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

 

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

Carlos M. Pelaez

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IB1 Theory

IB2 Policy

IB3 Evidence

IB4 Unwinding Strategy

IC United States Inflation

IC Long-term US Inflation

ID Current US Inflation

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

IIA Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates

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

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

V World Economic Slowdown. Table I-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 2014 and the growth rate of real GDP of the world and selected regional countries from 2014 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 and 3.1 percent in 2015 but accelerating to 3.6 percent in 2016 and 3.8 percent in 2017. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $35,542 billion of world output of $77,269 billion, or 46.0 percent, but are projected to grow at much lower rates than world output, 2.0 percent on average from 2014 to 2017 in contrast with 3.5 percent for the world as a whole. While the world would grow 14.6 percent in the four years from 2014 to 2017, the G7 as a whole would grow 8.1 percent. The difference in dollars of 2014 is high: growing by 14.6 percent would add around $11.3 trillion of output to the world economy, or roughly, two times the output of the economy of Japan of $4,602 billion but growing by 8.1 percent would add $6.3 trillion of output to the world, or about the output of Japan in 2014. 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 2014 of $30,296 billion, or 39.2 percent of world output. The EMDEs would grow cumulatively 19.5 percent or at the average yearly rate of 4.5 percent, contributing $5.9 trillion from 2014 to 2017 or the equivalent of somewhat less than the GDP of $10,357 billion of China in 2014. The final four countries in Table I-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output in 2014 adds to $16,616 billion, or 21.5 percent of world output, which is equivalent to 46.8 percent of the combined output of the major advanced economies of the G7.

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

	GDP USD 2014	Real GDP ∆% 2014	Real GDP ∆% 2015	Real GDP ∆% 2016	Real GDP ∆% 2017
World	77,269	3.4	3.1	3.6	3.8
G7	35,542	1.7	1.9	2.2	2.1
Canada	1,785	2.4	1.0	1.7	2.4
France	2,834	0.2	1.2	1.5	1.6
DE	3,874	1.6	1.5	1.6	1.5
Italy	2,148	-0.4	0.8	1.3	1.2
Japan	4,602	-0.1	0.6	1.0	0.4
UK	2,950	3.0	2.5	2.2	2.2
US	17,348	2.4	2.6	2.8	2.8
Euro Area	13,457	0.9	1.5	1.6	1.7
DE	3,874	1.6	1.5	1.6	1.5
France	2,834	0.2	1.2	1.5	1.6
Italy	2,148	-0.4	0.8	1.3	1.2
POT	230	0.9	1.6	1.5	1.4
Ireland	251	5.2	4.9	3.8	3.2
Greece	238	0.8	-2.3	-1.3	2.7
Spain	1,407	1.4	3.1	2.5	2.2
EMDE	30,296	4.6	4.0	4.5	5.1
Brazil	2,347	0.1	-3.0	-1.0	2.3
Russia	1,861	0.6	-3.8	-0.6	1.0
India	2,051	7.3	7.3	7.5	7.5
China	10,357	7.3	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/2015/02/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 I-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 12.7 percent for Italy, which is lower but still high. The G7 rate of unemployment is 6.4 percent. Unemployment rates are not likely to decrease substantially if slow growth persists in advanced economies.

http://www.imf.org/external/pubs/ft/weo/2015/02/weodata/index.aspx

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	5.9	5.6	5.6
Canada	7.1	6.9	6.8	6.8	6.6
France	10.3	10.3	10.2	9.9	9.7
DE	5.2	5.0	4.7	4.7	4.7
Italy	12.2	12.7	12.2	11.9	11.6
Japan	4.0	3.6	3.5	3.5	3.6
UK	7.6	6.2	5.6	5.5	5.4
US	7.4	6.2	5.3	4.9	4.8
Euro Area	12.0	11.6	11.0	10.5	10.1
DE	5.2	5.0	4.7	4.7	4.7
France	10.3	10.3	10.2	9.9	9.7
Italy	12.2	12.7	12.2	11.9	11.6
POT	16.2	13.9	12.3	11.3	10.9
Ireland	13.0	11.3	9.6	8.5	7.7
Greece	27.5	26.5	26.8	27.1	25.7
Spain	26.1	24.5	21.8	19.9	18.7
EMDE	NA	NA	NA	NA	NA
Brazil	5.4	4.8	6.6	8.6	8.9
Russia	5.5	5.2	6.0	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/2015/02/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 IIIQ2015 available now for all countries. There are preliminary estimates for all countries for IVQ2015. Growth is weak throughout most of the world.

• Japan. The GDP of Japan increased 0.9 percent in IQ2012, 3.7 percent at SAAR (seasonally adjusted annual rate) and 3.5 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP fell 0.4 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 1.6 percent, which is much lower than 3.7 percent in IQ2012. Growth of 3.5 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan’s GDP contracted 0.5 percent in IIIQ2012 at the SAAR of minus 1.8 percent and increased 0.2 percent relative to a year earlier. Japan’s GDP decreased 0.1 percent in IVQ2012 at the SAAR of minus 0.3 percent and changed 0.0 percent relative to a year earlier. Japan grew 1.0 percent in IQ2013 at the SAAR of 4.0 percent and increased 0.3 percent relative to a year earlier. Japan’s GDP increased 0.7 percent in IIQ2013 at the SAAR of 2.7 percent and increased 1.1 percent relative to a year earlier. Japan’s GDP grew 0.5 percent in IIIQ2013 at the SAAR of 2.1 percent and increased 2.0 percent relative to a year earlier. In IVQ2013, Japan’s GDP decreased 0.1 percent at the SAAR of minus 0.3 percent, increasing 2.1 percent relative to a year earlier. Japan’s GDP increased 1.2 percent in IQ2014 at the SAAR of 5.0 percent and increased 2.7 percent relative to a year earlier. In IIQ2014, Japan’s GDP fell 2.0 percent at the SAAR of minus 7.9 percent and fell 0.3 percent relative to a year earlier. Japan’s GDP contracted 0.6 percent in IIIQ2014 at the SAAR of minus 2.6 percent and fell 1.5 percent relative to a year earlier. In IVQ2014, Japan’s GDP grew 0.6 percent, at the SAAR of 2.5 percent, decreasing 1.0 percent relative to a year earlier. The GDP of Japan increased 1.0 percent in IQ2015 at the SAAR of 4.2 percent and decreased 1.0 percent relative to a year earlier. Japan’s GDP decreased 0.3 percent in IIQ2015 at the SAAR of minus 1.4 percent and increased 0.7 percent relative to a year earlier. The GDP of Japan increased 0.3 percent in IIIQ2015 at the SAAR of 1.3 percent and increased 1.7 percent relative to a year earlier. Japan’s GDP contracted 0.4 percent in IVQ2015 at the SAAR of minus 1.4 percent and grew 0.5 percent relative to a year earlier
• China. China’s GDP grew 1.8 percent in IQ2012, annualizing to 7.4 percent, and 8.0 percent relative to a year earlier. The GDP of China grew at 2.1 percent in IIQ2012, which annualizes to 8.7 percent and 7.5 percent relative to a year earlier. China grew at 1.8 percent in IIIQ2012, which annualizes at 7.4 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 2.0 percent, which annualizes at 8.2 percent, and 8.0 percent in IVQ2012 relative to IVQ2011. In IQ2013, China grew at 1.8 percent, which annualizes at 7.4 percent and 7.8 percent relative to a year earlier. In IIQ2013, China grew at 1.7 percent, which annualizes at 7.0 percent and 7.5 percent relative to a year earlier. China grew at 2.2 percent in IIIQ2013, which annualizes at 9.1 percent and 7.9 percent relative to a year earlier. China grew at 1.6 percent in IVQ2013, which annualized to 6.6 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 7.3 percent relative to a year earlier. China’s GDP grew 1.8 percent in IIQ2014, which annualizes at 7.4 percent, and 7.4 percent relative to a year earlier. China’s GDP grew 1.8 percent in IIIQ2014, which is equivalent to 7.4 percent in a year, and 7.1 percent relative to a year earlier. The GDP of China grew 1.7 percent in IVQ2014, which annualizes at 7.0 percent, and 7.2 percent relative to a year earlier. The GDP of China grew at 1.3 percent in IQ2015, which annualizes at 5.3 percent, and 7.0 percent relative to a year earlier. The GDP of China grew 1.9 percent in IIQ2015, which annualizes at 7.8 percent, and increased 7.0 percent relative to a year earlier. In IIIQ2015, China’s GDP grew at 1.8 percent, which annualizes at 7.4 percent and increased 6.9 percent relative to a year earlier. The GDP of China grew at 1.6 percent in IVQ2015, which annualizes at 6.6 percent and increased 6.8 percent relative to a year earlier. There is decennial change in leadership in China (http://www.xinhuanet.com/english/special/18cpcnc/index.htm). Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2015.
• Euro Area. GDP fell 0.2 percent in the euro area in IQ2012 and decreased 0.5 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.3 percent IIQ2012 and fell 0.8 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.1 percent and declined 0.9 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.4 percent relative to the prior quarter and fell 1.1 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 changed 0.0 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 increased 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 1.3 percent relative to a year earlier. The GDP of the euro area increased 0.4 percent in IIQ2015 and increased 1.6 percent relative to a year earlier. The euro area’s GDP increased 0.3 percent in IIIQ2015 and increased 1.6 percent relative to a year earlier. Euro area GDP increased 0.3 percent in IVQ2015 and increased 1.5 percent relative to a year earlier.
• Germany. The GDP of Germany increased 0.4 percent in IQ2012 and increased 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 grew 0.7 percent relative to a year earlier. The GDP of Germany increased 0.4 percent in IIIQ2013 and grew 1.0 percent relative to a year earlier. In IVQ2013, Germany’s GDP increased 0.3 percent and increased 1.2 percent relative to a year earlier. The GDP of Germany increased 0.7 percent in IQ2014 and grew 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 0.4 percent in IQ2015 and increased 1.3 percent relative to a year earlier. Germany’s GDP increased 0.4 percent in IIQ2015 and grew 1.6 percent relative to a year earlier. The GDP of Germany increased 0.3 percent in IIIQ2015 and grew 1.7 percent relative to a year earlier. Germany’s GDP increased 0.3 percent in IVQ2015 and grew 2.1 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/2016/01/closely-monitoring-global-economic-and.html and earlier http://cmpassocregulationblog.blogspot.com/2015/12/dollar-revaluation-and-decreasing.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. GDP increased 0.5 percent in IIIQ2015 at SAAR of 2.0 percent and grew 2.1 percent in IIIQ2015 relative to a year earlier. US GDP grew at SAAR of 0.7 percent in IVQ2015, increasing 0.2 percent in the quarter and 1.8 percent relative to a year earlier
• United Kingdom. In IQ2012, UK 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 0.8 percent in IIQ2014 and 3.0 percent relative to a year earlier. GDP increased 0.7 percent in IIIQ2013 and 2.8 percent relative to a year earlier. In IVQ2014, GDP increased 0.7 percent and 2.8 percent relative to a year earlier. GDP increased 0.4 percent in IQ2015 and increased 2.5 percent relative to a year earlier. GDP increased 0.5 percent in IIQ2015 and increased 2.3 percent relative to a year earlier. UK GDP increased 0.4 percent in IIIQ2015 and increased 2.1 percent relative to a year earlier. GDP increased 0.5 percent in IVQ2015 and increased 1.9 percent relative to a year earlier.
• Italy. 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 0.8 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 13 quarters including IVQ2013, IQ2014, IIQ2014, IIIQ2014 and IVQ2014 accumulates to 5.7 percent. Italy’s GDP fell 1.0 percent in IQ2012 and declined 2.4 percent relative to IQ2011. Italy’s GDP fell 0.7 percent in IIQ2012 and declined 3.2 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.5 percent and declined 3.2 percent relative to a year earlier. The GDP of Italy contracted 0.5 percent in IVQ2012 and fell 2.7 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.8 percent and fell 2.5 percent relative to a year earlier. Italy’s GDP contracted 0.2 percent in IIQ2013 and fell 2.0 percent relative to a year earlier. The GDP of Italy changed 0.0 percent in IIIQ2013 and declined 1.4 percent relative to a year earlier. Italy’s GDP decreased 0.1 percent in IVQ2013 and decreased 1.0 percent relative to a year earlier. In IQ2014, Italy’s GDP decreased 0.1 percent and fell 0.3 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 0.4 percent relative to a year earlier. The GDP of Italy decreased 0.1 percent in IVQ20214 and declined 0.5 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 0.5 percent relative to a year earlier. Italy’s GDP increased 0.2 percent in IIIQ2015 and increased 0.8 percent relative to a year earlier. The GDP of Italy increased 0.1 percent in IVQ2015 and grew 1.0 percent relative to a year earlier.
• France. France’s GDP increased 0.1 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 0.2 percent and increased 0.1 percent relative to a year earlier. The GDP of France increased 0.8 percent in IIQ2013 and increased 1.2 percent relative to a year earlier. France’s GDP decreased 0.1 percent in IIIQ2013 and increased 0.8 percent relative to a year earlier. The GDP of France increased 0.2 percent in IVQ2013 and increased 1.0 percent relative to a year earlier. In IQ2014, France’s GDP decreased 0.1 percent and increased 0.7 percent relative to a year earlier. In IIQ2014, France’s GDP contracted 0.1 percent and decreased 0.2 percent relative to a year earlier. France’s GDP increased 0.2 percent in IIIQ2014 and increased 0.2 percent relative to a year earlier. The GDP of France increased 0.1 percent in IVQ2014 and increased 0.1 percent relative to a year earlier. France’s GDP increased 0.7 percent in IQ2015 and increased 0.9 percent relative to a year earlier. In IIQ2015, France’s GDP changed 0.0 percent and increased 1.1 percent relative to a year earlier. France’s GDP increased 0.3 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: 0.9 SAAR: 3.7	3.5
China	1.8	8.0
Euro Area	-0.2	-0.5
Germany	0.4	1.5
France	0.0	0.4
Italy	-1.0	-2.4
United Kingdom	0.2	1.5
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.5         SAAR: 1.9	2.5
Japan	QOQ: -0.4 SAAR: -1.6	3.5
China	2.1	7.5
Euro Area	-0.3	-0.8
Germany	0.1	0.3 0.8 CA
France	-0.3	0.2
Italy	-0.7	-3.2
United Kingdom	-0.2	1.0
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.1  SAAR: 0.5	2.4
Japan	QOQ: –0.5 SAAR: –1.8	0.2
China	1.8	7.4
Euro Area	-0.1	-0.9
Germany	0.2	0.1
France	0.3	0.3
Italy	-0.5	-3.2
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: -0.3	0.0
China	2.0	8.0
Euro Area	-0.4	-1.1
Germany	-0.5	-0.3
France	-0.1	0.0
Italy	-0.5	-2.7
United Kingdom	-0.1	1.0
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.5 SAAR: 1.9	1.1
Japan	QOQ: 1.0 SAAR: 4.0	0.3
China	1.8	7.8
Euro Area	-0.2	-1.1
Germany	-0.3	-1.7
France	0.1	0.1
Italy	-0.8	-2.5
UK	0.7	1.4
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.3 SAAR: 1.1	0.9
Japan	QOQ: 0.7 SAAR: 2.7	1.1
China	1.7	7.5
Euro Area	0.4	-0.4
Germany	0.9	0.7
France	0.8	1.1
Italy	-0.2	-2.0
UK	0.6	2.2
	IIIQ2013/IIQ2013	III/Q2013/  IIIQ2012
USA	QOQ: 0.7 SAAR: 3.0	1.5
Japan	QOQ: 0.5 SAAR: 2.1	2.0
China	2.2	7.9
Euro Area	0.2	0.0
Germany	0.4	1.0
France	-0.1	0.8
Italy	0.0	-1.4
UK	0.9	2.1
	IVQ2013/IIIQ2013	IVQ2013/IVQ2012
USA	QOQ: 0.9 SAAR: 3.8	2.5
Japan	QOQ: -0.1 SAAR: -0.3	2.1
China	1.6	7.6
Euro Area	0.2	0.6
Germany	0.3	1.2
France	0.2	1.0
Italy	-0.1	-1.0
UK	0.6	2.8
	IQ2014/IVQ2013	IQ2014/IQ2013
USA	QOQ -0.2 SAAR -0.9	1.7
Japan	QOQ: 1.2 SAAR: 5.0	2.7
China	1.6	7.3
Euro Area	0.2	1.1
Germany	0.7	2.6
France	-0.2	0.7
Italy	-0.1	-0.3
UK	0.6	2.8
	IIQ2014/IQ2014	IIQ2014/IIQ2013
USA	QOQ 1.1 SAAR 4.6	2.6
Japan	QOQ: -2.0 SAAR: -7.9	-0.3
China	1.8	7.4
Euro Area	0.1	0.7
Germany	-0.1	1.0
France	-0.1	-0.2
Italy	-0.2	-0.3
UK	0.8	3.0
	IIIQ2014/IIQ2014	IIIQ2014/IIIQ2013
USA	QOQ: 1.1 SAAR: 4.3	2.9
Japan	QOQ: -0.6 SAAR: -2.6	-1.5
China	1.8	7.1
Euro Area	0.3	0.8
Germany	0.2	1.2
France	0.3	0.1
Italy	-0.1	-0.4
UK	0.7	2.8
	IVQ2014/IIIQ2014	IVQ2014/IVQ2013
USA	QOQ: 0.5 SAAR: 2.1	2.5
Japan	QOQ: 0.6 SAAR: 2.5	-1.0
China	1.7	7.2
Euro Area	0.4	0.9
Germany	0.6	1.6
France	0.1	0.1
Italy	-0.1	-0.5
UK	0.7	2.8
	IQ2015/IVQ2014	IQ2015/IQ2014
USA	QOQ: 0.2 SAAR: 0.6	2.9
Japan	QOQ: 1.0 SAAR: 4.2	-1.0
China	1.3	7.0
Euro Area	0.5	1.3
Germany	0.4	1.3
France	0.7	0.9
Italy	0.4	0.1
UK	0.4	2.5
	IIQ2015/IQ2015	IIQ2015/IIQ2014
USA	QOQ: 1.0 SAAR: 3.9	2.7
Japan	QOQ: -0.3 SAAR: -1.4	0.7
China	1.9	7.0
Euro Area	0.4	1.6
Germany	0.4	1.6
France	0.0	1.1
Italy	0.3	0.5
UK	0.5	2.3
	IIIQ2015/IIQ2015	IIIQ2015/IIIQ2014
USA	QOQ: 0.5 SAAR: 2.0	2.1
Japan	QOQ: 0.3 SAAR: 1.3	1.7
China	1.8	6.9
Euro Area	0.3	1.6
Germany	0.3	1.7
France	0.3	1.1
Italy	0.2	0.8
UK	0.4	2.1
	IVQ2015/IIIQ2015	IVQ2015/IVQ2014
USA	QOQ: 0.2 SAAR: 0.7	1.8
Japan	QOQ: -0.4 SAAR: -1.4	0.5
China	1.6	6.8
Euro Area	0.3	1.5
Germany	0.3	2.1
France	0.2	1.3
Italy	0.1	1.0
UK	0.5	1.9

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

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

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

• Japan. Japan provides the most worrisome data (http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/07/valuation-of-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/dollar-revaluation-squeezing-corporate.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/imf-view-of-economy-and-finance-united.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/impatience-with-monetary-policy-of.html and earlier http://cmpassocregulationblog.blogspot.com/2015/02/world-financial-turbulence-squeeze-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2014/05/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/interest-rate-risks-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html and earlier http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html and earlier http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-zero-interest-rates-world.html http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations_8763.html http://cmpass ocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html and earlier http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and_4699.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and for GDP http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what_13.html). In Jan 2016, Japan’s exports decreased 12.9 percent in 12 months while imports decreased 18.0 percent. The second part of Table V-4 shows that net trade deducted 1.6 percentage points from Japan’s growth of GDP in IIQ2012, deducted 1.8 percentage points from GDP growth in IIIQ2012 and deducted 0.6 percentage points from GDP growth in IVQ2012. Net trade added 0.4 percentage points to GDP growth in IQ2012, 1.8 percentage points in IQ2013 and deducted 0.3 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.3 percentage points from GDP growth in Japan. Net trade ducted 2.0 percentage points from GDP growth in Japan in IVQ2013. Net trade deducted 0.9 percentage points from GDP growth of Japan in IQ2014. Net trade added 3.6 percentage points to GDP growth in IIQ2014. Net trade added 0.5 percentage points to GDP growth in IIIQ2014 and added 1.4 percentage points in IVQ2014. Net trade deducted 0.0 percentage points from GDP growth in IQ2015 and deducted 1.3 percentage points in IIQ2015. Net trade added 0.8 percentage points to GDP growth in IIIQ2015 and added 0.6 percentage points in IVQ2015

• China. In Jan 2016, China exports decreased 11.2 percent relative to a year earlier and imports decreased 18.8 percent.
• Germany. Germany’s exports decreased 1.6 percent in the month of Dec 2015 and increased 3.2 percent in the 12 months ending in Dec 2015. Germany’s imports decreased 1.6 percent in the month of Dec 2015 and increased 3.5 percent in the 12 months ending in Dec 2015. 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 contributed 0.0 percentage points to GDP growth in IQ2014. Net trade added 0.2 percentage points to GDP growth in IIQ2014 and added 0.5 percentage points in IIIQ2014. Net trade deducted 0.3 percentage points to GDP growth in IVQ2014 and deducted 0.1 percentage points in IQ2015. Net trade added 0.6 percentage points to GDP growth in IIQ2015 and deducted 0.4 percentage points in IIIQ2015
• United Kingdom. Net trade contributed 0.7 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.7 percentage points from UK growth. Net trade contributed 0.1 percentage points to UK value added in IVQ2013. Net trade contributed 0.2 percentage points to UK value added in IQ2014 and 0.5 percentage points in IIQ2014. Net trade deducted 0.5 percentage points to GDP growth in IIIQ2014 and added 0.2 percentage points in IVQ2014. Net traded deducted 1.0 percentage points from growth in IQ2015. Net trade added 1.6 percentage points to GDP growth in IIQ2015 and deducted 1.0 percentage points in IIIQ2015
• France. France’s exports decreased 0.9 percent in Dec 2015 while imports decreased 2.2 percent. France’s exports increased 0.9 percent in the 12 months ending in Dec 2015 and imports increased 1.3 percent relative to a year earlier. Net traded added 0.1 percentage points to France’s GDP in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.1 percentage points from France’s GDP growth in IQ2013 and added 0.3 percentage points in IIQ2013, deducting 1.7 percentage points in IIIQ2013. Net trade added 0.1 percentage points to France’s GDP in IVQ2013 and deducted 0.1 percentage points in IQ2014. Net trade deducted 0.2 percentage points from France’s GDP growth in IIQ2014 and deducted 0.2 percentage points in IIIQ2014. Net trade added 0.2 percentage points to France’s GDP growth in IVQ2014 and deducted 0.2 percentage points in IQ2015. Net trade added 0.4 percentage points to GDP growth in IIQ2015 and deducted 0.7 percentage points in IIIQ2015. Net trade deducted 0.3 percentage points from GDP growth in IVQ2015

United States. US exports decreased 0.3 percent in Dec 2015 and goods exports decreased 7.1 percent in Jan-Dec 2015 relative to a year earlier. Imports decreased 0.3 percent in Dec 2015 and goods imports decreased 4.5 percent in Jan-Dec 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. Net trade deducted 0.26 percentage points from GDP growth in IIIQ2015. Net trade deducted 0.47 percentage points from GDP growth in IVQ2015. Industrial production increased 0.9 percent in Jan 2016 and decreased 0.7 percent in Dec 2015 after decreasing 0.8 percent in Nov 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.”

Manufacturing declined 22.2 from the peak in Jun 2007 to the trough in Apr 2009 and increased 19.8 percent from the trough in Apr 2009 to Dec 2015. Manufacturing grew 19.3 percent from the trough in Apr 2009 to Jan 2016. Manufacturing in Jan 2016 is lower by 7.2 percent relative to 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 IVQ2015 would have accumulated to 26.7 percent. GDP in IVQ2015 would be $18,994.6 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,552.3 billion than actual $16,442.3 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.5 million unemployed or underemployed equivalent to actual unemployment/underemployment of 15.9 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2016/02/fluctuating-risk-financial-assets-in.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-with-exchange-rate.html). US GDP in IVQ2015 is 13.4 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $16,442.3 billion in IVQ2015 or 9.7 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 Jan 1919 to Jan 2016. Growth at 3.2 percent per year would raise the NSA index of manufacturing output from 107.6075 in Dec 2007 to 138.8098 in Jan 2016. The actual index NSA in Jan 2016 is 103.8436, which is 25.2 percent below trend. Manufacturing output grew at average 2.2 percent between Dec 1986 and Dec 2015. Using trend growth of 2.2 percent per year, the index would increase to 128.3031 in Jan 2016. The output of manufacturing at 103.8436 in Jan 2016 is 19.1 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	-0.3 Nov	-7.1 Jan-Dec	-0.3 Nov	-4.5 Jan-Dec
Japan		Jan 2016 -12.9 Dec 2015 -8.0 Nov 2015 -3.3 Oct 2015 -2.1 Sep 2015 0.6 Aug 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		Jan 2016 -18.0 Dec 2015 -18.0 Nov 2015 -10.2 Oct 2015 -13.4 Sep 2015 -11.1 Aug -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	Jan-Dec 2015 -2.8	2016 Jan -11.2 2015 -1.4 Dec -6.8 Nov -6.9 Oct -3.7 Sep -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	Jan-Dec 2015 -14.1	2016 Jan -18.8 2015 -7.6 Dec -8.7 Nov -18.8 Oct -20.4 Sep -13.8 Aug -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	3.3 12 M-Dec	5.3 Jan-Dec	2.3 12-M Dec	3.4 Jan-Dec
Germany	-1.6 Dec CSA	3.2 Dec	-1.6 Dec CSA	3.5 Dec
France Dec	-0.9	0.9	-2.2	1.3
Italy Dec	-2.2	3.0	-3.5	2.6
UK	-0.8 Dec	-2.9 Oct 15-Dec 15 /Oct 14-Dec 14	-3.6 Nov	-1.9 Oct 15-Dec 15 /Oct 14-Dec 14
Net Trade % Points GDP Growth	Points
USA	IVQ2015 -0.47 IIIQ2015 -0.26 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	0.4 IQ2012 -1.6 IIQ2012 -1.8 IIIQ2012 -0.6 IVQ2012 1.8 IQ2013 -0.3 IIQ2013 -1.3 IIIQ2013 -2.0 IVQ2013 -0.9 IQ2014 3.6 IIQ2014 0.5 IIIQ2014 1.4 IVQ2014 0.0 IQ2015 -1.3 IIQ2015 0.8 IIIQ2015 0.6 IVQ2015
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 -0.1 IIQ2015 0.6 IIIQ2015 -0.4
France	0.1 IIIQ2012 0.1 IVQ2012 -0.1 IQ2013 0.3 IIQ2013 -1.7 IIIQ2013 0.1 IVQ2013 -0.1 IQ2014 -0.2 IIQ2014 -0.2 IIIQ2014 0.2 IVQ2014 -0.2 IQ2015 0.4 IIQ2015 -0.7 IIIQ2015 -0.3 IVQ2015
UK	0.7 IIQ2013 -1.7 IIIQ2013 0.1 IVQ2013 0.2 IQ2014 0.5 IIQ2014 -0.5 IIIQ2014 0.2 IVQ2014 -1.0 IQ2015 1.6 IIQ2015 -1.0 IIIQ2015

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 Jan 2016. The share of Asia in Japan’s trade is close to one-half for 50.9 percent of exports and 52.3 percent of imports. Within Asia, exports to China are 16.1 percent of total exports and imports from China 27.9 percent of total imports. While exports to China decreased 17.5 percent in the 12 months ending in Jan 2016, imports from China decreased 6.0 percent. The largest export market for Japan in Jan 2016 is the US with share of 21.1 percent of total exports, which is close to that of China, and share of imports from the US of 9.8 percent in total imports. Japan’s exports to the US decreased 5.3 percent in the 12 months ending in Jan 2016 and imports from the US decreased 9.7 percent. Western Europe has share of 12.1 percent in Japan’s exports and of 12.9 percent in imports. Rates of growth of exports of Japan in Jan 2016 are minus 5.3 percent for exports to the US, minus 45.7 percent for exports to Brazil and minus 7.9 percent for exports to Germany. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity. Growth rates of imports in the 12 months ending in Jan 2016 are mixed. Imports from Asia decreased 12.0 percent in the 12 months ending in Jan 2016 while imports from China decreased 6.0 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD) and revaluation of the dollar relative to the euro.

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

Jan 2016	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,351,639	-12.9	5,997,582	-18.0
Asia	2,723,519 % Total 50.9	-17.8	3,137,201 % Total 52.3	-12.0
China	860,032 % Total 16.1	-17.5	1,673,621 % Total 27.9	-6.0
USA	1,128,744 % Total 21.1	-5.3	584,815 % Total 9.8	-9.7
Canada	60,897	-22.2	81,323	-12.8
Brazil	22,055	-45.7	79,551	-8.2
Mexico	81,443	-7.3	55,237	43.5
Western Europe	646,517 % Total 12.1	-3.8	774,614 % Total 12.9	4.4
Germany	147,771	-7.9	208,499	-0.1
France	48,380	-0.5	82,372	-16.4
UK	120,160	3.8	59,063	-0.4
Middle East	217,154	0.2	577,550	-43.5
Australia	96,336	-16.8	292,947	-37.3

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 3.3 percent in 2014 to 4.1 percent in 2016 and 4.7 percent on average from 2017 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 ∆%

	2014	2015	2016	Average ∆% 2017-2019
World Trade Volume (Goods and Services)	3.3	3.2	4.1	4.7
Exports Goods & Services	3.2	3.4	3.9	4.6
Imports Goods & Services	3.5	3.0	4.3	4.8
Average Oil Price USD/Barrel	96.25	51.62	50.36	Average ∆% 2007-2016 82.03
Average Annual ∆% Export Unit Value of Manufactures	-0.6	-4.1	-0.7	Average ∆% 2007-2016 0.8
Exports of Goods & Services	2014	2015	2016	Average ∆% 2007-2016
EMDE	2.9	3.9	4.8	4.6
G7	3.4	3.1	3.4	2.9
Imports Goods & Services
EMDE	3.6	1.3	4.4	6.0
G7	3.4	4.0	4.2	2.4
Terms of Trade of Goods & Services
EMDE	-0.5	-4.7	-1.0	0.1
G7	0.4	1.6	0.1	0.0
Terms of Trade of Goods
EMDE	-0.6	-4.3	-0.6	0.2
G7	0.2	1.4	0.0	-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/2015/02/weodata/index.aspx

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, decreased to 52.5 in Jan from 52.7 in Dec, indicating expansion at slower rate (https://www.markiteconomics.com/Survey//PressRelease.mvc/70c47b048dd64219b99dc4d2b3d20f08). This index has remained above the contraction territory of 50.0 during 39 consecutive months. The employment index increased from 51.8 in Dec to 52.1 in Jan with input prices rising at slower rate, new orders increasing at faster rate and output increasing at slower rate (https://www.markiteconomics.com/Survey//PressRelease.mvc/70c47b048dd64219b99dc4d2b3d20f08). David Hensley, Director of Global Economic Coordination at JP Morgan, finds slowing growth at the beginning of 2016 but with increasing orders (https://www.markiteconomics.com/Survey//PressRelease.mvc/70c47b048dd64219b99dc4d2b3d20f08). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, increased to 50.9 in Jan from 50.7 in Dec (https://www.markiteconomics.com/Survey//PressRelease.mvc/3e171bc4c0dd4e388c2e8b2750ffb919). New export orders increased at the same rate. David Hensley, Director of Global Economic Coordination at JP Morgan, finds the index suggesting moderate improvement in new orders but with export orders near stagnation (https://www.markiteconomics.com/Survey//PressRelease.mvc/3e171bc4c0dd4e388c2e8b2750ffb919). The Markit Brazil Composite Output Index increased from 43.9 in Dec to 45.1 in Jan, indicating contraction in activity of Brazil’s private sector (https://www.markiteconomics.com/Survey//PressRelease.mvc/fe80a2dc670641329fd0377c0d3d348b). The Markit Brazil Services Business Activity index, compiled by Markit, increased from 43.5 in Dec to 44.4 in Jan, indicating contracting services activity (https://www.markiteconomics.com/Survey//PressRelease.mvc/fe80a2dc670641329fd0377c0d3d348b). Pollyana De Lima, Economist at Markit, finds challenging conditions (https://www.markiteconomics.com/Survey//PressRelease.mvc/fe80a2dc670641329fd0377c0d3d348b). The Markit Brazil Purchasing Managers’ Index^TM (PMI^™) increased from 45.6 in Dec to 47.4 in Jan, indicating deterioration in manufacturing (https://www.markiteconomics.com/Survey//PressRelease.mvc/bc34237e385745df8e6025e226c9a283). Pollyanna De Lima, Economist at Markit, finds stress in manufacturing (https://www.markiteconomics.com/Survey//PressRelease.mvc/bc34237e385745df8e6025e226c9a283).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased to 52.7 in Jan from 51.2 in Dec (https://www.markiteconomics.com/Survey//PressRelease.mvc/1a8aa2bcfdd74d8197c327d1363bc250). New export orders increased marginally because of the strong US dollar. Chris Williamson, Chief Economist at Markit, finds growth improving (https://www.markiteconomics.com/Survey//PressRelease.mvc/1a8aa2bcfdd74d8197c327d1363bc250). The Markit Flash US Services PMI™ Business Activity Index decreased from 54.3 in Dec to 53.7 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/a69e171606884a09abaf1f0e5900244c). The Markit Flash US Composite PMI™ Output Index decreased from 54.0 in Dec to 53.7 in Jan. Chris Williamson, Chief Economist at Markit, finds that the surveys are consistent with GDP growth at annual rate of 1.5 percent (https://www.markiteconomics.com/Survey//PressRelease.mvc/a69e171606884a09abaf1f0e5900244c). The Markit US Composite PMI™ Output Index of Manufacturing and Services decreased to 53.2 in Jan from 54.0 in Dec (https://www.markiteconomics.com/Survey//PressRelease.mvc/75d3a3339e8d43ab934e9b8821943d47). The Markit US Services PMI™ Business Activity Index decreased from 54.3 in Dec to 53.2 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/75d3a3339e8d43ab934e9b8821943d47). Chris Williamson, Chief Economist at Markit, finds the indexes suggesting weaker growth (https://www.markiteconomics.com/Survey//PressRelease.mvc/75d3a3339e8d43ab934e9b8821943d47). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) increased to 52.4 in Jan from 51.2 in Dec, which indicates expansion at faster rate (https://www.markiteconomics.com/Survey//PressRelease.mvc/bc714a2168d245a699306b65ee377b07). New foreign orders increased mildly. Chris Williamson, Chief Economist at Markit, finds constrains from the stronger dollar (https://www.markiteconomics.com/Survey//PressRelease.mvc/bc714a2168d245a699306b65ee377b07). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 0.2 percentage points from 48.0 in Dec to 48.2 in Jan, which indicates contraction at slower rate (https://www.instituteforsupplymanagement.org/ISMReport/MfgROB.cfm?navItemNumber=30219). The index of new orders increased 2.7 percentage points from 48.8 in Dec to 51.5 in Jan. The index of new exports decreased 4.0 percentage points from 51.0 in Dec to 47.0 in Jan, contracting from expanding. The Non-Manufacturing ISM Report on Business^® PMI decreased 2.3 percentage points from 55.8 in Dec to 53.5 in Jan, indicating growth of business activity/production during 78 consecutive months, while the index of new orders decreased 2.4 percentage points from 58.9 in Dec to 56.5 in Jan (https://www.instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm?navItemNumber=30224). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Jan 12 months NSA ∆%: 1.4; ex food and energy ∆%: 2.2 Jan month SA ∆%: 0.0; ex food and energy ∆%: 0.3 Blog 2/21/16
Producer Price Index	Finished Goods Jan 12-month NSA ∆%: -1.2; ex food and energy ∆% 1.7 Jan month SA ∆% = -0.5; ex food and energy ∆%: 0.1 Final Demand Jan 12-month NSA ∆%: -0.2; ex food and energy ∆% 0.6 Jan month SA ∆% = 0.1; ex food and energy ∆%: 0.4 Blog 2/21/16
PCE Inflation	Dec 12-month NSA ∆%: headline 0.6; ex food and energy ∆% 1.4 Blog 2/7/16
Employment Situation	Household Survey: Dec Unemployment Rate SA 4.9% Blog calculation People in Job Stress Dec: 26.5 million NSA, 15.9% of Labor Force Establishment Survey: Nov Nonfarm Jobs +151,000; Private +158,000 jobs created  Dec 12-month Average Hourly Earnings Inflation Adjusted ∆%: 1.8 Blog 2/7/16
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 Dec 2015 3.667 million higher by 2.8 percent than 3.568 million in Dec 2006 Blog 2/14/16
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 IIIQ2015/IIIQ2014: 2.1 IVQ2015/IVQ2014 1.8 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 IIIQ2015 SAAR: 2.0 IVQ2015 SAAR: 0.7 Blog 1/31/2016
Real Private Fixed Investment	SAAR IVQ2015 ∆% 0.2 IVQ2007 to IVQ2015: 6.8% Blog 1/31/16
Corporate Profits	IIIQ2015 SAAR: Corporate Profits -1.6; Undistributed Profits -8.0 Blog 12/27/15
Personal Income and Consumption	Dec month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.4 Real Personal Consumption Expenditures (RPCE): 0.1 12-month Dec NSA ∆%: RDPI: 3.1; RPCE ∆%: 2.2 Blog 2/7/16
Quarterly Services Report	IIIQ15/IIIQ14 NSA ∆%: Information 3.6 Financial & Insurance 1.1 Earlier Data: Blog 3/22/15
Employment Cost Index	Compensation Private IVQ2015 SA ∆%: 0.5 Dec 12 months ∆%: 1.9 Earlier Data: Blog 2/1/15
Industrial Production	Jan month SA ∆%: 0.9 Jan 12 months SA ∆%: -0.7 Manufacturing Jan SA 0.5 ∆% Jan 12 months SA ∆% 1.2, NSA 1.4 Capacity Utilization: 77.1 Blog 2/21/16
Productivity and Costs	Nonfarm Business Productivity IVQ2015∆% SAAE -3.0; IVQ2015/IVQ2014 ∆% 0.3; Unit Labor Costs SAAE IVQ2015 ∆% 4.5; IVQ2015/IVQ2014 ∆%: 2.8 Blog 2/7/16
New York Fed Manufacturing Index	General Business Conditions From Jan minus 19.37 to Feb minus 16.64 New Orders: From Jan minus 23.54 to Feb minus 11.63 Blog 2/21/16
Philadelphia Fed Business Outlook Index	General Index from Jan -3.5 to Feb -2.8 New Orders from Jan -11.4 to Feb -5.3 Blog 2/21/16
Manufacturing Shipments and Orders	New Orders SA Dec ∆% -2.9 Ex Transport -0.8 Jan-Dec NSA New Orders ∆% minus 6.6 Ex transport minus 6.8 Earlier data: Blog 4/5/15
Durable Goods	Nov New Orders SA ∆%: 0.0 ; ex transport ∆%: -0.1 Jan-Nov 15/Jan-Oct 14 New Orders NSA ∆%: -3.7; ex transport ∆% -2.6 Earlier Data: Blog 4/26/15
Sales of New Motor Vehicles	Jan 2016 1,148,057; Jan 2015 1,151,123. Jan 16 SAAR 17.58 million, Dec 15 SAAR 17.34 million, Jan 2015 SAAR 16.72 million Blog 2/7/16
Sales of Merchant Wholesalers	Jan-Dec 2015/Jan-Dec 2014 NSA ∆%: Total -3.6; Durable Goods: 0.3; Nondurable Goods: -7.0 EARLIER DATA: Blog 4/12/15
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Dec 15 12-M NSA ∆%: Sales Total Business -2.4; Manufacturers -5.1 Retailers 2.5; Merchant Wholesalers -4.2 Blog 2/14/16
Sales for Retail and Food Services	Jan 2016/Jan 2015 ∆%: Retail and Food Services 1.4; Retail ∆% 0.8 Blog 2/14/16
Value of Construction Put in Place	SAAR month SA Nov ∆%: minus 0.1 Jan-Dec NSA: 10.5 Earlier Data: Blog 4/5/15
Case-Shiller Home Prices	Nov 2015/ Nov 2014 ∆% NSA: 10 Cities 5.3; 20 Cities: 5.8; National: 5.3 ∆% Nov SA: 10 Cities 0.9 ; 20 Cities: 0.9 Blog 1/31/16
FHFA House Price Index Purchases Only	Nov SA ∆% 0.5; 12 month NSA ∆%: 5.9 Blog 1/31/16
New House Sales	Dec 2015 month SAAR ∆%: 10.8 Jan-Dec 2015/Jan-Dec 2014 NSA ∆%: 13.7 Blog 1/31/16
Housing Starts and Permits	Jan Starts month SA ∆% -3.8; Permits ∆%: -0.2 Jan 2016/Jan 2015 NSA ∆% Starts 0.8; Permits  ∆% -6.3 Earlier Data: Blog 4/19/15
Rate of Homeownership	IVQ2015: 63.8 Blog 1/31/16
Trade Balance	Balance Dec SA -$43,357 million versus Nov -$42,226 million Exports Dec SA ∆%: -0.3 Imports Dec SA ∆%: 0.3 Goods Exports Jan-Dec 2015/Jan-Dec 2014 NSA ∆%: minus 7.1 Goods Imports Jan-Dec 2015/Jan-Dec 2014 NSA ∆%: minus 4.5 Blog 2/14/16
Export and Import Prices	Jan 12-month NSA ∆%: Imports -6.2; Exports -5.7 Earlier Data: Blog 4/12/15
Consumer Credit	Dec ∆% annual rate: Total 7.2; Revolving 7.5; Nonrevolving 7.1 Earlier Data: Blog 5/10/15
Net Foreign Purchases of Long-term Treasury Securities	Dec Net Foreign Purchases of Long-term US Securities: minus $43.4 billion Major Holders of Treasury Securities: China $1246.1 billion; Japan $1122.5 billion; Total Foreign US Treasury Holdings Nov $6165.8 billion Blog 2/21/16
Treasury Budget	Fiscal Year 2016/2015 ∆% Jan: Receipts 3.2; Outlays minus 0.1; Individual Income Taxes 3.5 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 Deficit Fiscal Year 2015 $439 billion Blog 2/14/2016
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 6/21/15 1/3/16
Commercial Banks Assets and Liabilities	Dec 2015 SAAR ∆%: Securities 11.9 Loans 10.4 Cash Assets minus 59.9 Deposits 2.1 Blog 1/24/16
Flow of Funds Net Worth of Families and Nonprofits	IIIQ2015 ∆ since 2007 Assets +$18,633.0 BN Nonfinancial 2464.0 BN Real estate $1629.1 BN Financial +16,169.0 BN Net Worth +$18,659.5 BN Blog 1/3/16
Current Account Balance of Payments	IIIQ2015 -138,480 MM % GDP 2.7 Blog 1/3/16
Collapse of United States Dynamism of Income Growth and Employment Creation	Blog 2/21/16
IMF View	World Real Economic Growth 2015 ∆% 3.1 Blog 10/11/15
Income, Poverty and Health Insurance in the United States	46.657 Million Below Poverty in 2014, 14.8% of Population Median Family Income CPI-2014 Adjusted $53,657 in 2014 back to 1996 Levels Uncovered by Health Insurance 32.968 Million in 2014 Blog 10/11/15
Monetary Policy and Cyclical Valuation of Risk Financial Assets	Blog 1/17/2016

Links to blog comments in Table USA: 2/14/16 http://cmpassocregulationblog.blogspot.com/2016/02/subdued-foreign-growth-and-dollar.html

2/7/16 http://cmpassocregulationblog.blogspot.com/2016/02/fluctuating-risk-financial-assets-in.html

1/31/16 http://cmpassocregulationblog.blogspot.com/2016/01/closely-monitoring-global-economic-and.html

1/24/16 http://cmpassocregulationblog.blogspot.com/2016/01/uncertainty-of-valuations-of-risk.html

1/17/16 http://cmpassocregulationblog.blogspot.com/2016/01/unconventional-monetary-policy-and.html

1/3/16 http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-and-dollar.html

12/27/15 http://cmpassocregulationblog.blogspot.com/2015/12/dollar-revaluation-and-decreasing.html

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

Risk aversion channels funds toward US long-term and short-term securities that finance the US balance of payments and fiscal deficits benefitting from risk flight to US dollar denominated assets. There are now temporary interruptions because of fear of rising interest rates that erode prices of US government securities because of mixed signals on monetary policy and exit from the Fed balance sheet of four trillion dollars of securities held outright. Net foreign purchases of US long-term securities (row C in Table VA-1) weakened from $18.2 billion in Nov 2015 to minus $43.4 billion in Dec 2015. Foreign (residents) purchases minus sales of US long-term securities (row A in Table VA-1) in Nov 2015 of minus $41.0 billion weakened to minus $43.4 billion in Dec 2015. Net US (residents) purchases of long-term foreign securities (row B in Table VA-1) improved from minus $9.6 billion in Nov 2015 to $14.0 billion in Dec 2015. Other transactions (row C2 in Table VA-1) changed from minus $13.2 billion in Nov 2015 to minus $14.0 billion in Dec 2015. In Dec 2015,

C = A + B + C2 = -$43.4 billion + $14.0 billion -$14.0 billion = -$43.4 billion

There are minor rounding errors. There is weakening demand in Table VA-1 in Dec in A1 private purchases by residents overseas of US long-term securities of $8.0 billion of which weakening in A11 Treasury securities of $12.2 billion, weakening in A12 of $0.7 billion in agency securities, weakening of $4.5 billion of corporate bonds and improvement of minus $9.5 billion in equities. Worldwide risk aversion causes flight into US Treasury obligations with significant oscillations. Official purchases of securities in row A2 decreased $51.3 billion with decrease of Treasury securities of $48.1 billion in Dec 2015. Official purchases of agency securities increased $1.0 billion in Dec 2015. Row D shows increase in Dec 2015 of $56.5 billion in purchases of short-term dollar denominated obligations. Foreign private holdings of US Treasury bills increased $43.8 billion (row D11) with foreign official holdings increasing $10.3 billion while the category “other” increased $2.4 billion. Foreign private holdings of US Treasury bills increased $43.8 billion in what could be arbitrage of duration exposures. Risk aversion of default losses in foreign securities dominates decisions to accept zero interest rates in Treasury securities with no perception of principal losses. In the case of long-term securities, investors prefer to sacrifice inflation and possible duration risk to avoid principal losses with significant oscillations in risk perceptions.

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

	Nov 2014 12 Months	Nov 2015 12 Months	Nov 2015	Dec 2015
A Foreign Purchases less Sales of US LT Securities	249.3	144.4	41.0	-43.4
A1 Private	171.0	356.8	41.2	8.0
A11 Treasury	120.6	205.5	37.5	12.2
A12 Agency	43.2	123.2	10.2	0.7
A13 Corporate Bonds	18.4	137.6	6.9	4.5
A14 Equities	-11.2	-109.5	-13.4	-9.5
A2 Official	78.3	-212.4	-0.2	-51.3
A21 Treasury	44.9	-225.9	0.9	-48.1
A22 Agency	31.4	33.5	3.7	1.0
A23 Corporate Bonds	7.0	-3.8	-1.8	0.1
A24 Equities	-4.9	-16.2	-2.9	-4.3
B Net US Purchases of LT Foreign Securities	25.9	175.9	-9.6	14.0
B1 Foreign Bonds	131.7	288.4	-11.3	19.1
B2 Foreign Equities	-105.7	-112.5	1.7	-5.1
C1 Net Transactions	275.3	320.2	31.4	-29.4
C2 Other	-84.0	-286.0	-13.2	-14.0
C Net Foreign Purchases of US LT Securities	191.2	34.3	18.2	-43.4
D Increase in Foreign Holdings of Dollar Denominated Short-term	26.7	60.6	52.8	56.5
D1 US Treasury Bills	-13.9	53.0	51.8	54.0
D11 Private	49.2	51.6	32.6	43.8
D12 Official	-63.1	1.4	19.1	10.3
D2 Other	40.6	7.6	1.0	2.4

C1 = A + B; C = C1+C2

A = A1 + A2

A1 = A11 + A12 + A13 + A14

A2 = A21 + A22 + A23 + A24

B = B1 + B2

D = D1 + D2

Sources: United States Treasury

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

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

Table VA-3 provides major foreign holders of US Treasury securities. China is the largest holder with $1246.1 billion in Dec 2015, decreasing 1.5 percent from $1264.5 billion in Nov 2015 while increasing $1.8 billion from Dec 2014 or 0.1 percent. The United States Treasury estimates US government debt held by private investors at $10,379 billion in Sep 2015. China’s holding of US Treasury securities represent 12.0 percent of US government marketable interest-bearing debt held by private investors (http://www.fms.treas.gov/bulletin/index.html). Min Zeng, writing on “China plays a big role as US Treasury yields fall,” on Jul 16, 2004, published in the Wall Street Journal (http://online.wsj.com/articles/china-plays-a-big-role-as-u-s-treasury-yields-fall-1405545034?tesla=y&mg=reno64-wsj), finds that acceleration in purchases of US Treasury securities by China has been an important factor in the decline of Treasury yields in 2014. Japan decreased its holdings from $1230.9 billion in Dec 2014 to $1122.5 billion in Dec 2015 or 8.8 percent. The combined holdings of China and Japan in Dec 2015 add to $2368.6 billion, which is equivalent to 22.8 percent of US government marketable interest-bearing securities held by investors of $10,379 billion in Sep 2015 (http://www.fms.treas.gov/bulletin/index.html). Total foreign holdings of Treasury securities increased from $6156.0 billion in Dec 2014 to $6165.8 billion in Dec 2015, or 0.2 percent. The US continues to finance its fiscal and balance of payments deficits with foreign savings (see Pelaez and Pelaez, The Global Recession Risk (2007)). A point of saturation of holdings of US Treasury debt may be reached as foreign holders evaluate the threat of reduction of principal by dollar devaluation and reduction of prices by increases in yield, including possibly risk premium. Shultz et al (2012) find that the Fed financed three-quarters of the US deficit in fiscal year 2011, with foreign governments financing significant part of the remainder of the US deficit while the Fed owns one in six dollars of US national debt. Concentrations of debt in few holders are perilous because of sudden exodus in fear of devaluation and yield increases and the limit of refinancing old debt and placing new debt. In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):

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

Table VA-2, US, Major Foreign Holders of Treasury Securities $ Billions at End of Period

	Dec 2015	Nov 2015	Dec 2014
Total	6165.8	6125.7	6156.0
China	1246.1	1264.5	1244.3
Japan	1122.5	1144.9	1230.9
Caribbean Banking Centers	351.6	336.6	272.4
Oil Exporters	292.5	289.0	285.9
Ireland	264.2	246.4	202.0
Brazil	254.8	255.0	255.8
Switzerland	231.9	227.1	190.1
United Kingdom	218.3	215.4	188.9
Luxembourg	200.5	193.0	171.8
Hong Kong	200.2	196.6	172.6
Taiwan	178.7	177.5	174.4
Belgium	121.7	143.6	335.4
India	116.8	115.4	83.0
Foreign Official Holdings	4095.4	4117.2	4122.6
A. Treasury Bills	336.7	326.4	335.3
B. Treasury Bonds and Notes	3758.7	3790.8	3787.3

Source: United States Treasury

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

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

VB Japan. The GDP of Japan grew at 1.0 percent per year on average from 1991 to 2002, with the GDP implicit deflator falling at 0.8 percent per year on average. The average growth rate of Japan’s GDP was 4 percent per year on average from the middle of the 1970s to 1992 (Ito 2004). Low growth in Japan in the 1990s is commonly labeled as “the lost decade” (see Pelaez and Pelaez, The Global Recession Risk (2007), 81-115). Table VB-GDP provides yearly growth rates of Japan’s GDP from 1995 to 2014. Growth weakened from 1.9 per cent in 1995 and 2.6 percent in 1996 to contractions of 2.0 percent in 1998 and 0.2 percent in 1999. Growth rates were below 2 percent with exception of 2.3 percent in 2000, 2.4 percent in 2004 and 2.2 percent in 2007. Japan’s GDP contracted sharply by 1.0 percent in 2008 and 5.5 percent in 2009. As in most advanced economies, growth was robust at 4.7 percent in 2010 but mediocre at minus 0.5 percent in 2011 because of the tsunami and 1.7 percent in 2012. Japan’s GDP grew 1.7 percent in 2013 and stagnated in 2014 at 0.0. The GDP of Japan increased 0.4 percent in 2015. 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 2015 is 0.9 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	1.4
2014	0.0
2015	0.4

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/mopo/outlook/gor1510b.pdf) with changes on Jan 29, 2016 (https://www.boj.or.jp/en/mopo/outlook/gor1601b.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 2015, the forecast is of growth of GDP between 1.0 to 1.3 percent, with the all items CPI less fresh food 0.0 to 0.2 percent (https://www.boj.or.jp/en/mopo/outlook/gor1601b.pdf). The critical difference is forecast of the CPI excluding fresh food of 0.2 to 1.6 percent in 2016 and 2.0 to 3.1 percent in 2017 (https://www.boj.or.jp/en/mopo/outlook/gor1601b.pdf). Consumer price inflation in Japan excluding fresh food was minus 0.2 percent in Dec 2015 and 0.1 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).
6. Quantitative and Qualitative Monetary Easing (QQE) with Negative Nominal Interest Rate. On January 29, 2016, the Policy Board of the Bank of Japan introduced a new policy to attain the “price stability target of 2 percent at the earliest possible time” (https://www.boj.or.jp/en/announcements/release_2016/k160129a.pdf). The new framework consists of three dimensions: quantity, quality and interest rate. The interest rate dimension consists of rates paid to current accounts that financial institutions hold at the Bank of Japan of three tiers zero, positive and minus 0.1 percent. The quantitative dimension consists of increasing the monetary base at the annual rate of 80 trillion yen. The qualitative dimension consists of purchases by the Bank of Japan of Japanese government bonds (JGBs), exchange traded funds (ETFs) and Japan real estate investment trusts (J-REITS).

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
Jan 2016	+1.0 to +1.3 [+1.1]	0.0 to 0.2 [+0.1]
Oct 2015	+0.8 to +1.4 [+1.2]	0.0 to +0.4 [+0.1
Jul 2015	+1.5 to +1.9 [+1.7]	+0.3 to +1.0 [+0.7]
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
Jan 2016	+1.0 to +1.7 [+1.5]	0.2 to 1.2 [+0.8]
Oct 2015	+1.2 to +1.6 [+1.4]	+0.8 to +1.5 [+1.4]
Jul 2015	+1.5 to 1.7 [+1.5]	+1.2 to +2.1 [+1.9]
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
Jan 2016	+0.1 to + 0.5 [+0.3]	+2.0 to +3.1 [+2.8]	+ 1.0 to +2.1 [+1.8]
Oct 2015	+0.1 to +0.5 [+0.3]	+2.5 to +3.4 [+3.1]	+1.2 to 2.1 [+1.8]
Jul 2015	+0.1 to +0.5 [+0.2]	+2.7 to +3.4 [+3.1]	+1.4 to +2.1 [+1.8]
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

https://www.boj.or.jp/en/mopo/outlook/gor1510b.pdf

https://www.boj.or.jp/en/mopo/outlook/gor1601b.pdf

The Nikkei Flash Japan Manufacturing PMI Index™ with the Flash Japan

Manufacturing PMI™ decreased from 52.6 in Dec to 52.4 in Jan and the Flash Japan

Manufacturing Output Index™ decreased from 53.9 in Dec to 53.2 in Jan

(https://www.markiteconomics.com/Survey//PressRelease.mvc/c88de57326834a93965670c7e07ca290). New export orders increased at faster rate. Amy Brownbill, Economist at

Markit, finds improving conditions in Japan’s manufacturing

(https://www.markiteconomics.com/Survey//PressRelease.mvc/c88de57326834a93965670c7e07ca290).The Nikkei Composite Output PMI Index increased from 52.2 in Dec to 52.6 in Jan, indicating increase of business activity (https://www.markiteconomics.com/Survey//PressRelease.mvc/7a94887e31c648d682bf898dac2bf56d). The Nikkei Business Activity Index of Services increased to 52.4 in Jan from 51.5 in Dec (https://www.markiteconomics.com/Survey//PressRelease.mvc/7a94887e31c648d682bf898dac2bf56d). Amy Brownbill, Ecoomist at Markit and author of the report, finds improving outlook (https://www.markiteconomics.com/Survey//PressRelease.mvc/7a94887e31c648d682bf898dac2bf56d). The Nikkei Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 52.6 in Dec to 52.3 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/014c1abae6e040a5b7d6f9ba3863c3d8). New orders increased from home and abroad. Amy Brownbill, Economist at Markit, finds improving conditions in manufacturing (https://www.markiteconomics.com/Survey//PressRelease.mvc/014c1abae6e040a5b7d6f9ba3863c3d8).Table JPY provides the country data table for Japan.

Table JPY, Japan, Economic Indicators

Historical GDP and CPI	1981-2010 Real GDP Growth and CPI Inflation 1981-2010 Blog 8/9/11 Table 26
Corporate Goods Prices	Jan ∆% -0.9 12 months ∆% -3.1 Blog 2/14/16
Consumer Price Index	Dec NSA ∆% -0.1; Dec 12 months NSA ∆% 0.2 Blog 1/31/16
Real GDP Growth	IVQ2015 ∆%: -0.4 on IIIQ2015;  IVQ2015 SAAR minus 1,4; ∆% from quarter a year earlier: 0.5 % Blog 6/16/13 8/18/13 9/15/13 11/17/13 12/15/13 2/23/14 3/16/14 5/18/14 6/15/14 8/17/14 9/14/14 11/23/14 12/14/14 2/22/15 3/15/15 5/24/15 6/14/15 8/23/15 9/13/15 11/22/15 12/13/15 2/21/16
Employment Report	Dec Unemployed 2.04 million Change in unemployed since last year: -60 thousand Unemployment rate: 3.3 % Blog 1/31/16
All Industry Indices	Dec month SA ∆% -0.9 12-month NSA ∆% -0.5 Earlier Data: Blog 4/26/15
Industrial Production	Dec SA month ∆%: -1.4 Nov -0.9 Dec 12-month NSA ∆% -1.6 Nov 1.7 Earlier Data: Blog 3/29/15
Machine Orders	Total Dec ∆% 3.6 Private ∆%: 5.4 Dec ∆% Excluding Volatile Orders 4.2 Earlier Data: Blog 4/19/15
Tertiary Index	Dec month SA ∆% -0.6 Dec 12 months NSA ∆% 0.1 Earlier Data: Blog 4/26/15
Wholesale and Retail Sales	Dec 12 months: Total ∆%: -2.9 Wholesale ∆%: -3.7 Retail ∆%: -1.1 Earlier Data: Blog 3/29/15
Family Income and Expenditure Survey	Dec 12-month ∆% total nominal consumption -4.2, real -4.4 Earlier Data: Blog 3/29/15
Trade Balance	Exports Jan 12 months ∆%: minus 12.9 Imports Jan 12 months ∆% -18.0 Earlier Data: Blog 4/26/15

Links to blog comments in Table JPY: 2/14/16 http://cmpassocregulationblog.blogspot.com/2016/02/subdued-foreign-growth-and-dollar.html

1/31/16 http://cmpassocregulationblog.blogspot.com/2016/01/closely-monitoring-global-economic-and.html

1/17/16 http://cmpassocregulationblog.blogspot.com/2016/01/unconventional-monetary-policy-and.html

12/13/15 http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-interest-rates-with-volatile_17.html

11/22/15 http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-liftoff-followed-by.html

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Japan’s economy grew 1.2 percent in IQ2014, seasonally adjusted, partly because of anticipation of purchases to avoid the increase in the tax on value added of consumption in Apr 2014, contracting 2.0 percent in IIQ2014, as shown in Table VB-1, incorporating the latest estimates and revisions. Japan’s GDP contracted 0.6 percent in IIIQ2014 and grew 0.6 percent in IVQ2014. The GDP of Japan increased 1.0 percent in IQ2015 and contracted 0.3 percent in IIQ2014. The GDP of Japan grew 0.3 percent in IIIQ2015. Japan’s GDP contracted 0.4 percent in IVQ2015. The economy of Japan contracted 0.1 percent in IVQ2013 after growing 0.5 percent in IIIQ2013, 0.7 percent in IIQ2013 and 1.0 percent in IQ2013. Japan’s GDP decreased 0.1 percent in IVQ2012 relative to IIIQ2012. GDP growth in IQ2012 was revised to 1.0 percent; IIQ2012 GDP growth was revised to -0.4 percent; and IIIQ2012 growth was revised to -0.5 percent. The economy of Japan had already weakened in IVQ2010 when GDP fell revised 0.5 percent. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell 2.0 percent in IQ2011 and fell again 0.6 percent in IIQ2011 because of the disruption of the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Recovery was robust in the first two quarters of 2010 but GDP grew at 1.5 percent in IIIQ2010 and fell 0.5 percent in IVQ2010. The deepest quarterly contractions in the global recession were 3.3 percent in IVQ2008 and 4.0 percent in IQ2009. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). Using seasonally adjusted and price adjusted data (http://www.esri.cao.go.jp/index-e.html), Japan’s GDP fell 9.2 percent from the pre-downturn peak in IQ2008 to the lowest reading in IQ2009. Japan’s GDP decreased 0.4 percent from IQ2008 to IVQ2015. GDP in Japan grew 9.7 percent from IIQ2009 to IVQ2015 at the annual equivalent rate of 1.4 percent, using the latest revision (http://www.esri.cao.go.jp/index-e.html).

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

	IQ	IIQ	IIIQ	IVQ
2015	1.0	-0.3	0.3	-0.4
2014	1.2	-2.0	-0.6	0.6
2013	1.0	0.7	0.5	-0.1
2012	0.9	-0.4	-0.5	-0.1
2011	-2.0	-0.6	2.7	0.2
2010	1.4	1.1	1.5	-0.5
2009	-4.0	1.7	0.1	1.7
2008	0.7	-1.2	-1.0	-3.3
2007	1.0	0.2	-0.4	0.8
2006	0.4	0.4	-0.1	1.3
2005	0.2	1.3	0.4	0.2
2004	0.9	0.1	0.1	-0.3
2003	-0.6	1.3	0.4	1.0
2002	-0.2	1.0	0.6	0.4
2001	0.7	-0.2	-1.1	-0.1
2000	1.7	0.2	-0.3	0.7
1999	-0.8	0.4	-0.2	0.5
1998	-1.9	-0.5	0.3	0.5
1997	0.8	-1.0	0.4	-0.1

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Table VB-2 provides contributions to real GDP at seasonally adjusted annual rates (SAAR). The GDP of Japan grew at minus 1.4 percent in IVQ2015 with deduction of 2.0 percent by personal consumption (PC) expenditures and 0.5 percent by private inventories (PINV). Net trade (Trade) contributed 0.6 percent and gross fixed capital formation 0.1 percent. GDP grew at 1.3 percent in IIIQ2015 with highest contributions of 0.9 percent by personal consumption expenditures, 0.8 percentage points by net exports and 0.2 percentage points by government consumption. Gross Fixed Capital Formation contributed 0.8 percentage points and inventory divestment deducted 0.8 percentage points. GDP fell at 1.4 percent in IIQ2015 with highest deductions of 2.0 percent by personal consumption expenditures and 1.3 percent of net exports. Goss fixed capital formation contributed 0.2 percentage points, government consumption expenditures 0.4 percentage points and inventory investment 1.3 percentage points. GDP grew at 4.2 percent in IQ2015 with highest contributions of 0.6 percent by personal consumption expenditures and increase in inventory investment at 2.2 percent. Gross fixed capital formation increased at 1.3 percent while trade contributed 0.0 percentage points and government consumption expenditures added 0.2 percentage points. GDP expanded at 2.5 percent in IVQ2014 with contribution of 1.6 percent by personal consumption expenditures, 1.4 percent by net trade and 0.3 percent by government consumption expenditures. Gross fixed capital formation added 0.1 percent and private inventory divestment deducted 0.6 percent. Trade added 1.4 percentage points. Japan contracted at 2.6 percent in IIIQ2014 with deduction of 0.8 percentage points of GFCF and deduction of 2.6 percentage points of inventory divestment. Traded added 0.5 percentage points and government 0.2 percent. Japan’s GDP contracted at 7.9 percent in IIQ2014 with deductions of 12.2 percent by personal consumption and 4.2 percent by gross fixed capital formation. Trade added 3.6 percentage points and government expenditures deducted 0.1 percent. Inventory investment added 5.1 percent. The GDP of Japan expanded at 5.0 percent in IQ2014 with contributions of 5.6 percent by personal consumption and 2.3 percent of gross fixed capital formation. There were deductions of 0.9 percent by trade, 1.9 percent by inventory divestment and 0.1 percent by government expenditures. The GDP of Japan contracted at 0.3 percent annual equivalent in IVQ2013 with contribution of personal consumption expenditures of 0.2 percent and growth of GFCF at 1.0 percent. Trade deducted 2.0 percentage points. Japan grew at 2.1 percent in IIIQ2013 with contribution of 0.8 percentage points by personal consumption and 1.6 percentage points by GFCF. Trade deducted 1.3 percentage points. Japan grew at 2.7 percent SAAR in IIQ2013 driven by contribution of 2.1 percent of personal consumption, deduction of 0.3 percent of net trade and contribution of gross fixed capital formation at 2.5 percent. In IQ2013, Japan’s GDP increased at the SAAR of 4.0 percent in large part because of 1.8 percent in personal consumption and 1.8 percent in trade. The SAAR of GDP in IVQ2012 was minus 0.3 percent: 0.4 percentage points from growth of personal consumption expenditures less 0.6 percentage points of net trade (exports less imports) less 0.4 percentage points of private inventory investment (PINV) plus 0.5 percentage points of government consumption and minus 0.2 percentage points of gross fixed capital formation. The SAAR of GDP in IIIQ2011 was revised to a high 11.2 percent. Net trade deducted from GDP growth in three quarters of 2011 and provided the growth impulse of 3.9 percentage points in IIIQ2011. Growth in 2011 and IQ2012 was driven by personal consumption expenditures that deducted 1.0 percentage points from GDP growth in IIIQ2012 but contributed 0.4 percentage points to GDP growth in IVQ2012.

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

	GDP	PC	GFCF	Trade	PINV	GOVC
2015
I	4.2	0.6	1.3	0.0	2.2	0.2
II	-1.4	-2.0	0.2	-1.3	1.3	0.4
III	1.3	0.9	0.2	0.8	-0.8	0.2
IV	-1.4	-2.0	0.1	0.6	-0.5	0.4
2014
I	5.0	5.6	2.3	-0.9	-1.9	-0.1
II	-7.9	-12.2	-4.2	3.6	5.1	-0.1
III	-2.6	0.0	-0.8	0.5	-2.6	0.2
IV	2.5	1.6	0.1	1.4	-0.6	0.3
2013
I	4.0	1.8	-0.4	1.8	0.4	0.5
II	2.7	2.1	2.5	-0.3	-2.3	0.6
III	2.1	0.8	1.6	-1.3	1.0	0.1
IV	-0.3	0.2	1.0	-2.0	0.5	0.0
2012
I	3.7	1.2	-0.7	0.4	1.9	0.8
II	-1.6	1.8	0.8	-1.6	-2.3	-0.2
III	-1.8	-1.0	-1.0	-1.8	1.5	0.4
IV	-0.3	0.4	-0.2	-0.6	-0.4	0.5
2011
I	-7.7	-4.1	-0.3	-1.2	-1.9	-0.2
II	-2.2	2.6	0.3	-4.5	-1.4	0.4
III	11.2	3.9	1.3	3.9	1.8	0.1
IV	1.0	1.1	3.2	-2.9	-0.6	0.2
2010
I	5.8	1.7	0.1	2.3	2.3	-0.6
II	4.6	0.1	1.2	0.1	1.9	1.3
III	6.1	3.2	0.9	0.5	1.3	0.3
IV	-2.0	-1.0	-1.2	-0.4	0.1	0.3
2009
I	-15.1	-2.0	-2.0	-4.4	-7.4	0.7
II	7.1	4.1	-3.0	7.5	-2.2	0.7
III	0.4	0.0	-1.4	2.2	-1.4	1.0
IV	7.1	3.5	0.0	2.7	0.6	0.3
2008
I	2.7	1.4	0.4	1.2	-0.3	-0.1
II	-4.6	-3.2	-2.2	0.6	1.0	-0.8
III	-4.1	-0.5	-1.0	0.0	-2.6	0.0
IV	-12.6	-2.8	-4.5	-11.5	5.7	0.3
2007
I	4.0	0.9	0.5	1.1	1.3	0.3
II	0.6	0.6	-1.5	0.8	0.0	0.5
III	-1.5	-1.0	-1.7	2.0	-0.6	-0.2
IV	3.4	0.3	0.3	1.3	0.9	0.6

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

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 to IQ2012. The only strong contribution of net trade was 3.9 percent in IIIQ2011. Net trade added 1.8 percentage points to GDP growth in IQ2013 but deducted 0.3 percentage points in IIQ2013, 1.3 percentage points in IIIQ2013 and 2.0 percentage points in IVQ2013. Net trade deducted 0.9 percentage points from GDP growth in IQ2014. Net trade added 3.6 percentage points to GDP growth in IIQ2014 and 0.5 percentage points in IIIQ2014. Net trade added 1.4 percentage points to GDP growth in IVQ2014. Net trade contributed 0.0 percentage points to GDP growth in IQ2015 and deducted 1.3 percentage points in IIQ2015. Net trade added 0.8 percentage points to GDP growth in IIIQ2015. Net trade added 0.6 percentage points to GDP growth in IVQ2015. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

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

	Net Trade	Exports	Imports
2015
I	0.0	1.5	-1.6
II	-1.3	-3.4	2.2
III	0.8	1.9	-1.0
IV	0.6	-0.6	1.2
2014
I	-0.9	3.9	-4.8
II	3.6	0.1	3.5
III	0.5	1.0	-0.5
IV	1.4	2.3	-0.9
2013
I	1.8	2.2	-0.5
II	-0.3	1.8	-2.1
III	-1.3	-0.2	-1.1
IV	-2.0	-0.0	-2.0
2012
I	0.4	1.6	-1.2
II	-1.6	-0.2	-1.5
III	-1.8	-2.3	0.5
IV	-0.6	-2.1	1.6
2011
I	-1.2	-0.5	-0.7
II	-4.5	-4.6	0.1
III	3.9	5.8	-1.9
IV	-2.9	-1.9	-0.9
2010
I	2.3	3.6	-1.3
II	0.1	2.7	-2.6
III	0.5	1.4	-0.9
IV	-0.4	0.1	-0.4
2009
I	-4.4	-16.4	12.0
II	7.5	4.7	2.7
III	2.2	5.2	-3.1
IV	2.7	4.1	-1.4
2008
I	1.2	2.1	-0.9
II	0.6	-1.5	2.1
III	0.0	0.1	-0.2
IV	-11.5	-10.2	-1.3
2007
I	1.1	1.7	-0.5
II	0.8	1.6	-0.8
III	2.0	1.4	0.6
IV	1.3	2.0	-0.7

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Japan’s percentage growth of GDP not seasonally adjusted in a quarter relative to the same quarter a year earlier is shown in Table VB-4. Contraction of GDP in a quarter relative to the same quarter a year earlier extended over seven quarters from IIQ2008 through IVQ2009. Contraction was sharpest in IQ2009 with output declining 9.4 percent relative to a year earlier. Yearly quarterly rates of growth of Japan were relatively high for a mature economy through the decade with the exception of the contractions from IVQ2001 to IIQ2002 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused flat GDP in IQ2011 at 0.1 percent relative to the same quarter a year earlier and decline of 1.5 percent in IIQ2011. GDP fell 0.5 percent in IIIQ2011 relative to a year earlier and increased 0.1 percent in IVQ2011 relative to a year earlier. Growth resumed with 3.5 percent in IQ2012 relative to a year earlier. Growth of 3.5 percent in IIQ2012 is largely caused by the low level in IIQ2011 resulting from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP increased 0.2 percent in IIIQ2012 relative to a year earlier and changed 0.0 percent in IVQ2012 relative to a year earlier. GDP increased 0.3 percent in IQ2013 relative to a year earlier and 1.1 percent in IIQ2013. Growth of 2.0 percent in IIIQ2013 relative to a year earlier is partly due to the decline of 0.5 percent in GDP in IIIQ2012.  GDP increased 2.1 percent in IVQ2013 relative to a year earlier. The GDP of Japan increased 2.7 percent in IQ2014 relative to a year earlier. Japan’s GDP contracted 0.3 percent in IIQ2014 relative to a year earlier. GDP contracted 1.5 percent in IIIQ2014 relative to a year earlier. Japan’s GDP contracted 1.0 percent in IVQ2014 relative to a year earlier. GDP fell 1.0 percent relative to a year earlier in IQ2015 and increased 0.7 percent in IIQ2015 relative to a year earlier. GDP increased 1.7 percent in IIIQ2015 relative to a year earlier. GDP increased 0.5 percent in IVQ2015 relative to a year earlier. Japan faces the challenge of recovery from the devastation of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in an environment of declining world trade and bouts of risk aversion that cause appreciation of the Japanese yen, eroding the country’s competitiveness in world markets. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977).  Using price adjusted but not seasonally adjusted data (http://www.esri.cao.go.jp/index-e.html), Japan’s GDP contracted 11.5 percent from the high in IVQ2007 to the low in IIQ2009. GDP fell 0.3 percent from IVQ2007 to IVQ2015. Japan’s GDP grew 12.6 percent from IIIQ2009 to IVQ2015 at the annual equivalent rate of 1.8 percent.

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

	IQ	IIQ	IIIQ	IVQ
2015	-1.0	0.7	1.7	0.5
2014	2.7	-0.3	-1.5	-1.0
2013	0.3	1.1	2.0	2.1
2012	3.5	3.5	0.2	0.0
2011	0.1	-1.5	-0.5	0.1
2010	5.0	4.5	6.1	3.4
2009	-9.4	-6.6	-5.6	-0.5
2008	1.4	-0.1	-0.6	-4.7
2007	2.8	2.3	2.0	1.6
2006	2.6	1.3	0.9	2.0
2005	0.4	1.4	1.5	1.9
2004	4.0	2.6	2.2	0.7
2003	1.7	1.8	1.5	1.8
2002	-1.6	-0.2	1.4	1.6
2001	1.6	0.9	0.0	-1.0
2000	2.7	2.4	2.2	1.8
1999	-0.3	0.1	-0.1	-0.5
1998	-2.4	-1.8	-2.3	-1.5
1997	3.5	1.5	1.7	-0.2

Source: Japan Economic and Social Research Institute, Cabinet Office

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

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 to IQ2012. The only strong contribution of net trade was 3.9 percent in IIIQ2011. Net trade added 1.8 percentage points to GDP growth in IQ2013 but deducted 0.3 percentage points in IIQ2013, 1.3 percentage points in IIIQ2013 and 2.0 percentage points in IVQ2013. Net trade deducted 0.9 percentage points from GDP growth in IQ2014. Net trade added 3.6 percentage points to GDP growth in IIQ2014 and 0.5 percentage points in IIIQ2014. Net trade added 1.4 percentage points to GDP growth in IVQ2014. Net trade contributed 0.0 percentage points to GDP growth in IQ2015 and deducted 1.3 percentage points in IIQ2015. Net trade added 0.8 percentage points to GDP growth in IIIQ2015. Net trade added 0.6 percentage points to GDP growth in IVQ2015. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

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

	Net Trade	Exports	Imports
2015
I	0.0	1.5	-1.6
II	-1.3	-3.4	2.2
III	0.8	1.9	-1.0
IV	0.6	-0.6	1.2
2014
I	-0.9	3.9	-4.8
II	3.6	0.1	3.5
III	0.5	1.0	-0.5
IV	1.4	2.3	-0.9
2013
I	1.8	2.2	-0.5
II	-0.3	1.8	-2.1
III	-1.3	-0.2	-1.1
IV	-2.0	-0.0	-2.0
2012
I	0.4	1.6	-1.2
II	-1.6	-0.2	-1.5
III	-1.8	-2.3	0.5
IV	-0.6	-2.1	1.6
2011
I	-1.2	-0.5	-0.7
II	-4.5	-4.6	0.1
III	3.9	5.8	-1.9
IV	-2.9	-1.9	-0.9
2010
I	2.3	3.6	-1.3
II	0.1	2.7	-2.6
III	0.5	1.4	-0.9
IV	-0.4	0.1	-0.4
2009
I	-4.4	-16.4	12.0
II	7.5	4.7	2.7
III	2.2	5.2	-3.1
IV	2.7	4.1	-1.4
2008
I	1.2	2.1	-0.9
II	0.6	-1.5	2.1
III	0.0	0.1	-0.2
IV	-11.5	-10.2	-1.3
2007
I	1.1	1.7	-0.5
II	0.8	1.6	-0.8
III	2.0	1.4	0.6
IV	1.3	2.0	-0.7

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 104.9 in Jun 2009 to 94.0 in Jan 2012 or minus 10.4 percent and increased to 105.4 in Jan 2016 for gain of 12.1 percent relative to Jan 2012 and 0.5 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials. The recovery from the global recession began in the third quarter of 2009.

Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2016

Source: Bank of Japan

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

Chart IV-5A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 89.2 in Jan 2016 or minus 13.5 percent relative to Apr 2012 and fell 8.9 percent to 89.2 in Jan 2016 relative to Jun 2009.

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

Source: Bank of Japan

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

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-6 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan (for the relation of terms of trade and growth see Pelaez 1979, 1976a). The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 113.1 in Apr 2012 or 21.0 percent and to 99.9 in Jan 2016 or decline of 11.7 percent relative to Apr 2012 and increase of 6.8 percent relative to Jun 2009.

Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2016

Source: Bank of Japan

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

Chart IV-6A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 82.0 in Jan 2016 or minus 31.4 percent relative to Apr 2012 and decline of 4.9 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency decreased 8.9 percent from Jun 2009 to Jan 2016 while the import corporate goods price index decreased 4.9 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

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

Source: Bank of Japan

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

Table IV-6B provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Jan 2016. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Jan 2016, the export index on the contract currency basis decreased 10.1 percent and decreased 8.7 percent on the yen basis. For the entire period from Jan 2008 to Jan 2016, the import price index decreased 18.6 percent on the contract currency basis and decreased 16.1 percent on the yen basis. During significant part of the expansion period, prices of Japan’s exports of corporate goods on the contract currency, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while prices of imports of corporate goods on the contract currency, mostly commodities and raw materials, increased 38.6 percent. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

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

	X-CC	X-Y	M-CC	M-Y
2008/01	99.2	115.5	100.7	119.0
2008/02	99.8	116.1	102.4	120.6
2008/03	100.5	112.6	104.5	117.4
2008/04	101.6	115.3	110.1	125.2
2008/05	102.4	117.4	113.4	130.4
2008/06	103.5	120.7	119.5	140.3
2008/07	104.7	122.1	122.6	143.9
2008/08	103.7	122.1	123.1	147.0
2008/09	102.7	118.3	117.1	137.1
2008/10	100.2	109.6	109.1	121.5
2008/11	98.6	104.5	97.8	105.8
2008/12	97.9	100.6	89.3	93.0
2009/01	98.0	99.5	85.6	88.4
2009/02	97.5	100.1	85.7	89.7
2009/03	97.3	104.2	85.2	93.0
2009/04	97.6	105.6	84.4	93.0
2009/05	97.5	103.8	84.0	90.8
2009/06	97.9	104.9	86.2	93.5
2009/07	97.5	103.1	89.2	95.0
2009/08	98.3	104.4	89.6	95.8
2009/09	98.3	102.1	91.0	94.7
2009/10	98.0	101.2	91.0	94.0
2009/11	98.4	100.8	92.8	94.8
2009/12	98.3	100.7	95.4	97.5
2010/01	99.4	102.2	97.0	100.0
2010/02	99.7	101.6	97.6	99.8
2010/03	99.7	101.8	97.0	99.2
2010/04	100.5	104.6	99.9	104.6
2010/05	100.7	102.9	101.7	104.9
2010/06	100.1	101.6	100.0	102.3
2010/07	99.4	99.0	99.9	99.8
2010/08	99.1	97.3	99.5	97.5
2010/09	99.4	97.0	100.0	97.2
2010/10	100.1	96.4	100.5	95.8
2010/11	100.7	97.4	102.6	98.2
2010/12	101.2	98.3	104.4	100.6
2011/01	102.1	98.6	107.2	102.6
2011/02	102.9	99.5	109.0	104.3
2011/03	103.5	99.6	111.8	106.3
2011/04	104.1	101.7	115.9	111.9
2011/05	103.9	99.9	118.8	112.4
2011/06	103.8	99.3	117.5	110.5
2011/07	103.6	98.3	118.3	110.2
2011/08	103.6	96.6	118.6	108.1
2011/09	103.7	96.1	117.0	106.2
2011/10	103.0	95.2	116.6	105.6
2011/11	101.9	94.8	115.4	105.4
2011/12	101.5	94.5	116.1	106.2
2012/01	101.8	94.0	115.0	104.2
2012/02	102.4	95.8	115.8	106.4
2012/03	102.9	99.2	118.3	112.9
2012/04	103.1	98.7	119.5	113.1
2012/05	102.3	96.3	118.1	109.8
2012/06	101.4	95.0	115.2	106.7
2012/07	100.6	94.0	112.0	103.5
2012/08	100.9	94.1	112.4	103.6
2012/09	101.0	94.1	114.7	105.2
2012/10	101.1	94.7	113.8	105.2
2012/11	100.9	95.9	113.2	106.5
2012/12	100.7	98.0	113.4	109.5
2013/01	101.0	102.4	113.8	115.4
2013/02	101.5	105.9	114.8	120.2
2013/03	101.3	106.6	115.1	122.0
2013/04	100.2	107.5	114.1	123.8
2013/05	99.6	109.1	112.6	125.3
2013/06	99.2	106.1	112.0	121.2
2013/07	99.1	107.5	111.6	122.8
2013/08	99.0	106.1	111.8	121.3
2013/09	99.0	107.2	113.0	124.0
2013/10	99.2	106.7	113.1	122.9
2013/11	99.1	108.0	113.1	124.9
2013-12	99.1	110.4	113.8	129.0
2014-01	99.2	110.7	114.4	130.1
2014-02	98.9	109.2	113.8	127.7
2014-03	98.6	109.1	113.4	127.4
2014-04	98.3	109.0	112.7	126.9
2014-05	98.2	108.2	112.4	125.9
2014-06	97.9	108.1	112.5	126.2
2014-07	98.0	107.9	112.5	125.9
2014-08	98.1	108.8	112.3	126.7
2014-09	97.9	111.0	111.5	129.4
2014-10	97.3	110.8	109.6	127.9
2014-11	96.9	115.7	106.9	131.6
2014-12	96.0	116.4	103.3	129.4
2015-01	94.5	113.2	98.3	121.5
2015-02	93.8	112.1	93.2	114.8
2015-03	93.7	112.9	93.9	117.0
2015-04	93.6	112.2	92.4	114.5
2015-05	93.8	113.5	91.6	114.7
2015-06	93.7	115.2	92.9	118.7
2015-07	92.9	113.6	91.9	116.7
2015-08	92.2	112.7	90.2	114.4
2015-09	91.2	109.5	88.1	109.3
2015-10	90.6	108.7	87.1	107.9
2015-11	90.3	109.4	86.3	108.4
2015-12	89.7	108.3	84.5	105.5
2016-01	89.2	105.4	82.0	99.9

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

Source: Bank of Japan

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

Chart IV-7 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2015. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from policy interest rates rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Chart IV-5A and associated table at (http://cmpassocregulationblog.blogspot.com/2016/01/closely-monitoring-global-economic-and.html http://cmpassocregulationblog.blogspot.com/2015/12/dollar-revaluation-and-decreasing.html http://cmpassocregulationblog.blogspot.com/2015/11/dollar-revaluation-constraining.html http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-increase-considered.html http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-increase-considered.htmlhttp://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html

http://cmpassocregulationblog.blogspot.com/2015/08/fluctuations-of-global-financial.html http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial_77.html http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial_29.html http://cmpassocregulationblog.blogspot.com/2015/06/dollar-revaluation-squeezing-corporate_97.html http://cmpassocregulationblog.blogspot.com/2015/05/dollar-devaluation-and-carry-trade.html http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html http://cmpassocregulationblog.blogspot.com/2015/02/financial-and-international.html http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html http://cmpassocregulationblog.blogspot.com/2014/09/financial-volatility-mediocre-cyclical.html http://cmpassocregulationblog.blogspot.com/2014/09/geopolitical-and-financial-risks_71.html http://cmpassocregulationblog.blogspot.com/2014/03/financial-uncertainty-mediocre-cyclical_8145.html http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world_1.html and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or_561.html and at http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk_1.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).

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

Source: Bank of Japan

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

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

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

Source: US Bureau of Labor Statistics

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

Further insight into inflation of the corporate goods price index (CGPI) of Japan is in Table IV-7. The increase in the tax on value added of consumption caused sharp increases in prices across all segments. Petroleum and coal with weight of 5.7 percent decreased 9.3 percent in Jan 2016 and decreased 20.1 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, decreased 0.3 percent in Jan 2016 and decreased 0.3 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income (for analysis of terms of trade and growth see Pelaez (1979, 1976a). There are now inflation effects of the intentional policy of devaluing the yen and recent collapse of commodity prices.

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

Jan 2016	Weight	Month ∆%	12 Month ∆%
Total	1000.0	-0.9	-3.1
Food, Beverages, Tobacco, Feedstuffs	137.5	0.0	1.3
Petroleum & Coal	57.4	-9.3	-20.1
Production Machinery	30.8	-0.3	-0.3
Electronic Components	31.0	-0.3	-2.6
Electric Power, Gas & Water	52.7	-0.4	-10.9
Iron & Steel	56.6	-0.7	-6.2
Chemicals	92.1	-1.3	-5.2
Transport Equipment	136.4	0.0	0.4

Source: Bank of Japan

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

Percentage point contributions to change of the corporate goods price index (CGPI) in Jan 2016 are in Table IV-8, divided into domestic, export and import segments. In the domestic CGPI, decreasing 0.9 percent in Jan 2016, the energy shock is evident in the deduction of 0.48 percentage points by petroleum and coal products in renewed reversal of carry trades of exposures in commodity futures. The exports CGPI decreased 0.6 percent on the basis of the contract currency with deduction of 0.25 percentage points by other primary products and manufactured goods and deduction of 0.13 percentage points by chemicals and related products. The imports CGPI decreased 3.0 percent on the contract currency basis. Petroleum, coal and natural gas products deducted 2.08 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide.

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

Groups Jan 2016	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change:  -0.9%
Petroleum & Coal Products	-0.48
Agriculture, Forestry & Fishery Products	-0.15
Chemicals & Related Products	-0.12
Nonferrous Metals	-0.07
Iron & Steel	-0.04
Electric Power, Gas & Water	-0.03
B. Export Price Index	Monthly Change:    -0.6% contract currency
Other Primary Products & Manufactured Goods	-0.25
Chemicals & Related Products	-0.13
Electric & Electronic Products	-0.12
Metals & Related Products	-0.08
General Purpose, Production & Business Oriented Machinery	-0.05
Transportation Equipment	0.05
C. Import Price Index	Monthly Change: -3.0% contract currency basis
Petroleum, Coal & Natural Gas	-2.08
Chemicals & Related Products	-0.30
Metals & Related Products	-0.25
Foodstuffs & Feedstuffs	-0.13
General Purpose, Production & Business Oriented Machinery	-0.08
Electric & Electronic Products	-0.05
Other Primary Products & Manufactured Goods	-0.04
Transportation Equipment	0.02

Source: Bank of Japan

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

There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Jan 2011 to Feb 2016. The index of current prices paid or costs of inputs moved from 16.13 in Dec 2012 to 2.97 in Feb 2016 while the index of current prices received or sales prices moved from 1.08 in Dec 2012 to minus 4.95 in Feb 2016. The farther the index is from the area of no change at zero, the faster the rate of change. Prices paid or costs of inputs at 2.97 in Feb 2016 are expanding at faster pace than prices received or of sales of products contracting at 4.95. The index of future prices paid or expectations of costs of inputs in the next six months fell from 51.61 in Dec 2012 to 14.85 in Feb 2016 while the index of future prices received or expectation of sales prices in the next six months decreased from 25.81 in Dec 2012 to 3.96 in Feb 2016. Prices paid or of inputs are expected to increase at a faster pace in the next six months than prices received or prices of sales products. Prices of sales of finished products are less dynamic than prices of costs of inputs during waves of increases. Prices of costs of costs of inputs fall less rapidly than prices of sales of finished products during waves of price decreases. As a result, margins of prices of sales less costs of inputs oscillate with typical deterioration against producers, forcing companies to manage tightly costs and labor inputs. Instability of sales/costs margins discourages investment and hiring.

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

	Current Prices Paid	Current Prices Received	Six Months Prices Paid	Six Months Prices Received
Jan-11	35.79	15.79	60.00	42.11
Feb-11	45.78	16.87	55.42	27.71
Mar-11	53.25	20.78	71.43	36.36
Apr-11	57.69	26.92	56.41	38.46
May-11	69.89	27.96	68.82	35.48
Jun-11	56.12	11.22	55.1	19.39
Jul-11	43.33	5.56	51.11	30
Aug-11	28.26	2.17	42.39	15.22
Sep-11	32.61	8.7	53.26	22.83
Oct-11	22.47	4.49	40.45	17.98
Nov-11	18.29	6.1	36.59	25.61
Dec-11	24.42	3.49	56.98	36.05
Jan-12	26.37	23.08	53.85	30.77
Feb-12	25.88	15.29	62.35	34.12
Mar-12	50.62	13.58	66.67	32.1
Apr-12	45.78	19.28	50.6	22.89
May-12	37.35	12.05	57.83	22.89
Jun-12	19.59	1.03	34.02	17.53
Jul-12	7.41	3.7	35.8	16.05
Aug-12	16.47	2.35	31.76	14.12
Sep-12	19.15	5.32	40.43	23.4
Oct-12	17.2	4.3	44.09	24.73
Nov-12	14.61	5.62	39.33	15.73
Dec-12	16.13	1.08	51.61	25.81
Jan-13	22.58	10.75	38.71	21.51
Feb-13	26.26	8.08	44.44	13.13
Mar-13	25.81	2.15	50.54	23.66
Apr-13	28.41	5.68	44.32	14.77
May-13	20.45	4.55	29.55	14.77
Jun-13	20.97	11.29	45.16	17.74
Jul-13	17.39	1.09	28.26	11.96
Aug-13	20.48	3.61	40.96	19.28
Sep-13	21.51	8.6	39.78	24.73
Oct-13	21.69	2.41	45.78	25.3
Nov-13	17.11	-3.95	42.11	17.11
Dec-13	15.66	3.61	48.19	27.71
Jan-14	36.59	13.41	45.12	23.17
Feb-14	25	15	40	23.75
Mar-14	21.18	2.35	43.53	25.88
Apr-14	22.45	10.2	33.67	14.29
May-14	19.78	6.59	31.87	14.29
Jun-14	17.2	4.3	36.56	16.13
Jul-14	25	6.82	37.5	18.18
Aug-14	27.27	7.95	42.05	21.59
Sep-14	23.91	17.39	43.48	32.61
Oct-14	11.36	6.82	42.05	26.14
Nov-14	10.64	0	41.49	25.53
Dec-14	10.42	6.25	40.63	32.29
Jan-15	12.63	12.63	33.68	15.79
Feb-15	14.61	3.37	26.97	5.62
Mar-15	12.37	8.25	31.96	12.37
Apr-15	19.15	4.26	38.3	13.83
May-15	9.38	1.04	26.04	7.29
Jun-15	9.62	0.96	24.04	5.77
Jul-15	7.45	5.32	27.66	6.38
Aug-15	7.27	0.91	34.55	10.91
Sep-15	4.12	-5.15	28.87	7.22
Oct-15	0.94	-8.49	27.36	7.55
Nov-15	4.55	-4.55	29.09	11.82
Dec-15	4.04	-4.04	27.27	20.2
Jan-16	16.00	4.00	31.00	12.00
Feb-16	2.97	-4.95	14.85	3.96

Source: Federal Reserve Bank of New York

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

Price indexes of the Federal Reserve Bank of Philadelphia Outlook Survey are in Table IV-5A. As in inflation waves throughout the world (Section I and earlier http://cmpassocregulationblog.blogspot.com/2016/01/uncertainty-of-valuations-of-risk.html) indexes of both current and expectations of future prices paid and received were quite high until May 2011. Prices paid, or inputs, were more dynamic, reflecting carry trades from zero interest rates to commodity futures. All indexes softened after May 2011 with even decline of prices received in Aug 2011 during the first round of risk aversion. Current and future price indexes have increased again but not back to the intensity in the beginning of 2011 because of risk aversion frustrating carry trades even induced by zero interest rates. The index of prices paid or prices of inputs moved from 20.6 in Dec 2012 to minus 2.2 in Feb 2016. The index of current prices received was minus 1.6 in Apr 2013, indicating decrease of prices received. The index of current prices received decreased from 8.5 in Dec 2012 to minus 5.5 in Sep 2015, decreasing to minus 4.5 in Feb 2016. The farther the index is from the area of no change at zero, the faster the rate of change. The index of current prices paid or costs of inputs at minus 2.2 in Feb 2016 indicates slower contraction than the index of current prices received or sales prices of production in Feb 2016, showing contraction at minus 4.5. Prices paid indicate faster expansion than prices received during most of the history of the index. The index of future prices paid decreased to 11.9 in Feb 2016 from 42.3 in Dec 2012 while the index of future prices received decreased from 22.2 in Dec 2012 to 2.1 in Feb 2016. Expectations are incorporating faster increases in prices of inputs or costs of production, 11.9 in Feb 2016, than of sales prices of produced goods, 2.1 in Feb 2016, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages investment and hiring.

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

	Current Prices Paid	Current Prices Received	Six Months Prices Paid	Six Months Prices Received
10-Dec	42.6	5.1	56.3	24.5
11-Jan	48.2	12.5	58.9	34.4
11-Feb	61.8	13.6	67.9	31.5
11-Mar	59.2	17.8	61.5	33.5
11-Apr	52.8	23.1	56.4	36.3
11-May	51.3	20.8	54.8	28.4
11-Jun	36.3	6.5	40.8	6.7
11-Jul	34.1	5.6	48.2	17.3
11-Aug	23.4	-3	42.8	22.8
11-Sep	30.1	6.3	38.6	20.5
11-Oct	22.6	1.5	41.5	28.1
11-Nov	21.8	4.9	34.5	26.6
11-Dec	24.9	5.3	42.8	21.3
12-Jan	26	9	48	21.3
12-Feb	33.6	10.4	50.5	26.2
12-Mar	17.4	6.9	38.6	24.8
12-Apr	22	10	37.1	25
12-May	10.4	1.6	40.2	8.9
12-Jun	1.7	-5.7	33.1	16.6
12-Jul	8	3.3	27.2	20.8
12-Aug	16.3	7.1	35	23.9
12-Sep	12.8	2.5	38.8	24.7
12-Oct	17	4.3	44.3	15.6
12-Nov	21.9	4.1	45.9	11
12-Dec	20.6	8.5	42.3	22.2
13-Jan	13.2	0.4	35.1	21.1
13-Feb	13	0.4	33.8	22.7
13-Mar	13	1.4	35.1	20.2
13-Apr	11.7	-1.6	31.7	16.6
13-May	13.5	1.4	34.9	18.7
13-Jun	18.2	12	30.3	23.6
13-Jul	18.2	5.2	39.6	25.4
13-Aug	18.1	13	33.8	22.9
13-Sep	21.9	11.5	38.3	27.8
13-Oct	16.8	8.3	41.7	35
13-Nov	22.8	5.7	40.9	36.6
13-Dec	16.9	7.9	40.9	29.2
14-Jan	20.6	8.1	37.6	12.9
14-Feb	16.7	10	27.4	18.8
14-Mar	21	7.8	33.7	20.4
14-Apr	21.2	11.7	39.2	21.3
14-May	28.2	18.9	38.3	28.1
14-Jun	28	10.6	42.8	29.1
14-Jul	28.7	13.3	35.5	22.7
14-Aug	22.1	6.3	43.9	27.7
14-Sep	21.5	7.5	40.4	26.8
14-Oct	22.5	15.9	31.5	22.5
14-Nov	13.6	7.1	32.2	18.8
14-Dec	15.2	9.7	26.6	21.2
15-Jan	12.6	2.5	30.6	19.8
15-Feb	6.6	2.8	33	20.8
15-Mar	1.3	-4.1	30.4	9.8
15-Apr	1.3	-0.7	21.1	14.2
15-May	-12.0	-4.7	23.1	17.7
15-Jun	12.0	1.4	40.6	11.2
15-Jul	14.8	-0.6	31.9	17.1
15-Aug	3.8	-3.4	33.1	8.5
15-Sep	-3.1	-5.5	26.9	6.4
15-Oct	-3.2	-2.8	18.4	9.7
15-Nov	-7.5	-4.1	22.4	10.8
15-Dec	-8.3	-8.5	26	15
16-Jan	-1.1	-2.8	18.8	10.1
16-Feb	-2.2	-4.5	11.9	2.1

Source: Federal Reserve Bank of Philadelphia

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

Chart IV-1 of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices paid or prices of inputs from 2006 to 2016. Recession dates are in shaded areas. In the middle of deep global contraction after IVQ2007, input prices continued to increase in speculative carry trades from central bank policy rates falling toward zero into commodities futures. The index peaked above 70 in the second half of 2008. Inflation of inputs moderated significantly during the shock of risk aversion in late 2008, even falling briefly into contraction territory below zero during several months in 2009 in the flight away from risk financial assets into US government securities (Cochrane and Zingales 2009) that unwound carry trades. Return of risk appetite induced carry trade with significant increase until return of risk aversion in the first round of the European sovereign debt crisis in Apr 2010. Carry trades returned during risk appetite in expectation that the European sovereign debt crisis was resolved. The various inflation waves originating in carry trades induced by zero interest rates with alternating episodes of risk aversion are mirrored in the prices of inputs after 2011, in particular after Aug 2012 with the announcement of the Outright Monetary Transactions Program of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). Subsequent risk aversion and flows of capital away from commodities into stocks and high-yield bonds caused sharp decline in the index of prices paid followed by another recent rebound with marginal decline and new increase. The index falls, rebounds and falls again in the final segment but there are no episodes of contraction after 2009 with exception of minus 12.0 in May 2015, minus 3.1 in Sep 2015, minus 3.2 in Oct 2015, minus 7.5 in Nov 2015 and minus 8.3 in Dec 2015. The reading for the index in Jan 2016 is minus 1.1 and minus 2.2 for Feb 2016.

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

Source: Federal Reserve Bank of Philadelphia

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

Chart IV-2 of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices received from 2006 to 2016. The significant difference between the index of current prices paid in Chart IV-1 and the index of current prices received in Chart IV-2 is that increases in prices paid are significantly sharper than increases in prices received. There were several periods of negative readings of prices received from 2010 to 2016. Prices paid increased at 1.3 in Mar 2015 while prices received contracted at 4.1. There were several contraction of prices paid: 12.0 in May 2015 with milder contraction of 4.7 of prices received; minus 3.1 for prices paid in Sep 2015 with minus 5.5 for prices received; and minus 3.2 for prices paid in Oct 2015 with minus 2.8 for prices received. The index of prices received fell to minus 4.1 in Nov 2015 with minus 7.5 for prices paid and to minus 8.5 in Dec 2015 with minus 8.3 for prices paid. The index of prices received fell to minus 4.5 in Feb 2016 with minus 2.2 for prices paid. Prices received relative to prices paid deteriorate most of the time largely because of the carry trades from zero interest rates to commodity futures. Profit margins of business are compressed intermittently by fluctuations of commodity prices induced by unconventional monetary policy of zero interest rates, frustrating production, investment and hiring decisions of business, which is precisely the opposite outcome pursued by unconventional monetary policy.

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

Source: Federal Reserve Bank of Philadelphia

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

VC China. China estimates an index of nonmanufacturing purchasing managers based on a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. The total index increased from 55.7 in Jan 2011 to 58.0 in Mar 2012, decreasing to 53.9 in Aug 2013. The index decreased from 56.0 in Nov 2013 to 54.6 in Dec 2013, easing to 53.4 in Jan 2014. The index moved to 53.5 in Jan 2016. 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 Jan 2016.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Jan 2016	53.5	49.6	49.9	47.7	58.4
Dec2015	54.4	51.7	49.0	48.2	58.3
Nov	53.6	50.2	49.3	47.7	60.0
Oct	53.1	51.2	51.2	48.8	61.1
Sep	53.4	50.2	50.8	47.9	60.0
Aug	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 53.5 in Jan 2016.

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 49.4 in Jan 2016. 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 49.5 in Jan 2016.

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

	IPM	PI	NOI	INV	EMP	SDEL
2016
Jan	49.4	51.4	49.5	46.8	47.8	50.5
2015
Dec	49.7	52.2	50.2	47.6	47.4	50.7
Nov	49.6	51.9	49.8	47.1	47.6	50.6
Oct	49.8	52.2	50.3	47.2	47.8	50.6
Sep	49.8	52.3	50.2	47.5	47.9	50.8
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 49.4 in Jan 2016.

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

Source: National Bureau of Statistics of China

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

Growth of China’s GDP in IVQ2015 relative to the same period in 2015 was 6.8 percent and cumulative growth to IVQ2015 was 6.9 percent, as shown in Table VC-GDP. Secondary industry accounts for 40.5 percent of cumulative GDP in IVQ2015. In cumulative IVQ2015, industry accounts for 33.8 percent of GDP and construction for 6.9 percent. Tertiary industry accounts for 50.5 percent of cumulative GDP in IVQ2015 and primary industry for 9.0 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 by increasing growth of services. 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 IQ2011 to 6.1 percent in IVQ2011 and 7.4 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 7.4 percent in IIIQ2012 and 8.2 percent in IVQ2012. Annual equivalent growth in IQ2013 eased to 7.4 percent and to 7.0 percent in IIQ2013, rebounding to 9.1 percent in IIIQ2013. Annual equivalent growth was 6.6 percent in IVQ2013, declining to 6.6 percent in IQ2014 and increasing to 7.4 percent in IIQ2014. Annual equivalent growth slowed to 7.4 percent in IIIQ2014 and 7.0 percent in IVQ2014. Growth slowed to annual equivalent 5.3 percent in IQ2015, increasing to 7.8 percent in IIQ2015 and 7.4 percent in IIIQ2015. Growth slowed to 6.6 percent in annual equivalent in IVQ2015.

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

Cumulative GDP IIQ2015	Value Current CNY Billion IIIQ2015	Value Current CNY Billion IQ2015 to IVQ2015	IIIQ2015 Year-on-Year Constant Prices ∆%	Cumulative to IVQ2015 ∆%
GDP	18,937.2	67,670.8	6.8	6.9
Primary Industry	2,196.5	6,086.3	4.1	3.9
Farming	2,270.8	6,291.1	4.2	4.0
Secondary Industry	7,640.5	27,427.8	6.1	6.0
Industry	6,158.7	22,897.4	5.8	5.9
Construction	1,512.9	4,645.6	7.3	6.8
Tertiary Industry	9,100.2	34,156.7	8.2	8.3
Transport, Storage, Post	809.9	3,036.4	4.6	4.6
Wholesale, Retail Trades	1,835.7	6,620.4	6.3	6.1
Accommodation and Restaurants	342.7	1,215.9	6.6	6.2
Finance	1,481.5	5,750.0	12.9	15.9
Real Estate	1,159.5	4,130.8	4.1	3.8
Other	3,365.5	13,0833	9.9	9.2
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter		∆% Annual Equivalent	∆% Year-on-Year
2015
IVQ2015	1.6		6.6	6.8
IIIQ2015	1.8		7.4	6.9
IIQ2015	1.9		7.8	7.0
IQ2015	1.3		5.3	7.0
2014
IVQ2014	1.7		7.0	7.2
IIIQ2014	1.8		7.4	7.1
IIQ2014	1.8		7.4	7.4
IQ2014	1.6		6.6	7.3
2013
IVQ2013	1.6		6.6	7.6
IIIQ2013	2.2		9.1	7.9
IIQ2013	1.7		7.0	7.5
IQ2013	1.8		7.4	7.8
2012
IVQ2012	2.0		8.2	8.0
IIIQ2012	1.8		7.4	7.4
IIQ2012	2.1		8.7	7.5
IQ2012	1.8		7.4	8.0
2011
IVQ2011	1.5		6.1	8.7
IIIQ2011	1.9		7.8	9.4
IIQ2011	2.4		10.0	9.9
IQ2011	2.5		10.4	10.2

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

Growth of China’s GDP in IVQ2015 relative to the same period in 2015 was 6.8 percent and cumulative growth to IVQ2015 was 6.9 percent. Secondary industry accounts for 40.5 percent of cumulative GDP in IVQ2015. In cumulative IVQ2015, industry accounts for 33.8 percent of GDP and construction for 6.9 percent. Tertiary industry accounts for 50.5 percent of cumulative GDP in IVQ2015 and primary industry for 9.0 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 by increasing growth of services. Table GDPA shows that 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 1.6 percent relative to IIIQ2013, which is equivalent to 6.6 percent per year. GDP grew 7.3 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 7.4 percent in IIQ2014 relative to a year earlier and 1.8 percent relative to the prior quarter, which is annual equivalent 7.4 percent. In IIIQ2014, GDP grew 7.1 percent relative to a year earlier and 1.8 percent relative to the prior quarter, which is 7.4 percent in annual equivalent. GDP grew 1.7 percent in IVQ2014, which is 7.0 percent in annual equivalent and 7.2 percent relative to a year earlier. In IQ2015, GDP grew 1.3 percent, which is equivalent to 5.3 in a year and 7.0 percent relative to a year earlier. GDP grew 1.9 percent in IIQ2015, which is equivalent to 7.8 percent in a year, and grew 7.0 percent relative to a year earlier. GDP grew at 1.8 percent in IIIQ2015, which is equivalent to 7.4 percent in a year, and grew 6.9 percent relative to a year earlier. GDP grew at 1.6 percent in IVQ2015, which is equivalent to 6.6 percent in a year and 6.8 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	IIIQ2015	IVQ2015
GDP	7.0	7.0	6.9	6.8
Primary Industry	3.2	3.5	3.8	4.1
Secondary Industry	6.4	6.1	6.0	6.1
Tertiary Industry	7.9	8.4	8.4	8.2
GDP ∆% Relative to a Prior Quarter	1.3	1.9	1.8	1.6
	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	7.3	7.4	7.1	7.2
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	1.8	1.7	2.2	1.6	1.6	1.8	1.8	1.7
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ  2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	10.2	9.9	9.4	8.7	8.0	7.5	7.4	8.0
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	2.5	2.4	1.9	1.5	1.8	2.1	1.8	2.0
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

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

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

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

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

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

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

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

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

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

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

The Caixin Flash China General Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey//PressRelease.mvc/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, increasing from 49.4 in Dec to 50.1 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/af1ce8d680084e6c9419d193cde229f2). He Fan, Chief Economist at Caixin Insight Group, finds improving services activity (https://www.markiteconomics.com/Survey//PressRelease.mvc/af1ce8d680084e6c9419d193cde229f2). The Caixin General Manufacturing PMI^™ increased to 48.4 in Jan from 48.2 in Dec, indicating moderate deterioration in manufacturing (https://www.markiteconomics.com/Survey//PressRelease.mvc/09185002723a4f5c9f91d7f80462b11e). He Fan, Chief Economist at Caixin Insight Group, finds headwinds (https://www.markiteconomics.com/Survey//PressRelease.mvc/09185002723a4f5c9f91d7f80462b11e). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Jan 12-month ∆%: minus 5.3 Jan month ∆%: -0.5 Blog 2/21/16
Consumer Price Index	Jan 12-month ∆%: 1.8 Jan month ∆%: 0.5 Blog 2/21/16
Value Added of Industry	Dec month ∆%: 0.41 Jan-Dec 2015/Jan-Dec 2014 ∆%: 6.1 Earlier Data Blog 4/19/15
GDP Growth Rate	Year IVQ2015 ∆%: 6.9 Fourth Quarter 2015 ∆%: 1.6 Quarter IVQ2015 AE ∆%: 6.6 Blog 1/24/16
Investment in Fixed Assets	Total Jan-Dec 2015 ∆%: 10.0 Real estate development: 1.0 Earlier Data: Blog 4/19/15
Retail Sales	Dec month ∆%: 0.82 Jan-Dec 10.7 12 month ∆%: NA : 11.1 Earlier Data: Blog 4/19/15
Trade Balance	Jan balance $63.287billion Exports 12M ∆% -11.2 Imports 12M ∆% -18.8 2015 Exports ∆% -2.8 2015 Imports ∆% -14.1 Cumulative Jan 2016: $63.287billion Cumulative Jan 2015: $60.03 Earlier Data: Blog 4/19/15

Links to blog comments in Table CNY: 1/24/16 http://cmpassocregulationblog.blogspot.com/2016/01/uncertainty-of-valuations-of-risk.html

1/17/16 http://cmpassocregulationblog.blogspot.com/2016/01/unconventional-monetary-policy-and.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 5.7 percent from the high pre-recession date on IQ2008 to the trough in IIQ2009 while the GDP of the euro area (19 countries) fell 5.7 percent. The GDP of the euro area (19 countries) increased 5.8 percent from IIIQ2009 to IVQ2015 at the annual equivalent rate of 0.9 percent. The GDP of the euro area (19) countries in IVQ2015 is lower by 0.3 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 3.2 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 2.1 percent in 2010 and 1.6 percent in 2011. EUROSTAT estimates growth of GDP of the euro area of minus 0.9 percent in 2012 and minus 0.9 percent in 2013. Euro Area GDP grew 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	3.0
2000	2.2	8.9	3.8
2001	2.4	8.3	2.1
2002	2.3	8.6	1.0
2003	2.1	9.1	0.7
2004	2.2	9.3	2.3
2005	2.2	9.1	1.7
2006	2.2	8.4	3.2
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	2.1
2011	2.7	10.2	1.6
2012	2.5	11.4	-0.9
2013	1.3	12.0	-0.3
2014	0.4	11.6	0.9
2015	0.0	10.9

http://ec.europa.eu/eurostat

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

The GDP of the euro area in 2014 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $13,457.0 billion or 17.4 percent of world GDP of $77,269.2 billion (http://www.imf.org/external/pubs/ft/weo/2015/02/weodata/index.aspx). The sum of the GDP of France $2833.7 billion with the GDP of Germany of $3874.4 billion, Italy of $2147.7 billion and Spain $1406.5 billion is $10,262.3 billion or 76.3 percent of total euro area GDP and 13.3 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
		1.7
2014	0.9	1.6	0.2	-0.4	1.4
2013	-0.3	0.3	0.7	-1.7	-1.7
2012	-0.9	0.4	0.2	-2.8	-2.6
2011	1.6	3.7	2.1	0.6	-1.0
2010	2.1	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	3.2	3.7	2.4	2.0	4.2
2005	1.7	0.7	1.6	0.9	3.7
2004	2.3	1.2	2.8	1.6	3.2
2003	0.7	-0.7	0.8	0.2	3.2
2002	1.0	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	3.0	2.0	3.4	1.6	4.5
1998	2.9	2.0	3.6	1.6	4.3
Average 1999-2014	1.1	1.2	1.3	0.1	1.6
Average 1999-2007	2.2	1.6	2.1	1.5	3.8
1997	2.6	1.8	2.3	1.8	3.7
1996	1.7	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 Dec to 53.5 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/0ff66b28239749119d7ddee71db4f62d). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests GDP quarterly growth at around 0.3 to 0.4 percent in the beginning of 2016 (https://www.markiteconomics.com/Survey//PressRelease.mvc/0ff66b28239749119d7ddee71db4f62d). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP decreased from 54.3 in Dec to 53.6 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/77432d4febf8431284502ffe264667e7). Chris Williamson, Chief Economist at Markit, finds potential for growth of 0.4 percent in IQ2016 (https://www.markiteconomics.com/Survey//PressRelease.mvc/77432d4febf8431284502ffe264667e7). The Markit Eurozone Services Business Activity Index decreased from 54.2 in Dec to 53.6 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/77432d4febf8431284502ffe264667e7). The Markit Eurozone Manufacturing PMI^® decreased from 53.2 in Dec to 52.3 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/84f3ac0028354e3c84b67ef5d880ae0b). New export orders increased. Chris Williamson, Chief Economist at Markit, finds industrial growth in the euro area at around 1.5 percent in early 2016 (https://www.markiteconomics.com/Survey//PressRelease.mvc/84f3ac0028354e3c84b67ef5d880ae0b). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IVQ2015 ∆% 0.3; IVQ2015/IVQ2014 ∆% 1.5 Blog 9/13/15 11/22/15 12/13/15 2/14/16
Unemployment	Dec 2015: 10.5 % unemployment rate; Dec 2015: 16.924 million unemployed Blog 2/7/16
HICP	Dec month ∆%: 0.0 12 months Dec ∆%: 0.2 Blog 1/24/16
Producer Prices	Euro Zone industrial producer prices Dec ∆%: -0.8 Dec 12-month ∆%: -3.0 Blog 2/7/16
Industrial Production	Dec Month ∆%: -1.0; 12 months ∆%: -1.3 Earlier Data: Blog 4/19/15
Retail Sales	Dec month ∆%: 0.3 Dec 12 months ∆%: 1.4 Earlier Data: Blog 3/15/15
Confidence and Economic Sentiment Indicator	Sentiment 106.8 Dec 2015 Consumer minus 5.7 Dec 2015 Earlier Data: Blog 4/5/15
Trade	Jan-Dec 2015/Jan-Dec 2014 Exports ∆%: 5.3 Imports ∆%: 2.3 Dec 2015 12-month Exports ∆% 3.3 Imports ∆% 3.4 Earlier Data: Blog 4/19/15

Links to blog comments in Table EUR: 2/14/16 http://cmpassocregulationblog.blogspot.com/2016/02/subdued-foreign-growth-and-dollar.html

2/7/16 http://cmpassocregulationblog.blogspot.com/2016/02/fluctuating-risk-financial-assets-in.html

1/24/16 http://cmpassocregulationblog.blogspot.com/2016/01/uncertainty-of-valuations-of-risk.html

12/13/15 http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-interest-rates-with-volatile_17.html

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

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

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

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1971 to 2015, 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, 3.7 percent in 2011 and 0.4 percent in 2012. Growth decelerated to 0.3 percent in 2013, increasing to 1.6 percent in 2014. The German economy grew at 1.7 percent in 2015.

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 ∆% 1991-2015	1.3
Average ∆% 1991-1999	1.5
Average ∆% 2000-2007	1.4
Average ∆% 2003-2007	2.2
Average ∆% 2007-2015	0.9
Average ∆% 2009-2015	1.9
2015	1.7	1.4
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/PressServices/Press/pr/2015/11/PE15_419_811.html

https://www.destatis.de/EN/PressServices/Press/pr/2015/11/PE15_430_811.html

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

https://www.destatis.de/EN/PressServices/Press/pr/2016/02/PE16_044_811.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, decreased from 55.5 in Dec to 54.5 in Jan. The index of manufacturing output reached 52.8 in Jan, decreasing from 54.4 in Dec, while the index of services decreased to 55.4 in Jan from 56.0 in Dec. The overall Flash Germany Manufacturing PMI^® decreased from 53.2 in Dec to 52.1 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/72e184e568474fcc9895198f1dd5e636). New orders in manufacturing increased. Oliver Kolodseike, Economist at Markit, finds continuing growth of the private sector of Germany (https://www.markiteconomics.com/Survey//PressRelease.mvc/72e184e568474fcc9895198f1dd5e636). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, decreased from 55.5 in Dec to 54.5 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/1c8ea368a63d4eb3a393d4cbe56c9748). Oliver Kolodseike, Economist at Markit and author of the report, finds continuing growth of the private sector of Germany (https://www.markiteconomics.com/Survey//PressRelease.mvc/1c8ea368a63d4eb3a393d4cbe56c9748). The Germany Services Business Activity Index decreased from 56.0 in Dec to 55.0 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/1c8ea368a63d4eb3a393d4cbe56c9748). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, decreased from 53.2 in Dec to 52.3 in

Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/6c80d4cfd54a4972a3e87ad2ac092512). New export orders increased. Oliver Kolodseike, Economist at Markit and author of the report, finds improvement in manufacturing with weaker growth of exports (https://www.markiteconomics.com/Survey//PressRelease.mvc/6c80d4cfd54a4972a3e87ad2ac092512).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IVQ2015 0.3 ∆%; IVQ2015/IVQ2014 ∆% 2.1 2015/2014: 1.7% 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 11/22/15 11/29/15 2/14/16
Consumer Price Index	Jan month NSA ∆%: -0.8 Jan 12-month NSA ∆%: 0.5 Blog 2/14/16
Producer Price Index	Jan month ∆%: -0.7 NSA, minus 0.3 CSA 12-month NSA ∆%: -2.4 Blog 2/21/16
Industrial Production	MFG Dec month CSA ∆%: minus 1.1 12-month NSA: -0.2 Earlier Data: Blog 4/12/15
Machine Orders	MFG Dec month ∆%: -0.7 Dec 12-month ∆%: -1.0 Earlier Data: Blog 4/12/15
Retail Sales	Dec Month ∆% -0.2 Nov 0.4 12-Month Dec % 1.5 Nov 2.4 Earlier Data: Blog 4/5/15
Employment Report	Unemployment Rate SA Dec 4.5% Blog 2/7/16
Trade Balance	Exports Dec 12-month NSA ∆%: 3.2 Imports Dec 12 months NSA ∆%: 3.5 Exports Dec month CSA ∆%: -1.6; Imports Dec month CSA minus 1.6 Earlier Data: Blog 4/12/15

Links to blog comments in Table DE: 2/14/16 http://cmpassocregulationblog.blogspot.com/2016/02/subdued-foreign-growth-and-dollar.html

2/7/16 http://cmpassocregulationblog.blogspot.com/2016/02/fluctuating-risk-financial-assets-in.html

1/24/16 http://cmpassocregulationblog.blogspot.com/2016/01/uncertainty-of-valuations-of-risk.html

1/10/16 http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-with-exchange-rate.html

11/29/15 http://cmpassocregulationblog.blogspot.com/2015/11/dollar-revaluation-constraining.html

11/22/15 http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-liftoff-followed-by.html

11/15/15 http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-policy-conundrum-recovery.html

11/1/15 http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-increase-considered.html

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

08/16/15 http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IVQ1949 to IVQ2015 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 2015, 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 ∆%
1949-2015	3.2
2007-2015*	0.4
2007-2014	0.3
2000-2015	1.0
2000-2014	1.0
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 IVQ2015

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=123&date=20160129

The Markit Flash France Composite Output Index increased from 50.1 in Dec to 50.5 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/d89b1284813e4e7cb4a851f0cb3bd003) Jack Kennedy, Senior Economist at Markit and author of the report, finds moderate growth (https://www.markiteconomics.com/Survey//PressRelease.mvc/d89b1284813e4e7cb4a851f0cb3bd003). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased from 50.1 in Dec to 50.2 in Jan, indicating expansion at moderate pace (https://www.markiteconomics.com/Survey//PressRelease.mvc/54a903c1c4a34928bf2e66bf482d62dd). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds stagnating services (https://www.markiteconomics.com/Survey//PressRelease.mvc/54a903c1c4a34928bf2e66bf482d62dd). The Markit France Services Activity index increased from 49.8 in Dec to 50.3 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/54a903c1c4a34928bf2e66bf482d62dd). The Markit France Manufacturing Purchasing Managers’ Index^® decreased to 50.0 in Jan from 51.4 in Dec (https://www.markiteconomics.com/Survey//PressRelease.mvc/d59fb04352324a0cbecc7f6b98bef1b4). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds stagnating manufacturing (https://www.markiteconomics.com/Survey//PressRelease.mvc/d59fb04352324a0cbecc7f6b98bef1b4). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Jan month ∆% -0.1 12 months ∆%: 1.0 2/21/16
PPI	Dec month ∆%: -1.2 Dec 12 months ∆%: -2.7 Blog 1/31/15
GDP Growth	IVQ2015/IIIQ2015 ∆%: 0.2 IVQ2015/IVQ2014 ∆%: 1.3 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 11/15/15 12/27/15 1/31/16
Industrial Production	Dec ∆%: Manufacturing -0.8 12-Month ∆%: 1.7 Earlier Data: Blog 4/12/15
Consumer Spending	Manufactured Goods Dec ∆%: 1.7 Nov 12-Month Manufactured Goods ∆%: 1.9 Earlier Data: Blog 4/5/15
Employment	Unemployment Rate: IIIQ2015 10.2% Blog 12/6/15
Trade Balance	Dec Exports ∆%: month -0.9, 12 months 0.9 Imports ∆%: month -2.2, 12 months 1.3 Earlier Data: Blog 4/12/15
Confidence Indicators	Historical average 100 Jan Mfg Business Climate 102.0 Earlier Data: Blog 3/29/15

Links to blog comments in Table FR: 1/31/16 http://cmpassocregulationblog.blogspot.com/2016/01/closely-monitoring-global-economic-and.html

1/17/16 http://cmpassocregulationblog.blogspot.com/2016/01/unconventional-monetary-policy-and.html

12/27/15 http://cmpassocregulationblog.blogspot.com/2015/12/dollar-revaluation-and-decreasing.html

12/6/15 http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-fed-funds-rate-followed-by.html

11/15/15 http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-policy-conundrum-recovery.html

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

VG Italy. Table VG-IT provides revised percentage changes of GDP in Italy of quarter on prior quarter and quarter on same quarter a year earlier. GDP increased 0.1 percent in IVQ2015 and increased 1.0 percent relative to a year earlier. In IIIQ2015, GDP increased 0.2 percent and increased 0.8 percent relative to a year earlier. GDP increased 0.3 percent in IIQ2015 and 0.5 percent relative to a year earlier. GDP increased 0.4 percent in IQ2015 and increased 0.1 percent relative to a year earlier. GDP decreased 0.1 percent in IVQ2014 and fell 0.5 percent relative to a year earlier. GDP fell 0.1 percent in IIIQ2014 and fell 0.4 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 0.1 percent in IQ2014 and fell 0.3 percent relative to a year earlier. Italy’s GDP decreased 0.1 percent in IVQ2013 and fell 1.0 percent relative to a year earlier. The GDP of Italy changed 0.0 percent in IIIQ2013 and fell 1.4 percent relative to a year earlier. Italy’s GDP decreased 0.2 percent in IIQ2013, continuing eight consecutive quarterly declines, and fell 2.0 percent relative to a year earlier. Italy’s GDP fell 0.8 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 0.8 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 13 quarters including IVQ2013, IQ2014, IIQ2014, IIIQ2014 and IVQ2014 accumulates to 5.7 percent. The yearly rate has fallen from 2.3 percent in IVQ2010 to minus 2.7 percent in IVQ2012, minus 2.5 percent in IQ2013, minus 2.0 percent in IIQ2013 and minus 1.4 percent in IIIQ2013. GDP fell 1.0 percent in IVQ2013 relative to a year earlier. GDP fell 0.3 percent in IQ2014 relative to a year earlier and fell 0.3 percent in IIQ2014 relative to a year earlier. GDP fell 0.4 percent in IIIQ2014 relative to a year earlier and fell 0.5 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. GDP increased 0.8 percent in IIIQ2015 relative to a year earlier and increased 1.0 percent in IVQ2015 relative to a year earlier. Using seasonally and calendar adjusted chained volumes in the dataset of EUROSTAT (http://ec.europa.eu/eurostat), the GDP of Italy in IIIQ2015 is lower by 8.9 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
IVQ2015	0.1	1.0
IIIQ2015	0.2	0.8
IIQ2015	0.3	0.5
IQ2015	0.4	0.1
IVQ2014	-0.1	-0.5
IIIQ2014	-0.1	-0.4
IIQ2014	-0.2	-0.3
IQ2014	-0.1	-0.3
IVQ2013	-0.1	-1.0
IIIQ2013	0.0	-1.4
IIQ2013	-0.2	-2.0
IQ2013	-0.8	-2.5
IVQ2012	-0.5	-2.7
IIIQ2012	-0.5	-3.2
IIQ2012	-0.7	-3.2
IQ2012	-1.0	-2.4
IVQ2011	-1.0	-1.0
IIIQ2011	-0.5	0.4
IIQ2011	0.2	1.4
IQ2011	0.3	2.1
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/180150

The Markit/ADACI Business Activity Index decreased from 55.3 in Dec to 53.6 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/f9ae50445bb74c36b09f9ef80c2cd0db). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds expansion of private sector activity (https://www.markiteconomics.com/Survey//PressRelease.mvc/f9ae50445bb74c36b09f9ef80c2cd0db). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), decreased from 55.6 in Dec to 53.2 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/b0d7b10ab90e4c3c845e6da1f6108bdb). New export orders continued to increase. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds growth in manufacturing at slower pace (https://www.markiteconomics.com/Survey//PressRelease.mvc/b0d7b10ab90e4c3c845e6da1f6108bdb). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Jan month ∆% -0.2 12 months ∆%: 0.3 2/7/16
Producer Price Index	Nov month ∆%: -0.6 Nov 12-month ∆%: -4.2 Blog 1/3/16
GDP Growth	IVQ2015/IIIQ2015 SA ∆%: 0.1 IVQ2015/IVQ2014 NSA ∆%:1.0 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 11/15/15 12/6/15 2/14/16
Labor Report	Dec 2015 Participation rate 63.8% Employment ratio 56.4% Unemployment rate 11.4% Youth Unemployment 37.9% Blog 2/7/16
Industrial Production	Dec month ∆%: -0.7 12 months CA ∆%: -1.0 Earlier Data: Blog 4/19/15
Retail Sales	Nov month ∆%: 0.3 Nov 12-month ∆%: -0.1 Earlier Data: Blog 4/26/15
Business Confidence	Mfg Jan 103.2, Dec 104.0 Construction Jan 114.6, Dec 114.8 Earlier Data: Blog 4/5/15
Trade Balance	Balance Dec SA €4585 million Exports Dec month SA ∆%: -2.2; Imports month ∆%: -3.5 Exports 12 months Dec NSA ∆%: 3.0 Imports 12 months NSA ∆%: 2.6 Earlier Data: Blog 4/19/15

Links to blog comments in Table IT: 2/14/16 http://cmpassocregulationblog.blogspot.com/2016/02/subdued-foreign-growth-and-dollar.html

2/7/16 http://cmpassocregulationblog.blogspot.com/2016/02/fluctuating-risk-financial-assets-in.html

1/17/16 http://cmpassocregulationblog.blogspot.com/2016/01/unconventional-monetary-policy-and.html

1/3/16 http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-and-dollar.html

12/6/15 http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-fed-funds-rate-followed-by.html

11/15/15 http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-policy-conundrum-recovery.html

11/1/15 http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-increase-considered.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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Professors Ricardo Caballero and Francesco Giavazzi (2012Jan15) find that the resolution of the European sovereign crisis with survival of the euro area would require success in the restructuring of Italy. Growth of the Italian economy would ensure that success. A critical problem is that the common euro currency prevents Italy from devaluing the exchange rate to parity or the exchange rate that would permit export growth to promote internal economic activity, which could generate fiscal revenues for primary fiscal surpluses that ensure creditworthiness. Fiscal consolidation and restructuring are important but of long-term gestation. Immediate growth of the Italian economy would consolidate the resolution of the sovereign debt crisis. Caballero and Giavazzi (2012Jan15) argue that 55 percent of the exports of Italy are to countries outside the euro area such that devaluation of 15 percent would be effective in increasing export revenue. Newly available data in Table III-3 providing Italy’s trade with regions and countries supports the argument of Caballero and Giavazzi (2012Jan15). Italy’s exports to the European Monetary Union (EMU), or euro area, are only 40.4 percent of the total in Dec 2015. Exports to the non-European Union area with share of 45.1 percent in Italy’s total exports are growing at 3.6 percent in Jan-Dec 2015 relative to Jan-Dec 2014 while those to EMU are growing at 3.2 percent.

Table III-3, Italy, Exports and Imports by Regions and Countries, % Share and 12-Month ∆%

Dec 2015	Exports % Share	∆% Jan-Dec 2015/ Jan-Dec 2014	Imports % Share	∆% Jan-Dec 2015/ Jan-Dec 2014
EU	54.9	3.8	57.1	5.8
EMU 19	40.4	3.2	45.4	5.1
France	10.5	1.2	8.6	4.1
Germany	12.6	1.7	15.2	4.4
Spain	4.5	10.1	4.8	6.7
UK	5.2	7.3	2.9	2.8
Non EU	45.1	3.6	42.9	-0.1
Europe non EU	11.8	-4.8	11.5	-5.4
USA	7.5	20.9	3.5	13.8
China	2.6	-0.7	7.0	12.3
OPEC	5.7	-1.3	5.8	-12.3
Total	100.0	3.7	100.0	3.3

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/180249

Table III-4 provides Italy’s trade balance by regions and countries. Italy had trade deficit of €986 million with the 19 countries of the euro zone (EMU 19) in Dec 2015 and cumulative deficit of €4155 million in Jan-Dec 2015. Depreciation to parity could permit greater competitiveness in improving the trade surplus of €5966 million in Jan-Dec 2015 with Europe non-European Union, the trade surplus of €21,794 million with the US and the trade surplus with non-European Union of €33,663 million in Jan-Dec 2015. There is significant rigidity in the trade deficit in Jan-Dec 2015 of €17,736 million with China. There is a trade surplus of €4407 million with members of the Organization of Petroleum Exporting Countries (OPEC). Higher exports could drive economic growth in the economy of Italy that would permit less onerous adjustment of the country’s fiscal imbalances, raising the country’s credit rating.

Table III-4, Italy, Trade Balance by Regions and Countries, Millions of Euro 

Regions and Countries	Trade Balance Dec 2015 Millions of Euro	Trade Balance Cumulative Jan-Dec 2015 Millions of Euro
EU	105	11,524
EMU 19	-986	-4,155
France	736	10,453
Germany	-720	-5,783
Spain	125	1,457
UK	868	11,897
Non EU	5,917	33,663
Europe non EU	866	5,966
USA	2,066	21,794
China	-1,211	-17,736
OPEC	1,074	4,407
Total	6,022	45,187

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/180249

Growth rates of Italy’s trade and major products are in Table III-5 for the period Jan-Dec 2015 relative to Jan-Dec 2014. Growth rates of cumulative imports relative to a year earlier are negative for energy with minus 19.8 percent. Exports of durable goods increased 6.5 percent and exports of capital goods increased 6.0 percent. The rate of growth of exports of 3.7 percent in Jan-Dec 2015/Jan-Dec 2014 relative to that of imports of 3.3 percent may reflect weak demand in Italy with GDP declining during eight consecutive quarters from IIIQ2011 through IIQ2013 together with softening commodity prices. GDP changed 0.0 percent in IIIQ2013, decreased 0.1 percent in IVQ2013, decreased 0.1 percent in IQ2014 and fell 0.2 percent in IIQ2014. Italy’s GDP fell 0.1 percent in IIIQ2014 and decreased 0.1 percent in IVQ2014. Italy’s GDP increased 0.4 percent in IQ2015 and increased 0.3 percent in IIQ2015. Italy’s GDP increased 0.2 percent in IIIQ2015 and increased 0.1 percent in IVQ2015.

Table III-5, Italy, Exports and Imports % Share of Products in Total and ∆%

	Exports Share %	Exports ∆% Jan-Dec 2015/ Jan-Dec 2014	Imports Share %	Imports ∆% Jan-Dec 2015/ Jan-Dec 2014
Consumer Goods	31.7	4.9	28.5	6.6
Durable	6.0	6.5	3.2	15.2
Non-Durable	25.7	4.5	25.4	5.5
Capital Goods	33.0	6.0	22.0	14.0
Inter- mediate Goods	31.7	1.8	33.1	4.5
Energy	3.7	-10.5	16.3	-19.8
Total ex Energy	96.3	4.3	83.7	7.7
Total	100.0	3.7	100.0	3.3

Note: % Share for 2014 total trade.

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/180249

Table III-6 provides Italy’s trade balance by product categories in Dec 2015 and cumulative Jan-Dec 2015. Italy’s trade balance excluding energy, generated surplus of €8542 million in Dec 2015 and €78,746 million cumulative in Jan-Dec 2015 but the energy trade balance created deficit of €2521 million in Dec 2015 and cumulative deficit of €33,558 million in Jan-Dec 2015. The overall surplus in Dec 2015 was €5022 million with cumulative surplus of €45,187 million in Jan-Dec 2015. Italy has significant competitiveness in various economic activities in contrast with some other countries with debt difficulties.

Table III-6, Italy, Trade Balance by Product Categories, € Millions

	Dec 2015	Cumulative 2015
Consumer Goods	2,218	23,904
Durable	1,099	12,348
Nondurable	1,119	11,556
Capital Goods	5,082	49,761
Intermediate Goods	1,243	5,080
Energy	-2,521	-33,558
Total ex Energy	8,542	78,746
Total	6,022	45,187

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/180249

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. Growth fell to 2.2 percent in 2015.  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 2015, 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 2015 has been only at 2.0 percent as advanced economies struggle with weak internal demand and world trade. GDP in 2015 is higher by 7.2 percent relative to 2007 while it would have been 24.7 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
2015	2.2
Average Growth Rates ∆% per Year
1948-2015	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*	5.0
2007-2015	1.0
2000-2015	1.8

*Absolute change from 2007 to 2013 and 2007 to 2014

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q4-2015/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from 55.5 in Dec to 55.6 in Jan (https://www.markiteconomics.com/Survey//PressRelease.mvc/1f65039eb8064ed99bd6c82f7fdcb1e1). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at around 0.6 percent in IQ2016 (https://www.markiteconomics.com/Survey//PressRelease.mvc/1f65039eb8064ed99bd6c82f7fdcb1e1). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased to 52.9 in Jan from 52.1 in Dec (https://www.markiteconomics.com/Survey//PressRelease.mvc/5b4e345e978d439e8d8ce3753dcf1135). New export orders decreased. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds moderate improvement in manufacturing conditions (https://www.markiteconomics.com/Survey//PressRelease.mvc/5b4e345e978d439e8d8ce3753dcf1135). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Jan month ∆%: 0.1 Jan 12-month ∆%: 0.2 Blog 2/21/16
Output/Input Prices	Output Prices: Jan 12-month NSA ∆%: -1.0; excluding food, petroleum ∆%: 0.0 Input Prices: Jan 12-month NSA ∆%: -7.6 Excluding ∆%: -4.7 Blog 2/21/16
GDP Growth	IVQ2015 prior quarter ∆% 0.5; year earlier same quarter ∆%: 1.9 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13 9/29/13 10/27/13 12/1/13 12/22/13 2/2/14 3/2/14 4/6/14 5/4/14 5/25/14 6/29/14 7/27/14 8/17/14 10/5/14 10/26/14 11/30/14 12/28/14 2/1/15 3/1/15 4/5/15 5/3/15 5/31/15 7/5/15 8/2/15 9/6/15 10/4/15 11/1/15 11/29/15 12/27/15 1/31/16
Industrial Production	Dec 2015/Dec 2014 ∆%: Production Industries 0.4; Manufacturing -1.7 Earlier Data: Blog 4/12/15
Retail Sales	Jan month ∆%: 2.3 Jan 12-month ∆%: 5.2 Earlier Data: Blog 4/26/15
Labor Market	Oct-Dec Unemployment Rate: 5.1% Blog 2/21/16 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 Dec minus ₤2709 million Exports Dec ∆%: -0.8; Oct-Dec ∆%: -2.9 Imports Dec ∆%: -3.6 Oct-Dec ∆%: -1.9 EARLIER DATA: Blog 4/12/15

Links to blog comments in Table UK: 1/31/16 http://cmpassocregulationblog.blogspot.com/2016/01/closely-monitoring-global-economic-and.html

1/24/16 http://cmpassocregulationblog.blogspot.com/2016/01/uncertainty-of-valuations-of-risk.html

12/27/15 http://cmpassocregulationblog.blogspot.com/2015/12/dollar-revaluation-and-decreasing.html

11/29/15 http://cmpassocregulationblog.blogspot.com/2015/11/dollar-revaluation-constraining.html

11/1/15 http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-increase-considered.html

10/4/15 http://cmpassocregulationblog.blogspot.com/2015/10/labor-market-uncertainty-and-interest.html

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

08/02/15 http://cmpassocregulationblog.blogspot.com/2015/08/turbulence-of-valuations-of-financial.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-L3 provides indicators of the labor force survey of the UK for Oct-Dec 2015 and earlier quarters. There has been improvement in UK labor markets with the rate of unemployment decreasing from 5.7 percent in Oct-Dec 2014 to 5.1 percent in Oct-Dec 2015.

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

	LFHP	EMP	PART	UNE	RATE
Oct-Dec 2013	40,578	30,288	72.0	2,348	7.2
Oct-Dec 2014	40,665	30,896	73.2	1,862	5.7
Jan-Mar 2015	40,690	31,098	73.5	1,827	5.5
Apr-Jun 2015	40,713	31,035	73.4	1,852	5.6
Jul-Sep 2015	40,740	31,211	73.7	1,749	5.3
Oct-Dec 2015	40,766	31,417	74.1	1,690	5.1
∆ on Quarter	27	205	0.4	-60	-0.2
∆%	0.1	0.7		-3.4
∆ on Year	101	521	0.9	-172	-0.6
∆%	0.2	1.7		-9.3

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

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/february-2016/index.html

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016.