15

Consumer Price Index

Aug 12-month ∆%: 2.0 Aug month ∆%: 0.5
Blog 9/13/15

Value Added of Industry

Aug month ∆%: 0.53

Jan-Aug 2015/Jan-Aug 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-Aug 2015 ∆%: 10.9

Real estate development: 3.5

Earlier Data:
Blog 4/19/15

Retail Sales

Aug month ∆%: 0.86
Jan-Aug 12 month ∆%: NA : 10.5

Earlier Data:
Blog 4/19/15

Trade Balance

Aug balance $60.24 billion
Exports 12M ∆% -5.5
Imports 12M ∆% -13.8

Cumulative Aug 2015: $366.97 billion

Earlier Data:
Blog 4/19/15

Links to blog comments in Table CNY: 9/13/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what_13.html

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 (18 countries) fell 5.8 percent from the high pre-recession date on IQ2008 to the trough in IIQ2009 while the GDP of the euro area (19 countries) fell 5.8 percent. The GDP of the euro area (18 countries) increased 4.5 percent from IIIQ2009 to IQ2015 at the annual equivalent rate of 0.8 percent while that of the euro area (19 countries) increased 4.5 percent at the annual equivalent rate of 0.8 percent. The GDP of the euro area (18) countries in IQ2015 is lower by 1.5 percent relative to the pre-recession peak in IQ2008 and that of the euro area (19 countries) is lower by 1.5 percent relative to the pre-recession peak in IQ2008. The GDP of the euro area (18) countries increased at the average yearly rate of 2.3 percent from IQ1999 to IQ2008 while that of the euro area (19 countries) increased at 2.3 percent. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1999. Growth was very strong at 3.3 percent in 2006 and 3.1 percent in 2007. The global recession had strong impact with growth of only 0.5 percent in 2008 and decline of 4.5 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.6 percent in 2011. EUROSTAT estimates growth of GDP of the euro area of minus 0.8 percent in 2012 and minus 0.4 percent in 2013 but 0.9 percent in 2014.

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

Year

HICP ∆%

Unemployment
%

GDP ∆%

1999

1.2

9.7

2.9

2000

2.2

8.9

3.8

2001

2.4

8.3

2.1

2002

2.3

8.6

0.9

2003

2.1

9.1

0.7

2004

2.2

9.3

2.2

2005

2.2

9.1

1.7

2006

2.2

8.4

3.3

2007

2.2

7.5

3.1

2008

3.3

7.6

0.5

2009

0.3

9.6

-4.5

2010

1.6

10.2

2.0

2011

2.7

10.2

1.6

2012

2.5

11.4

-0.8

2013

1.3

12.0

-0.4

2014

0.4

11.6

0.9

http://ec.europa.eu/eurostat

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

The GDP of the euro area in 2013 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $12,753.7 billion or 17.1 percent of world GDP of $74,699.3 billion (http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/weoselgr.aspx). The sum of the GDP of France $2807.3 billion with the GDP of Germany of $3635.9 billion, Italy of $2071.9 billion and Spain $1358.7 billion is $9873.8 billion or 77.4 percent of total euro area GDP and 13.2 percent of World GDP. The four largest economies account for slightly more than three quarters of economic activity of the euro area. Table VD-EUR1 is constructed with the dataset of EUROSTAT, providing growth rates of the euro area as a whole and of the largest four economies of Germany, France, Italy and Spain annually from 1996 to 2014. The impact of the global recession on the overall euro area economy and on the four largest economies was quite strong. There was sharp contraction in 2009 and growth rates have not rebounded to earlier growth with exception of Germany in 2010 and 2011.

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

 

Euro Area

Germany

France

Italy

Spain

2014

0.8

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, decreased from 54.3 in Aug to 53.9 in Sep (http://www.markiteconomics.com/Survey//PressRelease.mvc/a1d5eaff1ae0476e814b383d770e7067). Chris Williamson, Chief 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/a1d5eaff1ae0476e814b383d770e7067). The Markit Eurozone PMI® Composite Output Index, combining services and manufacturing activity with close association with GDP increased from 53.9 in Jul to 54.3 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/c6996a1705e6410f9b88b71c3949edbb). Chris Williamson, Chief Economist at Markit, finds potential for growth of 0.4 percent in the beginning of IIIQ2015 (http://www.markiteconomics.com/Survey//PressRelease.mvc/c6996a1705e6410f9b88b71c3949edbb). The Markit Eurozone Services Business Activity Index increased from 54.0 in Jul to 54.4 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/c6996a1705e6410f9b88b71c3949edbb). The Markit Eurozone Manufacturing PMI® decreased from 52.3 in Aug to 52.0 in Sep (http://www.markiteconomics.com/Survey//PressRelease.mvc/2fd7f87cb6274622ac52d4b861cabc33). New export orders increased. Chris Williamson, Chief Economist at Markit, finds weak industrial growth in the euro area (http://www.markiteconomics.com/Survey//PressRelease.mvc/2fd7f87cb6274622ac52d4b861cabc33). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP

IIQ2015 ∆% 0.4; IIQ2015/IIQ2014 ∆% 1.5 Blog 9/13/15

Unemployment 

Aug 2015: 11.0 % unemployment rate; Aug 2015: 17.603 million unemployed

Blog 10/4/15

HICP

Aug month ∆%: 0.0

12 months Jul ∆%: 0.1
Blog 9/20/15

Producer Prices

Euro Zone industrial producer prices Aug ∆%: -0.8
Aug 12-month ∆%: -2.6
Blog 10/4/15

Industrial Production

Jul Month ∆%: 0.6; 12 months ∆%: 1.9

Earlier Data:
Blog 4/19/15

Retail Sales

Jun month ∆%: 0.4
Jun 12 months ∆%: 2.7

Earlier Data:
Blog 3/15/15

Confidence and Economic Sentiment Indicator

Sentiment 105.6 Sep 2015

Consumer minus 7.1 Sep 2015

Earlier Data:

Blog 4/5/15

Trade

Jan-Jul 2015/Jan-Jun 2014 Exports ∆%: 6.6
Imports ∆%: 2.4

Jul 2015 12-month Exports ∆% 6.6 Imports ∆% 0.9

Earlier Data:
Blog 4/19/15

Links to blog comments in Table EUR: 9/20/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-increase-on-hold-because.html

9/13/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what_13.html

9/6/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html

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

EUROSTAT estimates the rate of unemployment in the euro area at 11.0 percent in

Aug 2015, as shown in Table VD-1. The number of unemployed in Aug 2015 was 17.603 million, which was 0.892 million lower than 18.495 million in Aug 2014. The rate of unemployment fell from 11.5 percent in Aug 2014 to 11.0 percent in Aug 2015.

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

 

Unemployment Rate %

Number Unemployed
Millions

Aug 2015

11.0

17.603

Jul

11.0

17.604

Jun

11.1

17.797

May

11.1

17.766

Apr

11.1

17.804

Mar

11.2

17.922

Feb

11.2

17.966

Jan

11.3

18.080

Dec 2014

11.4

18.247

Nov

11.5

18.467

Oct

11.5

18.495

Sep

11.5

18.487

Aug

11.5

18.495

Jul

11.6

18.641

Jun

11.5

18.520

May

11.6

18.670

Apr

11.7

18.711

Mar

11.8

18.827

Feb

11.8

18.923

Jan

11.9

19.013

Dec 2013

11.9

18.976

Nov

11.9

19.065

Oct

11.9

19.101

Sep

12.0

19.254

Aug

12.0

19.253

Jul

12.0

19.284

Jun

12.1

19.315

May

12.1

19.354

Apr

12.1

19.344

Mar

12.1

19.304

Feb

12.0

19.285

Jan

12.0

19.232

Dec 2012

11.9

19.018

Nov

11.8

18.889

Oct

11.7

18.762

Sep

11.6

18.495

Aug

11.5

18.369

Jul

11.5

18.332

Jun

11.4

18.265

May

11.3

18.061

Apr

11.2

17.922

Mar

11.1

17.643

Feb

10.9

17.373

Jan

10.7

17.126

Dec 2011

10.7

17.049

Nov

10.6

16.900

Oct

10.5

16.648

Sep

10.4

16.485

Aug

10.2

16.256

Jul 

10.1

16.110

Jun

10.0

15.895

May

10.0

15.835

Apr

9.9

15.696

Mar

10.0

15.782

Feb

10.0

15.811

Jan

10.1

15.913

Dec 2010

10.1

16.004

Source: EUROSTAT

http://ec.europa.eu/eurostat

Table VD-2 shows the disparity in rates of unemployment in the euro area with 11.0 percent for the region as a whole and 17.603 million unemployed but 4.4 percent in Germany and 1.896 million unemployed. At the other extreme is Spain with rate of unemployment of 22.2 percent and 5.094 million unemployed. The rate of unemployment of the European Union in Aug 2015 is 9.5 percent with 23.022 million unemployed.

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

Aug 2015

Unemployment Rate %

Unemployed Millions

Euro Zone

11.0

17.603

Germany

4.5

1.896

France

10.8

3.190

Netherlands

6.8

0.604

Finland

9.7

0.260

Portugal

12.4

0.633

Ireland

9.5

0.206

Italy

11.9

3.061

Greece

25.2*

1.205*

Spain

22.2

5.094

Belgium

8.8

0.435

European Union

9.5

23.022

*Jun 2015

Source: EUROSTAT

http://ec.europa.eu/eurostat

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

clip_image008

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

Source: EUROSTAT

http://ec.europa.eu/eurostat

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1971 to 2014, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.6 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.1 percent in 2010, 3.6 percent in 2011 and 0.4 percent in 2012. Growth decelerated to 0.1 percent in 2013, increasing to 1.6 percent in 2014.

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

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

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

 

Price Adjusted Chain-Linked

Price- and Calendar-Adjusted Chain Linked

Average ∆% 1991-2014

1.3

  

Average ∆% 1991-1999

1.5

  

Average ∆% 2000-2007

1.4

  

Average ∆% 2003-2007

2.2

  

Average ∆% 2007-2014

0.7

  

Average ∆% 2009-2014

2.0

  

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

1.8

1997

1.8

1.9

1996

0.8

0.9

1995

1.7

1.8

1994

2.5

2.5

1993

-1.0

-1.0

1992

1.9

1.5

1991

5.1

5.2

1990

5.3

5.5

1989

3.9

4.0

1988

3.7

3.4

1987

1.4

1.3

1986

2.3

2.3

1985

2.3

2.6

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/PressServices/Press/pr/2015/08/PE15_305_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, decreased from 55.0 in Aug to 54.3 in Sep. The index of manufacturing output reached 54.2 in Sep, decreasing from 55.1in Aug, while the index of services decreased to 54.3 in Sep from 54.9 in Aug. The overall Flash Germany Manufacturing PMI® decreased from 53.3 in Aug to 52.5 in Sep (http://www.markiteconomics.com/Survey//PressRelease.mvc/bfc760bac4564e6da89b83cdf6267354). 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/bfc760bac4564e6da89b83cdf6267354). The Markit Germany Composite Output Index of the Markit Germany Services PMI®, combining manufacturing and services with close association with Germany’s GDP, increased from 53.7 in Jul to 55.0 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/24391401f4094a32a5de6b342509c37b). 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/24391401f4094a32a5de6b342509c37b). The Germany Services Business Activity Index increased from 53.8 in Jul to 54.9 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/24391401f4094a32a5de6b342509c37b). The Markit/BME Germany Purchasing Managers’ Index® (PMI®), showing close association with Germany’s manufacturing conditions, decreased from 53.3 in Aug to 52.3 in

Sep (http://www.markiteconomics.com/Survey//PressRelease.mvc/c3c4b90d76c64124b587f847dafb07fb). New export orders increased. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds contribution of manufacturing to GDP growth in IIIQ2015 (http://www.markiteconomics.com/Survey//PressRelease.mvc/c3c4b90d76c64124b587f847dafb07fb).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 8/30/15

Consumer Price Index

Aug month NSA ∆%: 0.0
Aug12-month NSA ∆%: 0.2
Blog 9/13/15

Producer Price Index

Aug month ∆%: -0.5 NSA, minus 0.1 CSA
12-month NSA ∆%: -1.7
Blog 9/27/15

Industrial Production

MFG Jul month CSA ∆%: 0.3
12-month NSA: -0.3

Earlier Data:
Blog 4/12/15

Machine Orders

MFG Jul month ∆%: -1.4
Jul 12-month ∆%: -0.5

Earlier Data:
Blog 4/12/15

Retail Sales

Aug Month ∆% -0.4 Jul 1.6

12-Month Aug % 2.5 Jul 3.8

Earlier Data:

Blog 4/5/15

Employment Report

Unemployment Rate SA Jul 4.5%
Blog 10/4/15

Trade Balance

Exports Jul 12-month NSA ∆%: 6.2
Imports Jul 12 months NSA ∆%: 6.1
Exports Jul month CSA ∆%: 2.4; Imports Jul month CSA 2.2

Earlier Data:

Blog 4/12/15

Links to blog comments in Table DE: 9/27/15 http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html

9/13/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what_13.html

9/6/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html

08/30/15 http://cmpassocregulationblog.blogspot.com/2015/08/fluctuations-of-global-financial.html

08/23/15 http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html

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

Germany’s labor market continues to show strength not found in most of the advanced economies, as shown in Table VE-1A. The number unemployed, not seasonally adjusted, decreased from 2.11 million in Aug 2014 to 1.83 million in Aug 2015, or 5.2 percent, while the unemployment rate decreased from 5.0 percent in Aug 2014 to 4.4 percent in Aug 2015. The number of persons in employment, not seasonally adjusted, decreased from 40.29 million in Aug 2014 to 40.11 million in Aug 2015, or 0.4 percent, while the employment rate decreased from 65.8 percent in Aug 2014 to 65.4 percent in Aug 2015. The number unemployed, seasonally adjusted, decreased from 1.92 million in Jul 2015 to 1.90 million in Aug 2015, while the unemployment rate decreased from 4.6 percent in Jul 2015 to 4.5 percent in Aug 2015. The number of persons in employment, seasonally adjusted, increased from 39.91 million in Jul 2015 to 39.93 million in Aug 2015, or 0.1 percent. The employment rate seasonally adjusted increased from 65.0 in Jul 2015 to 65.1 in Aug 2015.

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

 

Aug 2015

Jul 2015

Aug 2014

NSA

      

Number
Unemployed Millions

1.83

∆% Aug 2015 /Jul 2015:-5.2

∆% Aug 2015/Aug 2014: -13.3

1.93

2.11

% Rate Unemployed

4.4

4.6

5.0

Persons in Employment Millions

40.11

∆% Aug 2015/ Jul 2015: 0.5

∆% Aug 2015/Aug 2014: -0.4

39.90

40.29

Employment Rate

65.4

65.0

65.8

SA

      

Number
Unemployed Millions

1.90

∆% Aug 2015/ Jul  2015: -1.0

∆% Aug 2015/Aug 2014: –9.1

1.92

2.09

% Rate Unemployed

4.5

4.6

5.0

Persons in Employment Millions

39.93

∆% Aug 2015/ Jul 2015: 0.1

∆% Aug 2015/Aug 2014: 0.3

39.91

39.82

Employment Rate

65.1

65.0

65.0

NSA: not seasonally adjusted; SA: seasonally adjusted

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2015/09/PE15_362_132.html

The unemployment rate in Germany as percent of the labor force in Table VE-2A stood at 6.5 percent in Sep, Oct and Nov 2012, increasing to 6.7 percent in Dec 2012, 7.4 percent in Jan 2013, 7.3 in Mar 2013 and 7.1 percent in Apr 2013. The unemployment rate fell to 6.8 percent in May 2013 and 6.6 percent in Jun 2013 and rose to 6.8 percent in Jul-Aug 2013. The rate fell to 6.6 percent in Sep 2013 and 6.5 percent in Oct 2013 and Nov 2013. The unemployment rate increased to 6.7 percent in Dec 2013 and 7.3 percent in Jan 2013. The unemployment rate reached 7.3 percent in Feb 2014 and 7.1 percent in Mar 2014. The unemployment rate fell to 6.8 percent in Apr 2014 and 6.6 percent in May 2014. The unemployment rate fell to 6.5 percent in Jun 2014, increasing to 6.6 percent in Jun 2014 and 6.7 percent in Aug 2014. The unemployment rate fell to 6.5 percent in Sep 2014 and 6.3 percent in Oct 2014 and Nov 2014. The unemployment rate increase to 6.4 percent in Dec 2014 and 7.0 percent in Jan 2015, falling to 6.9 percent in Feb 2015 and 6.5 percent in Apr 2015. The unemployment rate fell to 6.3 percent in May 2015 and 6.2 percent in Jun 2015. The unemployment rate increased to 6.3 percent in Jul 2015 and 6.4 percent in Aug 2015. The unemployment rate fell from 6.4 in Aug 2015 to 6.2 percent in Sep 2015. The rate is much lower than 11.1 percent in 2005 and 9.6 percent in 2006.

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

Sep 2015

6.2

Aug

6.4

Jul

6.3

Jun

6.2

May

6.3

Apr

6.5

Mar

6.8

Feb

6.9

Jan

7.0

Dec 2014

6.4

Nov

6.3

Oct

6.3

Sep

6.5

Aug

6.7

Jul

6.6

Jun

6.5

May

6.6

Apr

6.8

Mar

7.1

Feb

7.3

Jan

7.3

Dec 2013

6.7

Nov

6.5

Oct

6.5

Sep

6.6

Aug

6.8

Jul

6.8

Jun

6.6

May

6.8

Apr

7.1

Mar

7.3

Feb

7.4

Jan

7.4

Dec 2012

6.7

Nov

6.5

Oct

6.5

Sep

6.5

Aug

6.8

Jul

6.8

Jun

6.6

May

6.7

Apr

7.0

Mar

7.2

Feb

7.4

Jan

7.3

Dec 2011

6.6

Nov

6.4

Oct

6.5

Sep

6.6

Aug

7.0

Jul

7.0

Jun

6.9

May

7.0

Apr

7.3

Mar

7.6

Feb

7.9

Jan

7.9

Dec 2010

7.1

Dec 2009

7.8

Dec 2008

7.4

Dec 2007

8.1

Dec 2006

9.6

Dec 2005

11.1

Source: Statistisches Bundesamt Deutschland

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

Chart VE-1A of Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, shows the long-term decline of the rate of unemployment in Germany from more than 12 percent in early 2005 to 6.6 percent in Dec 2011, increasing to 6.7 percent in Dec 2012, 6.8 percent in Apr 2013 and 6.6 percent in May 2013. The unemployment rate rose slightly to 6.8 percent in Aug 2013, falling to 6.6 percent in Sep 2013 and 6.5 percent in Oct 2013. The rate remained at 6.5 percent in Nov 2013, increasing to 6.7 percent in Dec 2013 and 7.3 in Jan 2014. The rate remained at 7.3 percent in Feb 2014, declining to 7.1 percent in Mar 2014. The rate fell to 6.8 percent in Apr 2014, 6.6 percent in May 2014 and 6.5 percent in Jun 2014. The rate increased to 6.6 percent in Jul 2014 and 6.7 percent in Aug 2014, falling to 6.5 percent in Sep 2014. The rate fell to 6.3 percent in Oct 2014 and 6.3 percent in Nov 2014, increasing to 6.4 percent in Dec 2014. The rate increased to 7.0 percent in Jan 2015, falling to 6.9 percent in Feb 2015 and 6.8 percent in Mar 2015. The unemployment rate fell to 6.5 percent in Apr 2015 and 6.3 percent in May 2015. The unemployment rate fell to 6.2 percent in Jun 2015, increasing to 6.3 percent in Jul 2015 and 6.4 percent in Aug 2015. The unemployment rate fell to 6.2 percent in Sep 2015.

clip_image009

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

Source: Statistisches Bundesamt Deutschland

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

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

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

Period

Average ∆%

1949-2014

3.2

2007-2015*

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=28&date=20150923

The Markit Flash France Composite Output Index increased from 50.2 in Aug to 51.4 in Sep (http://www.markiteconomics.com/Survey//PressRelease.mvc/54b06bb09e644663beb0431b07d3d06e). Jack Kennedy, Senior Economist at Markit and author of the report, finds moderate growth (http://www.markiteconomics.com/Survey//PressRelease.mvc/54b06bb09e644663beb0431b07d3d06e). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, decreased from 51.5 in Jul to 50.2 in Aug, indicating expansion at slower pace (http://www.markiteconomics.com/Survey//PressRelease.mvc/6661697d708c4f96af67e0e93fa29414). 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/6661697d708c4f96af67e0e93fa29414). The Markit France Services Activity index decreased from 52.0 in Jul to 50.6 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/6661697d708c4f96af67e0e93fa29414). The Markit France Manufacturing Purchasing Managers’ Index® increased to 50.6 in Sep from 48.3 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/91e3cff38b2a42d7b39d2e163218fbc3). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI®, finds improving manufacturing (http://www.markiteconomics.com/Survey//PressRelease.mvc/91e3cff38b2a42d7b39d2e163218fbc3). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI

Aug month ∆% 0.3
12 months ∆%: 0.1
9/20/15

PPI

Aug month ∆%: -1.0
Aug 12 months ∆%: -2.0

Blog 10/4/15

GDP Growth

IIQ2015/IQ2015 ∆%: 0.0
IIQ2015/IIQ2014 ∆%: 1.1
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 9/27/15

Industrial Production

Jul ∆%:
Manufacturing -1.0 12-Month ∆%: 0.6

Earlier Data:
Blog 4/12/15

Consumer Spending

Manufactured Goods
Aug ∆%: 0.3 Aug 12-Month Manufactured Goods
∆%: 2.2

Earlier Data:
Blog 4/5/15

Employment

Unemployment Rate: IIQ2015 10.0%
Blog 9/6/15

Trade Balance

Jul Exports ∆%: month -1.7, 12 months 8.0

Imports ∆%: month -0.3, 12 months 1.5

Earlier Data:

Blog 4/12/15

Confidence Indicators

Historical average 100

Sep Mfg Business Climate 104.0

Earlier Data:

Blog 3/29/15

Links to blog comments in Table FR: 9/27/15 http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html

9/20/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-increase-on-hold-because.html

9/6/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html

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 0.3 percent and increased 0.7 percent relative to a year earlier. GDP increased 0.4 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, 0.7 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 5.1 percent in eight consecutive quarterly contractions from IIIQ2011 to IIQ2013 at the annual equivalent rate of minus 2.6 percent. The total contraction in the 12 quarters including IQ2014, IIQ2014 and IIIQ2014 accumulates to 5.6 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

0.3

0.7

IQ2015

0.4

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

-0.7

-3.1

IQ2012

-1.0

-2.3

IVQ2011

-1.0

-1.0

IIIQ2011

-0.5

0.4

IIQ2011

0.2

1.4

IQ2011

0.3

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/167323

The Markit/ADACI Business Activity Index increased from 52.0 in Jul to 54.6 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/f12aaae895d74c27ae029a3a705da4e3). Phil Smith, Economist at Markit and author of the Italy Services PMI®, finds expansion of private sector activity (http://www.markiteconomics.com/Survey//PressRelease.mvc/f12aaae895d74c27ae029a3a705da4e3). The Markit/ADACI Purchasing Managers’ Index® (PMI®), decreased from 53.8 in Aug to 52.7 in Sep (http://www.markiteconomics.com/Survey//PressRelease.mvc/a098aed8a04042afb398e544f729cd3c). New export orders continued to increase. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI®, finds growth in manufacturing (http://www.markiteconomics.com/Survey//PressRelease.mvc/a098aed8a04042afb398e544f729cd3c). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index

Sep month ∆%: -0.3
Sep 12-month ∆%: 0.3
Blog 10/4/15

Producer Price Index

Aug month ∆%: -0.7
Aug 12-month ∆%: -3.6

Blog 10/4/15

GDP Growth

IIQ2015/IQ2015 SA ∆%: 0.3
IIQ2015/IIQ2014 NSA ∆%: 0.7
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 9/6/15

Labor Report

Jul 2015

Participation rate 64.4%

Employment ratio 56.5%

Unemployment rate 11.9%

Youth Unemployment 40.7%

Blog 10/4/15

Industrial Production

Jul month ∆%: 1.1
12 months CA ∆%: 2.7

Earlier Data:
Blog 4/19/15

Retail Sales

Jun month ∆%: -0.3

Jun 12-month ∆%: 1.7

Earlier Data:

Blog 4/26/15

Business Confidence

Mfg Sep 104.2, May 103.4

Construction Sep 123.3, May 111.8

Earlier Data:

Blog 4/5/15

Trade Balance

Balance Jul SA €3653 million
Exports Jul month SA ∆%: -0.4; Imports month ∆%: -3.7
Exports 12 months Jul NSA ∆%: 6.3 Imports 12 months NSA ∆%: 4.2

Earlier Data:
Blog 4/19/15

Links to blog comments in Table IT: 9/20/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-increase-on-hold-because.html

9/6/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html

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

Data on Italy’s labor market since 2004 are provided in Table VG-2. The unemployment rate has risen from 6.2 percent in Dec 2006 to 11.9 percent in Aug 2015. The rate of youth unemployment for ages 15 to 24 years increased from 21.2 percent in Dec 2006 to 40.7 percent in Aug 2015. As in other advanced economies, unemployment has reached high levels.

Table VG-1, Italy, Labor Report

 

Participation Rate %

Employment Ratio %

Unemployment Rate %

Unemployment
Rate 15-24 Years %

Aug 2015

64.4

56.5

11.9

40.7

Jul

64.2

56.3

12.0

40.4

Jun

64.4

56.2

12.5

43.0

May

64.2

56.1

12.4

42.0

Apr

64.3

56.2

12.3

41.7

Mar

64.0

55.9

12.5

42.2

Feb

63.9

55.9

12.3

42.1

Jan

63.9

55.9

12.3

41.4

Dec 2014

64.0

55.9

12.4

41.1

Nov

64.2

55.7

13.0

42.8

Oct

64.3

55.9

12.9

42.2

Sep

64.3

55.9

12.8

41.9

Aug

63.8

55.6

12.7

43.0

Jul

64.0

55.7

12.8

43.1

Jun

63.8

55.8

12.3

42.3

May

63.7

55.6

12.6

42.4

Apr

63.5

55.4

12.6

43.3

Mar

63.8

55.7

12.5

43.7

Feb

63.7

55.5

12.7

43.2

Jan

63.7

55.4

12.8

43.3

Dec 2013

63.6

55.5

12.5

42.5

Dec 2012

63.5

56.1

11.4

38.5

Dec 2011

62.7

56.7

9.5

31.3

Dec 2010

61.9

56.8

8.1

28.4

Dec 2009

62.2

56.9

8.3

26.6

Dec 2008

62.3

58.1

6.7

23.0

Dec 2007

63.0

58.8

6.6

22.2

Dec 2006

62.4

58.5

6.2

21.2

Dec 2005

62.6

57.8

7.5

23.0

Dec 2004

62.5

57.5

7.9

24.0

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/169406

Table VG-3 provides more detail on the labor report for Italy in Aug 2015. The level of employment increased 0.3 percent from Jul 2015 to Aug 2015 and increased 325,000 from Aug 2014 to Aug 2015. Unemployment decreased 11,000 in Aug 2015 and decreased 162,000 from a year earlier. A dramatic aspect found in most advanced economies is the high rate of unemployment of youth at 40.7 percent in Aug 2015 for ages 15 to 24 years.

Table VG-2, Italy, Labor Report, NSA

Aug 2015

1000s

Change from Prior Month 1000s

∆% from Prior Month

Change from Prior Year 1000s

∆% from Prior Year

EMP

22,566

69

0.3

325

1.5

UNE

3,061

-11

-0.4

-162

-5.0

INA   15-64

13,907

-86

-0.6

-248

-1.7

EMP 15-24

920

7

0.8

-9

-1.0

UNE 15-24

631

13

2.1

-71

10.1

INA 15-24

4,378

-22

-0.5

40

0.9

EMP %

56.5

  

0.2

  

0.2*

UNE %

11.9

  

-0.1

  

-0.2*

Youth UNE %  15-24

40.7

  

0.3

  

-0.6*

INA % 15-64

35.6

  

-0.2

  

-0.1

Notes: EMP: Employed; UNE: Unemployed; INA 15-64: Inactive aged 15 to 64; EMP %: Employment Rate; UNE %: Unemployment Rate; Youth UNE % 15-24: Youth Unemployment Rate aged 15 to 24; INA % 15-64: Inactive Rate aged 15 to 64. *Percentage change from prior quarter to current quarter

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/169406

Chart VG-1 provides the rate of unemployment in Italy that decreased from 12.7 percent in Aug 2014 to 11.9 percent in Aug 2015.

clip_image010

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

Source: Istituto Nazionale di Statistica

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

Chart VG-2 of the Istituto Nazionale di Statistica provides the total number of employed persons in Italy. The level of employment increased from 22.241 million in Aug 2014 to 22.566 million in Aug 2015.

clip_image011

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

Source: Istituto Nazionale di Statistica

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

VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 4.2 percent in 2009 after dropping 0.5 percent in 2008. Recovery of 1.5 percent in 2010 is relatively low in comparison with annual growth rates in 2007 and earlier years. Growth was only 2.0 percent in 2011 and 1.2 percent in 2012. Growth increased to 2.2 percent in 2013 and 2.9 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 2.8 percent. Growth in the current cyclical expansion from 2010 to 2014 has been only at 2.1 percent as advanced economies struggle with weak internal demand and world trade. GDP in 2014 higher by 5.1 percent relative to 2007 while it would have been 21.3 higher at trend of 2.8 percent as from 2000 to 2007.

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

 

∆% on Prior Year

1998

3.4

1999

3.1

2000

3.8

2001

2.8

2002

2.5

2003

3.3

2004

2.5

2005

3.0

2006

2.7

2007

2.6

2008

-0.5

2009

-4.2

2010

1.5

2011

2.0

2012

1.2

2013

2.2

2014

2.9

Average Growth Rates ∆% per Year

  

1948-2014

2.6

1950-1959

3.1

1960-1969

3.1

1970-1979

2.6

1980-1989

3.2

1990-1999

2.3

2000-2007

2.8

2007-2013*

2.1

2007-2014*

5.1

2000-2014

1.7

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

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI® decreased from 57.4 in Jul to 55.6 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/d32e0d01a8024dd4bcbc4ceab790a076). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at around 0.5 percent in IIIQ2015 (http://www.markiteconomics.com/Survey//PressRelease.mvc/d32e0d01a8024dd4bcbc4ceab790a076). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index® (PMI®) decreased to 51.5 in Sep from 51.6 in Aug (http://www.markiteconomics.com/Survey//PressRelease.mvc/8c014b3ddd0d4121aa366ec5ebd01a16). 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/8c014b3ddd0d4121aa366ec5ebd01a16). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI

Aug month ∆%: 0.2
Aug 12-month ∆%: 0.0
Blog 9/20/15

Output/Input Prices

Output Prices: Aug 12-month NSA ∆%: -1.8; excluding food, petroleum ∆%: 0.1
Input Prices: Aug 12-month NSA
∆%: -13.8
Excluding ∆%: -5.4
Blog 9/20/15

GDP Growth

IIQ2015 prior quarter ∆% 0.7; year earlier same quarter ∆%: 2.4
Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13 9/29/13 10/27/13 12/1/13 12/22/13 2/2/14 3/2/14 4/6/14 5/4/14 5/25/14 6/29/14 7/27/14 8/17/14 10/5/14 10/26/14 11/30/14 12/28/14 2/1/15 3/1/15 4/5/15 5/3/15 5/31/15 7/5/15 8/2/15 9/6/15 10/4/15

Industrial Production

Jul 2015/Jul 2014 ∆%: Production Industries 0.8; Manufacturing -0.5

Earlier Data:
Blog 4/12/15

Retail Sales

Aug month ∆%: 0.2
Aug 12-month ∆%: 3.7

Earlier Data:
Blog 4/26/15

Labor Market

May-Jul Unemployment Rate: 5.5%
Blog 9/20/15 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 Jul minus ₤371 million
Exports Jul%: -5.2; May-Jul ∆%: 2.5
Imports Jul ∆%: 0.6 May-Jul ∆%: -2.1

EARLIER DATA:
Blog 4/12/15

Links to blog comments in Table UK: 9/20/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-increase-on-hold-because.html

9/6/15 http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html

08/23/15 http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.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

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

Table VH-1 provides quarter on quarter chained value measures of GDP since 1998 in the third estimate for IIQ2015 (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html). The UK Office for National Statistics provides revision of the national accounts in accordance with the European System of Accounts 2010 (ESA 2010) (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html). GDP grew 0.7 percent in IIQ2015 relative to IQ2015. Growth of 0.8 percent in IIIQ2012 interrupted three consecutive quarters of weakness in GDP growth. Most advanced economies are underperforming relative to the period before the global recession. The UK Office for National Statistics analyzes that the decline in the impulse of growth in the UK originated in weakness in markets in the UK and worldwide. The UK Office for National Statistics estimates that GDP in IIQ2015 is higher by 5.9 percent relative to the peak in IQ2008 (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html). UK GDP in chained value measures is ₤422,382 million in IQ2008 and ₤442,671 million in IVQ2014 or increase of 4.9 percent. Growth at trend of 2.8 percent per year would bring GDP to ₤508,931 million in 2014. UK GDP in IVQ2014 at ₤442,671 million is lower by ₤66,260 million relative to trend at ₤508,931 million or lower by 13.0 percent compared with trend. The UK Office for National Statistics estimates the contraction of 6.0 percent from peak to trough (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q2-2015/index.html), which is roughly equal at 6.3 percent to compounding the quarterly rates except for rounding in Table VH-1 from IIQ2008 to IIQ2009. The revised data show contraction of 6.1 percent from IQ2008 to IIQ2009. UK GDP is ₤422,382 million in IQ2008 declining 6.1 percent to ₤396,514 million in IIQ2009. GDP increased 12.8 percent from IIQ2009 to ₤447,199 million in IIQ2015 or at the annual equivalent rate of 2.1 percent. GDP increased 5.9 percent from IQ2008 to IIQ2015 or at the annual equivalent rate of 0.8 percent. Using the seasonally adjusted chained-value measures (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html), GDP increased from ₤422,382 million in IQ2008 to ₤447,199 million in IIQ2015, or 5.9 percent at the annual equivalent rate of 0.8 percent. UK GDP in IIQ2015 at ₤447,199 million is lower by ₤68,808 million relative to trend at ₤516,007 million or lower by 13.3 percent compared with trend.

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

 

IQ

IIQ

IIIQ

IV

2015

0.4

0.7

    

2014

0.6

0.9

0.6

0.8

2013

0.7

0.6

0.9

0.6

2012

0.2

-0.2

1.0

-0.1

2011

0.7

0.3

0.8

0.2

2010

0.4

0.8

0.5

0.1

2009

-1.6

-0.2

0.2

0.4

2008

0.2

-0.6

-1.7

-2.3

2007

1.0

0.6

0.8

0.8

2006

0.4

0.3

0.1

0.6

2005

0.7

1.1

1.0

1.4

2004

0.7

0.5

0.2

0.5

2003

0.7

0.9

0.8

0.7

2002

0.4

0.8

1.0

0.9

2001

1.1

0.8

0.6

0.3

2000

1.1

0.7

0.4

0.3

1999

0.5

0.2

1.6

1.3

1998

0.6

0.7

0.7

1.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html

There are four periods in growth of GDP in a quarter relative to the same quarter a year earlier in the UK in the years from 2000 to the present as shown in Table VH-2. (1) Growth rates were quite high from 2000 to 2007. (2) There were six consecutive quarters of contraction of GDP from IIIQ2008 to IVQ2009. Contractions relative to the quarter a year earlier were quite sharp with the highest of 4.2 percent in IVQ2008, 5.9 percent in IQ2009, 5.6 percent in IIQ2009 and 3.8 percent in IIIQ2009. (3) The economy bounced strongly with 1.7 percent in IIQ2010, 2.0 percent in IIIQ2010 and 1.8 percent in IVQ2010. (4) Recovery in 2011 did not continue at rates comparable to those in 2000 to 2007 and even relative to those in the final three quarters of 2010. Growth relative to the same quarter a year earlier fell from 1.8 percent in IVQ2010 to 1.7 percent in IIQ2011, 2.0 percent in IIIQ2011, 2.1 percent in IVQ2011 but only 1.5 percent in IQ2012, increase of 1.0 percent in IIQ2012 relative to IIQ2011, increase of 1.2 percent in IIIQ2012 and 1.0 percent in IVQ2012. In IQ2012, GDP increased 0.2 percent and increased 1.5 percent relative to a year earlier. In IIQ2012, GDP fell 0.2 percent relative to IQ2012 and increased 1.0 percent relative to a year earlier. In IIIQ2012, GDP increased 1.0 percent and increased 1.2 percent relative to the same quarter a year earlier. In IVQ2012, GDP fell 0.1 percent and increased 1.0 percent relative to a year earlier. Fiscal consolidation in an environment of weakening economic growth is much more challenging. Growth increased to 1.4 percent in IQ2013 relative to a year earlier and 0.7 percent in IQ2013 relative to IVQ2012. In IIQ2013, GDP increased 0.6 percent and 2.2 percent relative to a year earlier. GDP increased 0.9 percent in IIIQ2013 and 2.1 percent relative to a year earlier. GDP increased 0.6 percent in IVQ2013 and 2.8 percent relative to a year earlier. In IQ2014, GDP increased 0.6 percent and 2.8 percent relative to a year earlier. GDP increased 0.9 percent in IIQ2014 and 3.1 percent relative to a year earlier. GDP increased 0.6 percent in IIIQ2013 and 2.9 percent relative to a year earlier. In IVQ2014, GDP increased 0.8 percent and 3.0 percent relative to a year earlier. GDP increased 0.4 percent in IQ2015 and increased 2.7 percent relative to a year earlier. GDP increased 0.7 percent in IIQ2015 and increased 2.4 percent relative to a year earlier.

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

 

IQ

IIQ

IIIQ

IV

2015

2.7

2.4

    

2014

2.8

3.1

2.9

3.0

2013

1.4

2.2

2.1

2.8

2012

1.5

1.0

1.2

1.0

2011

2.1

1.7

2.0

2.1

2010

0.7

1.7

2.0

1.8

2009

-5.9

-5.6

-3.8

-1.3

2008

2.4

1.2

-1.2

-4.2

2007

2.0

2.3

2.9

3.1

2006

4.0

3.1

2.2

1.4

2005

1.9

2.5

3.3

4.3

2004

3.1

2.7

2.2

1.9

2003

3.4

3.5

3.3

3.2

2002

2.2

2.2

2.5

3.1

2001

2.6

2.6

2.9

2.9

2000

4.3

4.8

3.5

2.6

1999

2.9

2.4

3.4

3.7

1998

3.8

3.4

3.3

3.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html

Table VH-3 provides annual percentage changes of gross value added and key components. Production fell 8.7 percent in 2009 and its most important component manufacturing fell 9.4 percent. Services fell 2.7 percent in 2009. Services grew in all years from 2010 to 2014 while manufacturing fell 1.4 percent in 2012 and 1.1 percent in 2013. Manufacturing resumed growth with 2.7 percent in 2014.

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

 

TP

MFG

CONS

SERV

GVA BP

GVA EX

2012 Weights

149

103

59

786

1000

984

1998

1.1

0.3

1.5

4.6

3.6

3.6

1999

1.0

0.5

1.3

4.0

3.2

3.1

2000

1.9

2.3

0.9

4.7

3.9

4.4

2001

-1.7

-1.7

1.8

3.9

2.5

3.0

2002

-1.6

-2.4

5.7

2.8

2.2

2.4

2003

-0.6

-0.6

4.8

4.3

3.4

3.9

2004

0.7

1.8

5.3

2.4

2.3

2.8

2005

-0.7

-

-2.4

4.6

3.3

3.9

2006

0.6

2.1

0.8

3.3

2.6

3.0

2007

0.3

0.6

2.2

3.1

2.6

2.7

2008

-2.6

-2.8

-2.6

0.4

-0.2

-0.1

2009

-8.7

-9.4

-13.2

-2.7

-4.3

-4.2

2010

3.3

4.5

8.6

0.9

1.7

2.0

2011

-0.6

2.2

2.2

2.2

1.9

2.3

2012

-2.8

-1.4

-7.5

2.5

1.0

1.3

2013

-0.8

-1.1

1.6

2.8

2.2

2.4

2014

1.4

2.7

8.1

3.2

2.9

2.9

Note: TP: Total Production; MFG: Manufacturing; CONS: Construction; SERV: Services; GVA BP: Gross Value Added at Basic Prices; GVA EX: Gross Value Added excluding Oil and Gas

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html

Percentage changes of gross value added and components in a quarter relative to the same quarter a year earlier are in Table VH-4A. Gross value added increased 2.6 percent in IQ2015 relative to a year earlier while services increased 3.1 percent. Manufacturing increased 1.1 percent in IQ2015 relative to a year earlier. Gross value added grew 2.3 percent in IIQ2015 while services increased 2.7 percent. Manufacturing changed 0.0 percent in IIQ2015 relative to a year earlier.

Table VH-4A, UK, Gross Value Added by Components, ∆% on Same Quarter of Previous Year

 

TP

MFG

CONS

SERV

GVA BP

GVA EX

2012 Weights

149

103

59

786

1000

984

1998 Q1

1.4

1.0

4.7

4.5

3.8

4.1

1998 Q2

1.9

1.1

0.1

4.4

3.6

3.4

1998 Q3

0.8

0.2

1.3

4.8

3.6

3.7

1998 Q4

0.2

-1.0

-

4.7

3.4

3.3

1999 Q1

-0.6

-1.5

-1.5

4.6

3.0

2.8

1999 Q2

-0.3

-0.9

1.4

3.7

2.7

2.6

1999 Q3

2.3

1.8

3.2

3.8

3.5

3.3

1999 Q4

2.9

2.8

2.1

4.1

3.7

3.7

2000 Q1

2.9

3.1

3.3

4.8

4.3

4.4

2000 Q2

3.2

3.4

2.1

5.4

4.7

5.1

2000 Q3

0.8

1.2

-1.9

5.0

3.7

4.3

2000 Q4

0.7

1.8

-

3.6

2.7

3.5

2001 Q1

0.1

0.8

-1.9

4.2

2.8

3.8

2001 Q2

-1.7

-1.6

1.6

4.1

2.6

3.2

2001 Q3

-1.7

-1.7

3.7

3.5

2.3

2.8

2001 Q4

-3.3

-4.2

3.8

3.7

2.2

2.4

2002 Q1

-2.6

-3.5

5.2

2.4

1.7

1.8

2002 Q2

-1.6

-2.7

3.4

2.5

1.8

1.8

2002 Q3

-1.5

-1.7

7.4

2.8

2.4

2.8

2002 Q4

-0.6

-1.6

6.9

3.4

3.0

3.1

2003 Q1

-1.4

-2.1

3.5

4.2

3.0

3.2

2003 Q2

-1.2

-0.7

5.5

4.4

3.3

4.1

2003 Q3

-0.5

-1.0

4.5

4.5

3.5

3.8

2003 Q4

0.5

1.5

5.7

4.4

3.7

4.4

2004 Q1

1.3

2.7

11.7

3.4

3.6

4.3

2004 Q2

2.0

2.8

6.8

2.6

2.7

3.0

2004 Q3

-0.4

0.7

3.5

2.1

1.7

2.2

2004 Q4

-0.3

1.1

-0.2

1.6

1.1

1.6

2005 Q1

-1.2

-0.8

-2.8

2.6

1.6

2.1

2005 Q2

-0.7

-

-1.7

3.8

2.7

3.2

2005 Q3

-0.3

0.9

-3.0

5.3

3.9

4.5

2005 Q4

-0.6

-0.3

-2.2

6.7

4.9

5.5

2006 Q1

1.1

1.6

-1.9

5.4

4.1

4.5

2006 Q2

-0.4

1.4

-0.6

4.1

3.0

3.6

2006 Q3

1.1

2.5

1.8

2.4

2.0

2.3

2006 Q4

0.8

3.0

3.9

1.4

1.4

1.7

2007 Q1

0.1

1.8

4.2

2.2

1.9

2.3

2007 Q2

0.6

0.9

3.0

2.8

2.4

2.5

2007 Q3

0.1

0.1

1.1

3.9

3.0

3.2

2007 Q4

0.4

-0.3

0.5

3.7

2.9

2.9

2008 Q1

-0.3

0.2

0.3

3.2

2.5

2.7

2008 Q2

-1.1

-1.4

-0.4

2.3

1.6

1.8

2008 Q3

-2.1

-2.6

-1.7

-0.8

-1.1

-1.0

2008 Q4

-6.9

-7.2

-8.7

-2.9

-3.9

-3.8

2009 Q1

-10.7

-12.4

-16.1

-3.7

-5.7

-5.7

2009 Q2

-9.9

-10.9

-16.2

-4.0

-5.8

-5.8

2009 Q3

-9.5

-9.9

-12.2

-2.1

-4.0

-3.8

2009 Q4

-4.4

-3.9

-7.8

-0.7

-1.7

-1.5

2010 Q1

2.0

2.7

1.5

-0.1

0.3

0.5

2010 Q2

2.8

4.3

11.2

0.9

1.7

2.0

2010 Q3

4.2

5.9

11.3

1.5

2.5

2.6

2010 Q4

4.1

5.1

10.6

1.6

2.5

2.7

2011 Q1

1.6

4.5

7.7

2.1

2.4

2.9

2011 Q2

-0.3

3.0

2.1

1.9

1.7

2.2

2011 Q3

-1.0

1.2

-1.2

2.3

1.6

2.2

2011 Q4

-2.5

-

0.7

2.5

1.7

2.1

2012 Q1

-2.5

-

-4.1

2.7

1.4

1.8

2012 Q2

-2.6

-2.0

-8.6

2.5

1.0

1.2

2012 Q3

-2.1

-1.1

-9.6

2.6

1.1

1.3

2012 Q4

-3.9

-2.5

-7.8

2.1

0.6

0.9

2013 Q1

-2.9

-3.2

-4.3

2.4

1.2

1.5

2013 Q2

-1.2

-1.1

0.7

3.0

2.2

2.4

2013 Q3

-0.8

-1.1

5.1

2.6

2.2

2.4

2013 Q4

1.7

1.0

5.1

3.3

3.1

3.2

2014 Q1

1.9

2.6

8.2

3.0

2.9

2.9

2014 Q2

1.5

2.8

8.7

3.1

2.9

3.0

2014 Q3

1.1

2.8

8.6

3.1

2.8

2.9

2014 Q4

1.0

2.7

7.0

3.5

2.9

3.0

2015 Q1

0.8

1.1

5.8

3.1

2.6

2.7

2015 Q2

1.2

-

3.9

2.7

2.3

2.2

Note: TP: Total Production; MFG: Manufacturing; CONS: Construction; SERV: Services; GVA BP: Gross Value Added at Basic Prices; GVA EX: Gross Value Added excluding Oil and Gas

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html

Table VH-5 provides contributions to value added by expenditure components in a quarter relative to the prior quarter. Household final consumption expenditure contributed 0.4 percentage points in IQ2014 and 0.4 percentage points in IIQ2014. Household final consumption contributed 0.5 percentage points in IIIQ2014 and 0.4 percentage points in IVQ2014. Household final consumption expenditures contributed 0.5 percentage points in IQ2015 and 0.5 percentage points in IIQ2015. In IQ2014, net trade contributed 0.2 percentage points, contributing 1.3 percentage points in IIQ2014 and deducting 0.7 percentage points in IIIQ2014. Net trade added 0.2 percentage points in IVQ2014 and deducted 0.6 percentage points in IQ2015. Net trade added 1.4 percentage points in IIQ2015. Gross fixed capital formation (GFCF) added 0.4 percentage points in IQ2014, 0.2 percentage points in IIQ2014 and 0.2 percentage points in IIIQ2014. GFCF deducted 0.1 percentage points in IVQ2014 and added 0.3 percentage points in IQ2015. GFCF added 0.2 percentage points in IIQ2015.

Table VH-5, UK, Contribution to Quarter on Prior Quarter of Growth of Value Added by Expenditure Components, %

 

IQ2014

IIQ2014

IIIQ2014

IVQ2014

IQ2015

IIQ2015

HFC

0.4

0.4

0.5

0.4

0.5

0.5

NPISH

0.0

0.1

-0.1

0.0

0.0

0.1

GOVT

0.0

0.3

0.1

-0.1

0.2

0.1

GCF

0.1

-1.1

0.7

0.1

0.3

-1.3

     GFCF

0.4

0.2

0.2

-0.1

0.3

0.2

     BI

-0.2

0.5

-0.1

0.0

0.2

0.2

Exports

0.5

0.7

-0.5

1.1

-0.4

0.6

Less Imports

0.3

–0.6

0.2

0.9

0.2

-0.9

Net Trade

0.2

1.3

-0.7

0.2

-0.6

1.4

Components may not add because of rounding

HFC: Household Final Consumption; NPISH: NPISH Final Consumption; GOVT: General Government; GCF: Gross Capital Formation; GFCF: Gross Fixed Capital Formation; BINV: Business Investment; EXP: Exports; IMP: Less Imports

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html

Contributions of value added by expenditure components in a year relative to the prior year are in Table VH-6. Household final consumption added 1.1 percentage points in 2013 and 1.7 percentage points in 2014. Gross capital formation contributed 0.8 percentage points in 2013 and 1.2 percentage points in 2014. GFCF added 0.5 percentage points in 2013 and 1.2 percentage points in 2014.

VH-6, UK, Contribution to Growth on Prior Year of Value Added by Expenditure Components, %

 

2013

2014

HFC

1.1

1.7

NPISH

0.0

0.1

GOVT

-0.1

0.4

GCF

0.8

1.2

     GFCF

0.5

1.2

     BINV

0.5

0.4

Exports

0.5

0.5

Less Imports

0.5

0.9

Net Trade

0.0

-0.4

HFC: Household Final Consumption; NPISH: NPISH Final Consumption; GOVT: General Government; GCF: Gross Capital Formation; GFCF: Gross Fixed Capital Formation; BINV: Business Investment; EXP: Exports; IMP: Less Imports

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2015/index.html

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

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