United States Inflation, United States Industrial Production, United States International Trade, Rules, Discretionary Authorities and Slow Productivity Growth, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, World Cyclical Slow Growth and Global Recession Risk: Part I

CANNOT UPLOAD CHARTS AND IMAGES: ERROR 403

United States Inflation, United States Industrial Production, United States International Trade, Rules, Discretionary Authorities and Slow Productivity Growth, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, World Cyclical Slow Growth and Global Recession Risk

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018

I United States Inflation

II United States Industrial Production

IIB United States International Trade

IIC Rules, Discretionary Authorities and Slow Productivity Growth

IID 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 in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide

III World Financial Turbulence

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

I United States Inflation. Unconventional monetary policy of zero interest rates and large-scale purchases of long-term securities for the balance sheet of the central bank is proposed to prevent deflation. The data of CPI inflation of all goods and CPI inflation excluding food and energy for the past six decades does not show even one negative change, as shown in Table CPIEX.

Table CPIEX, Annual Percentage Changes of the CPI All Items Excluding Food and Energy

Year	Annual ∆%
1958	2.4
1959	2.0
1960	1.3
1961	1.3
1962	1.3
1963	1.3
1964	1.6
1965	1.2
1966	2.4
1967	3.6
1968	4.6
1969	5.8
1970	6.3
1971	4.7
1972	3.0
1973	3.6
1974	8.3
1975	9.1
1976	6.5
1977	6.3
1978	7.4
1979	9.8
1980	12.4
1981	10.4
1982	7.4
1983	4.0
1984	5.0
1985	4.3
1986	4.0
1987	4.1
1988	4.4
1989	4.5
1990	5.0
1991	4.9
1992	3.7
1993	3.3
1994	2.8
1995	3.0
1996	2.7
1997	2.4
1998	2.3
1999	2.1
2000	2.4
2001	2.6
2002	2.4
2003	1.4
2004	1.8
2005	2.2
2006	2.5
2007	2.3
2008	2.3
2009	1.7
2010	1.0
2011	1.7
2012	2.1
2013	1.8
2014	1.7
2015	1.8
2016	2.2
2017	1.8

Source: Bureau of Labor Statistics

http://www.bls.gov/cpi/

The history of producer price inflation in the past five decades does not provide evidence of deflation. The finished core PPI does not register even one single year of decline, as shown in Table PPIEX.

Table PPIEX, Annual Percentage Changes of the PPI Finished Goods Excluding Food and Energy

Year	Annual ∆%
1974	11.4
1975	11.4
1976	5.7
1977	6.0
1978	7.5
1979	8.9
1980	11.2
1981	8.6
1982	5.7
1983	3.0
1984	2.4
1985	2.5
1986	2.3
1987	2.4
1988	3.3
1989	4.4
1990	3.7
1991	3.6
1992	2.4
1993	1.2
1994	1.0
1995	2.1
1996	1.4
1997	0.3
1998	0.9
1999	1.7
2000	1.3
2001	1.4
2002	0.1
2003	0.2
2004	1.5
2005	2.4
2006	1.5
2007	1.9
2008	3.4
2009	2.6
2010	1.2
2011	2.4
2012	2.6
2013	1.5
2014	1.9
2015	2.0
2016	1.6
2017	1.8

Source: Bureau of Labor Statistics

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

Chart I-1 provides US nominal GDP from 1929 to 2017. The chart disguises the decline of nominal GDP during the 1930s from $104.6 billion in 1929 to $57.2 billion in 1933 or by 45.3 percent (data from the US Bureau of Economic Analysis at http://www.bea.gov/iTable/index_nipa.cfm). The level of nominal GDP reached $102.9 billion in 1940 and exceeded the $104.6 billion of 1929 only with $129.4 billion in 1941. The only major visible bump in the chart occurred in the recession of IVQ2007 to IIQ2009 with revised cumulative decline of real GDP of 4.2 percent. US nominal GDP fell from $14,718.6 billion in 2008 to $14,418.7 billion in 2009 or by 2.0 percent. US nominal GDP rose to $14,964.4 billion in 2010 or by 3.8 percent and to $15,517.9 billion in 2011 for an additional 3.7 percent for cumulative increase of 7.6 percent relative to 2009 and to $16,155.3 billion in 2012 for an additional 4.1 percent and cumulative increase of 12.0 percent relative to 2009. US nominal GDP increased from $14,477.6 in 2007 to $19,386.2 billion in 2017 or by 33.9 percent at the average annual rate of 3.0 percent per year (http://www.bea.gov/iTable/index_nipa.cfm). Tendency for deflation would be reflected in persistent bumps. In contrast, during the Great Depression in the four years of 1929 to 1933, GDP in constant dollars fell 26.3 percent cumulatively and fell 45.3 percent in current dollars (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 150-2, Pelaez and Pelaez, Globalization and the State, Vol. II (2009b), 205-7). The comparison of the global recession after 2007 with the Great Depression is entirely misleading (https://cmpassocregulationblog.blogspot.com/2018/03/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/continuing-dollar-devaluation-mediocre.html).

Chart I-1, US, Nominal GDP 1929-2017

Source: US Bureau of Economic Analysis

http://www.bea.gov/iTable/index_nipa.cfm

Chart I-2 provides US real GDP from 1929 to 2017. The chart also disguises the Depression of the 1930s. In the four years of 1929 to 1933, GDP in constant dollars fell 26.3 percent cumulatively and fell 45.3 percent in current dollars (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 150-2, Pelaez and Pelaez, Globalization and the State, Vol. II (2009b), 205-7; data from the US Bureau of Economic Analysis at http://www.bea.gov/iTable/index_nipa.cfm). Persistent deflation threatening real economic activity would also be reflected in the series of long-term growth of real GDP. There is no such behavior in Chart I-2 except for periodic recessions in the US economy that have occurred throughout history.

Chart I-2, US, Real GDP 1929-2017

Source: US Bureau of Economic Analysis

http://www.bea.gov/iTable/index_nipa.cfm

Deflation would also be in evidence in long-term series of prices in the form of bumps. The GDP implicit deflator series in Chart I-3 from 1929 to 2017 shows sharp dynamic behavior over time. There is decline of the implicit price deflator of GDP by 25.8 percent from 1929 to 1933 (data from the US Bureau of Economic Analysis at http://www.bea.gov/iTable/index_nipa.cfm). In contrast, the implicit price deflator of GDP of the US increased from 97.337 (2009 =100) in 2007 to 100.00 in 2009 or by 2.7 percent and increased to 113.419 in 2017 or by 13.4 percent relative to 2009 and 16.5 percent relative to 2007. The implicit price deflator of US GDP increased in every quarter from IVQ2007 to IVQ2012 with only two declines from 100.062 in IQ2009 to 99.895 in IIQ2009 or by 0.2 percent and to 99.873 in IIIQ2009 for cumulative 0.2 percent relative to IQ2009 and -0.02 percent relative to IIQ2009 (http://www.bea.gov/iTable/index_nipa.cfm). Wars are characterized by rapidly rising prices followed by declines when peace is restored. The US economy is not plagued by deflation but by long-run inflation.

Chart I-3, US, GDP Implicit Price Deflator 1929-2017

Source: US Bureau of Economic Analysis

http://www.bea.gov/iTable/index_nipa.cfm

Chart I-4 provides percent change from preceding quarter in prices of GDP at seasonally adjusted annual rates (SAAR) from 1980 to 2017. There is one case of negative change by 0.6 percent in IIQ2009 that was adjustment from 2.8 percent in IIIQ2008 following 2.3 percent in IQ2008 and 1.8 percent IIQ2008 caused by carry trades from policy interest rates being moved to zero into commodity futures. These positions were reversed because of the fear of toxic assets in banks in the proposal of TARP in late 2008 (Cochrane and Zingales 2009). Prices of GDP increased at 0.6 percent in IVQ2014. GDP prices decreased at 0.1 percent in IQ2015, increasing at 2.2 percent in IIQ015 and at 1.4 percent in IIIQ2015. Prices of GDP increased at 0.8 percent in IVQ2015 and at 0.3 percent in IQ2016. Prices of GDP increased at 2.4 percent in IIQ2016 and increased at 1.4 percent in IIIQ2016. Prices of GDP increased at 2.0 percent in IVQ2016 and increased at 2.0 percent in IQ2017. Prices of GDP increased at 1.0 percent in IIQ2017 and increased at 2.1 percent in IIIQ2017. Prices of GDP increased at 2.3 percent in IVQ2017. There has not been actual deflation or risk of deflation threatening depression in the US that would justify unconventional monetary policy.

Chart I-4, Percent Change from Preceding Period in Prices for GDP Seasonally Adjusted at Annual Rates 1980-2017

Source: US Bureau of Economic Analysis

http://www.bea.gov/iTable/index_nipa.cfm

Chart I-5 provides percent change from preceding year in prices of GDP from 1929 to 2016. There are four consecutive years of declines of prices of GDP during the Great Depression: 3.8 percent in 1930, 9.9 percent in 1931, 11.4 percent in 1932 and 2.7 percent in 1933. There were two consecutive declines of 1.8 percent in 1938 and 1.3 percent in 1939. Prices of GDP fell 0.1 percent in 1949 after increasing 12.6 percent in 1946, 11.2 percent in 1947 and 5.6 percent in 1948, which is similar to experience with wars in other countries. There are no other negative changes of annual prices of GDP in 74 years from 1939 to 2017.

Chart I-5, Percent Change from Preceding Year in Prices for Gross Domestic Product 1930-2016

http://www.bea.gov/iTable/index_nipa.cfm

The producer price index of the US from 1947 to 2018 in Chart I-6 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 I-6, US, Producer Price Index, Finished Goods, NSA, 1947-2018

Source: US Bureau of Labor Statistics

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

Chart I-17 provides 12-month percentage changes of the producer price index from 1948 to 2018. The distinguishing even in Chart I-7 is the Great Inflation of the 1970s. The shape of the two-hump Bactrian camel of the 1970’s resembles the double hump from 2007 to 2017.

Chart I-7, US, Producer Price Index, Finished Goods, 12-Month Percentage Change, NSA, 1948-2018

Source: US Bureau of Labor Statistics

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

Annual percentage changes of the producer price index from 1948 to 2017 are shown in Table I-1A. The producer price index fell 2.8 percent in 1949 following the adjustment to World War II and fell 0.6 percent in 1952 and 1.0 percent in 1953 around the Korean War. There are two other mild declines of 0.3 percent in 1959 and 0.3 percent in 1963. There are only few subsequent and isolated declines of the producer price index of 1.4 percent in 1986, 0.8 percent in 1998, 1.3 percent in 2002 and 2.6 percent in 2009. The decline of 2009 was caused by unwinding of carry trades in 2008 that had lifted oil prices to $140/barrel during deep global recession because of the panic of probable toxic assets in banks that would be removed with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Producer prices fell 3.2 percent in 2015 and declined 1.0 percent in 2016 during collapse of commodity prices form high prices induced by zero interest rates. Producer prices increased 3.2 percent in 2017. There is no evidence in this history of 66 years of the US producer price index suggesting that there is frequent and persistent deflation shock requiring aggressive unconventional monetary policy. The design of such anti-deflation policy could provoke price and financial instability because of lags in effect of monetary policy, model errors, inaccurate forecasts and misleading analysis of current economic conditions.

Table I-1A, US, Annual PPI Inflation ∆% 1948-2017

Year	Annual ∆%
1948	8.0
1949	-2.8
1950	1.8
1951	9.2
1952	-0.6
1953	-1.0
1954	0.3
1955	0.3
1956	2.6
1957	3.8
1958	2.2
1959	-0.3
1960	0.9
1961	0.0
1962	0.3
1963	-0.3
1964	0.3
1965	1.8
1966	3.2
1967	1.1
1968	2.8
1969	3.8
1970	3.4
1971	3.1
1972	3.2
1973	9.1
1974	15.4
1975	10.6
1976	4.5
1977	6.4
1978	7.9
1979	11.2
1980	13.4
1981	9.2
1982	4.1
1983	1.6
1984	2.1
1985	1.0
1986	-1.4
1987	2.1
1988	2.5
1989	5.2
1990	4.9
1991	2.1
1992	1.2
1993	1.2
1994	0.6
1995	1.9
1996	2.7
1997	0.4
1998	-0.8
1999	1.8
2000	3.8
2001	2.0
2002	-1.3
2003	3.2
2004	3.6
2005	4.8
2006	3.0
2007	3.9
2008	6.3
2009	-2.6
2010	4.2
2011	6.1
2012	1.9
2013	1.2
2014	1.9
2015	-3.2
2016	-1.0
2017	3.2

Source: US Bureau of Labor Statistics

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

The producer price index excluding food and energy from 1973 to 2018, the first historical date of availability in the dataset of the Bureau of Labor Statistics (BLS), shows similarly dynamic behavior as the overall index, as shown in Chart I-8. There is no evidence of persistent deflation in the US PPI.

Chart I-8, US Producer Price Index, Finished Goods Excluding Food and Energy, NSA, 1973-2018

Source: US Bureau of Labor Statistics

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

Chart I-9 provides 12-month percentage rates of change of the finished goods index excluding food and energy. The dominating characteristic is the Great Inflation of the 1970s. The double hump illustrates how inflation may appear to be subdued and then returns with strength.

Chart I-9, US Producer Price Index, Finished Goods Excluding Food and Energy, 12-Month Percentage Change, NSA, 1974-2018

Source: US Bureau of Labor Statistics

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

The producer price index of energy goods from 1974 to 2018 is in Chart I-10. The first jump occurred during the Great Inflation of the 1970s analyzed in various comments of this blog (http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html 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 in Appendix I. There is relative stability of producer prices after 1986 with another jump and decline in the late 1990s into the early 2000s. The episode of commodity price increases during a global recession in 2008 could only have occurred with interest rates dropping toward zero, which stimulated the carry trade from zero interest rates to leveraged positions in commodity futures. Commodity futures exposures were dropped in the flight to government securities after Sep 2008. Commodity future exposures were created again when risk aversion diminished around Mar 2010 after the finding that US bank balance sheets did not have the toxic assets that were mentioned in proposing TARP in Congress (see Cochrane and Zingales 2009). Fluctuations in commodity prices and other risk financial assets originate in carry trade when risk aversion ameliorates. There are also fluctuations originating in shifts in preference for asset classes such as between commodities and equities.

Chart I-10, US, Producer Price Index, Finished Energy Goods, NSA, 1974-2018

Source: US Bureau of Labor Statistics

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

Chart I-11 shows 12-month percentage changes of the producer price index of finished energy goods from 1975 to 2018. This index is only available after 1974 and captures only one of the humps of energy prices during the Great Inflation. Fluctuations in energy prices have occurred throughout history in the US but without provoking deflation. Two cases are the decline of oil prices in 2001 to 2002 that has been analyzed by Barsky and Kilian (2004) and the collapse of oil prices from over $140/barrel with shock of risk aversion to the carry trade in Sep 2008.

Chart I-11, US, Producer Price Index, Finished Energy Goods, 12-Month Percentage Change, NSA, 1974-2018

Source: US Bureau of Labor Statistics

http://www.bls.gov/cpi/data.htm

Chart I-12 provides the consumer price index NSA from 1918 to 2018. The dominating characteristic is the increase in slope during the Great Inflation from the middle of the 1960s through the 1970s. There is long-term inflation in the US and no evidence of deflation risks.

Chart I-12, US, Consumer Price Index, NSA, 1918-2018

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm

Chart I-13 provides 12-month percentage changes of the consumer price index from 1918 to 2018. The only episode of deflation after 1950 is in 2009, which is explained by the reversal of speculative commodity futures carry trades that were induced by interest rates driven to zero in a shock of monetary policy in 2008. The only persistent case of deflation is from 1930 to 1933, which has little if any relevance to the contemporary United States economy. There are actually three waves of inflation in the second half of the 1960s, in the mid-1970s and again in the late 1970s. Inflation rates then stabilized in a range with only two episodes above 5 percent.

Chart I-13, US, Consumer Price Index, All Items, 12- Month Percentage Change 1918-2018

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm

Table I-2 provides annual percentage changes of United States consumer price inflation from 1914 to 2017. There have been only cases of annual declines of the CPI after wars:

• World War I minus 10.5 percent in 1921 and minus 6.1 percent in 1922 following cumulative increases of 83.5 percent in four years from 1917 to 1920 at the average of 16.4 percent per year
• World War II: minus 1.2 percent in 1949 following cumulative 33.9 percent in three years from 1946 to 1948 at average 10.2 percent per year
• Minus 0.4 percent in 1955 two years after the end of the Korean War
• Minus 0.4 percent in 2009.
• The decline of 0.4 percent in 2009 followed increase of 3.8 percent in 2008 and is explained by the reversal of speculative carry trades into commodity futures that were created in 2008 as monetary policy rates were driven to zero. The reversal occurred after misleading statement on toxic assets in banks in the proposal for TARP (Cochrane and Zingales 2009).

There were declines of 1.7 percent in both 1927 and 1928 during the episode of revival of rules of the gold standard. The only persistent deflationary period since 1914 was during the Great Depression in the years from 1930 to 1933 and again in 1938-1939. Consumer prices increased only 0.1 percent in 2015 because of the collapse of commodity prices from artificially high levels induced by zero interest rates. Consumer prices increased 1.3 percent in 2016, increasing at 2.1 percent in 2017. Fear of deflation based on that experience does not justify unconventional monetary policy of zero interest rates that has failed to stop deflation in Japan. Financial repression causes far more adverse effects on allocation of resources by distorting the calculus of risk/returns than alleged employment-creating effects or there would not be current recovery without jobs and hiring after zero interest rates since Dec 2008 and intended now forever in a self-imposed forecast growth and employment mandate of monetary policy. Unconventional monetary policy drives wide swings in allocations of positions into risk financial assets that generate instability instead of intended pursuit of prosperity without inflation. There is insufficient knowledge and imperfect tools to maintain the gap of actual relative to potential output constantly at zero while restraining inflation in an open interval of (1.99, 2.0). Symmetric targets appear to have been abandoned in favor of a self-imposed single jobs mandate of easing monetary policy even with the economy growing at or close to potential output that is actually a target of growth forecast. The impact on the overall economy and the financial system of errors of policy are magnified by large-scale policy doses of trillions of dollars of quantitative easing and zero interest rates. The US economy has been experiencing financial repression as a result of negative real rates of interest during nearly a decade and programmed in monetary policy statements until 2015 or, for practical purposes, forever. The essential calculus of risk/return in capital budgeting and financial allocations has been distorted. If economic perspectives are doomed until 2015 such as to warrant zero interest rates and open-ended bond-buying by “printing” digital bank reserves (http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html; see Shultz et al 2012), rational investors and consumers will not invest and consume until just before interest rates are likely to increase. Monetary policy statements on intentions of zero interest rates for another three years or now virtually forever discourage investment and consumption or aggregate demand that can increase economic growth and generate more hiring and opportunities to increase wages and salaries. The doom scenario used to justify monetary policy accentuates adverse expectations on discounted future cash flows of potential economic projects that can revive the economy and create jobs. If it were possible to project the future with the central tendency of the monetary policy scenario and monetary policy tools do exist to reverse this adversity, why the tools have not worked before and even prevented the financial crisis? If there is such thing as “monetary policy science”, why it has such poor record and current inability to reverse production and employment adversity? There is no excuse of arguing that additional fiscal measures are needed because they were deployed simultaneously with similar ineffectiveness. Jon Hilsenrath, writing on “New view into Fed’s response to crisis,” on Feb 21, 2014, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702303775504579396803024281322?mod=WSJ_hp_LEFTWhatsNewsCollection), analyzes 1865 pages of transcripts of eight formal and six emergency policy meetings at the Fed in 2008 (http://www.federalreserve.gov/monetarypolicy/fomchistorical2008.htm). If there were an infallible science of central banking, models and forecasts would provide accurate information to policymakers on the future course of the economy in advance. Such forewarning is essential to central bank science because of the long lag between the actual impulse of monetary policy and the actual full effects on income and prices many months and even years ahead (Romer and Romer 2004, Friedman 1961, 1953, Culbertson 1960, 1961, Batini and Nelson 2002). Jon Hilsenrath, writing on “New view into Fed’s response to crisis,” on Feb 21, 2014, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702303775504579396803024281322?mod=WSJ_hp_LEFTWhatsNewsCollection), analyzed 1865 pages of transcripts of eight formal and six emergency policy meetings at the Fed in 2008 (http://www.federalreserve.gov/monetarypolicy/fomchistorical2008.htm). Jon Hilsenrath demonstrates that Fed policymakers frequently did not understand the current state of the US economy in 2008 and much less the direction of income and prices. The conclusion of Friedman (1953) that monetary impulses increase financial and economic instability because of lags in anticipating needs of policy, taking policy decisions and effects of decisions. This a fortiori true when untested unconventional monetary policy in gargantuan doses shocks the economy and financial markets.

Table I-2, US, Annual CPI Inflation ∆% 1914-2017

Year	Annual ∆%
1914	1.0
1915	1.0
1916	7.9
1917	17.4
1918	18.0
1919	14.6
1920	15.6
1921	-10.5
1922	-6.1
1923	1.8
1924	0.0
1925	2.3
1926	1.1
1927	-1.7
1928	-1.7
1929	0.0
1930	-2.3
1931	-9.0
1932	-9.9
1933	-5.1
1934	3.1
1935	2.2
1936	1.5
1937	3.6
1938	-2.1
1939	-1.4
1940	0.7
1941	5.0
1942	10.9
1943	6.1
1944	1.7
1945	2.3
1946	8.3
1947	14.4
1948	8.1
1949	-1.2
1950	1.3
1951	7.9
1952	1.9
1953	0.8
1954	0.7
1955	-0.4
1956	1.5
1957	3.3
1958	2.8
1959	0.7
1960	1.7
1961	1.0
1962	1.0
1963	1.3
1964	1.3
1965	1.6
1966	2.9
1967	3.1
1968	4.2
1969	5.5
1970	5.7
1971	4.4
1972	3.2
1973	6.2
1974	11.0
1975	9.1
1976	5.8
1977	6.5
1978	7.6
1979	11.3
1980	13.5
1981	10.3
1982	6.2
1983	3.2
1984	4.3
1985	3.6
1986	1.9
1987	3.6
1988	4.1
1989	4.8
1990	5.4
1991	4.2
1992	3.0
1993	3.0
1994	2.6
1995	2.8
1996	3.0
1997	2.3
1998	1.6
1999	2.2
2000	3.4
2001	2.8
2002	1.6
2003	2.3
2004	2.7
2005	3.4
2006	3.2
2007	2.8
2008	3.8
2009	-0.4
2010	1.6
2011	3.2
2012	2.1
2013	1.5
2014	1.6
2015	0.1
2016	1.3
2017	2.1

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm

Chart I-14 provides the consumer price index excluding food and energy from 1957 to 2018. There is long-term inflation in the US without episodes of persistent deflation.

Chart I-14, US, Consumer Price Index Excluding Food and Energy, NSA, 1957-2018

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm

Chart I-15 provides 12-month percentage changes of the consumer price index excluding food and energy from 1958 to 2018. There are three waves of inflation in the 1970s during the Great Inflation. There is no episode of deflation.

Chart I-15, US, Consumer Price Index Excluding Food and Energy, 12-Month Percentage Change, NSA, 1958-2018

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm

The consumer price index of housing is in Chart I-16. There was also acceleration during the Great Inflation of the 1970s. The index flattens after the global recession in IVQ2007 to IIQ2009. Housing prices collapsed under the weight of construction of several times more housing than needed. Surplus housing originated in subsidies and artificially low interest rates in the shock of unconventional monetary policy in 2003 to 2004 in fear of deflation.

Chart I-16, US, Consumer Price Index Housing, NSA, 1967-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm

Chart I-17 provides 12-month percentage changes of the housing CPI. The Great Inflation also had extremely high rates of housing inflation. Housing is considered as potential hedge of inflation.

Chart I-17, US, Consumer Price Index, Housing, 12- Month Percentage Change, NSA, 1968-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm

ID Current US Inflation. Consumer price inflation has fluctuated in recent months. Table I-3 provides 12-month consumer price inflation in Feb 2018 and annual equivalent percentage changes for the months from Dec 2017 to Feb 2018 of the CPI and major segments. The final column provides inflation from Jan 2018 to Feb 2018. CPI inflation increased 2.2 percent in the 12 months ending in Feb 2018. The annual equivalent rate from Dec 2017 to Feb 2018 was 3.7 percent in the new episode of reversal and renewed positions of carry trades from zero interest rates to commodities exposures; and the monthly inflation rate of 0.2 percent annualizes at 2.4 percent with oscillating carry trades at the margin. These inflation rates fluctuate in accordance with inducement of risk appetite or frustration by risk aversion of carry trades from zero interest rates to commodity futures. At the margin, the decline in commodity prices in sharp recent risk aversion in commodities markets caused lower inflation worldwide (with return in some countries in Dec 2012 and Jan-Feb 2013) that followed a jump in Aug-Sep 2012 because of the relaxed risk aversion resulting from the bond-buying program of the European Central Bank or Outright Monetary Transactions (OMT) (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). Carry trades moved away from commodities into stocks with resulting weaker commodity prices and stronger equity valuations. There is reversal of exposures in commodities but with preferences of equities by investors. Geopolitical events in Eastern Europe and the Middle East together with economic conditions worldwide are inducing risk concerns in commodities at the margin. With zero or very low interest rates, commodity prices would increase again in an environment of risk appetite, as shown in past oscillating inflation. Excluding food and energy, core CPI inflation was 1.8 percent in the 12 months ending in Feb 2018 and 2.8 percent in annual equivalent from Dec 2017 to Feb 2018. There is no deflation in the US economy that could justify further unconventional monetary policy, which is now open-ended or forever with very low interest rates and cessation of bond-buying by the central bank but with reinvestment of interest and principal, or QE→∞ even if the economy grows back to potential. The FOMC is engaging in gradual reduction of the Fed balance sheet. Financial repression of very low interest rates is now intended as a permanent distortion of resource allocation by clouding risk/return decisions, preventing the economy from expanding along its optimal growth path. The FOMC is initiating reduction of the positions in securities held outright in the Fed’s balance sheet. Consumer food prices in the US increased 1.4 percent in 12 months ending in Feb 2018 and increased at 1.6 percent in annual equivalent from Dec 2017 to Feb 2018. Monetary policies stimulating carry trades of commodities futures that increase prices of food constitute a highly regressive tax on lower income families for whom food is a major portion of the consumption basket especially with wage increases below inflation in a recovery without hiring (https://cmpassocregulationblog.blogspot.com/2018/02/collateral-effects-of-unwinding.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/dollar-devaluation-and-rising.html). Energy consumer prices increased 7.7 percent in 12 months, increased at 12.1 percent in annual equivalent from Dec 2017 to Feb 2018 and increased 0.1 percent in Feb 2018 or at 1.2 percent in annual equivalent. Waves of inflation are induced by carry trades from zero interest rates to commodity futures, which are unwound and repositioned during alternating risk aversion and risk appetite originating in the European debt crisis and increasingly in growth, soaring debt and politics in China. For lower income families, food and energy are a major part of the family budget. Inflation is not persistently low or threatening deflation in annual equivalent in any of the categories in Table I-2 but simply reflecting waves of inflation originating in carry trades. Zero interest rates induce carry trades into commodity futures positions with episodes of risk aversion and portfolio reallocations causing fluctuations that determine an upward trend of prices.

Table I-3, US, Consumer Price Index Percentage Changes 12 months NSA and Annual Equivalent ∆%

	% RI	∆% 12 Months Feb 2018/ Feb 2017 NSA	∆% Annual Equivalent Dec 2017 to Feb 2018 SA	∆% Feb 2018/Jan 2018 SA
CPI All Items	100.000	2.2	3.7	0.2
CPI ex Food and Energy	79.010	1.8	2.8	0.2
Food	13.371	1.4	1.6	0.0
Food at Home	7.380	0.5	0.4	-0.2
Food Away from Home	5.991	2.6	3.2	0.2
Energy	7.619	7.7	12.1	0.1
Gasoline	3.925	12.6	16.6	-0.9
Electricity	2.636	2.2	1.6	0.4
Commodities less Food and Energy	19.848	-0.5	2.8	0.1
New Vehicles	3.797	-1.5	-0.4	-0.5
Used Cars and Trucks	2.397	-0.1	3.2	-0.3
Medical Care Commodities	1.742	1.6	2.0	-0.3
Apparel	3.042	0.4	12.2	1.5
Services Less Energy Services	59.162	2.6	3.2	0.2
Shelter	32.767	3.1	2.8	0.2
Rent of Primary Residence	7.803	3.6	3.2	0.2
Owner’s Equivalent Rent of Residences	23.679	3.1	3.2	0.2
Transportation Services	5.933	4.5	8.7	1.0
Medical Care Services	6.942	1.8	3.2	0.0

% RI: Percent Relative Importance

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/

Table I-4 provides weights of components in the consumer price of the US in Dec 2012. Housing has a weight of 41.021 percent. The combined weight of housing and transportation is 57.867 percent or more than one-half of consumer expenditures of all urban consumers. The combined weight of housing, transportation and food and beverages is 73.128 percent of the US CPI. Table I-3 provides relative importance of key items in Feb 2018.

Table I-4, US, Relative Importance, 2009-2010 Weights, of Components in the Consumer Price Index, US City Average, Dec 2012

All Items	100.000
Food and Beverages	15.261
Food	14.312
Food at home	8.898
Food away from home	5.713
Housing	41.021
Shelter	31.681
Rent of primary residence	6.545
Owners’ equivalent rent	22.622
Apparel	3.564
Transportation	16.846
Private Transportation	15.657
New vehicles	3.189
Used cars and trucks	1.844
Motor fuel	5.462
Gasoline	5.274
Medical Care	7.163
Medical care commodities	1.714
Medical care services	5.448
Recreation	5.990
Education and Communication	6.779
Other Goods and Services	3.376

Refers to all urban consumers, covering approximately 87 percent of the US population (see http://www.bls.gov/cpi/cpiovrvw.htm#item1). Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/cpiri2011.pdf http://www.bls.gov/cpi/cpiriar.htm http://www.bls.gov/cpi/cpiri2012.pdf

Chart I-18 provides the US consumer price index for housing from 2001 to 2018. Housing prices rose sharply during the decade until the bump of the global recession and increased again in 2011-2012 with some stabilization in 2013. There is renewed increase in 2014 followed by stabilization and renewed increase in 2015-2018. The CPI excluding housing would likely show much higher inflation. The commodity carry trades resulting from unconventional monetary policy have compressed income remaining after paying for indispensable shelter.

Chart I-18, US, Consumer Price Index, Housing, NSA, 2001-2018

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm

Chart I-19 provides 12-month percentage changes of the housing CPI. Percentage changes collapsed during the global recession but have been rising into positive territory in 2011 and 2012-2013 but with the rate declining and then increasing into 2014. There is decrease into 2015 followed by stability and marginal increase in 2016-18.

Chart I-19, US, Consumer Price Index, Housing, 12-Month Percentage Change, NSA, 2001-2018

Source: US Bureau of Labor Statistics

http://www.bls.gov/cpi/data.htm

There have been waves of consumer price inflation in the US in 2011 and into 2018 (https://cmpassocregulationblog.blogspot.com/2018/02/world-inflation-waves-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/dollar-devaluation-and-increasing.html) that are illustrated in Table I-5. The first wave occurred in Jan-Apr 2011 and was caused by the carry trade of commodity prices induced by unconventional monetary policy of zero interest rates. Cheap money at zero opportunity cost in environment of risk appetite was channeled into financial risk assets, causing increases in commodity prices. The annual equivalent rate of increase of the all-items CPI in Jan-Apr 2011 was 4.9 percent and the CPI excluding food and energy increased at annual equivalent rate of 1.8 percent. The second wave occurred during the collapse of the carry trade from zero interest rates to exposures in commodity futures because of risk aversion in financial markets created by the sovereign debt crisis in Europe. The annual equivalent rate of increase of the all-items CPI dropped to 1.8 percent in May-Jun 2011 while the annual equivalent rate of the CPI excluding food and energy increased at 2.4 percent. In the third wave in Jul-Sep 2011, annual equivalent CPI inflation rose to 3.2 percent while the core CPI increased at 2.4 percent. The fourth wave occurred in the form of increase of the CPI all-items annual equivalent rate to 1.8 percent in Oct-Nov 2011 with the annual equivalent rate of the CPI excluding food and energy remaining at 2.4 percent. The fifth wave occurred in Dec 2011 to Jan 2012 with annual equivalent headline inflation of 1.8 percent and core inflation of 2.4 percent. In the sixth wave, headline CPI inflation increased at annual equivalent 2.4 percent in Feb-Apr 2012 and 2.0 percent for the core CPI. The seventh wave in May-Jul occurred with annual equivalent inflation of minus 1.2 percent for the headline CPI in May-Jul 2012 and 2.0 percent for the core CPI. The eighth wave is with annual equivalent inflation of 6.8 percent in Aug-Sep 2012 but 5.7 percent including Oct. In the ninth wave, annual equivalent inflation in Nov 2012 was minus 2.4 percent under the new shock of risk aversion and 0.0 percent in Dec 2012 with annual equivalent of 0.0 percent in Nov 2012-Jan 2013 and 2.0 percent for the core CPI. In the tenth wave, annual equivalent of the headline CPI was 6.2 percent in Feb 2013 and 1.2 percent for the core CPI. In the eleventh wave, annual equivalent was minus 3.0 percent in Mar-Apr 2013 and 0.6 percent for the core index. In the twelfth wave, annual equivalent inflation was 1.4 percent in May-Sep 2013 and 2.2 percent for the core CPI. In the thirteenth wave, annual equivalent CPI inflation in Oct-Nov 2013 was 1.8 percent and 1.8 percent for the core CPI. Inflation returned in the fourteenth wave at 2.7 percent for the headline CPI index and 1.8 percent for the core CPI in annual equivalent for Dec 2013 to Mar 2014. In the fifteenth wave, inflation moved to annual equivalent 1.8 percent for the headline index in Apr-Jul 2014 and 2.1 percent for the core index. In the sixteenth wave, annual equivalent inflation was 0.0 percent in Aug 2014 and 1.2 percent for the core index. In the seventeenth wave, annual equivalent inflation was 0.0 percent for the headline CPI and 2.4 percent for the core in Sep-Oct 2014. In the eighteenth wave, annual equivalent inflation was minus 4.3 percent for the headline index in Nov 2014-Jan 2015 and 1.2 percent for the core. In the nineteenth wave, annual equivalent inflation was 2.9 percent for the headline index and 2.2 percent for the core index in Feb-Jun 2015. In the twentieth wave, annual equivalent inflation was at 2.4 percent in Jul 2015 for the headline and core indexes. In the twenty-first wave, consumer prices decreased at 1.2 percent in annual equivalent in Aug-Sep 2015. In the twenty-second wave, consumer prices increased at annual equivalent 1.2 percent for the central index and 2.4 percent for the core in Oct-Nov 2015. In the twenty-third wave, annual equivalent inflation was 0.0 percent for the headline CPI in Dec 2015 to Jan 2016 and 1.8 percent for the core. In the twenty-fourth wave, annual equivalent was minus 2.4 percent and 2.4 percent for the core in Feb 2016. In the twenty-fifth wave, annual equivalent inflation was at 3.0 percent for the central index in Mar-Apr 2016 and at 1.8 percent for the core index. In the twenty-sixth wave, annual equivalent inflation was 3.0 percent for the central CPI in May-Jun 2016 and 2.4 percent for the core CPI. In the twenty-seventh wave, annual equivalent inflation was 0.0 percent for the central CPI and 2.4 percent for the core in Jul 2016. In the twenty-eighth wave, annual equivalent inflation was 2.4 percent for the headline CPI in Aug 2016 and 2.4 percent for the core. In the twenty-ninth wave, CPI prices increased at annual equivalent 3.0 percent in Sep-Oct 2016 while the core CPI increased at 1.2 percent. In the thirtieth wave, annual equivalent CPI prices increased at 3.0 percent in Nov-Dec 2016 while the core CPI increased at 2.4 percent. In the thirty-first wave, CPI prices increased at annual equivalent 6.2 percent in Jan 2017 while the core index increased at 3.7 percent. In the thirty-second wave, CPI prices changed at annual equivalent 0.0 percent in Feb 2017 while the core increased at 2.4 percent. In the thirty-third wave, CPI prices decreased at annual equivalent 2.4 percent in Mar 2017 while the core index fell at 1.2 percent. In the thirty-fourth wave, CPI prices increased at 2.4 percent annual equivalent in Apr 2017 while the core index increased at 1.2 percent. In the thirty-fifth wave, CPI prices fell at annual equivalent 0.6 in May-Jun 2017 while core prices increased at 1.2 percent. In the thirty-sixth wave, CPI prices increased at annual equivalent 1.2 percent in Jul 2017 while core prices increased at 1.2 percent. In the thirty-seventh wave, CPI prices increased at annual equivalent 5.5 percent in Aug-Sep 2017 while core prices increased at 1.8 percent. In the thirty-eighth wave, CPI prices increased at 2.4 percent annual equivalent in Oct-Nov 2017 while core prices increased at 1.8 percent. In the thirty-ninth wave, CPI prices increased at 3.7 percent annual equivalent in Dec 2017-Feb 2018 while core prices increased at 3.0 percent. The conclusion is that inflation accelerates and decelerates in unpredictable fashion because of shocks or risk aversion and portfolio reallocations in carry trades from zero interest rates to commodity derivatives.

Table I-5, US, Headline and Core CPI Inflation Monthly SA and 12 Months NSA ∆%

	All Items  SA Month	All Items NSA 12 month	Core SA Month	Core NSA 12 months
Feb 2018	0.2	2.2	0.2	1.8
Jan	0.5	2.1	0.3	1.8
Dec 2017	0.2	2.1	0.2	1.8
AE ∆% Dec-Feb	3.7		3.0
Nov	0.3	2.2	0.1	1.7
Oct	0.1	2.0	0.2	1.8
AE ∆% Oct-Nov	2.4		1.8
Sep	0.5	2.2	0.1	1.7
Aug	0.4	1.9	0.2	1.7
AE ∆% Aug-Sep	5.5		1.8
Jul	0.1	1.7	0.1	1.7
AE ∆% Jul	1.2		1.2
Jun	0.0	1.6	0.1	1.7
May	-0.1	1.9	0.1	1.7
AE ∆% May-Jun	-0.6		1.2
Apr	0.2	2.2	0.1	1.9
AE ∆% Apr	2.4		1.2
Mar	-0.2	2.4	-0.1	2.0
AE ∆% Mar	-2.4		-1.2
Feb	0.0	2.7	0.2	2.2
AE ∆% Feb	0.0		2.4
Jan	0.5	2.5	0.3	2.3
AE ∆% Jan	6.2		3.7
Dec 2016	0.3	2.1	0.2	2.2
Nov	0.2	1.7	0.2	2.1
AE ∆% Nov-Dec	3.0		2.4
Oct	0.3	1.6	0.1	2.1
Sep	0.2	1.5	0.1	2.2
AE ∆% Sep-Oct	3.0		1.2
Aug	0.2	1.1	0.2	2.3
AE ∆ Aug	2.4		2.4
Jul	0.0	0.8	0.2	2.2
AE ∆% Jul	0.0		2.4
Jun	0.3	1.0	0.2	2.2
May	0.2	1.0	0.2	2.2
AE ∆% May-Jun	3.0		2.4
Apr	0.3	1.1	0.2	2.1
Mar	0.2	0.9	0.1	2.2
AE ∆% Mar-Apr	3.0		1.8
Feb	-0.2	1.0	0.2	2.3
AE ∆% Feb	-2.4		2.4
Jan	0.1	1.4	0.2	2.2
Dec 2015	-0.1	0.7	0.1	2.1
AE ∆% Dec-Jan	0.0		1.8
Nov	0.1	0.5	0.2	2.0
Oct	0.1	0.2	0.2	1.9
AE ∆% Oct-Nov	1.2		2.4
Sep	-0.2	0.0	0.2	1.9
Aug	0.0	0.2	0.1	1.8
AE ∆% Aug-Sep	-1.2		1.8
Jul	0.2	0.2	0.2	1.8
AE ∆% Jul	2.4		2.4
Jun	0.3	0.1	0.2	1.8
May	0.3	0.0	0.1	1.7
Apr	0.1	-0.2	0.2	1.8
Mar	0.3	-0.1	0.3	1.8
Feb	0.2	0.0	0.1	1.7
AE ∆% Feb-Jun	2.9		2.2
Jan	-0.6	-0.1	0.1	1.6
Dec 2014	-0.3	0.8	0.1	1.6
Nov	-0.2	1.3	0.1	1.7
AE ∆% Nov-Jan	-4.3		1.2
Oct	0.0	1.7	0.2	1.8
Sep	0.0	1.7	0.2	1.7
AE ∆% Sep-Oct	0.0		2.4
Aug	0.0	1.7	0.1	1.7
AE ∆% Aug	0.0		1.2
Jul	0.1	2.0	0.2	1.9
Jun	0.1	2.1	0.1	1.9
May	0.2	2.1	0.2	2.0
Apr	0.2	2.0	0.2	1.8
AE ∆% Apr-Jul	1.8		2.1
Mar	0.2	1.5	0.2	1.7
Feb	0.1	1.1	0.1	1.6
Jan	0.3	1.6	0.1	1.6
Dec 2013	0.3	1.5	0.2	1.7
AE ∆% Dec-Mar	2.7		1.8
Nov	0.2	1.2	0.2	1.7
Oct	0.1	1.0	0.1	1.7
AE ∆% Oct-Nov	1.8		1.8
Sep	0.0	1.2	0.2	1.7
Aug	0.2	1.5	0.2	1.8
Jul	0.2	2.0	0.2	1.7
Jun	0.2	1.8	0.2	1.6
May	0.0	1.4	0.1	1.7
AE ∆% May-Sep	1.4		2.2
Apr	-0.2	1.1	0.0	1.7
Mar	-0.3	1.5	0.1	1.9
AE ∆% Mar-Apr	-3.0		0.6
Feb	0.5	2.0	0.1	2.0
AE ∆% Feb	6.2		1.2
Jan	0.2	1.6	0.2	1.9
Dec 2012	0.0	1.7	0.2	1.9
Nov	-0.2	1.8	0.1	1.9
AE ∆% Nov-Jan	0.0		2.0
Oct	0.3	2.2	0.2	2.0
Sep	0.5	2.0	0.2	2.0
Aug	0.6	1.7	0.1	1.9
AE ∆% Aug-Oct	5.7		2.0
Jul	0.0	1.4	0.2	2.1
Jun	-0.1	1.7	0.2	2.2
May	-0.2	1.7	0.1	2.3
AE ∆% May-Jul	-1.2		2.0
Apr	0.2	2.3	0.2	2.3
Mar	0.2	2.7	0.2	2.3
Feb	0.2	2.9	0.1	2.2
AE ∆% Feb-Apr	2.4		2.0
Jan	0.3	2.9	0.2	2.3
Dec 2011	0.0	3.0	0.2	2.2
AE ∆% Dec-Jan	1.8		2.4
Nov	0.2	3.4	0.2	2.2
Oct	0.1	3.5	0.2	2.1
AE ∆% Oct-Nov	1.8		2.4
Sep	0.2	3.9	0.1	2.0
Aug	0.3	3.8	0.3	2.0
Jul	0.3	3.6	0.2	1.8
AE ∆% Jul-Sep	3.2		2.4
Jun	0.0	3.6	0.2	1.6
May	0.3	3.6	0.2	1.5
AE ∆%  May-Jun	1.8		2.4
Apr	0.5	3.2	0.1	1.3
Mar	0.5	2.7	0.1	1.2
Feb	0.3	2.1	0.2	1.1
Jan	0.3	1.6	0.2	1.0
AE ∆%  Jan-Apr	4.9		1.8
Dec 2010	0.4	1.5	0.1	0.8
Nov	0.3	1.1	0.1	0.8
Oct	0.3	1.2	0.1	0.6
Sep	0.2	1.1	0.1	0.8
Aug	0.1	1.1	0.1	0.9
Jul	0.2	1.2	0.1	0.9
Jun	0.0	1.1	0.1	0.9
May	-0.1	2.0	0.1	0.9
Apr	0.0	2.2	0.0	0.9
Mar	0.0	2.3	0.0	1.1
Feb	-0.1	2.1	0.0	1.3
Jan	0.1	2.6	-0.1	1.6

Note: Core: excluding food and energy; AE: annual equivalent

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/

The behavior of the US consumer price index NSA from 2001 to 2018 is in Chart I-20. Inflation in the US is very dynamic without deflation risks that would justify symmetric inflation targets. The hump in 2008 originated in the carry trade from interest rates dropping to zero into commodity futures. There is no other explanation for the increase of the Cushing OK Crude Oil Future Contract 1 from $55.64/barrel on Jan 9, 2007 to $145.29/barrel on July 3, 2008 during deep global recession, collapsing under a panic of flight into government obligations and the US dollar to $37.51/barrel on Feb 13, 2009 and then rising by carry trades to $113.93/barrel on Apr 29, 2012, collapsing again and then recovering again to $105.23/barrel, all during mediocre economic recovery with peaks and troughs influenced by bouts of risk appetite and risk aversion (data from the US Energy Information Administration EIA, http://www.eia.gov/). The unwinding of the carry trade with the TARP announcement of toxic assets in banks channeled cheap money into government obligations (see Cochrane and Zingales 2009).

Chart I-20, US, Consumer Price Index, NSA, 2001-2018

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/

Chart I-21 provides 12-month percentage changes of the consumer price index from 2001 to 2018. There was no deflation or threat of deflation from 2008 into 2009. Commodity prices collapsed during the panic of toxic assets in banks. When stress tests in 2009 revealed US bank balance sheets in much stronger position, cheap money at zero opportunity cost exited government obligations and flowed into carry trades of risk financial assets. Increases in commodity prices drove again the all items CPI with interruptions during risk aversion originating in multiple fears but especially from the sovereign debt crisis of Europe.

Chart I-21, US, Consumer Price Index, 12-Month Percentage Change, NSA, 2001-2018

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/

The trend of increase of the consumer price index excluding food and energy in Chart I-22 does not reveal any threat of deflation that would justify symmetric inflation targets. There are mild oscillations in a neat upward trend.

Chart I-22, US, Consumer Price Index Excluding Food and Energy, NSA, 2001-2018

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/

Chart I-23 provides 12-month percentage change of the consumer price index excluding food and energy. Past-year rates of inflation fell toward 1 percent from 2001 into 2003 because of the recession and the decline of commodity prices beginning before the recession with declines of real oil prices. Near zero interest rates with fed funds at 1 percent between Jun 2003 and Jun 2004 stimulated carry trades of all types, including in buying homes with subprime mortgages in expectation that low interest rates forever would increase home prices permanently, creating the equity that would permit the conversion of subprime mortgages into creditworthy mortgages (Gorton 2009EFM; see http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html). Inflation rose and then collapsed during the unwinding of carry trades and the housing debacle of the global recession. Carry trades into 2011 and 2012 gave a new impulse to CPI inflation, all items and core. Symmetric inflation targets destabilize the economy by encouraging hunts for yields that inflate and deflate financial assets, obscuring risk/return decisions on production, investment, consumption and hiring.

Chart I-23, US, Consumer Price Index Excluding Food and Energy, 12-Month Percentage Change, NSA, 2001-2018

Source: US Bureau of Labor Statistics

http://www.bls.gov/cpi/

Headline and core producer price indexes are in Table I-6. The headline PPI SA increased 0.2 percent in Feb 2018 and increased 2.2 percent NSA in the 12 months ending in Feb 2018. The core PPI SA increased 0.2 percent in Feb 2018 and increased 1.9 percent in 12 months. Analysis of annual equivalent rates of change shows inflation waves similar to those worldwide. In the first wave, the absence of risk aversion from the sovereign risk crisis in Europe motivated the carry trade from zero interest rates into commodity futures that caused the annual equivalent rate of 11.1 percent in the headline PPI in Jan-Apr 2011 and 3.7 percent in the core PPI. In the second wave, commodity futures prices collapsed in Jun 2011 with the return of risk aversion originating in the sovereign risk crisis of Europe. The annual equivalent rate of headline PPI inflation collapsed to 0.6 percent in May-Jun 2011 but the core annual equivalent inflation rate was higher at 2.4 percent. In the third wave, headline PPI inflation resuscitated with annual equivalent at 4.1 percent in Jul-Sep 2011 and core PPI inflation at 3.2 percent. Core PPI inflation was persistent throughout 2011, jumping from annual equivalent at 2.0 percent in the first three months of 2010 to 3.0 percent in 12 months ending in Dec 2011. Unconventional monetary policy is based on the proposition that core rates reflect more fundamental inflation and are thus better predictors of the future. In practice, the relation of core and headline inflation is as difficult to predict as future inflation (see IIID Supply Shocks in http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html). In the fourth wave, risk aversion originating in the lack of resolution of the European debt crisis caused unwinding of carry trades with annual equivalent headline PPI inflation of 0.0 percent in Oct-Dec 2011 and 2.0 percent in the core annual equivalent. In the fifth wave from Jan to Mar 2012, annual equivalent inflation was 3.2 percent for the headline index but 3.2 percent for the core index excluding food and energy. In the sixth wave, annual equivalent inflation in Apr-May 2012 during renewed risk aversion was minus 4.1 percent for the headline PPI and 1.8 percent for the core. In the seventh wave, continuing risk aversion caused reversal of carry trades into commodity exposures with annual equivalent headline inflation of minus 1.2 percent in Jun-Jul 2012 while core PPI inflation was at annual equivalent 3.7 percent. In the eighth wave, relaxed risk aversion because of the announcement of the impaired bond buying program or Outright Monetary Transactions (OMT) of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html) induced carry trades that drove annual equivalent inflation of producer prices of the United States at 13.4 percent in Aug-Sep 2012 and 1.2 percent in the core index. In the ninth wave, renewed risk aversion caused annual equivalent inflation of minus 2.4 percent in Oct 2012-Dec 2012 in the headline index and 1.2 percent in the core index. In the tenth wave, annual equivalent inflation was 7.4 percent in the headline index in Jan-Feb 2013 and 1.8 percent in the core index. In the eleventh wave, annual equivalent inflation was minus 7.0 percent in Mar-Apr 2012 and 1.2 percent for the core index. In the twelfth wave, annual equivalent inflation returned at 2.7 percent in May-Aug 2013 and 1.2 percent in the core index. In the thirteenth wave, portfolio reallocations away from commodities and into equities reversed commodity carry trade with annual equivalent inflation of 0.8 percent in Sep-Nov 2013 in the headline PPI and 1.6 percent in the core. In the fourteenth wave, annual equivalent inflation returned at 5.3 percent annual equivalent for the headline index in Dec 2013-Feb 2014 and 4.1 percent for the core index. In the fifteenth wave, annual equivalent inflation was 3.7 percent for the general PPI index in Mar 2014 and 0.0 percent for the core PPI index. In the sixteenth wave, annual equivalent headline PPI inflation increased at 1.5 percent in Apr-Jul 2014 and 1.8 percent for the core PPI. In the seventeenth wave, annual equivalent inflation in Aug-Nov 2014 was minus 3.0 percent and 1.8 percent for the core index. In the eighteenth wave, annual equivalent inflation fell at 17.6 percent for the general index in Dec 2014 to Jan 2015 and increased at 3.0 percent in the core index. In the nineteenth wave, annual equivalent inflation increased at 1.2 percent in Feb 2015 and increased at 3.7 percent for the core index. In the twentieth wave, annual equivalent producer prices increased at 3.7 percent in Mar 2015 and the core at 2.4 percent. In the twenty-first wave, producer prices fell at 7.0 percent annual equivalent in Apr 2015 while the core index increased at 1.2 percent. In the twenty-second wave, producer prices increased at annual equivalent 12.0 percent in May-Jun 2015 and core producer prices at 2.4 percent. In the twenty-third wave, producer prices fell at 2.4 percent in Jul 2015 and the core index increased at 2.4 percent. In the twenty-fourth wave, annual equivalent inflation fell at 7.4 percent in Aug-Oct 2015 and the core index changed at 0.0 percent annual equivalent. In the twenty-fifth wave, annual equivalent inflation was 2.4 percent in Nov 2015 with the core at 1.2 percent. In the twenty-sixth wave, the headline PPI fell at annual equivalent 7.0 percent and the core increased at 2.0 percent in Dec 2015-Feb 2016. In the twenty-seventh wave, annual equivalent inflation was 4.5 percent for the central index in Mar-May 2016 and 1.6 percent for the core. In the twenty-eighth wave, annual equivalent inflation was 8.7 percent for the headline index in Jun 2016 and 3.7 percent for the core. In the twenty-ninth wave, producer prices fell at annual equivalent 1.2 percent in Jul 2016 and core producer prices changed at 0.0 percent. In the thirtieth wave, producer prices fell at 3.5 percent annual equivalent in Aug 2016 while core producer prices increased at 2.4 percent. In the thirty-first wave, producer prices increased at annual equivalent 5.5 percent in Sep-Oct 2016 while core prices increased at 1.2 percent. In the thirty-second wave, producer prices decreased at 3.5 percent annual equivalent in Nov 2016 and the core index increased at 1.2 percent. In the thirty-third wave, producer prices increased at 10.0 percent in Dec 2016 and the core index increased at 3.7 percent. In the thirty-fourth wave, producer prices increased at 11.4 percent in Jan 2017 while the core increased at 2.4 percent. In the thirty-fifth wave, producer prices increased at 1.2 percent in Feb 2017 while the core index increased at 1.2 percent. In the thirty-sixth wave, producer prices increased at annual equivalent 1.2 percent in Mar 2017 while core producer prices increased at 3.7 percent. In the thirty-seventh wave, annual equivalent inflation of the headline index was at 7.4 percent in Apr 2017 and 4.9 percent for the core. In the thirty-eighth wave, producer prices fell at 7.0 percent annual equivalent in May 2017 while core producer prices changed at 0.0 percent. In the thirty-ninth wave, producer prices increased at annual equivalent 1.2 percent in Jun 2017 while core producer prices increased at 2.4 percent. In the fortieth wave, headline producer prices fell at 1.2 percent annual equivalent in Jul 2017 while core prices increased at 1.2 percent. In the forty-first wave, central producer prices increased at 7.4 percent annual equivalent in Aug-Sep 2017 while core prices increased at 1.8 percent. In the forty-second wave, producer prices increased at annual equivalent 7.4 percent in Oct-Nov 2017 while core producer prices increased at 4.9 percent. In the forty-third wave, producer prices changed at annual equivalent 0.0 percent in Dec 2017 while core prices changed at 0.0 percent. In the forty-fourth wave, producer prices increased at 8.7 percent annual equivalent in Jan 2018 while core producer prices increased at 1.2 percent. In the forty-fifth wave, producer prices fell at annual equivalent 3.5 percent in Feb 2018 while core prices changed at 0.0 percent. It is almost impossible to forecast PPI inflation and its relation to CPI inflation. “Inflation surprise” by monetary policy could be proposed to climb along a downward sloping Phillips curve, resulting in higher inflation but lower unemployment (see Kydland and Prescott 1977, Barro and Gordon 1983 and past comments of this blog 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 http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). The architects of monetary policy would require superior inflation forecasting ability compared to forecasting naivety by everybody else. In practice, we are all naïve in forecasting inflation and other economic variables and events.

Table I-6, US, Headline and Core PPI Inflation Monthly SA and 12-Month NSA ∆%

	Finished Goods SA Month	Finished Goods NSA 12 months	Finished Core SA Month	Finished Core NSA 12 months
Feb 2018	-0.3	2.7	0.0	1.9
AE Feb	-3.5		0.0
Jan	0.7	3.0	0.1	1.9
AE Jan	8.7		1.2
Dec 2017	0.0	3.3	0.0	2.0
AE Dec	0.0		0.0
Nov	1.0	4.3	0.4	2.2
Oct	0.2	2.9	0.4	2.0
AE Oct-Nov	7.4		4.9
Sep	0.6	3.3	0.1	1.7
Aug	0.6	3.0	0.2	1.8
AE Aug-Sep	7.4		1.8
Jul	-0.1	2.1	0.1	1.8
AE Jul	-1.2		1.2
Jun	0.1	2.1	0.2	1.7
AE Jun	1.2		2.4
May	-0.6	2.8	0.0	1.9
AE May	-7.0		0.0
Apr	0.6	4.0	0.4	2.0
AE Apr	7.4		4.9
Mar	0.1	3.8	0.3	1.8
AE Mar	1.2		3.7
Feb	0.1	3.8	0.1	1.6
AE Feb	1.2		1.2
Jan	0.9	2.9	0.2	1.7
AE Jan	11.4		2.4
Dec 2016	0.8	1.9	0.3	1.7
AE Dec	10.0		3.7
Nov	-0.3	0.4	0.1	1.6
AE Nov	-3.5		1.2
Oct	0.5	0.7	0.1	1.6
Sep	0.4	-0.1	0.1	1.4
AE Sep-Oct	5.5		1.2
Aug	-0.3	-1.9	0.2	1.4
AE Aug	-3.5		2.4
Jul	-0.1	-2.0	0.0	1.2
AE Jul	-1.2		0.0
Jun	0.7	-2.0	0.3	1.5
AE Jun	8.7		3.7
May	0.6	-2.2	0.1	1.6
Apr	0.3	-1.5	0.2	1.6
Mar	0.2	-2.3	0.1	1.5
AE Mar-May	4.5		1.6
Feb	-0.8	-2.0	0.1	1.5
Jan	-0.3	-1.2	0.2	1.7
Dec 2015	-0.7	-2.7	0.2	1.8
AE Dec-Feb	-7.0		2.0
Nov	0.2	-3.3	0.1	1.7
AE Nov	2.4		1.2
Oct	-0.3	-4.0	-0.1	1.8
Sep	-1.3	-4.1	0.1	2.1
Aug	-0.3	-3.1	0.0	2.1
AE ∆% Aug-Oct	-7.4		0.0
Jul	-0.2	-2.8	0.2	2.3
AE ∆% Jul	-2.4		2.4
Jun	0.6	-2.6	0.5	2.3
May	1.3	-2.9	0.1	2.0
AE ∆% May-Jun	12.0		2.4
Apr	-0.6	-4.5	0.1	2.0
AE ∆% Apr	-7.0		1.2
Mar	0.3	-3.3	0.2	2.1
AE ∆% Mar	3.7		2.4
Feb	0.1	-3.2	0.3	1.9
AE ∆% Feb	1.2		3.7
Jan	-1.8	-3.0	0.4	1.7
Dec 2014	-1.4	-0.6	0.1	1.7
AE ∆% Dec-Jan	-17.6		3.0
Nov	-0.4	1.1	0.0	2.0
Oct	-0.3	1.8	0.3	2.2
Sep	-0.3	2.2	0.1	2.1
Aug	0.0	2.3	0.2	1.9
AE ∆% Aug-Nov	-3.0		1.8
July	0.0	2.9	0.1	1.9
Jun	0.2	2.8	0.2	1.9
May	-0.2	2.5	0.2	1.8
Apr	0.5	3.1	0.1	1.7
AE ∆% Apr-Jul	1.5		1.8
Mar	0.3	1.8	0.0	1.7
AE ∆% Mar	3.7		0.0
Feb	0.1	1.3	0.1	1.9
Jan	0.8	1.6	0.5	2.0
Dec 2013	0.4	1.4	0.4	1.6
AE ∆% Dec-Feb	5.3		4.1
Nov	0.3	0.8	0.2	1.3
Oct	0.2	0.3	0.1	1.2
Sep	-0.3	0.2	0.1	1.2
AE ∆% Sep-Nov	0.8		1.6
Aug	0.5	1.2	0.1	1.2
Jul	-0.1	2.1	0.1	1.3
Jun	0.1	2.3	0.1	1.6
May	0.4	1.6	0.1	1.7
AE ∆%  May-Aug	2.7		1.2
Apr	-0.6	0.5	0.1	1.7
Mar	-0.6	1.1	0.1	1.7
AE ∆%  Mar-Apr	-7.0		1.2
Feb	0.6	1.8	0.2	1.8
Jan	0.6	1.5	0.1	1.8
AE ∆%  Jan-Feb	7.4		1.8
Dec 2012	-0.2	1.4	0.0	2.1
Nov	-0.5	1.4	0.2	2.2
Oct	0.1	2.3	0.1	2.2
AE ∆%  Oct-Dec	-2.4		1.2
Sep	0.9	2.1	0.0	2.4
Aug	1.2	1.9	0.2	2.6
AE ∆% Aug-Sep	13.4		1.2
Jul	0.2	0.5	0.4	2.6
Jun	-0.4	0.7	0.2	2.6
AE ∆% Jun-Jul	-1.2		3.7
May	-0.6	0.6	0.1	2.7
Apr	-0.1	1.8	0.2	2.7
AE ∆% Apr-May	-4.1		1.8
Mar	0.1	2.7	0.2	2.9
Feb	0.3	3.4	0.2	3.1
Jan	0.4	4.1	0.4	3.1
AE ∆% Jan-Mar	3.2		3.2
Dec 2011	-0.1	4.7	0.2	3.0
Nov	0.3	5.7	0.1	3.0
Oct	-0.2	5.9	0.2	2.9
AE ∆% Oct-Dec	0.0		2.0
Sep	0.9	7.1	0.3	2.8
Aug	-0.3	6.6	0.2	2.7
Jul	0.4	7.2	0.3	2.7
AE ∆% Jul-Sep	4.1		3.2
Jun	-0.4	7.0	0.3	2.3
May	0.5	7.1	0.1	2.1
AE ∆%  May-Jun	0.6		2.4
Apr	0.9	6.7	0.3	2.3
Mar	0.7	5.7	0.3	2.0
Feb	1.1	5.5	0.2	1.8
Jan	0.8	3.7	0.4	1.6
AE ∆%  Jan-Apr	11.1		3.7
Dec 2010	0.9	3.8	0.2	1.4
Nov	0.4	3.4	0.0	1.2
Oct	0.8	4.3	0.0	1.6
Sep	0.3	3.9	0.2	1.6
Aug	0.6	3.3	0.1	1.3
Jul	0.1	4.1	0.1	1.5
Jun	-0.3	2.7	0.1	1.1
May	0.0	5.1	0.3	1.3
Apr	0.0	5.4	0.0	0.9
Mar	0.7	5.9	0.2	0.9
Feb	-0.7	4.1	0.1	1.0
Jan	1.0	4.5	0.2	1.0

Note: Core: excluding food and energy; AE: annual equivalent

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/data.htm

The US producer price index NSA from 2000 to 2018 is in Chart I-24. There are two episodes of decline of the PPI during recessions in 2001 and in 2008. Barsky and Kilian (2004) consider the 2001 episode as one in which real oil prices were declining when recession began. Recession and the fall of commodity prices instead of generalized deflation explain the behavior of US inflation in 2008. There is similar collapse of producer prices into 2015 as in 2009 caused by the drop of

commodity prices.

Chart I-24, US, Producer Price Index, NSA, 2000-2018

Source: US Bureau of Labor Statistics

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

Twelve-month percentage changes of the PPI NSA from 2000 to 2018 are in Chart I-25. It may be possible to forecast trends a few months in the future under adaptive expectations but turning points are almost impossible to anticipate especially when related to fluctuations of commodity prices in response to risk aversion. In a sense, monetary policy has been tied to behavior of the PPI in the negative 12-month rates in 2001 to 2003 and then again in 2009 to 2010. There is similar sharp decline of inflation into 2015 caused by the drop of commodities. Monetary policy following deflation fears caused by commodity price fluctuations would introduce significant volatility and risks in financial markets and eventually in consumption and investment.

Chart I-25, US, Producer Price Index, 12-Month Percentage Change NSA, 2000-2018

Source: US Bureau of Labor Statistics

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

The US PPI excluding food and energy from 2000 to 2018 is in Chart I-26. There is here again a smooth trend of inflation instead of prolonged deflation as in Japan.

Chart I-26, US, Producer Price Index Excluding Food and Energy, NSA, 2000-2018

Source: US Bureau of Labor Statistics

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

Twelve-month percentage changes of the producer price index excluding food and energy are in Chart I-27. Fluctuations replicate those in the headline PPI. There is an evident trend of increase of 12-month rates of core PPI inflation in 2011 but lower rates in 2012-2014. Prices rose less rapidly into 2015-2018 as during earlier fluctuations.

Chart I-27, US, Producer Price Index Excluding Food and Energy, NSA, 12-Month Percentage Changes, 2000-2018

Source: US Bureau of Labor Statistics

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

The US producer price index of energy goods from 2000 to 2018 is in Chart I-28. There is a clear upward trend with fluctuations, which would not occur under persistent deflation.

Chart I-28, US, Producer Price Index Finished Energy Goods, NSA, 2000-2018

Source: US Bureau of Labor Statistics

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

Chart I-29 provides 12-month percentage changes of the producer price index of energy goods from 2000 to 2018. Barsky and Killian (2004) relate the episode of declining prices of energy goods in 2001 to 2002 to the analysis of decline of real oil prices. Interest rates dropping to zero during the global recession in 2008 induced carry trades that explain the rise of the PPI of energy goods toward 30 percent. Bouts of risk aversion with policy interest rates held close to zero explain the fluctuations in the 12-month rates of the PPI of energy goods in the expansion phase of the economy. Symmetric inflation targets induce significant instability in inflation and interest rates with adverse effects on financial markets and the overall economy.

Chart I-29, US, Producer Price Index Energy Goods, 12-Month Percentage Change, NSA, 2000-2018

Source: US Bureau of Labor Statistics

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

Effective with the January 2014 Producer Price Index (PPI) data release in February 2014 (https://www.bls.gov/news.release/archives/ppi_02192014.pdf 8), “BLS transitions from the Stage of Processing (SOP) to the Final Demand-Intermediate Demand (FD-ID) aggregation system. This shift results in significant changes to the PPI news release, as well as other documents available from PPI. The transition to the FD-ID system is the culmination of a long-standing PPI objective to improve the current SOP aggregation system by incorporating PPIs for services, construction, government purchases, and exports. In comparison to the SOP system, the FD-ID system more than doubles PPI coverage of the United States economy to over 75 percent of in-scope domestic production. The FD-ID system was introduced as a set of experimental indexes in January 2011. Nearly all new FD-ID goods, services, and construction indexes provide historical data back to either November 2009 or April 2010, while the indexes for goods that correspond with the historical SOP indexes go back to the 1970s or earlier.”

Headline and core final demand producer price indexes are in Table I-6B. The headline FD PPI SA increased 0.3 percent in Feb 2018 and increased 2.8 percent NSA in the 12 months ending in Feb 2018. The core FD PPI SA increased 0.2 percent in Feb 2018 and increased 2.5 percent in 12 months. Analysis of annual equivalent rates of change shows inflation waves similar to those worldwide. In the first wave, the absence of risk aversion from the sovereign risk crisis in Europe motivated the carry trade from zero interest rates into commodity futures that caused the average equivalent rate of 7.4 percent in the headline FD PPI in Jan-Apr 2011 and 4.6 percent in the core FD PPI. In the second wave, commodity futures prices collapsed in Jun 2011 with the return of risk aversion originating in the sovereign risk crisis of Europe. The annual equivalent rate of headline FD PPI inflation collapsed to 2.4 percent in May-Jun 2011 but the core annual equivalent inflation rate was at 2.4 percent. In the third wave, headline FD PPI inflation resuscitated with annual equivalent at 3.2 percent in Jul-Sep 2011 and core PPI inflation at 3.2 percent. Core FD PPI inflation was persistent throughout 2011, from annual equivalent at 4.6 percent in the first four months of 2011 to 2.6 percent in 12 months ending in Dec 2011. Unconventional monetary policy is based on the proposition that core rates reflect more fundamental inflation and are thus better predictors of the future. In practice, the relation of core and headline inflation is as difficult to predict as future inflation (see IIID Supply Shocks in http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html). In the fourth wave, risk aversion originating in the lack of resolution of the European debt crisis caused unwinding of carry trades with annual equivalent headline FD PPI inflation of minus 0.8 percent in Oct-Dec 2011 and minus 0.4 percent in the core annual equivalent. In the fifth wave from Jan to Mar 2012, annual equivalent inflation was 3.7 percent for the headline index and 3.7 percent for the core index excluding food and energy. In the sixth wave, annual equivalent inflation in Apr-May 2012 during renewed risk aversion was 1.2 percent for the headline FD PPI and 3.0 percent for the core. In the seventh wave, continuing risk aversion caused reversal of carry trades into commodity exposures with annual equivalent headline inflation of minus 2.4 percent in Jun-Jul 2012 while core FD PPI inflation was at annual equivalent minus 1.2 percent. In the eighth wave, relaxed risk aversion because of the announcement of the impaired bond buying program or Outright Monetary Transactions (OMT) of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html) induced carry trades that drove annual equivalent inflation of final demand producer prices of the United States at 6.2 percent in Aug-Sep 2012 and 1.2 percent in the core index. In the ninth wave, renewed risk aversion caused annual equivalent inflation of 0.8 percent in Oct 2011-Dec 2012 in the headline index and 2.8 percent in the core index. In the tenth wave, annual equivalent inflation was 3.0 percent in the headline index in Jan-Feb 2013 and 0.6 percent in the core index. In the eleventh wave, annual equivalent price change was minus 1.2 percent in Mar-Apr 2013 and 2.4 percent for the core index. In the twelfth wave, annual equivalent inflation returned at 1.8 percent in May-Aug 2013 and 1.6 percent in the core index. In the thirteenth wave, portfolio reallocations away from commodities and into equities reversed commodity carry trade with annual equivalent inflation of 1.6 percent in Sep-Nov 2013 in the headline FD PPI and 2.0 percent in the core. In the fourteenth wave, annual equivalent inflation was 2.4 percent annual equivalent for the headline index in Dec 2013-Feb 2014 and 1.6 percent for the core index. In the fifteenth wave, annual equivalent inflation increased to 2.4 percent in the headline FD PPI and 2.7 percent in the core in Mar-Jul 2014. In the sixteenth wave, annual equivalent inflation was minus 1.2 percent for the headline FD index and minus 0.6 percent for the core FD index in Aug-Sep 2014. In the seventeenth wave, annual equivalent inflation was 2.4 percent for the headline FD and 4.9 percent for the core FD in Oct 2014. In the eighteenth wave, annual equivalent inflation was minus 3.0 percent for the headline FDI and 1.2 percent for the core in Nov-Dec 2014. In the nineteenth wave, annual equivalent inflation was minus 6.4 percent for the general index and minus 2.4 percent for the core in Jan-Feb 2015. In the twentieth wave, annual equivalent inflation was 1.2 percent for the general index in Mar 2015 and 0.0 percent for the core. In the twenty-first wave, final demand prices decreased at annual equivalent 1.2 percent for the headline index in Apr 2015 and increased at 2.4 percent for the core index. In the twenty-second wave, annual equivalent inflation returned at 3.7 percent for the headline index in May-Jul 2015 and at 2.0 percent for the core index. In the twenty-third wave, the headline final demand index fell at 2.4 percent annual equivalent in Aug 2015 and the core changed at 0.0 percent annual equivalent. In the twenty-fourth wave, FD prices fell at annual equivalent 4.1 percent in Sep-Oct 2015. In the twenty-fifth wave, FD prices increased at 1.2 percent annual equivalent in Nov 2015. In the twenty-sixth wave, FD prices decreased at 2.4 percent annual equivalent in Dec 2015. In the twenty-seventh wave, FD prices increased at 6.2 percent annual equivalent in Jan 2016 and the core FD increased at 6.2 percent. In the twenty-eighth wave, FD prices fell at annual equivalent 2.4 percent in Feb-Mar 2016 while the core decreased at 0.6 percent. In the twenty-ninth wave, FD prices increased at 4.1 percent annual equivalent in Apr-Jun 2016 and core FD increased at 2.4 percent. In the thirtieth wave, final demand prices changed at 0.0 percent in annual equivalent in Jul 2016 while the core changed at 0.0 percent. In the thirty-first wave, final demand prices decreased at annual equivalent 3.5 percent in Aug 2016 and the core decreased at 1.2 percent. In the thirty-second wave, final demand prices increased at annual equivalent 3.7 percent in Sep 2016 while core final demand increased at 2.4 percent. In the thirty-third wave, final demand prices increased at 3.7 percent and core final demand prices increased at 2.4 percent in Oct 2016. In the thirty-fourth wave, final demand producer prices increased at 3.0 percent annual equivalent in Nov-Dec 2016 while the core increased at 1.8 percent. In the thirty-fifth wave, final demand producer prices increased at 6.2 percent in Jan 2017 while core prices increased at 4.9 percent. In the thirty-sixth wave, final demand prices decreased at 1.2 percent annual equivalent in Feb 2017 while the core index decreased at 1.2 percent. In the thirty-seventh wave, final demand prices increased at 1.2 percent annual equivalent in Mar 2017 while the core index increased at 2.4 percent. In the thirty-eighth wave, final demand prices increased at 4.9 percent in Apr 2017 while the core increased at 4.9 percent. In the thirty-ninth wave, final demand prices increased at annual equivalent 1.2 percent in May-Jun 2017 while core prices increased at 1.8 percent. In the fortieth wave, final demand prices increased at 1.2 percent annual equivalent in Jul 2017 while core prices increased at 2.4 percent. In the forty-first wave, final demand prices increased at 4.3 percent annual equivalent in Aug-Nov 2017 while core prices increased at 3.0 percent. In the forty-second wave, final demand prices changed at annual equivalent 0.0 percent in Dec 2017 while core prices fell at 1.2 percent. In the forty-third wave, final demand prices increased at annual equivalent 3.7 percent in Jan-Feb 2018 while core prices increased at 3.7 percent. It is almost impossible to forecast PPI inflation and its relation to CPI inflation. “Inflation surprise” by monetary policy could be proposed to climb along a downward sloping Phillips curve, resulting in higher inflation but lower unemployment (see Kydland and Prescott 1977, Barro and Gordon 1983 and past comments of this blog 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 http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). The architects of monetary policy would require superior inflation forecasting ability compared to forecasting naivety by everybody else. In practice, we are all naïve in forecasting inflation and other economic variables and events.

Table I-6B, US, Headline and Core Final Demand Producer Price Inflation Monthly SA and 12-Month NSA ∆%

	Final Demand SA Month	Final Demand NSA 12 months	Final Demand Core SA Month	Final Demand Core NSA 12 months
Feb 2018	0.2	2.8	0.2	2.5
Jan	0.4	2.7	0.4	2.2
AE ∆% Jan-Feb	3.7		3.7
Dec 2017	0.0	2.6	-0.1	2.3
AE ∆% Dec	0.0		-1.2
Nov	0.4	3.1	0.3	2.4
Oct	0.4	2.8	0.4	2.4
Sep	0.3	2.6	0.1	2.2
Aug	0.3	2.4	0.2	2.2
AE ∆% Aug-Nov	4.3		3.0
Jul	0.1	2.0	0.2	1.9
AE ∆% Jul	1.2		2.4
Jun	0.1	1.9	0.0	1.8
May	0.1	2.3	0.3	2.0
AE ∆% May-Jun	1.2		1.8
Apr	0.4	2.5	0.4	1.9
AE ∆% Apr	4.9		4.9
Mar	0.1	2.2	0.2	1.5
AE ∆% Mar	1.2		2.4
Feb	-0.1	2.0	-0.1	1.3
AE ∆% Feb	-1.2		-1.2
Jan	0.5	1.7	0.4	1.4
AE ∆% Jan	6.2		4.9
Dec 2016	0.4	1.7	0.1	1.7
Nov	0.1	1.3	0.2	1.7
AE ∆% Nov-Dec	3.0		1.8
Oct	0.3	1.1	0.2	1.5
AE ∆% Oct	3.7		2.4
Sep	0.3	0.6	0.2	1.2
AE ∆% Sep	3.7		2.4
Aug	-0.3	0.0	-0.1	1.0
AE ∆% Aug	-3.5		-1.2
July	0.0	0.0	0.0	0.9
AE ∆% Jul	0.0		0.0
Jun	0.5	0.2	0.3	1.2
May	0.3	0.0	0.1	1.2
Apr	0.2	0.2	0.2	1.1
AE ∆% Apr-Jun	4.1		2.4
Mar	-0.1	-0.1	-0.1	1.1
Feb	-0.3	0.1	0.0	1.3
AE ∆% Mar-Feb	-2.4		-0.6
Jan	0.5	0.0	0.5	0.8
AE ∆% Jan	6.2		6.2
Dec 2015	-0.2	-1.1	0.2	0.2
AE ∆% Dec	-2.4		2.4
Nov	0.1	-1.3	0.1	0.3
AE ∆% Nov	1.2		1.2
Oct	-0.2	-1.4	-0.2	0.2
Sep	-0.5	-1.1	-0.1	0.7
AE ∆% Sep-Oct	-4.1		-1.8
Aug	-0.2	-1.0	0.0	0.6
AE ∆% Aug	-2.4		0.0
Jul	0.1	-0.7	0.2	0.8
Jun	0.3	-0.5	0.3	1.1
May	0.5	-0.8	0.0	0.7
AE ∆% May-Jul	3.7		2.0
Apr	-0.1	-1.1	0.2	1.0
AE ∆% Apr	-1.2		2.4
Mar	0.1	-0.9	0.0	0.8
AE ∆% Mar	1.2		0.0
Feb	-0.5	-0.5	-0.4	1.0
Jan	-0.6	0.0	0.0	1.7
AE ∆% Jan-Feb	-6.4		-2.4
Dec 2014	-0.3	0.9	0.2	2.0
Nov	-0.2	1.3	0.0	1.7
AE ∆% Nov-Dec	-3.0		1.2
Oct	0.2	1.5	0.4	1.9
AE ∆% Oct	2.4		4.9
Sep	-0.2	1.6	-0.1	1.6
Aug	0.0	1.9	0.0	1.9
AE ∆% Aug-Sep	-1.2		-0.6
Jul	0.3	1.9	0.5	1.9
Jun	0.0	1.8	0.0	1.6
May	0.2	2.1	0.3	2.1
Apr	0.1	1.8	0.0	1.5
Mar	0.4	1.6	0.3	1.6
AE ∆% Mar-Jul	2.4		2.7
Feb	0.2	1.2	0.2	1.6
Jan	0.3	1.3	0.2	1.4
Dec 2013	0.1	1.2	0.0	1.2
AE ∆% Dec-Feb	2.4		1.6
Nov	0.2	1.1	0.2	1.4
Oct	0.2	1.3	0.2	1.7
Sep	0.0	1.1	0.1	1.6
AE ∆% Sep-Nov	1.6		2.0
Aug	0.1	1.7	0.0	1.8
Jul	0.2	2.0	0.3	1.7
Jun	0.4	1.7	0.4	1.3
May	-0.1	0.9	-0.3	0.9
AE ∆%  May-Aug	1.8		1.6
Apr	-0.2	0.9	0.2	1.3
Mar	0.0	1.3	0.2	1.5
AE ∆%  Mar-Apr	-1.2		2.4
Feb	0.2	1.6	0.0	1.4
Jan	0.3	1.6	0.1	1.7
AE ∆%  Jan-Feb	3.0		0.6
Dec 2012	0.0	1.9	0.1	2.0
Nov	0.1	1.7	0.5	1.8
Oct	0.1	1.9	0.1	1.6
AE ∆%  Oct-Dec	0.8		2.8
Sep	0.7	1.5	0.3	1.4
Aug	0.3	1.2	-0.1	1.2
AE ∆% Aug-Sep	6.2		1.2
Jul	-0.1	1.0	-0.1	1.7
Jun	-0.3	1.3	-0.1	1.9
AE ∆% Jun-Jul	-2.4		-1.2
May	-0.1	1.6	0.2	2.2
Apr	0.3	2.0	0.3	2.1
AE ∆% Apr-May	1.2		3.0
Mar	0.2	2.4	0.2	2.3
Feb	0.3	2.8	0.3	2.6
Jan	0.4	3.1	0.4	2.5
AE ∆% Jan-Mar	3.7		3.7
Dec 2011	-0.1	3.2	0.0	2.6
Nov	0.3	3.7	0.2	2.7
Oct	-0.4	3.7	-0.3	2.7
AE ∆% Oct-Dec	-0.8		-0.4
Sep	0.4	4.5	0.2	2.9
Aug	0.2	4.4	0.4	3.0
Jul	0.2	4.5	0.2	2.7
AE ∆% Jul-Sep	3.2		3.2
Jun	0.1	4.3	0.2	2.6
May	0.3	4.2	0.2	2.3
AE ∆%  May-Jun	2.4		2.4
Apr	0.5	4.2	0.3	2.5
Mar	0.7	4.0	0.5	NA
Feb	0.6	3.3	0.3	NA
Jan	0.6	2.4	0.4	NA
AE ∆%  Jan-Apr	7.4		4.6
Dec 2010	0.3	2.8	0.1	NA
Nov	0.3	2.6	0.1	NA
Oct	0.4	NA	0.1	NA
Sep	0.3	NA	0.2	NA
Aug	0.2	NA	0.0	NA
Jul	0.2	NA	0.2	NA
Jun	-0.2	NA	-0.1	NA
May	0.2	NA	0.3	NA
Apr	0.3	NA	NA	NA
Mar	0.1	NA	NA	NA
Feb	-0.2	NA	NA	NA
Jan	0.9	NA	NA	NA
Dec 2009	0.1

Note: Core: excluding food and energy; AE: annual equivalent

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/data.htm

Chart I-24B provides the FD PPI NSA from 2009 to 2018. There is persistent inflation with periodic declines in inflation waves similar to those worldwide.

Chart I-24B, US, Final Demand Producer Price Index, NSA, 2009-2018

Source: US Bureau of Labor Statistics

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

Twelve-month percentage changes of the FD PPI from 2010 to 2018 are in Chart I-25B. There are fluctuations in the rates with evident trend of decline to more subdued inflation. Reallocations of investment portfolios of risk financial assets from commodities to stocks explain much lower FD PPI inflation.

Chart I-25B, US, Final Demand Producer Price Index, 12-Month Percentage Change NSA, 2010-2018

Source: US Bureau of Labor Statistics

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

The core FD PPI NSA is in Chart I-26B. The behavior is similar to the headline index but with less fluctuation.

Chart I-26B, US, Final Demand Producer Price Index Excluding Food and Energy, NSA, 2009-2018

Source: US Bureau of Labor Statistics

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

Percentage changes in 12 months of the core FD PPI are in Chart I-27B. There are fluctuations in 12-month percentage changes but with evident declining trend to more moderate inflation.

Chart I-27B, US, Final Demand Producer Price Index Excluding Food and Energy, 12-Month Percentage Change, NSA, 2010-2018

Source: US Bureau of Labor Statistics

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

The energy FD PPI NSA is in Chart I-28B. The index increased during the reposition of carry trades after the discovery of lack of toxic assets in banks that caused flight away from risk financial assets into government obligations of the US (Cochrane and Zingales 2009). Alternating risk aversion and appetite with reallocations among classes of risk financial assets explain the behavior of the index after late 2010.

Chart I-28B, US, Final Demand Energy Producer Price Index, NSA, 2009-2018

Source: US Bureau of Labor Statistics

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

Twelve-month percentage changes of the FD energy PPI are in Chart I-29B. Rates moderated from late 2010 to the present. There are multiple negative rates. Investors create and reverse carry trades from zero interest rates to derivatives of commodities in accordance with relative risk evaluations of classes of risk financial assets.

Chart I-29B, US, Final Demand Energy Producer Price Index, 12-Month Percentage Change, NSA, 2010-2018

Source: US Bureau of Labor Statistics

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

Table I-7 provides 12-month percentage changes of the CPI all items, CPI core and CPI housing from 2001 to 2018. There is no evidence in these data supporting symmetric inflation targets that would only induce greater instability in inflation, interest rates and financial markets. Unconventional monetary policy drives wide swings in allocations of positions into risk financial assets that generate instability instead of intended pursuit of prosperity without inflation. There is insufficient knowledge and imperfect tools to maintain the gap of actual relative to potential output constantly at zero while restraining inflation in an open interval (1.99, 2.0). Symmetric targets appear to have been abandoned in a favor of a self-imposed single jobs mandate of easing

monetary policy even with the economy growing at or close to potential output.

Table I-7, CPI All Items, CPI Core and CPI Housing, 12-Month Percentage Change, NSA 2001-2018

Feb	CPI All Items	CPI Core ex Food and Energy	CPI Housing
2018	2.2	1.8	2.8
2017	2.7	2.2	3.2
2016	1.0	2.3	2.1
2015	0.0	1.7	2.2
2014	1.1	1.6	2.5
2013	2.0	2.0	1.9
2012	2.9	2.2	1.8
2011	2.1	1.1	0.7
2010	2.1	1.3	-0.6
2009	0.2	1.8	1.9
2008	4.0	2.3	2.8
2007	2.4	2.7	3.3
2006	3.6	2.1	4.0
2005	3.0	2.4	3.0
2004	1.7	1.2	2.1
2003	3.0	1.7	2.6
2002	1.1	2.6	2.2
2001	3.5	2.7	4.5

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/

I United States Industrial Production. There is socio-economic stress in the combination of adverse events and cyclical performance:

• Mediocre economic growth below potential and long-term trend, resulting in idle productive resources with GDP two trillion dollars below trend (https://cmpassocregulationblog.blogspot.com/2018/03/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/continuing-dollar-devaluation-mediocre.html). US GDP grew at the average rate of 3.2 percent per year from 1929 to 2017, with similar performance in whole cycles of contractions and expansions, but only at 1.4 percent per year on average from 2007 to 2017. GDP in IVQ2017 is 14.3 percent lower than what it would have been had it grown at trend of 3.0 percent
• Private fixed investment stagnating at cumulative increase of 14.9 percent in the entire cycle from IVQ2007 to IVQ2017 (https://cmpassocregulationblog.blogspot.com/2018/03/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/continuing-dollar-devaluation-mediocre.html)
• Twenty-Three million or 13.3 percent of the effective labor force unemployed or underemployed in involuntary part-time jobs with stagnating or declining real wages (https://cmpassocregulationblog.blogspot.com/2018/03/twenty-three-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2018/02/twenty-four-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/twenty-three-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/12/twenty-one-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/twenty-one-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/09/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/08/data-dependent-monetary-policy-with.html and earlier https://cmpassocregulationblog.blogspot.com/2017/07/rising-yields-twenty-two-million.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/twenty-three-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/increasing-interest-rates-twenty-four.html and earlier https://cmpassocregulationblog.blogspot.com/2017/02/twenty-six-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-yields-and-dollar-revaluation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/the-case-for-increase-in-federal-funds.html and earlier http://cmpassocregulationblog.blogspot.com/2016/10/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/interest-rates-and-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/08/global-competitive-easing-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/fluctuating-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/financial-turbulence-twenty-four.html and earlier http://cmpassocregulationblog.blogspot.com/2016/05/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-monetary.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/twenty-five-million-unemployed-or.html and earlier 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 and earlier (http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-fed-funds-rate-followed-by.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/live-possibility-of-interest-rates.html and earlier http://cmpassocregulationblog.blogspot.com/2015/10/labor-market-uncertainty-and-interest.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/07/turbulence-of-financial-asset.html)
• Stagnating real disposable income per person or income per person after inflation and taxes (https://cmpassocregulationblog.blogspot.com/2018/03/twenty-three-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2018/02/twenty-four-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/12/dollar-devaluation-cyclically.html and earlier https://cmpassocregulationblog.blogspot.com/2017/12/twenty-one-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/twenty-one-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/09/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/08/data-dependent-monetary-policy-with.html and earlier https://cmpassocregulationblog.blogspot.com/2017/07/rising-yields-twenty-two-million.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/twenty-three-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/rising-valuations-of-risk-financial.html and earlier https://cmpassocregulationblog.blogspot.com/2017/02/twenty-six-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-yields-and-dollar-revaluation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-yields-and-dollar-revaluation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/the-case-for-increase-in-federal-funds.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/the-case-for-increase-in-federal-funds.html and earlier http://cmpassocregulationblog.blogspot.com/2016/10/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/interest-rates-and-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/08/global-competitive-easing-or.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/07/financial-asset-values-rebound-from.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/financial-turbulence-twenty-four.html and earlier http://cmpassocregulationblog.blogspot.com/2016/05/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-monetary.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/twenty-five-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/twenty-five-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/02/fluctuating-risk-financial-assets-in.html and earlier http://cmpassocregulationblog.blogspot.com/2015/12/dollar-revaluation-and-decreasing.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/dollar-revaluation-constraining.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/dollar-revaluation-constraining.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/live-possibility-of-interest-rates.html and earlier http://cmpassocregulationblog.blogspot.com/2015/10/labor-market-uncertainty-and-interest.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/higher-volatility-of-asset-prices-at.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/dollar-devaluation-and-carry-trade.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html)

• Depressed hiring that does not afford an opportunity for reducing unemployment/underemployment and moving to better-paid jobs (https://cmpassocregulationblog.blogspot.com/2018/02/collateral-effects-of-unwinding.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/dollar-devaluation-and-rising.html and earlier https://cmpassocregulationblog.blogspot.com/2017/12/fomc-increases-interest-rates-with.html and earlier https://cmpassocregulationblog.blogspot.com/2017/11/recovery-without-hiring-ten-million.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/increasing-valuations-of-risk-financial.html and earlier https://cmpassocregulationblog.blogspot.com/2017/09/dollar-devaluation-world-inflation.html and earlier https://cmpassocregulationblog.blogspot.com/2017/08/recovery-without-hiring-ten-million_40.html and earlier https://cmpassocregulationblog.blogspot.com/2017/07/dollar-devaluation-and-valuation-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/flattening-us-treasury-yield-curve.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/recovery-without-hiring-ten-million_14.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/world-inflation-waves-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/recovery-without-hiring-ten-million.html and earlier https://cmpassocregulationblog.blogspot.com/2017/02/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/unconventional-monetary-policy-and.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-values-of-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/dollar-revaluation-and-valuations-of.html and earlier http://cmpassocregulationblog.blogspot.com/2016/10/imf-view-of-world-economy-and-finance.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/interest-rate-uncertainty-and-valuation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/08/rising-valuations-of-risk-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/oscillating-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/considerable-uncertainty-about-economic.html and earlier http://cmpassocregulationblog.blogspot.com/2016/05/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-reducing.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/contraction-of-united-states-corporate.html and earlier http://cmpassocregulationblog.blogspot.com/2016/02/subdued-foreign-growth-and-dollar.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/unconventional-monetary-policy-and.html and earlier http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-interest-rates-with-volatile_17.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-policy-conundrum-recovery.html and earlier http://cmpassocregulationblog.blogspot.com/2015/10/impact-of-monetary-policy-on-exchange.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what_13.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html and earlier http://cmpassocregulationblog.blogspot.com/2015/07/oscillating-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/volatility-of-financial-asset.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/volatility-of-financial-asset.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/fluctuating-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/dollar-revaluation-recovery-without.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/global-exchange-rate-struggle-recovery.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/02/g20-monetary-policy-recovery-without.html)
• Productivity growth fell from 2.1 percent per year on average from 1947 to 2017 and average 2.3 percent per year from 1947 to 2007 to 1.2 percent per year on average from 2007 to 2017, deteriorating future growth and prosperity (Section II and earlier https://cmpassocregulationblog.blogspot.com/2018/02/collateral-effects-of-unwinding.html and earlier (https://cmpassocregulationblog.blogspot.com/2017/12/fomc-increases-interest-rates-with.html and earlier (https://cmpassocregulationblog.blogspot.com/2017/11/recovery-without-hiring-ten-million.html and earlier https://cmpassocregulationblog.blogspot.com/2017/09/ii-rules-discretionary-authorities-and.html and earlier https://cmpassocregulationblog.blogspot.com/2017/08/recovery-without-hiring-ten-million_40.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/flattening-us-treasury-yield-curve.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/recovery-without-hiring-ten-million_14.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/increasing-interest-rates-twenty-four.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-values-of-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/the-case-for-increase-in-federal-funds.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/interest-rates-and-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/08/rising-valuations-of-risk-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/considerable-uncertainty-about-economic.html and earlier http://cmpassocregulationblog.blogspot.com/2016/05/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/twenty-five-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/closely-monitoring-global-economic-and.html and earlier http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-fed-funds-rate-followed-by.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/live-possibility-of-interest-rates.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/higher-volatility-of-asset-prices-at.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/quite-high-equity-valuations-and.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/global-competitive-devaluation-rules.html and earlier http://cmpassocregulationblog.blogspot.com/2015/02/job-creation-and-monetary-policy-twenty.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/financial-risks-twenty-six-million.html)

• Output of manufacturing in Feb 2018 at 29.9 percent below long-term trend since 1919 and at 21.1 percent below trend since 1986 (Section II and earlier https://cmpassocregulationblog.blogspot.com/2018/02/world-inflation-waves-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/dollar-devaluation-and-increasing.html and earlier https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states_23.html and earlier https://cmpassocregulationblog.blogspot.com/2017/11/the-lost-economic-cycle-of-global_25.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/world-inflation-waves-long-term-and.html and earlier) (https://cmpassocregulationblog.blogspot.com/2017/09/monetary-policy-of-reducing-central.html and earlier https://cmpassocregulationblog.blogspot.com/2017/08/fluctuating-valuations-of-risk.html and earlier (https://cmpassocregulationblog.blogspot.com/2017/07/rising-valuations-of-risk-financial.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/fomc-interest-rate-increase-planned.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/dollar-devaluation-world-inflation.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/united-states-commercial-banks-assets.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/fomc-increases-interest-rates-world.html and earlier https://cmpassocregulationblog.blogspot.com/2017/02/world-inflation-waves-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/world-inflation-waves-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/of-course-economic-outlook-is-highly.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/interest-rate-increase-could-well.html and earlier http://cmpassocregulationblog.blogspot.com/2016/10/dollar-revaluation-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/interest-rates-and-volatility-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/08/interest-rate-policy-uncertainty-and.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/07/unresolved-us-balance-of-payments.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/fomc-projections-world-inflation-waves.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/05/most-fomc-participants-judged-that-if.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/04/contracting-united-states-industrial.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/03/monetary-policy-and-competitive.html and earlier http://cmpassocregulationblog.blogspot.com/2016/02/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/unconventional-monetary-policy-and.html and earlier http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-interest-rates-with-monetary.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-liftoff-followed-by.html http://cmpassocregulationblog.blogspot.com/2015/10/interest-rate-policy-quagmire-world.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-increase-on-hold-because.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/exchange-rate-and-financial-asset.html

and earlier http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/fluctuating-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.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/2015/01/exchange-rate-conflicts-squeeze-of.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/2014/10/imf-view-squeeze-of-economic-activity.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html)

• Unsustainable government deficit/debt and balance of payments deficit (https://cmpassocregulationblog.blogspot.com/2017/04/mediocre-cyclical-economic-growth-with.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-yields-and-dollar-revaluation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/unresolved-us-balance-of-payments.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-reducing.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-and-dollar.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/impatience-with-monetary-policy-of.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html http://cmpassocregulationblog.blogspot.com/2014/03/interest-rate-risks-world-inflation.html http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html)
• Worldwide waves of inflation (https://cmpassocregulationblog.blogspot.com/2018/02/world-inflation-waves-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/dollar-devaluation-and-increasing.html and earlier https://cmpassocregulationblog.blogspot.com/2017/12/fomc-increases-interest-rates-with.html and earlier https://cmpassocregulationblog.blogspot.com/2017/11/dollar-devaluation-and-decline-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/world-inflation-waves-long-term-and.html and earlier https://cmpassocregulationblog.blogspot.com/2017/09/dollar-devaluation-world-inflation.html and earlier https://cmpassocregulationblog.blogspot.com/2017/08/fluctuating-valuations-of-risk.html and earlier https://cmpassocregulationblog.blogspot.com/2017/07/dollar-devaluation-and-valuation-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/fomc-interest-rate-increase-planned.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/dollar-devaluation-world-inflation.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/world-inflation-waves-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/fomc-increases-interest-rates-world.html and earlier https://cmpassocregulationblog.blogspot.com/2017/02/world-inflation-waves-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/world-inflation-waves-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/of-course-economic-outlook-is-highly.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/interest-rate-increase-could-well.html and earlier http://cmpassocregulationblog.blogspot.com/2016/10/dollar-revaluation-world-inflation.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/09/interest-rates-and-volatility-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/08/interest-rate-policy-uncertainty-and.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/oscillating-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/fomc-projections-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2016/05/most-fomc-participants-judged-that-if.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/contracting-united-states-industrial.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/monetary-policy-and-competitive.html and earlier http://cmpassocregulationblog.blogspot.com/2016/02/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/uncertainty-of-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-interest-rates-with-monetary.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-liftoff-followed-by.html and earlier http://cmpassocregulationblog.blogspot.com/2015/10/interest-rate-policy-quagmire-world.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-increase-on-hold-because.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/interest-rate-policy-and-dollar.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2015/01/competitive-currency-conflicts-world.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/2014/10/financial-oscillations-world-inflation.html 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 http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html)
• Deteriorating terms of trade and net revenue margins of production across countries in squeeze of economic activity by carry trades induced by zero interest rates (Section II and earlier https://cmpassocregulationblog.blogspot.com/2018/02/world-inflation-waves-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/dollar-devaluation-and-increasing.html and earlier https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states_23.html and earlier https://cmpassocregulationblog.blogspot.com/2017/11/the-lost-economic-cycle-of-global_25.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/world-inflation-waves-long-term-and.html and earlier https://cmpassocregulationblog.blogspot.com/2017/09/monetary-policy-of-reducing-central.html and earlier https://cmpassocregulationblog.blogspot.com/2017/08/fluctuating-valuations-of-risk.html and earlier https://cmpassocregulationblog.blogspot.com/2017/07/dollar-devaluation-and-valuation-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/fomc-interest-rate-increase-planned.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/dollar-devaluation-world-inflation.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/united-states-commercial-banks-assets.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/fomc-increases-interest-rates-world.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/world-inflation-waves-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/of-course-economic-outlook-is-highly.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/interest-rate-increase-could-well.html and earlier http://cmpassocregulationblog.blogspot.com/2016/10/dollar-revaluation-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/interest-rates-and-volatility-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/unresolved-us-balance-of-payments.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/fomc-projections-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2016/05/most-fomc-participants-judged-that-if.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/imf-view-of-world-economy-and-finance.html and earlier) (http://cmpassocregulationblog.blogspot.com/2016/03/monetary-policy-and-competitive.html and earlier http://cmpassocregulationblog.blogspot.com/2016/02/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/uncertainty-of-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-interest-rates-with-monetary.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-liftoff-followed-by.html http://cmpassocregulationblog.blogspot.com/2015/10/interest-rate-policy-quagmire-world.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-increase-on-hold-because.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.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 http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.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/2014/10/imf-view-squeeze-of-economic-activity.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html
• Financial repression of interest rates and credit affecting the most people without means and access to sophisticated financial investments with likely adverse effects on income distribution and wealth disparity (https://cmpassocregulationblog.blogspot.com/2018/03/twenty-three-million-unemployed-or.html and earlier (https://cmpassocregulationblog.blogspot.com/2018/02/twenty-four-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/12/dollar-devaluation-cyclically.html and earlier (https://cmpassocregulationblog.blogspot.com/2017/12/twenty-one-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/twenty-one-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/09/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/08/data-dependent-monetary-policy-with.html and earlier https://cmpassocregulationblog.blogspot.com/2017/07/rising-yields-twenty-two-million.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/twenty-two-million-unemployed-or.html and earlier (https://cmpassocregulationblog.blogspot.com/2017/04/twenty-three-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/rising-valuations-of-risk-financial.html and earlier https://cmpassocregulationblog.blogspot.com/2017/02/twenty-six-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-yields-and-dollar-revaluation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/the-case-for-increase-in-federal-funds.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/the-case-for-increase-in-federal-funds.html and earlier http://cmpassocregulationblog.blogspot.com/2016/10/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/interest-rates-and-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/08/global-competitive-easing-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/financial-asset-values-rebound-from.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/financial-turbulence-twenty-four.html and earlier http://cmpassocregulationblog.blogspot.com/2016/05/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-monetary.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/twenty-five-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/twenty-five-million-unemployed-or.html and 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 and earlier http://cmpassocregulationblog.blogspot.com/2015/11/dollar-revaluation-constraining.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/11/live-possibility-of-interest-rates.html and earlier http://cmpassocregulationblog.blogspot.com/2015/10/labor-market-uncertainty-and-interest.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html and earlier http://cmpassocregulationblog.blogspot.com/2015/08/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/higher-volatility-of-asset-prices-at.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/dollar-devaluation-and-carry-trade.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/global-competitive-devaluation-rules.html and earlier http://cmpassocregulationblog.blogspot.com/2015/02/job-creation-and-monetary-policy-twenty.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2014/11/valuations-of-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2014/11/growth-uncertainties-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/10/world-financial-turbulence-twenty-seven.html)
• 43 million in poverty and 29 million without health insurance with family income adjusted for inflation regressing to 1999 levels (http://cmpassocregulationblog.blogspot.com/2016/09/the-economic-outlook-is-inherently.html and earlier http://cmpassocregulationblog.blogspot.com/2015/10/interest-rate-policy-uncertainty-imf.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html)
• Net worth of households and nonprofits organizations increasing by 24.1 percent after adjusting for inflation in the entire cycle from IVQ2007 to IIIQ2017 when it would have grown over 34.7 percent at trend of 3.1 percent per year in real terms from IVQ1945 to IIIQ2017 (https://cmpassocregulationblog.blogspot.com/2017/12/dollar-devaluation-cyclically.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/destruction-of-household-nonfinancial.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/united-states-commercial-banks-united.html and earlier (https://cmpassocregulationblog.blogspot.com/2017/03/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/the-economic-outlook-is-inherently.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/of-course-considerable-uncertainty.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/monetary-policy-and-fluctuations-of_13.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-and-dollar.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/financial-volatility-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html). Financial assets increased $26.0 trillion while nonfinancial assets increased $5.4 trillion with likely concentration of wealth in those with access to sophisticated financial investments. Real estate assets adjusted for inflation increased 0.4 percent.

Industrial production increased 1.1 percent in Feb 2018 and decreased 0.3 percent in Jan 2018 after increasing 0.5 percent in Dec 2017, with all data seasonally adjusted, as shown in Table I-1. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Mar 31, 2017 (https://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.[1] On net, the revisions were small, and the contour of total IP is little changed. Total IP is still reported to have moved up about 22 percent from the end of the recession in mid-2009 through late 2014, to have declined in 2015, and to have moved sideways in 2016. The most notable difference between the current and the previous estimates is that total IP is now reported to have decreased about 2 3/4 percent in 2015, whereas it previously showed a decline of about 1 3/4 percent.[2] The incorporation of detailed data for manufacturing from the U.S. Census Bureau's 2015 Annual Survey of Manufactures (ASM) accounts for the majority of the differences between the current and the previously published estimates.

Capacity for total industry is now reported to have expanded about 1 percent in 2015, a lower rate of increase than was reported earlier. Capacity was little changed in 2016 and is expected to increase 1 percent in 2017. Compared with prior reports, the rates of change in 2016 and 2017 are now a little smaller.

In the fourth quarter of 2016, capacity utilization for total industry stood at 75.8 percent, a rate 0.4 percentage point higher than previously published but still 4.1 percentage points below its long-run (1972–2016) average. Relative to earlier estimates, the utilization rates in recent years are now a little higher.”

The report of the Board of Governors of the Federal Reserve System states (https://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production rose 1.1 percent in February following a decline of 0.3 percent in January. Manufacturing production increased 1.2 percent in February, its largest gain since October. Mining output jumped 4.3 percent, mostly reflecting strong gains in oil and gas extraction. The index for utilities fell 4.7 percent, as warmer-than-normal temperatures last month reduced the demand for heating. At 108.2 percent of its 2012 average, total industrial production in February was 4.4 percent higher than it was a year earlier. Capacity utilization for the industrial sector climbed 0.7 percentage point in February to 78.1 percent, its highest reading since January 2015 but still 1.7 percentage points below its long-run (1972–2017) average.” In the six months ending in Feb 2018, United States national industrial production accumulated change of 3.5 percent at the annual equivalent rate of 7.2 percent, which is higher than growth of 4.4 percent in the 12 months ending in Feb 2018. Excluding growth of 1.6 percent in Oct 2017, growth in the remaining five months from Sep to Feb 2018 accumulated to 1.9 percent or 4.6 percent annual equivalent. Industrial production increased 1.6 percent in one of the past six months, increased 1.1 percent in one month, increased 0.5 percent in one month and 0.3 percent in two months, decreasing 0.3 percent in one month. Industrial production increased at annual equivalent 5.3 percent in the most recent quarter from Dec 2017 to Feb 2018 and increased at 9.1 percent in the prior quarter Sep 2017 to Nov 2017. Business equipment accumulated change of 3.2 percent in the six months from Sep 2017 to Feb 2018, at the annual equivalent rate of 6.6 percent, which is higher than growth of 4.6 percent in the 12 months ending in Feb 2018. The Fed analyzes capacity utilization of total industry in its report (https://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for the industrial sector fell 0.2 percentage point in January to 77.5 percent, a rate that is 2.3 percentage points below its long-run (1972–2017) average.” United States industry apparently decelerated to a lower growth rate followed by possible acceleration and weakening growth in past months. There could be renewed growth.

Table I-1, US, Industrial Production and Capacity Utilization, SA, ∆% 

	Feb 18	Jan 18	Dec 17	Nov 17	Oct 17	Sep 17	Feb 18/ Feb 17
Total	1.1	-0.3	0.5	0.3	1.6	0.3	4.4
Market Groups
Final Products	0.5	0.3	0.3	-0.4	1.1	0.6	4.2
Consumer Goods	0.1	0.5	0.5	-0.7	1.3	0.3	3.7
Business Equipment	1.0	-0.1	-0.2	0.0	0.9	1.6	4.6
Non Industrial Supplies	0.8	-1.1	0.7	0.4	0.8	0.6	1.4
Construction	2.3	-1.9	0.9	0.6	0.4	1.9	1.2
Materials	1.6	-0.5	0.5	0.8	2.4	-0.1	5.4
Industry Groups
Manufacturing	1.2	-0.2	0.1	0.2	1.3	0.2	2.5
Mining	4.3	-1.5	0.3	2.1	1.7	1.6	9.7
Utilities	-4.7	1.3	3.6	-1.7	4.0	-1.2	10.5
Capacity	78.1	77.4	77.8	77.5	77.3	76.1	1.3

Sources: Board of Governors of the Federal Reserve System

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

Manufacturing increased 1.2 percent in Feb 2018 and decreased 0.2 percent in Jan 2018 after increasing 0.1 percent in Dec 2017, seasonally adjusted, increasing 2.5 percent not seasonally adjusted in the 12 months ending in Feb 2018, as shown in Table I-2. Manufacturing increased cumulatively 2.8 percent in the six months ending in Feb 2018 or at the annual equivalent rate of 5.7 percent. Excluding the increase of 1.3 percent in Oct 2017, manufacturing changed 1.5 percent from Sep 2017 to Feb 2018 or at the annual equivalent rate of 3.6 percent. Table I-2 provides a longer perspective of manufacturing in the US. There has been evident deceleration of manufacturing growth in the US from 2010 and the first three months of 2011 with recovery followed by renewed deterioration/improvement in more recent months as shown by 12 months’ rates of growth. Growth rates appeared to be increasing again closer to 5 percent in Apr-Jun 2012 but deteriorated. The rates of decline of manufacturing in 2009 are quite high with a drop of 18.5 percent in the 12 months ending in Apr 2009. Manufacturing recovered from this decline and led the recovery from the recession. Rates of growth appeared to be returning to the levels at 3 percent or higher in the annual rates before the recession, but the pace of manufacturing fell steadily with some strength at the margin. There is renewed deterioration and improvement. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Mar 31, 2017 (https://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.[1] On net, the revisions were small, and the contour of total IP is little changed. Total IP is still reported to have moved up about 22 percent from the end of the recession in mid-2009 through late 2014, to have declined in 2015, and to have moved sideways in 2016. The most notable difference between the current and the previous estimates is that total IP is now reported to have decreased about 2 3/4 percent in 2015, whereas it previously showed a decline of about 1 3/4 percent.[2] The incorporation of detailed data for manufacturing from the U.S. Census Bureau's 2015 Annual Survey of Manufactures (ASM) accounts for the majority of the differences between the current and the previously published estimates.

Capacity for total industry is now reported to have expanded about 1 percent in 2015, a lower rate of increase than was reported earlier. Capacity was little changed in 2016 and is expected to increase 1 percent in 2017. Compared with prior reports, the rates of change in 2016 and 2017 are now a little smaller. In the fourth quarter of 2016, capacity utilization for total industry stood at 75.8 percent, a rate 0.4 percentage point higher than previously published but still 4.1 percentage points below its long-run (1972–2016) average. Relative to earlier estimates, the utilization rates in recent years are now a little higher.”

The bottom part of Table I-2 shows manufacturing decreasing 22.3 from the peak in Jun 2007 to the trough in Apr 2009 and increasing 18.0 percent from the trough in Apr 2009 to Dec 2017. Manufacturing grew 19.5 percent from the trough in Apr 2009 to Feb 2018. Manufacturing in Feb 2018 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. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 34 quarters from IIIQ2009 to IVQ2017. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the second estimate of GDP for IVQ2017 (https://www.bea.gov/newsreleases/national/gdp/2018/pdf/gdp4q17_2nd.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by dividing GDP of $14,745.9 billion in IIQ2010 by GDP of $14,355.6 billion in IIQ2009 {[($14,745.9/$14,355.6) -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2018/03/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/continuing-dollar-devaluation-mediocre.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.9 percent, 5.4 percent from IQ1983 to IIIQ1986, 5.2 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.7 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991, 3.8 percent from IQ1983 to IIQ1991 and at 7.8 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2018/03/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/continuing-dollar-devaluation-mediocre.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). 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 IVQ2017 would have accumulated to 34.4 percent. GDP in IVQ2017 would be $20,149.0 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2877.3 billion than actual $17,271.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 22.6 million unemployed or underemployed equivalent to actual unemployment/underemployment of 13.3 percent of the effective labor force (https://cmpassocregulationblog.blogspot.com/2018/03/twenty-three-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2018/02/twenty-four-million-unemployed-or.html). US GDP in IVQ2017 is 14.3 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $17,271.7 billion in IVQ2017 or 15.2 percent at the average annual equivalent rate of 1.4 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. 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 Feb 1919 to Feb 2018. Growth at 3.2 percent per year would raise the NSA index of manufacturing output from 108.2393 in Dec 2007 to 149.0946 in Feb 2018. The actual index NSA in Feb 2018 is 104.4525, which is 29.9 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Feb 2018. Using trend growth of 2.0 percent per year, the index would increase to 132.3793 in Feb 2018. The output of manufacturing at 104.4525 in Feb 2018 is 21.1 percent below trend under this alternative calculation.

Table I-2, US, Monthly and 12-Month Rates of Growth of Manufacturing ∆%

	Month SA ∆%	12-Month NSA ∆%
Feb 2018	1.2	2.5
Jan	-0.2	1.6
Dec 2017	0.1	2.2
Nov	0.2	2.4
Oct	1.3	2.3
Sep	0.2	1.1
Aug	-0.2	1.2
Jul	-0.3	1.3
Jun	0.1	1.4
May	-0.5	1.6
Apr	1.3	0.1
Mar	-0.7	1.0
Feb	0.3	0.9
Jan	0.4	0.4
Dec 2016	0.2	0.6
Nov	0.2	0.1
Oct	0.2	0.0
Sep	0.2	0.3
Aug	-0.4	-0.8
Jul	0.1	-0.5
Jun	0.2	0.2
May	-0.2	-0.3
Apr	0.0	0.5
Mar	-0.2	-0.7
Feb	-0.2	0.4
Jan	0.6	0.2
Dec 2015	-0.3	-0.9
Nov	-0.1	-0.7
Oct	0.2	0.2
Sep	-0.3	-0.8
Aug	-0.1	0.1
Jul	0.6	0.3
Jun	-0.3	-0.6
May	-0.1	0.2
Apr	0.1	0.3
Mar	0.3	0.3
Feb	-0.5	0.7
Jan	-0.4	2.1
Dec 2014	-0.4	1.7
Nov	0.9	1.9
Oct	0.0	1.1
Sep	0.0	1.2
Aug	-0.4	1.4
Jul	0.2	2.0
Jun	0.3	1.5
May	0.2	1.3
Apr	0.0	0.9
Mar	0.8	1.5
Feb	1.1	0.2
Jan	-1.0	-0.7
Dec 2013	0.0	0.0
Nov	0.0	1.0
Oct	0.1	1.7
Sep	0.1	1.1
Aug	1.0	1.3
Jul	-1.1	0.2
Jun	0.2	0.7
May	0.2	0.9
Apr	-0.4	1.1
Mar	-0.2	0.7
Feb	0.5	0.9
Jan	-0.3	1.0
Dec 2012	0.7	2.0
Nov	0.8	2.0
Oct	-0.2	0.9
Sep	0.0	1.7
Aug	-0.2	2.2
Jul	-0.1	2.5
Jun	0.2	3.3
May	-0.4	3.2
Apr	0.6	3.6
Mar	-0.5	2.5
Feb	0.4	3.8
Jan	0.9	3.2
Dec 2011	0.6	2.8
Nov	-0.4	2.3
Oct	0.6	2.5
Sep	0.3	2.3
Aug	0.4	1.9
Jul	0.5	2.2
Jun	0.1	1.8
May	0.1	1.6
Apr	-0.6	2.9
Mar	0.6	4.5
Feb	0.1	5.1
Jan	0.2	5.2
Dec 2010	0.4	5.8
Nov	0.0	4.9
Oct	0.1	6.1
Sep	0.1	6.4
Aug	0.2	7.0
Jul	0.6	7.5
Jun	-0.1	9.2
May	1.4	8.7
Apr	0.9	6.9
Mar	1.2	4.6
Feb	-0.1	1.2
Jan	1.1	1.1
Dec 2009	-0.2	-3.4
Nov	1.0	-6.3
Oct	0.2	-9.3
Sep	0.8	-10.7
Aug	1.2	-13.7
Jul	1.4	-15.4
Jun	-0.4	-18.0
May	-1.1	-17.8
Apr	-0.8	-18.5
Mar	-1.9	-17.4
Feb	-0.2	-16.3
Jan	-3.0	-16.6
Dec 2008	-3.5	-14.1
Nov	-2.3	-11.4
Oct	-0.6	-8.9
Sep	-3.4	-8.7
Aug	-1.1	-5.2
Jul	-1.2	-3.7
Jun	-0.6	-3.3
May	-0.5	-2.6
Apr	-1.1	-1.3
Mar	-0.3	-0.8
Feb	-0.6	0.8
Jan	-0.4	2.1
Dec 2007	0.1	1.8
Nov	0.5	3.3
Oct	-0.4	2.7
Sep	0.4	2.9
Aug	-0.3	2.7
Jul	0.1	3.6
Jun	0.3	3.1
May	-0.1	3.2
Apr	0.7	3.7
Mar	0.8	2.6
Feb	0.4	1.6
Jan	-0.5	1.3
Dec 2006		2.7
Dec 2005		3.5
Dec 2004		4.0
Dec 2003		2.2
Dec 2002		2.4
Dec 2001		-5.4
Dec 2000		0.8
Dec 1999		5.2
Average ∆% Dec 1986-Dec 2017		2.0
Average ∆% Dec 1986-Dec 2016		2.0
Average ∆% Dec 1986-Dec 2015		2.0
Average ∆% Dec 1986-Dec 2014		2.1
Average ∆% Dec 1986-Dec 2013		2.2
Average ∆% Dec 1986-Dec 1999		4.3
Average ∆% Dec 1999-Dec 2006		1.4
Average ∆% Dec 1999-Dec 2017		0.4
∆% Peak 112.5742 in 06/2007 to 103.0297 in 12/2017		-8.5
∆% Peak 112.5742 in 06/2007 to Trough 87.4229 in 4/2009		-22.3
∆% Trough 87.4229 in 04/2009 to 103.1572 in 12/2017		18.0
∆% Trough 87.4229 in 04/2009 to 104.4525 in 02/2018		19.5
∆% Peak 112.5742 in 06/2007 to 104.4525 in 02/2018		-7.2

Source: Board of Governors of the Federal Reserve System

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

Chart I-1 of the Board of Governors of the Federal Reserve System provides industrial production, manufacturing and capacity since the 1970s. There was acceleration of growth of industrial production, manufacturing and capacity in the 1990s because of rapid growth of productivity in the US (Cobet and Wilson (2002); see Pelaez and Pelaez, The Global Recession Risk (2007), 135-44). The slopes of the curves flatten in the 2000s. Production and capacity have not recovered sufficiently above levels before the global recession, remaining like GDP below historical trend. 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 Feb 1919 to Feb 2018. Growth at 3.2 percent per year would raise the NSA index of manufacturing output from 108.2393 in Dec 2007 to 149.0946 in Feb 2018. The actual index NSA in Feb 2018 is 104.4525, which is 29.9 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Feb 2018. Using trend growth of 2.0 percent per year, the index would increase to 132.3793 in Feb 2018. The output of manufacturing at 104.4525 in Feb 2018 is 21.1 percent below trend under this alternative calculation.

Chart I-1, US, Industrial Production, Capacity and Utilization

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/ipg1.gif

The modern industrial revolution of Jensen (1993) is captured in Chart I-2 of the Board of Governors of the Federal Reserve System (for the literature on M&A and corporate control see Pelaez and Pelaez, Regulation of Banks and Finance (2009a), 143-56, Globalization and the State, Vol. I (2008a), 49-59, Government Intervention in Globalization (2008c), 46-49). The slope of the curve of total industrial production accelerates in the 1990s to a much higher rate of growth than the curve excluding high-technology industries. Growth rates decelerate into the 2000s and output and capacity utilization have not recovered fully from the strong impact of the global recession. Growth in the current cyclical expansion has been more subdued than in the prior comparably deep contractions in the 1970s and 1980s. Chart I-2 shows that the past recessions after World War II are the relevant ones for comparison with the recession after 2007 instead of common comparisons with the Great Depression (https://cmpassocregulationblog.blogspot.com/2018/03/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/01/continuing-dollar-devaluation-mediocre.html). The bottom left-hand part of Chart II-2 shows the strong growth of output of communication equipment, computers and semiconductor that continued from the 1990s into the 2000s. Output of semiconductors has already surpassed the level before the global recession.

Chart I-2, US, Industrial Production, Capacity and Utilization of High Technology Industries

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/ipg3.gif

Additional detail on industrial production and capacity utilization is in Chart I-3 of the Board of Governors of the Federal Reserve System. Production of consumer durable goods fell sharply during the global recession by more than 30 percent and is oscillating above the level before the contraction. Output of nondurable consumer goods fell around 10 percent and is some 5 percent below the level before the contraction. Output of business equipment fell sharply during the contraction of 2001 but began rapid growth again after 2004. An important characteristic is rapid growth of output of business equipment in the cyclical expansion after sharp contraction in the global recession, stalling in the final segment. Output of defense and space only suffered reduction in the rate of growth during the global recession and surged ahead of the level before the contraction, declining in the final segment. Output of construction supplies collapsed during the global recession and is well below the level before the contraction. Output of energy materials was stagnant before the contraction but recovered sharply above the level before the contraction with alternating recent decline/improvement.

Chart I-3, US, Industrial Production and Capacity Utilization

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/ipg2.gif

United States manufacturing output from 1919 to 2018 monthly is in Chart I-4 of the Board of Governors of the Federal Reserve System. The second industrial revolution of Jensen (1993) is quite evident in the acceleration of the rate of growth of output given by the sharper slope in the 1980s and 1990s. Growth was robust after the shallow recession of 2001 but dropped sharply during the global recession after IVQ2007. Manufacturing output recovered sharply but has not reached earlier levels and is losing momentum at the margin. 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 Feb 1919 to Feb 2018. Growth at 3.2 percent per year would raise the NSA index of manufacturing output from 108.2393 in Dec 2007 to 149.0946 in Feb 2018. The actual index NSA in Feb 2018 is 104.4525, which is 29.9 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Feb 2018. Using trend growth of 2.0 percent per year, the index would increase to 132.3793 in Feb 2018. The output of manufacturing at 104.4525 in Feb 2018 is 21.1 percent below trend under this alternative calculation.

Chart I-4, US, Manufacturing Output, 1919-2018

Source: Board of Governors of the Federal Reserve System

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

Manufacturing jobs not seasonally adjusted increased 222,000 from Feb 2017 to
Feb 2018 or at the average monthly rate of 18,500. Industrial production increased 1.1 percent in Feb 2018 and decreased 0.3 percent in Jan 2018 after increasing 0.5 percent in Dec 2017, with all data seasonally adjusted. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Mar 31, 2017 (https://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.[1] On net, the revisions were small, and the contour of total IP is little changed. Total IP is still reported to have moved up about 22 percent from the end of the recession in mid-2009 through late 2014, to have declined in 2015, and to have moved sideways in 2016. The most notable difference between the current and the previous estimates is that total IP is now reported to have decreased about 2 3/4 percent in 2015, whereas it previously showed a decline of about 1 3/4 percent.[2] The incorporation of detailed data for manufacturing from the U.S. Census Bureau's 2015 Annual Survey of Manufactures (ASM) accounts for the majority of the differences between the current and the previously published estimates.

Capacity for total industry is now reported to have expanded about 1 percent in 2015, a lower rate of increase than was reported earlier. Capacity was little changed in 2016 and is expected to increase 1 percent in 2017. Compared with prior reports, the rates of change in 2016 and 2017 are now a little smaller. In the fourth quarter of 2016, capacity utilization for total industry stood at 75.8 percent, a rate 0.4 percentage point higher than previously published but still 4.1 percentage points below its long-run (1972–2016) average. Relative to earlier estimates, the utilization rates in recent years are now a little higher.” Manufacturing decreased 22.3 from the peak in Jun 2007 to the trough in Apr 2009 and increased 18.0 percent from the trough in Apr 2009 to Dec 2017. Manufacturing grew 19.5 percent from the trough in Apr 2009 to Feb 2018. Manufacturing in Feb 2018 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 IVQ2017 would have accumulated to 34.4 percent. GDP in IVQ2017 would be $20,149.0 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2877.3 billion than actual $17,271.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 22.6 million unemployed or underemployed equivalent to actual unemployment/underemployment of 13.3 percent of the effective labor force (https://cmpassocregulationblog.blogspot.com/2018/03/twenty-three-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2018/02/twenty-four-million-unemployed-or.html). US GDP in IVQ2017 is 14.3 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $17,271.7 billion in IVQ2017 or 15.2 percent at the average annual equivalent rate of 1.4 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. 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 Feb 1919 to Feb 2018. Growth at 3.2 percent per year would raise the NSA index of manufacturing output from 108.2393 in Dec 2007 to 149.0946 in Feb 2018. The actual index NSA in Feb 2018 is 104.4525, which is 29.9 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Feb 2018. Using trend growth of 2.0 percent per year, the index would increase to 132.3793 in Feb 2018. The output of manufacturing at 104.4525 in Feb 2018 is 21.1 percent below trend under this alternative calculation. Table I-13 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 87.0 percent in IIIQ2017. Most of US national income is in the form of services. In Feb 2018, there were 146.696 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 124,021 million NSA in Feb 2018 accounted for 84.5 percent of total nonfarm jobs of 146.696 million, of which 12.537 million, or 10.1 percent of total private jobs and 8.5 percent of total nonfarm jobs, were in manufacturing. Private service-providing jobs were 103.982 million NSA in Feb 2018, or 70.9 percent of total nonfarm jobs and 83.8 percent of total private-sector jobs. Manufacturing has share of 10.2 percent in US national income in IIIQ2017 and durable goods 5.9 percent, as shown in Table I-13. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table I-13, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

	SAAR IIQ2017	% Total	SAAR IIIQ2017	% Total
National Income WCCA	16,398.1	100.0	16,611.8	100.0
Domestic Industries	16,195.7	98.8	16,383.5	98.6
Private Industries	14,275.0	87.1	14,450.4	87.0
Agriculture	125.5	0.8	120.2	0.7
Mining	155.4	0.9	142.7	0.9
Utilities	196.5	1.2	195.9	1.2
Construction	817.1	5.0	850.3	5.1
Manufacturing	1657.0	10.1	1695.8	10.2
Durable Goods	977.3	6.0	985.9	5.9
Nondurable Goods	679.7	4.1	709.9	4.3
Wholesale Trade	933.0	5.7	938.5	5.6
Retail Trade	1141.6	7.0	1148.7	6.9
Transportation & WH	521.5	3.2	515.5	3.1
Information	618.9	3.8	625.0	3.8
Finance, Insurance, RE	2881.9	17.6	2952.8	17.8
Professional & Business Services	2352.4	14.3	2381.9	14.3
Education, Health Care	1671.8	10.2	1662.6	10.0
Arts, Entertainment	720.7	4.4	734.1	4.4
Other Services	481.5	2.9	485.6	2.9
Government	1920.7	11.7	1933.1	11.6
Rest of the World	202.4	1.2	228.3	1.4

Notes: SSAR: Seasonally-Adjusted Annual Rate; WCCA: Without Capital Consumption Adjustment by Industry; WH: Warehousing; RE, includes rental and leasing: Real Estate; Art, Entertainment includes recreation, accommodation and food services; BS: business services

Source: US Bureau of Economic Analysis

http://www.bea.gov/iTable/index_nipa.cfm

Motor vehicle sales and production in the US have been in long-term structural change. Table VA-1A provides the data on new motor vehicle sales and domestic car production in the US from 1990 to 2010. New motor vehicle sales grew from 14,137 thousand in 1990 to the peak of 17,806 thousand in 2000 or 29.5 percent. In that same period, domestic car production fell from 6,231 thousand in 1990 to 5,542 thousand in 2000 or -11.1 percent. New motor vehicle sales fell from 17,445 thousand in 2005 to 11,772 in 2010 or 32.5 percent while domestic car production fell from 4,321 thousand in 2005 to 2,840 thousand in 2010 or 34.3 percent. In Feb 2018, light vehicle sales accumulated to 2.457,013 million, which is lower by 0.8 percent relative to 2,476,931 a year earlier (http://www.motorintelligence.com/m_frameset.html). The seasonally adjusted annual rate of light vehicle sales in the US reached 17.08 million in Feb 2018, lower than 17.16 million in Jan 2018 and lower than 17.45 million in Feb 2017. (http://www.motorintelligence.com/m_frameset.html).

Table VA-1A, US, New Motor Vehicle Sales and Car Production, Thousand Units 7

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

Source: US Census Bureau

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

Chart I-5 of the Board of Governors of the Federal Reserve provides output of motor vehicles and parts in the United States from 1972 to 2017. Output virtually stagnated since the late 1990s with recent increase.

Chart 1-5, US, Motor Vehicles and Parts Output, 1972-2018

Source: Board of Governors of the Federal Reserve System

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

Chart I-6 of the Board of Governors of the Federal Reserve System provides output of computers and electronic products in the United States from 1972 to 2018. Output accelerated sharply in the 1990s and 2000s and surpassed the level before the global recession beginning in IVQ2007.

Chart I-6, US, Output of Computers and Electronic Products, 1972-2018

Source: Board of Governors of the Federal Reserve System

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

Chart I-7 of the Board of Governors of the Federal Reserve System shows that output of durable manufacturing accelerated in the 1980s and 1990s with slower growth in the 2000s perhaps because processes matured. Growth was robust after the major drop during the global recession but appears to vacillate in the final segment.

Chart I-7, US, Output of Durable Manufacturing, 1972-2018

Source: Board of Governors of the Federal Reserve System

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

Chart I-8 of the Board of Governors of the Federal Reserve System provides output of aerospace and miscellaneous transportation equipment from 1972 to 2018. There is long-term upward trend with oscillations around the trend and cycles of large amplitude.

Chart I-8, US, Output of Aerospace and Miscellaneous Transportation Equipment, 1972-2018

Source: Board of Governors of the Federal Reserve System

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

The Empire State Manufacturing Survey Index in Table VA-1 provides continuing deterioration that started in Jun 2012 well before Hurricane Sandy in Oct 2012. The current general index has been in negative contraction territory from minus 2.3 in Aug 2012 to minus 7.5 in Jan 2013 and minus 0.4 in May 2013. The current general index changed to 22.5 in Mar 2018. The index of current orders has also been in negative contraction territory from minus 2.9 in Aug 2012 to minus 10.9 in Jan 2013 and minus 7.8 in Jun 2013. The index of current new orders changed to 16.8 in Mar 2018. There is improvement in the general index for the next six months at 44.1 in Mar 2018 and new orders at 43.0.

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

	Current General Index	Current New Orders	Future General Index	Future New Orders
9/30/2011	-3.9	-4.2	22.4	23.4
10/31/2011	-5.3	1.9	14.4	19.5
11/30/2011	5.1	1.7	35.5	30.9
12/31/2011	11.6	10.2	46	43.8
1/31/2012	11.4	8.6	51	44.4
2/29/2012	16.5	7	46.5	38
3/31/2012	15.1	4.4	44	38
4/30/2012	7.3	3.7	40	37.7
5/31/2012	14.8	7	32.2	31.5
6/30/2012	1.5	3	27.7	27.7
7/31/2012	3.5	-3.4	24.2	21.6
8/31/2012	-2.3	-2.9	18.7	14.5
9/30/2012	-6.4	-9.9	26.9	27.8
10/31/2012	-4	-6.2	20	22.4
11/30/2012	-0.5	6.3	18.2	16.3
12/31/2012	-5.7	0.4	19.8	19.8
1/31/2013	-7.5	-10.9	21.7	23.4
2/28/2013	7.5	12	32.4	27.5
3/31/2013	4.5	4.7	35.2	33.3
4/30/2013	3.7	1.9	29.7	34.8
5/31/2013	-0.4	-3	26	29.7
6/30/2013	4.4	-7.8	27.7	21.5
7/31/2013	5.7	2.3	33.8	33.1
8/31/2013	10.3	3.1	35.8	30.8
9/30/2013	8.2	3.4	40.1	38
10/31/2013	4.4	10	41.3	37
11/30/2013	2.9	-2.1	38.4	40.7
12/31/2013	3.3	1.3	37.3	28.6
1/31/2014	12.4	8	36	37.2
2/28/2014	4.3	1.2	40.6	44.3
3/31/2014	2.4	0.8	35.4	36.8
4/30/2014	2.9	-1.7	37.6	33.6
5/31/2014	19	8.7	42.9	37.8
6/30/2014	15.6	13.1	41.1	43.3
7/31/2014	21.5	16.5	30.5	27.5
8/31/2014	16.9	15.8	45.7	50.3
9/30/2014	29.9	18	46.5	45.6
10/31/2014	7.2	2.5	42.1	42.3
11/30/2014	13	11	48.1	48.8
12/31/2014	-2.4	0.7	36.5	36.9
1/31/2015	11.9	6.3	46.8	40.4
2/28/2015	7.7	2.2	28.3	30.1
3/31/2015	3.3	-6.3	31.2	26.9
4/30/2015	-1.5	-6.8	35.8	32.9
5/31/2015	5.5	3.9	30.2	34
6/30/2015	-5	-6.8	26	25.4
7/31/2015	2.5	-5	29.2	33.6
8/31/2015	-12.6	-14	32.9	30.7
9/30/2015	-12.6	-11.3	23.3	23.8
10/31/2015	-12.1	-14.2	22.2	22.7
11/30/2015	-8.5	-10.2	23.1	22.3
12/31/2015	-6	-5.5	35.1	26.1
1/31/2016	-16.6	-22.1	10	13.4
2/29/2016	-16.9	-11.1	15.8	21.7
3/31/2016	-3.1	2.9	26	37.6
4/30/2016	7.5	8.3	28.5	35.9
5/31/2016	-5.8	-2.3	28.2	22.9
6/30/2016	2.5	6.5	33.2	35.9
7/31/2016	2.2	-1.7	31.1	31.7
8/31/2016	-4.1	1.4	25.2	28.7
9/30/2016	-1.6	-5.8	34.3	32.1
10/31/2016	-7.6	-1.2	35.2	37.8
11/30/2016	3.5	5	30.7	29.8
12/31/2016	9.3	10.7	49.4	47.7
1/31/2017	6.7	3.6	49	39.2
2/28/2017	17.1	12.3	41.3	41.6
3/31/2017	14.6	17.4	38.3	35.1
4/30/2017	4.1	7.3	39.4	32.5
5/31/2017	3	-1.9	39.8	34.3
6/30/2017	18.1	16.1	41.4	40
7/31/2017	12.7	13.4	36.6	35.7
8/31/2017	24.2	20.9	44	41.3
9/30/2017	23.8	24.4	40.8	43.6
10/31/2017	28.1	21	44.9	44.6
11/30/2017	20.9	21.3	49.8	52.5
12/31/2017	19.6	19	46.3	42.7
1/31/2018	17.7	11.9	48.6	47.6
2/28/2018	13.1	13.5	50.5	47.2
3/31/2018	22.5	16.8	44.1	43

Source: Federal Reserve Bank of New York

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

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

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

Source: Federal Reserve Bank of New York

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

Table VA-2 shows improvement after prior deterioration followed by current soft improvement of the Business Outlook survey of the Federal Reserve Bank of Philadelphia. The general index moved out of contraction of 6.2 in Feb 2013 to expansion at 22.3 in Mar 2018. New orders moved from minus 1.1 in Feb 2013 to 35.7 in Mar 2018. There is expansion in the future general index at 47.9 in Mar 2018 and in future new orders at 48.8 in Mar 2018.

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

	Current General Index	Current New Orders	Future General Index	Future New Orders
Jan-11	16.5	20.8	43.4	36.1
Feb-11	28.7	20.8	41.9	38.8
Mar-11	36.4	34.5	57	55.5
Apr-11	12.9	14.2	35.7	30.8
May-11	6.1	8.1	26.2	25.2
Jun-11	-0.4	-4.9	8.5	8.4
Jul-11	7.1	3.6	28.7	32.1
Aug-11	-19.6	-17.9	12.7	26.7
Sep-11	-10.6	-6.5	18.3	19.6
Oct-11	6.2	5.5	26.3	28.7
Nov-11	4.1	1	36.5	36.2
Dec-11	2.5	4.8	33.8	38.6
Jan-12	7.5	11	42.9	43.8
Feb-12	10	11.7	30.3	32.2
Mar-12	8.8	0.8	30.5	37.1
Apr-12	5.6	1.2	39.9	42.3
May-12	-0.8	2.1	24.9	35.4
Jun-12	-12.5	-17.4	25.4	33.9
Jul-12	-12.6	-3.7	21.6	25.5
Aug-12	-2.5	0.6	20.2	25.6
Sep-12	0.3	0.1	31.8	42.8
Oct-12	-1.1	-4.1	17.3	20.8
Nov-12	-10.4	-7.8	16.9	23.1
Dec-12	2.5	2.9	22.7	29
Jan-13	-1.4	-2.3	27.4	31.9
Feb-13	-6.2	-1.1	32.1	39.1
Mar-13	2	2	35.7	38.1
Apr-13	0.5	1.1	30.8	34.2
May-13	0.3	-3.7	39.4	42.1
Jun-13	12.8	11.8	37.1	39.5
Jul-13	16	8	41.7	52.1
Aug-13	8.2	7.9	38.7	38.9
Sep-13	20.8	19.1	49.1	51.6
Oct-13	13.5	23.6	55.7	61.1
Nov-13	4.9	8.8	42.4	47.3
Dec-13	3.9	11.9	41.6	44.8
Jan-14	15.4	7.2	35.6	40.3
Feb-14	0.5	1.9	44.1	39.6
Mar-14	12.6	9.4	42.9	39
Apr-14	17.1	17.4	39.5	38.2
May-14	18.5	14.9	43.5	42.3
Jun-14	14.3	10.3	52.8	54.3
Jul-14	21.7	30.2	53.8	48.2
Aug-14	23	14.6	62.2	51.4
Sep-14	22.1	14.1	46.7	44.7
Oct-14	18.2	17.4	51.2	49.3
Nov-14	36	29.5	50.8	46.6
Dec-14	21.6	13.5	48.1	44.7
Jan-15	13.1	9	51.2	46
Feb-15	7.9	4.9	35.3	46.4
Mar-15	7.6	5.6	38.6	38.4
Apr-15	10	4.1	39.9	32.8
May-15	6.5	5.3	37.3	34.4
Jun-15	8	10.4	42.1	45.8
Jul-15	4.9	5.1	40.5	43.8
Aug-15	6.4	5.2	35.2	39.5
Sep-15	-2.9	11.3	38	41.5
Oct-15	-4.3	-6.1	35.1	37.4
Nov-15	-3.3	-7.9	38.3	47.9
Dec-15	-9.5	-10.6	20.2	31.7
Jan-16	-4.5	-4	14.6	19.8
Feb-16	-10.3	-9.4	16.5	20.3
Mar-16	9.3	11.6	28.2	36
Apr-16	-1.2	-1.8	39.7	42
May-16	-4.2	-2.3	38.1	38.6
Jun-16	3.7	-2.3	34.3	35.3
Jul-16	2.3	14.1	36.8	33.2
Aug-16	6.2	-3.6	42.7	43.4
Sep-16	13.6	4.6	38.3	37.8
Oct-16	11.7	20.4	36.7	42.2
Nov-16	10	18.1	30.7	40.3
Dec-16	21.6	13.8	47.9	48
Jan-17	24.1	24.6	51	50.2
Feb-17	35.3	31.2	51.1	49.3
Mar-17	31.6	37.4	57.6	58.8
Apr-17	22.8	25.9	45.2	52.9
May-17	35.5	24.7	37.9	47
Jun-17	26.9	24.8	35.3	36.9
Jul-17	23.2	10.6	39.9	42.4
Aug-17	22.1	20.7	44	51.1
Sep-17	25.8	28.9	55	57.7
Oct-17	28.8	23.3	47.2	46.9
Nov-17	24.3	24.2	48.7	55.5
Dec-17	27.9	28.2	52.7	59
Jan-18	22.2	10.1	42.2	46.2
Feb-18	25.8	24.5	41.2	49.1
Mar-18	22.3	35.7	47.9	48.8

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart VA-2 of the Federal Reserve Bank of Philadelphia is very useful, providing current and future general activity indexes from Jan 2006 to May 2016. The shaded areas are the recession cycle dates of the National Bureau of Economic Research (NBER) (http://www.nber.org/cycles.html). The Philadelphia Fed index dropped during the initial period of recession and then led the recovery, as industry overall. There was a second decline of the index into 2011 followed now by what appeared as renewed strength from late 2011 into Jan 2012. There is decline to negative territory of the current activity index in Nov 2012 and return to positive territory in Dec 2012 with decline of current conditions into contraction in Jan-Feb 2013 and rebound to mild expansion in Mar-Apr 2013. The index of current activity moved into expansion in Jun-Oct 2013 with weakness in Nov-Dec 2013, improving in Jan 2014. There is renewed deterioration in Feb 2014 with rebound in Apr-Sep 2014 and mild deterioration in Oct 2014 followed by improvement in Nov 2014. The index deteriorated in Jan-Feb 2015, stabilizing in Mar-May 2015 and improving in Jun 2015. The index deteriorated in Jul 2015, improved in Aug 2015 and deteriorated in Sep-Oct 2015. The index shows contraction in Nov 2015 to Feb 2016 with recovery in Mar 2016. There is deterioration in Apr-May 2016 with improvement in Jun 2016 and deterioration in Jul 2016. There is improvement in Aug-Sep 2016 with moderate weakening in Oct-Nov 2016. The indexes improved sharply in Dec 2016 and Jan-Feb 2017, softening in Mar-Apr 2017. The current index weakened in Jun 2017 with stability in the six-month forecast. The current index deteriorated in Jul 2017 with improvement in the six-month forecast. The current index deteriorated in Aug 2017 with improvement in the six-month forecast. The current index improved in Sep 2017 with improvement in the six-month forecast. The current index improved and the future index deteriorated in Oct 2017. There is deterioration in Nov 2017 of the current index and improvement of the future index. Both the current and future indexes improved in Dec 2017, deteriorating in Jan 2018. There is improvement of the current index in Feb 2018 with mild deterioration in the future index. The current index deteriorates in Mar 2018 while the future index improves.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The index of current new orders of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia in Chart VA-2 illustrates the weakness of the cyclical expansion. The index weakened in 2006 and 2007 and then fell sharply into contraction during the global recession. There have been twelve readings into contraction from Jan 2012 to May 2013 and generally weak readings with some exceptions. The index of new orders moved into expansion in Jun-Oct 2013 with moderation in Nov-Dec 2013 and into Jan 2014. The index fell into contraction in Feb 2014, recovering in Mar-Apr 2014 but weaker reading in May 2014. There is marked improvement in Jun-Jul 2014 with slowing in Aug-Oct 2014 followed by acceleration in Nov 2014. New orders deteriorated in Jan-Apr 2015, improving in May-Jun 2015. New orders deteriorated in Jul-Aug 2015 and improved in Sep 2015. New orders deteriorated in Oct-2015 to Dec 2015, contracting at slower pace in Jan 2016. There is sharper contraction in Feb 2016 and an upward jump in Mar 2016 followed by deterioration in Apr-Jun 2016. New orders improved in Jul 2016, deteriorating in Aug 2016 and improving in Sep 2016. Improvement continued in Oct-Nov 2016 with mild deterioration in Dec 2016 followed by improvement in Jan-Feb 2017, softening in Mar-Jul 2017, recovering in Aug-Sep 2017. There is deterioration in Oct 2017 followed by improvement in Nov-Dec 2017. There is deterioration in Jan 2018 followed by improvement in Feb 2018 and improvement in Mar 2018.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018.