Diverging Economic Conditions and Growth in Regions and Countries, Renewed Increase in Fed Balance Sheet, World Inflation Waves, United Industrial Production Underperforming Below Trend, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, World Cyclical Slow Growth, Government Intervention in Globalization, and Global Recession Risk: Part IV

Diverging Economic Conditions and Growth in Regions and Countries, Renewed Increase in Fed Balance Sheet, World Inflation Waves, United Industrial Production Underperforming Below Trend, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, World Cyclical Slow Growth, Government Intervention in Globalization, and Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019.

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IB1 Theory

IB2 Policy

IB3 Evidence

IB4 Unwinding Strategy

IC United States Inflation

IC Long-term US Inflation

ID Current US Inflation

IE Theory and Reality of Economic History, Cyclical Slow Growth Not Secular Stagnation and Monetary Policy Based on Fear of Deflation

II United States Industrial Production

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

IIB Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates. Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008, IIIQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in six of the nine quarters from IVQ2010 to IQ2012. The only strong contribution of net trade was 3.6 percent in IIIQ2011. Net trade added 0.7 percent in IQ2012, deducting 2.0 percent in IIQ2012. Net trade deducted 1.9 percent in IIIQ2012. Net traded deducted 0.4 percent in IVQ2012. Net trade added 1.5 percentage points to GDP growth in IQ2013 but deducted 0.1 percentage points in IIQ2013, deducting 1.3 percentage points in IIIQ2013 and 2.2 percentage points in IVQ2013. Net trade deducted 0.7 percentage points from GDP growth in IQ2014. Net trade added 4.0 percentage points to GDP growth in IIQ2014 and deducted 0.2 percentage points in IIIQ2014. Net trade added 1.5 percentage points to GDP growth in IVQ2014. Net trade contributed 0.1 percentage points to GDP growth in IQ2015 and deducted 0.6-percentage points in IIQ2015. Net trade deducted 0.5 percentage points from GDP growth in IIIQ2015. Net trade contributed 0.0 percentage points to GDP growth in IVQ2015 and added 1.3 percentage points in IQ2016. Net trade contributed 0.4 percentage points to GDP growth in IIQ2016. Net trade added 1.4 percentage points to GDP growth in IIIQ2016 and contributed 1.4 percentage points in IVQ2016.  Net trade contributed 0.3 percentage points to GDP growth in IQ2017 and deducted 1.0 percentage points in IIQ2017. Net trade contributed 2.3 percentage points to GDP growth in IIIQ2017 and deducted 0.3 percentage-point in IVQ2017. Net trade contributed 0.2 percentage points to GDP growth in IQ2018 and contributed 0.0 percentage points in IIQ2018. Net trade deducted 0.5 percentage points from GDP growth in IIIQ2018 and deducted 1.8 percentage points in IVQ2018. Net trade contributed 1.6 percentage points to GDP growth in IQ2019 with export contraction deducting 1.5 percent and import contraction contributing 3.1 percent. Net trade deducted 1.2 percentage points from GDP growth in IIQ2019. Net trade deducted 0.7 percentage points from GDP growth in IIIQ2019. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

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

	Net Trade	Exports	Imports
2019
I	1.6	-1.5	3.1
II	-1.2	0.4	-1.5
III	-0.7	-0.5	-0.2
2018
I	0.2	0.6	-0.4
II	0.0	0.5	-0.5
III	-0.5	-1.3	0.9
IV	-1.8	0.9	-2.6
2017
I	0.3	1.3	-1.0
II	-1.0	0.0	-1.0
III	2.3	1.6	0.7
IV	-0.3	1.3	-1.6
2016
I	1.3	0.3	1.0
II	0.4	-0.4	0.8
III	1.4	1.6	-0.2
IV	1.4	1.9	-0.5
2015
I	0.1	0.8	-0.7
II	-0.6	-2.4	1.9
III	-0.5	1.7	-2.2
IV	0.0	-0.6	0.6
2014
I	-0.7	3.8	-4.5
II	4.0	0.9	3.1
III	-0.2	1.1	-1.3
IV	1.5	2.1	-0.7
2013
I	1.5	1.7	-0.3
II	-0.1	2.0	-2.1
III	-1.3	0.0	-1.3
IV	-2.2	-0.2	-2.0
2012
I	0.7	1.8	-1.1
II	-2.0	-0.6	-1.4
III	-1.9	-2.2	0.2
IV	-0.4	-2.0	1.6
2011
I	-1.3	-0.6	-0.7
II	-4.3	-4.6	0.4
III	3.6	5.4	-1.8
IV	-2.8	-1.7	-1.1
2010
I	2.0	3.3	-1.3
II	0.3	2.8	-2.5
III	0.6	1.7	-1.0
IV	-0.2	0.2	-0.4
2009
I	-4.7	-16.2	11.5
II	7.5	4.7	2.9
III	2.1	5.2	-3.1
IV	2.8	4.2	-1.4
2008
I	0.8	1.8	-0.9
II	0.5	-1.4	1.9
III	-0.1	0.1	-0.2
IV	-10.4	-9.2	-1.2
2007
I	1.1	1.6	-0.5
II	0.8	1.6	-0.8
III	2.2	1.7	0.5
IV	1.2	2.0	-0.8

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 93.9 in Jun 2009 to 84.1 in Jan 2012 or minus 10.4 percent and increased to 92.1 in Nov 2019 for gain of 9.5 percent relative to Jan 2012 and decrease of 1.9 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials. The recovery from the global recession began in the third quarter of 2009.

Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2019

Source: Bank of Japan

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

Chart IV-5A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 105.9 in Jun 2009 to 111.5 in Apr 2012 or 5.3 percent but dropped to 98.6 in Nov 2019 or minus 11.6 percent relative to Apr 2012 and fell 6.9 percent to 98.6 in Nov 2019 relative to Jun 2009.

Chart IV-5A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2019

Source: Bank of Japan

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

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-6 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. Measurement that is more careful should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan (for the relation of terms of trade and growth see Pelaez 1979, 1976a). The import corporate goods price index on the yen basis increased from 82.4 in Jun 2009 to 99.6 in Apr 2012 or 20.9 percent and to 92.6 in Nov 2019 or decrease of 7.0 percent relative to Apr 2012 and increase of 12.4 percent relative to Jun 2009.

Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2019

Source: Bank of Japan

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

Chart IV-6A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 95.0 in Jun 2009 to 131.6 in Apr 2012 or 38.5 percent and to 100.4 in Nov 2019 or minus 23.7 percent relative to Apr 2012 and increase of 5.7 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency decreased 6.9 percent from Jun 2009 to Nov 2019 while the import corporate goods price index increased 5.7 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials, increased 38.5 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

Chart IV-6A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2019

Source: Bank of Japan

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

Chart IV-3, Japan, Domestic Corporate Goods Price Index, Monthly, 2008-2019

Source: Bank of Japan

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

Chart IV-4, US, Producer Price Index Finished Goods, Monthly, 2008-2019

Source: US Bureau of Labor Statistics

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

Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2019

Source: Bank of Japan

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

Table IV-6B provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Nov 2019. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Nov 2019, the export index on the contract currency basis decreased 8.1 percent and decreased 10.8 percent on the yen basis. For the entire period from Jan 2008 to Nov 2019, the import price index decreased 9.5 percent on the contract currency basis and decreased 11.6 percent on the yen basis. During significant part of the expansion period, prices of Japan’s exports of corporate goods on the contract currency, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while prices of imports of corporate goods on the contract currency, mostly commodities and raw materials, increased 38.5 percent. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

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

	X-CC	X-Y	M-CC	M-Y
2008/01	107.3	103.3	110.9	104.8
2008/02	107.9	103.9	112.8	106.2
2008/03	108.7	100.7	115.1	103.4
2008/04	109.9	103.2	121.3	110.3
2008/05	110.7	105	124.9	114.9
2008/06	111.9	108	131.6	123.6
2008/07	113.2	109.2	135	126.8
2008/08	112.1	109.2	135.6	129.5
2008/09	111	105.8	129	120.8
2008/10	108.3	98.1	120.2	107
2008/11	106.6	93.5	107.7	93.2
2008/12	105.9	90	98.4	81.9
2009/01	106	89	94.3	77.9
2009/02	105.4	89.6	94.4	79
2009/03	105.2	93.2	93.8	81.9
2009/04	105.5	94.5	93	81.9
2009/05	105.4	92.9	92.5	80
2009/06	105.9	93.9	95	82.4
2009/07	105.4	92.2	98.3	83.7
2009/08	106.3	93.4	98.7	84.4
2009/09	106.3	91.4	100.2	83.4
2009/10	106	90.5	100.2	82.8
2009/11	106.4	90.2	102.2	83.5
2009/12	106.3	90.1	105.1	85.9
2010/01	107.5	91.4	106.8	88.1
2010/02	107.8	90.9	107.5	87.9
2010/03	107.8	91.1	106.8	87.4
2010/04	108.7	93.6	110	92.1
2010/05	108.9	92.1	112	92.4
2010/06	108.2	90.9	110.2	90.1
2010/07	107.5	88.6	110	87.9
2010/08	107.2	87.1	109.6	85.9
2010/09	107.5	86.8	110.2	85.6
2010/10	108.2	86.3	110.7	84.4
2010/11	108.9	87.1	113	86.5
2010/12	109.4	88	115	88.6
2011/01	110.4	88.2	118.1	90.4
2011/02	111.3	89	120.1	91.9
2011/03	111.9	89.1	123.2	93.6
2011/04	112.6	91	127.7	98.6
2011/05	112.3	89.4	130.9	99
2011/06	112.2	88.8	129.4	97.3
2011/07	112	88	130.3	97.1
2011/08	112	86.4	130.6	95.2
2011/09	112.1	86	128.9	93.6
2011/10	111.4	85.2	128.4	93
2011/11	110.2	84.8	127.1	92.8
2011/12	109.7	84.6	127.9	93.6
2012/01	110.1	84.1	126.7	91.8
2012/02	110.7	85.7	127.6	93.7
2012/03	111.3	88.8	130.3	99.5
2012/04	111.5	88.3	131.6	99.6
2012/05	110.6	86.2	130.1	96.7
2012/06	109.6	85	126.9	94
2012/07	108.8	84.1	123.4	91.2
2012/08	109.1	84.2	123.8	91.3
2012/09	109.2	84.2	126.3	92.7
2012/10	109.3	84.7	125.4	92.7
2012/11	109.1	85.8	124.7	93.8
2012/12	108.9	87.7	124.9	96.5
2013/01	109.2	91.6	125.4	101.7
2013/02	109.7	94.8	126.5	105.9
2013/03	109.5	95.4	126.8	107.5
2013/04	108.3	96.2	125.7	109.1
2013/05	107.7	97.6	124	110.4
2013/06	107.3	94.9	123.4	106.8
2013/07	107.2	96.2	122.9	108.2
2013/08	107	94.9	123.2	106.9
2013/09	107	95.9	124.5	109.2
2013/10	107.3	95.5	124.6	108.3
2013/11	107.2	96.6	124.6	110
2013/12	107.2	98.8	125.4	113.6
2014/01	107.3	99	126	114.6
2014/02	106.9	97.7	125.4	112.5
2014/03	106.6	97.6	124.9	112.2
2014/04	106.3	97.5	124.1	111.8
2014/05	106.2	96.8	123.8	110.9
2014/06	105.9	96.7	123.9	111.2
2014/07	106	96.5	123.9	110.9
2014/08	106.1	97.3	123.7	111.6
2014/09	105.9	99.3	122.8	114
2014/10	105.2	99.1	120.7	112.7
2014/11	104.8	103.4	117.8	115.9
2014/12	103.8	104.1	113.8	114
2015/01	102.2	101.2	108.2	106.6
2015/02	101.2	100.1	102.1	100.7
2015/03	101.3	100.9	103.1	102.6
2015/04	101.1	100.2	102	101
2015/05	101.4	101.4	101.6	101.5
2015/06	101.3	102.9	102.5	104.3
2015/07	100.6	101.7	101.5	102.9
2015/08	99.8	100.9	99	100.4
2015/09	98.6	98.2	96.6	96.2
2015/10	97.9	97.3	95.5	95
2015/11	97.5	98	94.9	95.7
2015/12	97.1	97.3	92.9	93.2
2016/01	96.4	94.7	89.9	88.3
2016/02	95.9	92.7	87.5	84.4
2016/03	96.1	92	87.3	83.2
2016/04	96.4	91	88.2	82.4
2016/05	96.5	90.6	88.6	82.4
2016/06	96.5	88.8	89.9	81.6
2016/07	96.9	88.2	90.8	81.5
2016/08	96.9	87.1	90.7	79.9
2016/09	97	87.5	91.1	80.7
2016/10	97.4	88.6	91.1	81.6
2016/11	98.1	91.2	93.8	86.3
2016/12	98.7	95.5	93.7	90.5
2017/01	99.4	95.6	96.1	92.1
2017/02	99.8	95.3	97.6	92.5
2017/03	100.3	95.7	98.4	93.3
2017/04	99.8	93.7	98.3	91.4
2017/05	99.4	94.6	98.1	92.6
2017/06	99.2	93.9	97.1	91
2017/07	99.3	94.9	96.3	91.2
2017/08	99.9	94.4	96.5	90.1
2017/09	100.5	95.5	97.8	91.8
2017/10	101.2	97.2	99.2	94.3
2017/11	101.5	97.4	100.3	95.4
2017/12	101.7	97.7	102.1	97.1
2018/01	101.9	97.1	102.9	96.7
2018/02	102.4	96.1	104.9	96.6
2018/03	102.6	95.2	104.4	94.9
2018/04	102.2	95.5	104.7	96.1
2018/05	102.7	96.9	106.3	98.8
2018/06	102.7	97	108.3	100.8
2018/07	102.4	97.4	108.3	101.8
2018/08	102.3	97	108	101.2
2018/09	102.2	97.4	108	101.8
2018/10	102.4	98	109.2	103.5
2018/11	102.1	97.9	109.7	104.3
2018/12	100.8	96.2	105.8	100.1
2019/01	100	93.7	102.6	94.8
2019/02	100.2	94.6	102.7	95.9
2019/03	100.4	95.3	103.7	97.2
2019/04	100.7	95.7	103.7	97.6
2019/05	100.5	94.4	104.4	96.9
2019/06	99.8	93	103.5	95
2019/07	99.4	92.6	101.4	93.2
2019/08	99.4	91.5	102.3	92.7
2019/09	98.8	91.5	100.8	92
2019/10	98.9	91.9	100.7	92.4
2019/11	98.6	92.1	100.4	92.6

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

Source: Bank of Japan

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

Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html  and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html and earlier http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from policy interest rates rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Chart IV-5A and associated table at: 10/24/19 https://cmpassocregulationblog.blogspot.com/2019/11/oscillating-risk-financial-assets-world.html https://cmpassocregulationblog.blogspot.com/2019/10/dollar-depreciation-fluctuating.html https://cmpassocregulationblog.blogspot.com/2019/09/uncertain-fomc-outlook-of-monetary.html

https://cmpassocregulationblog.blogspot.com/2019/08/contraction-of-valuations-of-risk.html https://cmpassocregulationblog.blogspot.com/2019/07/global-manufacturing-stress-world.html https://cmpassocregulationblog.blogspot.com/2019/06/fomc-outlook-uncertainty-central-bank.html https://cmpassocregulationblog.blogspot.com/2019/05/contraction-of-risk-financial-assets.html https://cmpassocregulationblog.blogspot.com/2019/04/high-levels-of-valuations-of-risk.html https://cmpassocregulationblog.blogspot.com/2019/03/inverted-yield-curve-of-treasury.html https://cmpassocregulationblog.blogspot.com/2019/02/revaluation-of-yuanus-dollar-exchange.html https://cmpassocregulationblog.blogspot.com/2019/01/delays-in-updating-united-states.html https://cmpassocregulationblog.blogspot.com/2018/12/increase-of-interest-rates-by-monetary.html https://cmpassocregulationblog.blogspot.com/2018/11/weaker-world-economic-growth-with.html https://cmpassocregulationblog.blogspot.com/2018/10/contraction-of-valuations-of-risk.html https://cmpassocregulationblog.blogspot.com/2018/09/world-inflation-waves-united-states.html https://cmpassocregulationblog.blogspot.com/2018/08/revision-of-united-states-national.html https://cmpassocregulationblog.blogspot.com/2018/07/continuing-gradual-increases-in-fed.html https://cmpassocregulationblog.blogspot.com/2018/06/world-inflation-waves-united-states.html https://cmpassocregulationblog.blogspot.com/2018/05/dollar-strengthening-world-inflation.html https://cmpassocregulationblog.blogspot.com/2018/04/dollar-appreciation-mediocre-cyclical.html https://cmpassocregulationblog.blogspot.com/2018/03/mediocre-cyclical-united-states_31.html https://cmpassocregulationblog.blogspot.com/2018/03/mediocre-cyclical-united-states.html https://cmpassocregulationblog.blogspot.com/2018/02/twenty-four-million-unemployed-or.html https://cmpassocregulationblog.blogspot.com/2017/12/dollar-devaluation-cyclically.html https://cmpassocregulationblog.blogspot.com/2017/12/twenty-one-million-unemployed-or.html https://cmpassocregulationblog.blogspot.com/2017/10/dollar-revaluation-and-increase-of.html https://cmpassocregulationblog.blogspot.com/2017/10/destruction-of-household-nonfinancial.html https://cmpassocregulationblog.blogspot.com/2017/08/dollar-devaluation-and-interest-rate.html https://cmpassocregulationblog.blogspot.com/2017/07/data-dependent-monetary-policy-with_30.html https://cmpassocregulationblog.blogspot.com/2017/07/dollar-devaluation-and-rising-yields.html https://cmpassocregulationblog.blogspot.com/2017/05/mediocre-cyclical-united-states.html https://cmpassocregulationblog.blogspot.com/2017/04/dollar-devaluation-mediocre-cyclical.html https://cmpassocregulationblog.blogspot.com/2017/04/mediocre-cyclical-economic-growth-with.html https://cmpassocregulationblog.blogspot.com/2017/03/rising-valuations-of-risk-financial.html http://cmpassocregulationblog.blogspot.com/2017/01/rising-valuations-of-risk-financial.html http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2016/11/dollar-revaluation-rising-yields-and.html http://cmpassocregulationblog.blogspot.com/2016/10/mediocre-cyclical-united-states_30.html http://cmpassocregulationblog.blogspot.com/2016/10/mediocre-cyclical-united-states.html http://cmpassocregulationblog.blogspot.com/2016/08/and-as-ever-economic-outlook-is.html http://cmpassocregulationblog.blogspot.com/2016/07/business-fixed-investment-has-been-soft.html http://cmpassocregulationblog.blogspot.com/2016/07/financial-asset-values-rebound-from.html http://cmpassocregulationblog.blogspot.com/2016/05/appropriate-for-fed-to-increase.html http://cmpassocregulationblog.blogspot.com/2016/03/contraction-of-united-states-corporate.html http://cmpassocregulationblog.blogspot.com/2016/02/mediocre-cyclical-united-states.html http://cmpassocregulationblog.blogspot.com/2016/01/closely-monitoring-global-economic-and.html http://cmpassocregulationblog.blogspot.com/2015/12/dollar-revaluation-and-decreasing.html http://cmpassocregulationblog.blogspot.com/2015/11/dollar-revaluation-constraining.html http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-increase-considered.html http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-increase-considered.htmlhttp://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html

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

Chart IV-7, Japan, Domestic Corporate Goods Price Index, Monthly, 1960-2019

Source: Bank of Japan

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

The producer price index of the US from 1960 to 2019 in Chart IV-8 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.

Chart IV-8, US, Producer Price Index Finished Goods, Monthly, 1960-2019

Source: US Bureau of Labor Statistics

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

Further insight into inflation of the corporate goods price index (CGPI) of Japan is in Table IV-7. The increase in the tax on value added of consumption caused sharp increases in prices across all segments. Petroleum and coal with weight of 6.0 percent increased 1.8 percent in Nov 2019 and decreased 8.3 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 4.1 percent, decreased 0.5 percent in Nov 2019 and increased 1.7 percent in 12 months. In general, most manufactured products had been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. The reversal of carry trades in commodity futures caused decrease in prices of commodities and raw materials while prices of manufactures stabilized. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income (for analysis of terms of trade and growth see Pelaez (1979, 1976a). There are now inflation effects of the intentional policy of devaluing the yen and recent collapse of commodity prices followed by increases.

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

Nov 2019	Weight	Month ∆%	12 Month ∆%
Total	1000.0	0.2	0.1
Food, Beverages	141.6	0.0	1.1
Petroleum & Coal	59.5	1.8	-8.3
Production Machinery	41.1	-0.5	1.7
Electronic Components	24.5	0.0	0.8
Electric Power, Gas & Water	67.1	0.4	-0.7
Iron & Steel	51.7	0.0	3.0
Chemicals	89.2	-0.2	-3.5
Transport Equipment	140.7	0.1	1.4

Source: Bank of Japan

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

Percentage point contributions to change of the corporate goods price index (CGPI) in Nov 2019 are in Table IV-8, divided into domestic, export and import segments. The final row D shows that the producer price index increased 0.1 percent when excluding the sharp increase in the consumption tax. Effects of carry trades and their reversals are evident in data for Nov 2019. In the domestic CGPI, increasing 0.2 percent in Nov 2019, the energy shock is evident in the contribution of 0.11 percentage points by petroleum and coal products in renewed carry trades of exposures in commodity futures. The exports CGPI decreased 0.3 percent on the basis of the contract currency with deduction of 0.13 percentage points by chemicals and related products. The imports CGPI decreased 0.3 percent on the contract currency basis. Petroleum, coal and natural gas deducted 0.33 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide.

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

Groups Nov 2019	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change:  0.2%
Petroleum & Coal Products	0.11
Electric Power, Gas & Water	0.02
Agriculture, Forestry & Fishery Products	0.01
Nonferrous Metals	0.01
Production Machinery	-0.02
Electrical Machinery & Equipment	-0.01
Chemicals & Related Products	-0.01
B. Export Price Index	Monthly Change:    -0.3 % contract currency
Chemicals & Related Products	-0.13
Other Primary Products & Manufactured Goods	-0.09
Metals & Related Products	-0.07
General Purpose, Production & Business Oriented Machinery	-0.01
Electric & Electronic Products	0.05
C. Import Price Index	Monthly Change: -0.3% contract currency basis
Petroleum, Coal & Natural Gas	-0.33
Electric & Electronic Products	-0.20
Other Primary Products & Manufactured Goods	-0.04
Chemicals & Related Products	-0.03
Metals & Related Products	0.29
Beverages & Foods and Agriculture Products for Food	0.02
D Producer Price Index Excluding Consumption Tax	Monthly Change 0.1%

Source: Bank of Japan

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

There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (https://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Dec 2010 to Nov 2019. The index of current prices paid or costs of inputs moved from 16.1 in Dec 2012 to 15.2 in Dec 2019 while the index of current prices received or sales prices moved from 1.1 in Dec 2012 to 4.3 in Dec 2019. The farther the index is from the area of no change at zero, the faster the rate of change. Prices paid or costs of inputs at 15.2 in Dec 2019 are expanding at faster pace than prices received or of sales of products at 4.3. The index of future prices paid or expectations of costs of inputs in the next six months moved from 51.6 in Dec 2012 to 39.1 in Dec 2019 while the index of future prices received or expectation of sales prices in the next six months moved from 25.8 in Dec 2012 to 29.0 in Dec 2019. Prices paid or of inputs at 39.1 in Dec 2019 are expected to increase at a faster pace in the next six months than prices received or prices of sales products at 29.0 in Dec 2019. Prices of sales of finished products are less dynamic than prices of costs of inputs during waves of increases. Prices of costs of costs of inputs fall less rapidly than prices of sales of finished products during waves of price decreases. As a result, margins of prices of sales less costs of inputs oscillate with typical deterioration against producers, forcing companies to manage tightly costs and labor inputs. Instability of sales/costs margins discourages investment and hiring.

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

	Current Prices Paid	Current Prices Received	Future Prices Paid	Future Prices Received
12/31/2010	28.4	3.4	58	38.6
1/31/2011	35.8	15.8	60	42.1
2/28/2011	45.8	16.9	55.4	27.7
3/31/2011	53.2	20.8	71.4	36.4
4/30/2011	57.7	26.9	56.4	38.5
5/31/2011	69.9	28	68.8	35.5
6/30/2011	56.1	11.2	55.1	19.4
7/31/2011	43.3	5.6	51.1	30
8/31/2011	28.3	2.2	42.4	15.2
9/30/2011	32.6	8.7	53.3	22.8
10/31/2011	22.5	4.5	40.4	18
11/30/2011	18.3	6.1	36.6	25.6
12/31/2011	24.4	3.5	57	36
1/31/2012	26.4	23.1	53.8	30.8
2/29/2012	25.9	15.3	62.4	34.1
3/31/2012	50.6	13.6	66.7	32.1
4/30/2012	45.8	19.3	50.6	22.9
5/31/2012	37.3	12	57.8	22.9
6/30/2012	19.6	1	34	17.5
7/31/2012	7.4	3.7	35.8	16
8/31/2012	16.5	2.4	31.8	14.1
9/30/2012	19.1	5.3	40.4	23.4
10/31/2012	17.2	4.3	44.1	24.7
11/30/2012	14.6	5.6	39.3	15.7
12/31/2012	16.1	1.1	51.6	25.8
1/31/2013	22.6	10.8	38.7	21.5
2/28/2013	26.3	8.1	44.4	13.1
3/31/2013	25.8	2.2	50.5	23.7
4/30/2013	28.4	5.7	44.3	14.8
5/31/2013	20.5	4.5	29.5	14.8
6/30/2013	21	11.3	45.2	17.7
7/31/2013	17.4	1.1	28.3	12
8/31/2013	20.5	3.6	41	19.3
9/30/2013	21.5	8.6	39.8	24.7
10/31/2013	21.7	2.4	45.8	25.3
11/30/2013	17.1	-3.9	42.1	17.1
12/31/2013	15.7	3.6	48.2	27.7
1/31/2014	36.6	13.4	45.1	23.2
2/28/2014	25	15	40	23.8
3/31/2014	21.2	2.4	43.5	25.9
4/30/2014	22.4	10.2	33.7	14.3
5/31/2014	19.8	6.6	31.9	14.3
6/30/2014	17.2	4.3	36.6	16.1
7/31/2014	25	6.8	37.5	18.2
8/31/2014	27.3	8	42	21.6
9/30/2014	23.9	17.4	43.5	32.6
10/31/2014	11.4	6.8	42	26.1
11/30/2014	10.6	0	41.5	25.5
12/31/2014	10.4	6.3	40.6	32.3
1/31/2015	12.6	12.6	33.7	15.8
2/28/2015	14.6	3.4	27	5.6
3/31/2015	12.4	8.2	32	12.4
4/30/2015	19.1	4.3	38.3	13.8
5/31/2015	9.4	1	26	7.3
6/30/2015	9.6	1	24	5.8
7/31/2015	7.4	5.3	27.7	6.4
8/31/2015	7.3	0.9	34.5	10.9
9/30/2015	4.1	-5.2	28.9	7.2
10/31/2015	0.9	-8.5	27.4	7.5
11/30/2015	4.5	-4.5	29.1	11.8
12/31/2015	4	-4	27.3	20.2
1/31/2016	16	4	31	12
2/29/2016	3	-5	14.9	4
3/31/2016	3	-5.9	19.8	7.9
4/30/2016	19.2	2.9	27.9	5.8
5/31/2016	16.7	-3.1	28.1	6.3
6/30/2016	18.4	-1	29.6	7.1
7/31/2016	18.7	1.1	26.4	7.7
8/31/2016	15.5	2.1	25.8	9.3
9/30/2016	17	1.8	41.1	20.5
10/31/2016	22.6	4.7	35.8	30.2
11/30/2016	15.5	2.7	39.1	20.9
12/31/2016	22.6	3.5	42.6	22.6
1/31/2017	36.1	17.6	50.4	27.7
2/28/2017	37.8	19.4	38.8	25.5
3/31/2017	31	8.8	41.6	19.5
4/30/2017	32.8	12.4	37.2	25.5
5/31/2017	20.9	4.5	38.1	22.4
6/30/2017	20	10.8	33.1	13.8
7/31/2017	21.3	11	30.7	15.7
8/31/2017	31	6.2	33.3	21.7
9/30/2017	35.8	13.8	42.3	18.7
10/31/2017	27.3	7	41.4	25
11/30/2017	24.6	9.2	48.5	23.8
12/31/2017	29.7	11.6	50	27.5
1/31/2018	36.2	21.7	52.9	31.2
2/28/2018	48.6	21.5	52.1	25.7
3/31/2018	50.3	22.4	55.9	28
4/30/2018	47.4	20.7	54.8	31.1
5/31/2018	54	23	54	29.5
6/30/2018	52.7	23.3	51.2	27.1
7/31/2018	42.7	22.2	48.7	28.2
8/31/2018	45.2	20	53.3	26.7
9/30/2018	46.3	16.3	56.1	30.9
10/31/2018	42	14.3	52.9	23.5
11/30/2018	44.5	13.1	59.1	31.4
12/31/2018	39.7	12.8	51.9	27.6
1/31/2019	35.9	13.1	47.6	28.3
2/28/2019	27.1	22.9	37.1	30.7
3/31/2019	34.1	18.1	40.6	23.9
4/30/2019	27.3	14	37.1	16.1
5/31/2019	26.2	12.4	33.1	17.2
6/30/2019	27.8	6.8	36.8	12.8
7/31/2019	25.5	5.8	39.4	18.2
8/31/2019	23.2	4.5	38.1	12.9
9/30/2019	29.4	9.2	42.5	17
10/31/2019	23.1	6.3	42.5	21.3
11/30/2019	20.5	6.2	42.5	26
12/31/2019	15.2	4.3	39.1	29

Source: Federal Reserve Bank of New York

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

Price indexes of the Federal Reserve Bank of Philadelphia Outlook Survey are in Table IV-5A. As in inflation waves throughout the world (Section I and earlier https://cmpassocregulationblog.blogspot.com/2019/11/oscillating-risk-financial-assets-world.html) indexes of both current and expectations of future prices paid and received were quite high until May 2011. Prices paid, or inputs, were more dynamic, reflecting carry trades from zero interest rates to commodity futures. All indexes softened after May 2011 with even decline of prices received in Aug 2011 during the first round of risk aversion. Current and future price indexes have increased again but not back to the intensity in the beginning of 2011 because of risk aversion frustrating carry trades even induced by zero interest rates. The index of prices paid or prices of inputs moved from 21.1 in Dec 2012 to 19.0 in Dec 2019. The index of current prices received was minus 2.4 in Apr 2013, indicating decrease of prices received. The index of current prices received decreased from 9.1 in Dec 2012 to minus 4.8 in Sep 2015, decreasing to minus 3.4 in Feb 2016. The index of current prices received was 11.9 in Dec 2019. The farther the index is from the area of no change at zero, the faster the rate of change. The index of current prices paid or costs of inputs at 19.0 in Dec 2019 indicates faster expansion than the index of current prices received or sales prices of production in Dec 2019, showing 11.9. Prices paid indicate faster expansion than prices received during most of the history of the index. The index of future prices paid moved to 50.9 in Dec 2019 from 42.0 in Dec 2012 while the index of future prices received moved from 21.7 in Dec 2012 to 49.3 in Dec 2019. Expectations are incorporating faster increases in prices of inputs or costs of production, 50.9 in Dec 2019, than of sales prices of produced goods, 49.3 in Dec 2019, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages investment and hiring.

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

	Current Prices Paid	Current Prices Received	Future Prices Paid	Future Prices Received
Dec-10	42.7	5.3	56.3	24.2
Jan-11	48.3	12.6	58.8	34.6
Feb-11	61.4	13.7	68.1	31.6
Mar-11	59.2	17.9	61.5	33.5
Apr-11	52.7	22.9	56.4	36.4
May-11	51.2	20.6	54.8	28.5
Jun-11	36	6.1	40.7	6.8
Jul-11	34.1	5.7	48.2	17.2
Aug-11	23.5	-3.2	42.7	22.8
Sep-11	30.1	6.4	38.4	20.5
Oct-11	22.8	1.7	41.4	27.6
Nov-11	21.8	5.2	34.5	26.2
Dec-11	25	5.6	42.8	21.1
Jan-12	26.1	9.3	47.9	21.8
Feb-12	33.4	10.4	50.9	26.4
Mar-12	17.4	6.9	38.7	24.8
Apr-12	21.8	9.6	37	25.2
May-12	10.1	1.1	40.4	9.2
Jun-12	1.1	-6.4	32.8	16.9
Jul-12	8.1	3.3	27.3	20.3
Aug-12	16.3	6.9	35	23.9
Sep-12	13	2.8	38.4	24.7
Oct-12	17.4	4.8	44.3	14.9
Nov-12	22.2	4.8	45.9	10.6
Dec-12	21.1	9.1	42	21.7
Jan-13	13	0.8	35.2	21.7
Feb-13	12.9	0.3	34.8	23.2
Mar-13	13.3	1.1	35.3	20.4
Apr-13	11.6	-2.4	31	16.8
May-13	12.5	0.4	35.4	19.4
Jun-13	16.7	11.2	29.6	24.2
Jul-13	18.9	5.6	40.2	24.7
Aug-13	17.8	12.8	34.2	23.1
Sep-13	22.3	11.8	37.4	27.1
Oct-13	18.1	9.3	41.8	34.1
Nov-13	23.5	6.7	41.1	36.1
Dec-13	17.6	9.2	40.2	28.1
Jan-14	20.1	8.4	37.7	13.7
Feb-14	16.3	10.2	28.6	19.8
Mar-14	21.1	6.8	33.7	20.6
Apr-14	20.9	10	37.8	21.4
May-14	26.5	17.2	39.2	29.6
Jun-14	25.7	9.3	42.3	30
Jul-14	30.4	14.1	36.6	21.7
Aug-14	21.8	6.1	45	27.7
Sep-14	21.9	7.9	39.3	25.7
Oct-14	24.7	17.4	31.3	21.2
Nov-14	14.5	8.8	32.9	18.1
Dec-14	16.2	12.4	25.5	19.7
Jan-15	12	2.2	31	20.9
Feb-15	6	3.3	34	22.6
Mar-15	1.1	-5.7	30.2	9.7
Apr-15	0.5	-3.4	18.8	14.2
May-15	-14.2	-7.4	24	20.4
Jun-15	9.1	-0.4	39	12.2
Jul-15	17.3	0.4	33.8	16.1
Aug-15	3.3	-3.4	35	8
Sep-15	-2.2	-4.8	26.3	5.1
Oct-15	0.1	-0.5	18	8.2
Nov-15	-6.7	-1.6	23.8	9.4
Dec-15	-7.2	-4.5	24.5	13.7
Jan-16	-1.2	-3.7	19.6	11.5
Feb-16	-3.3	-3.4	12.2	4.6
Mar-16	-1.8	1.3	23.7	14.3
Apr-16	11.5	4	33.7	22.2
May-16	13.6	10.6	25.7	14.6
Jun-16	20.4	1.6	35.8	17.6
Jul-16	12.5	1.3	28.4	22.6
Aug-16	19.4	6.8	31.8	12.7
Sep-16	21.8	10.7	42.7	32.8
Oct-16	11.2	-0.7	41.6	27
Nov-16	27.5	19.3	38.6	28.6
Dec-16	30.8	11.2	45.1	29.6
Jan-17	33.2	24.7	48.5	27.9
Feb-17	29.4	12.3	46.2	24.5
Mar-17	39.2	18.9	53.5	38.4
Apr-17	30.3	14	33	29
May-17	24.6	13.1	43.9	26.4
Jun-17	23.4	17.9	42.3	28.8
Jul-17	19.2	8.6	48.1	30.3
Aug-17	21.9	13.3	37.5	36.6
Sep-17	35.9	24.4	50.4	34
Oct-17	41.3	16.2	59.9	39.6
Nov-17	38.7	12.3	54.7	42
Dec-17	28.2	15	56.6	41.5
Jan-18	35	24.1	55	44.6
Feb-18	44.7	24.5	63.5	48.7
Mar-18	42.6	21.1	62	50.3
Apr-18	53.1	28.3	63.7	47
May-18	51	33.5	62.1	36.4
Jun-18	50.7	31.9	62.1	54.8
Jul-18	60	35	60.1	50.8
Aug-18	55.2	31.9	60.3	58
Sep-18	42.6	22.6	53.1	44.9
Oct-18	42	26.5	56.3	51.1
Nov-18	41.2	25.3	60.3	57.6
Dec-18	38.9	29	60.9	47.9
Jan-19	32.7	24.8	39.9	34.1
Feb-19	21.8	27.7	39.8	29.7
Mar-19	19.7	24.7	47.3	32.4
Apr-19	21.6	20	26	25.4
May-19	23.1	17.5	42.3	38.6
Jun-19	12.9	0.6	30.2	24.4
Jul-19	16.1	9.5	35.3	34.1
Aug-19	12.8	13	39	27.8
Sep-19	33	20.8	48.7	36.3
Oct-19	16.8	16.4	36.2	29.7
Nov-19	7.8	12.2	43.2	36.7
Dec-19	19	11.9	50.9	49.3

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-1 of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices paid or prices of inputs from 2006 to 2019. Recession dates are in shaded areas. In the middle of deep global contraction after IVQ2007, input prices continued to increase in speculative carry trades from central bank policy rates falling toward zero into commodities futures. The index peaked above 70 in the second half of 2008. Inflation of inputs moderated significantly during the shock of risk aversion in late 2008, even falling briefly into contraction territory below zero during several months in 2009 in the flight away from risk financial assets into US government securities (Cochrane and Zingales 2009) that unwound carry trades. Return of risk appetite induced carry trade with significant increase until return of risk aversion in the first round of the European sovereign debt crisis in Apr 2010. Carry trades returned during risk appetite in expectation that the European sovereign debt crisis was resolved. The various inflation waves originating in carry trades induced by zero interest rates with alternating episodes of risk aversion are mirrored in the prices of inputs after 2011, in particular after Aug 2012 with the announcement of the Outright Monetary Transactions Program of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). Subsequent risk aversion and flows of capital away from commodities into stocks and high-yield bonds caused sharp decline in the index of prices paid followed by another recent rebound with marginal decline and new increase. The index falls, rebounds and falls again in the final segment but there are no episodes of contraction after 2009 with exception of minus 14.2 in May 2015, minus 2.2 in Sep 2015, 0.1 in Oct 2015, minus 6.7 in Nov 2015 and minus 7.2 in Dec 2015. The reading for the index in Jan 2016 is minus 1.2 and minus 3.3 for Feb 2016. The index is minus 1.8 in Mar 2016 and 11.5 in Apr 2016, increasing at 13.6 in May 2016 and 20.4 in Jun 2016. The index reached 12.5 in Jul 2016, 19.4 in Aug 2016 and 21.8 in Sep 2016. The index was 11.2 in Oct 2016 and 19.0 in Dec 2019.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2 of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices received from 2006 to 2019. The significant difference between the index of current prices paid in Chart IV-1 and the index of current prices received in Chart IV-2 is that increases in prices paid are significantly sharper than increases in prices received. There were several periods of negative readings of prices received from 2010 to 2016. Prices paid increased at 1.1 in Mar 2015 while prices received contracted at 5.7. There were several contractions of prices paid: 7.4 in May 2015 for prices received with faster contraction of 14.2 of prices paid; minus 2.2 for prices paid in Sep 2015 with minus 4.8 for prices received; and 0.1 for prices paid in Oct 2015 with minus 0.5 for prices received. The index of prices received fell to minus 1.6 in Nov 2015 with minus 6.7 for prices paid and to minus 4.5 in Dec 2015 with minus 7.2 for prices paid. The index of prices received fell to minus 3.4 in Feb 2016 with minus 3.3 for prices paid. The index of prices paid decreased at 1.8 in Mar 2016 with increase at 1.3 for prices received. Prices paid moved to 19.0 in Dec 2019 while prices received moved to 11.9. Prices received relative to prices paid deteriorate most of the time largely because of the carry trades from zero interest rates to commodity futures. Profit margins of business are compressed intermittently by fluctuations of commodity prices induced by unconventional monetary policy of zero interest rates, frustrating production, investment and hiring decisions of business, which is precisely the opposite outcome pursued by unconventional monetary policy.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2A of the Federal Reserve Bank of Philadelphia shows current prices paid and current prices received from Jan 2007 to Mar 2017. Current prices paid jumped ahead of current prices received during the contraction from IVQ2007 to IIQ2009 through the carry trade from zero interest rates to exposures in commodity derivatives. There is the same behavior during most of the cyclical expansion after IIIQ2009. Rebalancing of financial investment portfolios away from commodities into equities explains the recent weakness of prices paid. There is a new ongoing carry trade into commodity futures.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2B of the Federal Reserve Bank of Philadelphia shows Current and Future Prices Received of the Business Outlook Survey from 2007 to Jun 2017. There is correlation in the direction of the indexes. The six-month forecast is typically above current prices received. There is upward trend in both indexes in the final segment with wide fluctuations.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2C of the Federal Reserve Bank of Philadelphia shows Current and Future Prices Received of the Business Outlook Survey from 2007 to Jul 2017. There is correlation in the direction of the indexes. The six-month forecast is typically above current prices received. There is upward trend in both indexes in the final segment with wide fluctuations.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2D of the Federal Reserve Bank of Philadelphia shows Current Prices Paid and Current Prices Received of the Business Outlook Survey from 2007 to Sep 2017. Current prices paid are typically above prices received.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2DE of the Federal Reserve Bank of Philadelphia shows Current Prices Paid and Current Prices Received of the Business Outlook Survey from 2007 to Oct 2017. Current prices paid are typically above prices received.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2DEf of the Federal Reserve Bank of Philadelphia shows current prices paid and received of the Business Outlook Survey from 2007 to Dec 2017.Current prices paid are mostly above current prices received. There is upward trend in both indexes in the final segment with wide fluctuations.

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

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2Def1 of the Federal Reserve Bank of Philadelphia shows current prices paid and received of the Business Outlook Survey from 2007 to Jan 2018. There is correlation in the direction of the indexes. The six-month forecast is typically above current prices received. There is upward trend in both indexes in the final segment with wide fluctuations.

Chart IV-2dEf1, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices and Future Prices Paid Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2Def2 of the Federal Reserve Bank of Philadelphia shows current prices paid and received of the Business Outlook Survey from 2007 to Feb 2018. There is correlation in the direction of the indexes. Prices paid are typically above prices received.

Chart IV-2df2, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Piad and Future Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2DEF3 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to Mar 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “Price increases for purchased inputs were reported by 44 percent of the manufacturers this month. The prices paid diffusion index fell 2 points to 42.6 but remains near last month’s reading, which was the highest since 2011 (see Chart 2). The current prices received index, reflecting the manufacturers own prices, declined 3 points to a reading of 20.7” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0318).

Chart IV-2dEf3, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2DEF4 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to Apr 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “Price increases for purchased inputs were reported by 59 percent of the manufacturers this month, up notably from 44 percent in March. The prices paid diffusion index increased 14 points to the highest reading since Mar 2011 (see Chart 2). The current prices received index, reflecting the manufacturers own prices, increased 9 points to a reading of 29.8, its highest reading since May 2008” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0418).

Chart IV-2dEf4, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2DEF5 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to May 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “Price increases for purchased inputs were reported by 55 percent of the manufacturers this month, down slightly from 59 percent in April. The prices paid diffusion index fell 4 points but remains at an elevated level (see Chart 2). The current prices received index, reflecting the manufacturers’ own prices, increased 7 points to a reading of 36.4, its second consecutive month of increase and highest reading since February 1989.” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0518).

Chart IV-2dEf5, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2DEF5 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to Jun 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “The firms continued to report higher prices for both purchased inputs and their own manufactured goods, although the survey’s price indicators fell modestly from their May readings. Price increases for purchased inputs were reported by 54 percent of the manufacturers this month, but the prices paid diffusion index edged 1 point lower (see Chart 2). The current prices received index, reflecting the manufacturers’ own prices, decreased 3 points but remains at a high reading of 33.2. Nearly 34 percent of the firms reported higher prices for their manufactured goods.” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0618).

Chart IV-2dEf5, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart IV-2DEF5 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to Jul 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “The manufacturers continued to report higher prices for both purchased inputs and their own manufactured goods. Price increases for purchased inputs were reported by 63 percent of the manufacturers this month, up from 54 percent last month. The index has now risen 30 points since January (see Chart 2). The current prices received index, reflecting the manufacturers’ own prices, increased 3 points. Over 36 percent of the firms reported higher prices for their manufactured goods this month.” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0718).

Chart IV-2dEf6, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Aug 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0818): “The survey’s current price measures moderated slightly but remain elevated, indicating that price increases for both purchased inputs and the firms’ own manufactured goods remain widespread. The prices paid index fell 8 points. Price increases for purchased inputs were reported by 63 percent of the manufacturers this month. Nearly 35 percent of the firms reported higher prices for their own manufactured goods this month, although the prices received index fell 3 points. In this month’s special questions, the firms were asked to forecast the changes in the prices of their own products and for U.S. consumers over the next four quarters. Regarding their own prices, the firms’ median forecast was for an increase of 3.0 percent, the same as when the same question was last asked in May. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 3.0 percent over the next four quarters, the same as the previous forecast. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 3.0 percent, slightly higher than the 2.5 percent projected in the previous survey. The firms’ forecast for the long-run (10-year average) inflation rate was also 3.0 percent.”

The Business Outlook survey of the FRB of Philadelphia for Sep 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0918): “The survey’s diffusion indexes for prices remained positive but decreased from their readings in August (see Chart 2). On the cost side, 44 percent of the firms reported increases in the prices paid for inputs, down from 63 percent in August, and the prices paid index decreased 15 points to 39.6. With respect to prices received for firms’ own manufactured goods, 25 percent of the firms reported higher prices compared with 35 percent last month. The prices received index decreased 14 points.”

Chart IV-2dEf6, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Oct 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos1018): “The survey’s diffusion indexes for prices remained positive but lower than their readings for most of this year (see Chart 2). On the cost side, 42 percent of the firms reported increases in the prices paid for inputs, and the prices paid index, which had fallen 15 points last month, decreased 1 point to 38.2. With respect to prices received for firms’ own manufactured goods, 27 percent of the firms reported higher prices compared with 3 percent that reported decreases. The prices received index increased 5 points.”

Chart IV-2Oct18, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Nov 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos1118): “The survey’s diffusion indexes for prices remained positive but lower than their readings for most of this year (see Chart 2). With respect to prices received for firms’ own manufactured goods, 24 percent of the firms reported higher prices compared with 2 percent that reported decreases. The prices received index decreased 2 points. On the cost side, 41 percent of the firms reported increases in the prices paid for inputs. The prices paid index edged up 1 point but remains 24 points lower than its peak in July.”

Chart IV-2Nov18, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Dec 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos1218): “The survey’s diffusion indexes for prices remained positive, suggesting continued increases in firms’ input prices and the prices for their own manufactured goods. On the cost side, 42 percent of the firms reported increases in the prices paid for inputs. The prices paid index edged down 1 point and remains 25 points below its peak in July (see Chart 2). The prices received index increased 4 points to 26.2, its highest reading in four months, but 10 points below its peak in May.”

Chart IV-2Dec18, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Jan 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0119): “The survey’s diffusion indexes for prices remained positive but decreased from their readings in December. On the cost side, the prices paid index decreased 6 points to 32.7. The index has been trending down since last July and is at its lowest reading in 13 months (see Chart 2). With respect to prices received for firms’ own manufactured goods, 29 percent of the firms reported higher prices, and 4 percent reported lower prices. The prices received index decreased 4 points to 24.8.”

Chart IV-2Jan19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Feb 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0219): “Price pressures originating from purchased inputs continued to abate. The prices paid index decreased 11 points to 21.8. The index has been trending down since last July and is now at its lowest reading since July 2017 (see Chart 2). Over 28 percent of the firms reported higher input prices this month, down from 40 percent last month. With respect to prices received for firms’ own manufactured goods, almost 33 percent of the firms reported higher prices, and 5 percent reported lower prices. The prices received index increased 3 points to 27.7.”

Chart IV-2Feb19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Mar 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0319): “Price pressures arising from purchased inputs continued to ease. The prices paid index decreased 2 points to 19.7. The prices paid index declined for the eighth consecutive month and is at its lowest reading since July 2017 (see Chart 2). Nearly 24 percent of the firms reported higher input prices this month, down from 28 percent last month. With respect to prices received for firms’ own manufactured goods, 26 percent of the firms reported higher prices, down from 33 percent last month. The prices received index decreased 3 points to 24.7.”

Chart IV-2Mar19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Apr 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0419): “With respect to prices received for firms’ own manufactured goods, the prices received index decreased 5 points to 20.0, its lowest reading since December 2017. Nearly 23 percent of the firms reported higher prices, down from 26 percent last month. The prices paid index increased 2 points to 21.6, its first increase in 9 months (see Chart 2). Over 26 percent of the firms reported higher input prices this month, while 5 percent reported lower input prices.”

Chart IV-2Apr19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for May 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0519): “In this month’s special questions, the firms were asked to forecast the changes in the prices of their own products and for U.S. consumers over the next four quarters. Regarding their own prices, the firms’ median forecast was for an increase of 2.8 percent, about the same as when the question was last asked in February. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 3.0 percent over the next four quarters, the same as the previous forecast. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 2.5 percent, an increase from 2.3 percent in the previous quarter. The firms’ median forecast for the long-run (10-year average) inflation rate remained steady at 2.5 percent.”

The Business Outlook survey of the FRB of Philadelphia for Jun 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0619): “The current prices received index, reflecting the manufacturers’ own prices, declined nearly 17 points to a reading of 0.6, its lowest reading since October 2016 (see Chart 2). Price increases for manufacturers’ own goods were reported by 10 percent of the firms this month, down from 23 percent last month. Price increases for purchased inputs were reported by 28 percent of the manufacturers this month, and the prices paid diffusion index decreased 10 points to 12.9, also its lowest reading since October 2016.”

Chart IV-2Jun19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Jul 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0719): “The prices paid and prices received indexes both increased this month but remained well below their readings over the past few years. The current prices received index, reflecting the manufacturers’ own prices, increased 9 points to a reading of 9.5. Price increases for manufacturers’ own goods were reported by 16 percent of the firms this month, up from 10 percent last month. Price increases for purchased inputs were reported by 29 percent of the manufacturers this month, but 13 percent reported price decreases. The prices paid diffusion index increased 3 points to 16.1.”

The Business Outlook survey of the FRB of Philadelphia for Aug 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0819): “The firms continued to report increases in the prices paid for inputs. The percentage of firms reporting increases in input prices (25 percent) remained higher than the percentage reporting decreases (12 percent). The prices paid diffusion index decreased 3 points and remains well below readings over the past two and a half years. The current prices received index, reflecting the manufacturers’ own prices, increased 4 points to a reading of 13.0 but is also still well below readings of the past few years.”

The Business Outlook survey of the FRB of Philadelphia for Sep 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0919): Price increases were more widespread this month. On the cost side, nearly 38 percent of the firms reported increases in the prices paid for inputs this month, up from 25 percent in August. The prices paid index increased 20 points to 33.0, its highest reading since December 2018 (see Chart 2). With respect to prices received for firms’ own manufactured goods, 26 percent of the firms reported higher prices, up from 16 percent in August. The diffusion index for prices received increased 8 points to 20.8, its highest reading since March.

Chart IV-2Sep19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Oct 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos1019): “The firms continued to report overall increases in the prices paid for inputs, but the prices paid index fell 16 points to 16.8. Nearly 24 percent of the respondents reported higher input prices, down from 38 percent in September (see Chart 2). The current prices received index, reflecting the manufacturers’ own prices, decreased 4 points to a reading of 16.4.”

Chart IV-2Oct19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The Business Outlook survey of the FRB of Philadelphia for Nov 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos1119): “The firms continued to report overall increases in prices paid for inputs and received for goods, but the indicators for both measures declined for the second consecutive month. The prices paid diffusion index decreased 9 points to 7.8, its lowest level since March 2016. The percentage of firms reporting increases in input prices (17 percent) remained higher than the percentage reporting decreases (9 percent). The current prices received index, reflecting the manufacturers’ own prices, decreased 4 points to a reading of 12.2.”

The Business Outlook survey of the FRB of Philadelphia for Dec 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos1219): “The firms continued to report overall increases in the prices paid for inputs, with the index rising 11 points to 19.0 (see Chart 2). Over 25 percent of the respondents reported higher input prices, up from 17 percent in November. The current prices received index, reflecting the manufacturers’ own prices, ticked down to a reading of 11.9. Over 80 percent of the firms reported no change in their own product prices this month.”

Chart IV-2Dec19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received 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, 2019.