Japanese Bond Yields Not As Low As They Appear

Kash Mansori notes that despite the fact that both the deficit and the debt level in Japan are higher, bond yields are far higher in Italy, 7% (not 8% as he asserted) in Italy versus 1% in Japan.

The explanations that he offers, (the Japanese access to a printing press, high domestic savings and the vicious cycle created by the self-fulfilling prophecy of default) for this are basically correct and correspond largely to my explanation of the low U.S. bond yields (except that in the U.S., foreign central banks fill the role of domestic savers in Japan).

However, it should be noted that Japanese bond yields aren't as low as they seem. Japan has for the last two decades or so had more or less persistent price deflation even as the rest of the world has had almost persistent price inflation. This means that real interest rates are much higher in Japan compared to the rest of the world then what nominal interest rates would suggest.

In the year to October this year, consumer price inflation was 3% in the euro area and -0.2% in Japan . That means that the nominal difference in interest rate of about 6% was in real terms less than half of that.

The point here is not to deny that Italian bond yields are disturbingly high as they certainly are. The point is instead that even professional economists and bond investors (who really should know better) seems to fall for the money illusion as they compare without further thought bond yields in different currency areas without any regard for inflation.

Statistical Notes Wednesday November 30

-Third quarter Swedish GDP growth slowed to 4.6% in volume terms and 3.6% in terms of trade adjusted terms in the third quarter, but that still makes it the fastest growing economy in the EU except for the three Baltic countries.


-In sharp contrast to its northern neighbor, Denmark had negative growth, with GDP falling by 0.4% compared to a year earlier.

-Euro area consumer price inflation held at 3% in November, while unemployment in October rose to a new high of 10.3%. Unemployment was highest in Spain at 22.8% and lowest at 4.1% in Austria.

-Real retail sales in Estonia rose 4% compared to the previous month and 5% compared to a year earlier.

-Third quarter GDP growth in India slowed to 6.9% from 7.7%.in the second quarter.

-Unemployment in Japan seemingly rose from 4.1% to 4.5%, though that was mostly the result of the inclusion of Fukushima and other areas heavily affected by the earthquake/tsunami earlier this year that had previously been excluded.

-Industrial production in South Korea in October fell by 0.7% compared to the previous month but rose by 6.2% compared to a year earlier. Also, a broader index of economic activity rose 0.3% compared to the previous month and 4.8% compared to a year earlier.

We'll See About That

Venezuela's government led by Marxist nutcase Hugo Chavez has implemented massive increases in government spending and money supply, and quite predictably this has caused price inflation to increase.

The government's respone to this has been to implement price controls and threaten companies that don't do as they're told with nationalization. When responding to the people that points out that this will lead to shortages, Karlin Granadillo, who leads the agency that are going to enforce the price controls, said that "the law of supply and demand is a lie".

Well, we'll see about that. I have a feeling that she will be disappointed.

No Peak Oil In America

Mark Perry points to this interesting Wall Street Journal editorial which points out that despite the massive subsidies from the Obama administration to Solyndra and other "clean energy" companies, it is actually the non-subsidized production of oil and natural gas that is booming. Since 2003 employment in the oil and gas extraction sector has increased as much as 80%, while employment in most other sectors have declined or stagnated.

As the article points out, this boom hasn't occurred because of Obama, but despite of him and would have been even greater if someone else had been President since January 2009 (and will therefore accelerate if someone else is inaugurated in January 2013.)

An excerpt:

"So President Obama was right all along. Domestic energy production really is a path to prosperity and new job creation. His mistake was predicting that those new jobs would be "green," when the real employment boom is taking place in oil and gas....

...The ironies here are richer than the shale deposits in North Dakota's Bakken formation. While Washington has tried to force-feed renewable energy with tens of billions in special subsidies, oil and gas production has boomed thanks to private investment. And while renewable technology breakthroughs never seem to arrive, horizontal drilling and hydraulic fracturing have revolutionized oil and gas extraction—with no Energy Department loan guarantees needed.

The oil and gas rush has led to a jobs boom. North Dakota has the nation's lowest jobless rate, at 3.5%, and the state now has some 200 rigs pumping 440,000 barrels of oil a day, four times the amount in 2006. The state reports more than 16,000 current job openings, and places like Williston have become meccas for workers seeking jobs that often pay more than $100,000 a year....

...Good news? You'd think so, but liberals can't seem to handle this truth so they are now trying to discredit the jobs that accompany it. The American Petroleum Institute recently commissioned a study by the Wood Mackenzie consulting firm, which estimated that better federal energy policy would create an additional 1.4 million jobs by 2030...

...And it stands to reason that if the Obama Administration dropped its hostility to oil and gas energy, even more jobs would be created as the industry invested to exploit other areas with new technology and production methods.

Yet earlier this month the Interior Department released a new five-year plan that puts most of the Outer Continental Shelf off-limits for oil drilling. And the Administration has delayed for at least another year the Keystone XL pipeline that is shovel-ready to create 20,000 new direct, pipeline-related jobs.

The Office of Natural Resources Revenue recently noted that federal revenue from offshore bonus bids (from lease sales) in fiscal 2011 was merely $36 million—down from $9.5 billion in fiscal 2008. The Obama Administration has managed the nearly impossible feat of turning energy policy into a money loser, pouring taxpayer dollars into green-energy busts like Solyndra. The Washington Post reported in September that Mr. Obama's $38.6 billion green loan program had created a mere 3,500 jobs over two years. He had predicted it would "save or create" 65,000.

Mr. Obama nonetheless keeps talking about "green jobs" as if repetition will conjure them. He'd do more for the economy if he dropped the ideological illusions and embraced the job-creating, wealth-producing reality of domestic fossil fuels."

Workers Worst Off During Obama Administration

As a follow-up on Tuesday's post on how American workers have fallen behind during the current recovery, I have below summarized the statistics for how the overall economy as well as corporate profits and labor income fared during the recoveries from the 3 deepest slumps in post-World War II America, the ones in 1973-75, 1981-82 and 2007-09 (Source the Bureau of Economic Analysis interactive database):

1) Q1 1975 to Q2 1977
Real increase in per capita national income: 9.5%
Real increase in per capita corporate profits: 45.9%
Real increase in per capita labor income: 7.9%

2) Q4 1982 to Q1 1985
Real increase in per capita national income: 14.8%
Real increase in per capita corporate profits: 45.8%
Real increase in per capita labor income: 10.5%

3) Q2 2009 to Q3 2011
Real increase in per capita national income: 4.6%
Real increase in per capita corporate profits: 46.8%
Real increase in per capita labor income: -1.0%

As you can see the most recent recovery stands out in two respects: both that it was far weaker than the other two and that the relative gain in corporate profits compared to labor income has been far greater. Growth has been less than half of that in the 1975-77 recovery and less than a third of that in the 1983-85 recovery. Meanwhile, corporate profits gained more than 48% compared to labor income in this recovery, compared to a 35% relative gain in the 1975-77 recovery and a 32% relative gain in the 1983-85 recovery.

The irony is here that under a left-wing President pursuing pursuing supposedly pro-worker policies, workers are far worse off both in relative but particularly absolute terms than under the more centrist Ford administration, and even worse both in relative but particularly absolute terms compared to the tax cutting Reagan administration. Shareholders have gained more or less the same during these three administrations in absolute terms, but have in relative terms gained the most during Obama because workers have seen their income continue to drop in contrast to the solid gains during particularly the Reagan administration.

Statistical Notes Wednesday November 23

-Headline quarterly U.S. GDP growth was downwardly revised from 2.5% to 2%, while the terms of trade adjusted growth number was downwardly revised from 3% to 2.7%. Adjusted Gross Domestic Income, that is supposed to be equal to GDP but isn't due to different data sources, increased a more moderate 1%.

Meanwhilem, after three straight monthly declines, real disposable income increased by 0.3% in October. While both "core" and overall durable goods orders fell, shipments increased. Intial unemployment claims increased slightly, but were still at a relatively low level.

-Canada's consumer price inflation rate fell from 3.2% to 2.9% in October.

-Euro area industrial orders fell as much as 6.4% in September compared to the previous month, but were still up by 1.6% compared to September 2010.

-Both Latvia and Lithuania saw big gains in employment and drops in unemployment in the third quarter this year compared to both Q2 2011 and Q3 2010, though the gains weren't quite as big as in Estonia. And at 14.4% and 14.8%, the unemployment rates are still unacceptably high.

-Inflation in Singapore fell in October to 5.4% from 5.5%, while inflation in Hong Kong remained at 5.8%.

-Employment in Taiwan rose in October by 0.14% compared to the previous month and 2.1% compared to a year earlier, helping to push down the unemployment rate to 4.3%.

-Israel's third quarter GDP increased at a 3.4% annualized rate compared to the previous quarter and by 4.7% compared to a year earlier. Although both the quarterly and yearly increases are lower than earlier in the year, they are still well above growth in most other countries.

American Workers Worse Off During Recovery

Between the last quarter of the U.S. recession, Q2 2009 and Q3 2011 nominal national income has increased 11.6%. Given the 4.7% increase in the domestic purchases price deflator that translates into a 6.6% gain, which is 2.9% at an annualized rate. A very weak recovery compared to those after the 1973-75 and particularly the 1981-82 recessions, but still clearly a recovery.

However, as the population has increased by 1.9%, per capita national income is up only 4.6%. And for the vast majority of Americans who rely primarily on income from their jobs, it gets worse. Because while real corporate profits rose as much as 49.6%, real labor income ("compensation of employees) rose only 0.9%. Given the 1.9% population increase, this means that real per capita labor income has fallen by 1% during the recovery.

It is normal for corporate profits to increase more than labor income during recoveries, just as it is normal for them to drop more than labor income during slumps. However, the divergence has been larger than normal this time, and more importantly economic growth has been much lower, creating the unusual situation where workers are worse off during a recovery. And since most Americans depend almost entirely on labor income, this means that most Americans are worse off during the recovery.

Why Is America Getting Away With Deficit Spending?

In response to my post about how the U.S. federal government can borrow and have a higher debt level than for example Spain while having a borrowing cost that is dramatically lower, one reader asked why that is. Well, there are essentially three different factors involved here:

1) Many countries with large external surpluses (China, Saudia Arabia etc.) peg their currencies with varying degree of rigidity to the U.S. dollar, and the most effective way of maintaining that through asset purchases are by buying dollar assets, creating an artificial demand for such assets.

2) Even more important is the self-fulfilling prophecy factor. If an asset is perceived as a "safe haven" then it will become so regardless of its objective qualities. If dog feces for some bizarre reason was perceived as a "safe haven" then suddenly in times of panic, multi billion dollar fund managers would buy large quantities of it. Given the fact that U.S. Treasuries during the last decades yielded worse than almost all other asset classes, the perception that they are safe in any sense except "safe way to lose money" is not much less irrational than regarding dog feces as "safe haven".

Similarly, if it is perceived that there is a risk that Spain for example will default, then its yields will soar, something that paradoxically will reduce demand for its securities since it increases the perceived risk of default, raising yields further in a vicious spiral. The U.S. government has had the luck of being perceived as a "safe haven" while the Spanish government has had the bad luck of being perceived as "risky", setting in motion self-fulfilling mechanisms.

3) The U.S. government is protected by its central bank, the Fed, which has the power to buy potentially unlimited quantities of its debts, while the ECB has only bought limited amounts of debt securities, and by declaring that the purchases will be very limited has failed to stop the self-fulfilling prophecy mechanism.

The reader then asked if the low yields of the U.S. government was a bubble. This can be answered by going through the 3 mentioned factors again. Could Saudi Arabia and the others stop trying to peg their currencies? Of course they could, but they're not likely to do so anytime soon. Could the perception of U.S. Treasuries as "safe haven" change? That is certainly also possible, but we can't know when that happens. Could the Fed stop its potentially unlimited purchases? Yes, as I explained here, there is a limit to the extent to which central banks can use "the printing presses" to back up their government, namely when they fear the inflationary consequences more than the effects on the governments ability to borrow and spend. The fact that Hungary has again slipped into a fiscal crisis despite having retained its own currency (the forint) illustrates that when private demand is too weak and the central bank too fearful of inflation, having your own central bank won't stop a fiscal crisis. That could happen in America too, but it's not as long as "Helicopter Ben" is in charge.

Democrats Can Also Be Inconsistent

[Sorry about the lack of posting the last few days, but I have been sick. Now that I'm feeling better, I will start posting again, starting with this one]

Last month I discussed how some Republicans are inconsistent in their analysis of various forms of spending cut, arguing that cuts in non-military spending helps the economy while arguing that cuts in military spending hurts the economy.

Now we see Robert Reich make a contradiction which is basically the same except that he has the reversed opinion of which spending is good: he argues that increased non-military spending would boost the economy while arguing that military spending is "bloat" and implicitly arguing that it can be cut without weakening the economy.

As with the reverse Republican position, his position per se is not self-contradictory. One can believe that the non-military programs are of greater use than the military ones and therefore favor a shift in spending from military to non-military programs. However his belief in Keynesian effects from non-military programs is in contradiction with his implicit argument of non-Keynesian effects from military programs

$15 Trillion

The U.S. Federal debt just rose above $15 trillion, yet bond markets are unconcerned about it, even as they are in panic over a lot lower debt levels (even in relative terms) in some European countries. This just goes to show that it is not a just world.

Statistical Notes Tuesday November 15

-Nominal U.S. retail sales rose 0.5% in October compared to the previous month and 7.2% compared to October. Because the consumer price inflation numbers aren't available yet, it is still unclear how high the increases were in real terms, but most likely they were both positive.

-Seasonally adjusted employment increased by 10,100 in Australia in October compared to December. The yearly increase slowed to 0.9%, lower than the population growth rate.

-Canadian exports rose by 4.2% in September compared to August and 20.3% compared to September 2010, turning a previous trade deficit into a trade surplus. Increased exports of oil and other energy products was the main cause of these increases.

-Euro area industrial production fell by 2% in September compared to August, but were still up by 2.2% compared to a year earlier.

Euro area GDP in the third quarter rose 0.2% in the third quarter compared to the second and 1.4% compared to Q3 2010. Estonia had the highest growth rate of the euro area countries that has reported so far, followed by Slovakia, Germany and France, while Holland and Portugal contracted. Greece contracted on a yearly level by 5.2%, but quarterly change wasn't reported.

-According to preliminary estimates GDP in Estonia increased 0.8% (3.2% at an annualized rate) in the third quarter compared to the second quarter and 7.9% compared to Q3 2010. Although the growth rate is lower than earlier this year, it is still well above the level seen in most other countries.

-After three straight quarterly declines, third quarter GDP in Japan increased by 1.5% (6% at annualized rate) compared to the previous quarter. However, compared to a year earlier, GDP fell by 0.2%.

-Hong Kong's third quarter GDP growth slowed down to 4.3% from 5.3%, driven mainly by a drop in inventories.

That's A Real Labor Market Recovery

Employment in Estonia rose as much as 8.6% in the year to the third quarter. If employment growth had been that fast in the U.S., it would have a million new jobs per month.

The unemployment rate is still fairly high at 10.9%, but is down from a peak of 19.8% in the first quarter of 2010. And if employment growth continues at this rate, and indeed even if it slows down, Estonia will soon see its unemployment rate fall below the EU average.

Greece More Competitive Than Germany?

Perennial optimist Mark Perry tries to spin the news that wages are increasing a lot faster in China than in the U.S. as something positive for the U.S. because this will lead to more manufacturing staying in the U.S.

He is right in the sense that all else being equal lower relative wages in the U.S. will increase the willingness of companies to invest in the U.S. rather than China. However, though lower wages is a potential mean by which to increase employment, it is negative as a self-end. That is especially true to the extent it reflects lower relative productivity, because to the extent to which productivity is also lower it will not increase employment.

This can be illustrated by the fact that average hourly earnings is more than twice as high in Germany than in Greece, but as should be obvious especially these days, that doesn't mean that Greece is more competitive than Germany, because German productivity exceeds Greek productivity even more. And though wages are increasing a lot faster in China than in the U.S., so is productivity.

Who Pays Corporate Taxes?

Walter Williams reminds us that contrary to what some people think, stock holders don't pay most of the burden for corporate income taxes.

Statistical Notes Wednesday November 9

-Industrial production in Britain was unchanged in September compared to August, but fell by 0.7% compared to September 2010.

British exports increased 0.5% in September compared to the previous month, but the trade deficit still increased to £3.9 billion from £2.7 billion due to a 2.9% increase in imports.

-Industrial production in Germany fell by 2.7% in September compared to August, but was still up 5.5% compared to September 2010.

Exports rose by 0.9% in September compared to August and 10.9% compared to September 2010. As a result, Germany's trade- and current account surplus rose somewhat compared to a year earlier.

-Euro area retail sales fell by 0.7% in September compared to August and by 1.5% compared to September 2010.

-Swedish factory orders fell by 0.9% in September compared to the previous month, but rose 1.7% compared to a year earlier, while industrial production rose 1.3% compared to the previous month and 4.8% compared to a month earlier.

-Annual Estonian export growth fell to 30% in September, the lowest so far this year, but still relatively high.

In Latvia export growth was 16% in September, while preliminary annual third quarter GDP growth was 5.7%, compared to 5.6% in the second quarter.

-China's economy cooled in September as inflation fell from 6.1% to 5.5%, while the rate of increase in industrial production fell from 13.8% to 13.2% and the rate of increase in retail sales fell from 17.8% to 17.2%.

-Employment in South Korea rose by 2.1% in the year to October, enabling both an increase in the labor force participation rate and a drop in the seasonally adjusted unemployment rate to 3.1%

Worse Than Latin

A reader offered Bryan Caplan's "Why I Am Not an Austrian Economist" as an example of a defense of the use of mathematical models in economics.

Yet if you see the methological section of Caplan's essay, he doesn't really defend it, as he says that "The empirical evidence on their contribution is decidedly negative" and also says that it makes it more difficult to understand and it is a "waste of time". His disagreement with Austrians on this subject is that this is the established "language" of modern economics, and though there are no rational reasons for this, we should just accept it, similar to how people within the Catholic church must accept the use of Latin, which also has no rational basis. In other words, "yes, it's stupid,just like the use of Latin within the Catholic church, but we should accept it anyway because that's just the way it is".

Caplan is right in the sense that if you want an academic economic position right now, you need to learn mathematical economic modeling, no matter how much you dislike it because it is mandatory for anyone pursuing such a career. However, that doesn't mean we should stop arguing against it, just like the fact that just because it is mandatory for anyone working outside of the "underground economy" to pay high taxes doesn't mean that we shouldn't argue against high taxes.

Furthermore, Caplan's likening of mathematical economics with latin in the Catholic church understates how bad it is. As far as I know, the use of the otherwise extinct Latin language instead of the native languages of the different Catholic countries doesn't really mean that its beliefs are altered. In this case, the problem is indeed only that it is a waste of time to learn it. That's bad, but perhaps not that important.

What's worse is that the mathematical modeling means that the theories are adapted to fit mathematical equations, instead of reality. That is why for example entrepreneurship is disregarded in economic models, despite being an important part of the real life economy, since it is incompatible with the equilibrium required by some of the mathematical functions use. The problem is thus not just that it's a waste of time, it also makes economic theories more unrealistic.

Always Check The Details

Technically, they didn't lie to him as 72 virgins did in fact wait for him, though not the kind of virgins he had hoped for,,,,,

Question For Readers

I am now writing a paper on the (lack of) usefullness of mathematical methods in economics. I have plenty of arguments against it, but I feel I don't have enough arguments for it that I can reply to, particularly when it comes to pure theory (though I welcome arguments for econometrics too, but that is not as urgent).

So whether or not you agree with them please send these arguments too me, either by commenting on this post or by e-mailing them (stefankarlsson49@gmail.com) to me.

Statistical Notes Friday November 4

-The British service sector PMI fell significantly in October, just like its manufacturing PMI, but unlike the manufacturing PMI, it was at 51.3 still somewhat above the 50 level.

-The U.S. job market continued to be fairly strong in October, with the payroll survey showing gains of 80,000 jobs and the household survey a gain of 277,000 jobs, the latter resulting in an increase in the employment rate to 58.4% from 58.3% and a decrease in the unemployment rate to 9% from 9.1%. Previous months payroll gains were also revised up.

The average work week was unchanged both on the month and the year, while nominal average hourly earnings rose by 0.2% compared to the previous month and 1.8% compared to the previous year. It is unknown what the real change was since the inflation numbers aren't yet available, but at least the yearly real change was almost certainly negative, probably about a 2% decline.

Meanwhile, the ISM non-manufacturing index fell slightly, from 53 to 52.9.

-The October job numbers from Canada was a lot weaker, with employment declining by 54,000 (since Canada is one ninth the size of the U.S., that's equivalent to nearly half a million jobs), erasing almost all of the large gains from the previous months, and increasing the unemployment rate to 7.3% from 7.1%. Much of both the previous months gain and the latest months drop was probably due to measurement errors and/or temporary factors.

-German factory orders in September came in a lot weaker than expected, dropping by 4.4% compared to the previous month, the third monthly drop in a row. As a result, the annual gain fell to just 2.4%

-Industrial production in Spain fell by 1.7% in the year to September, compared to a 0.3% gain in the year to August.

-Mixed economic news from the Baltic states. Estonia saw industrial production drop as much as 10% in September compared to August, lowering the yearly growth rate to just 6% (previously more than 20%). This monthly drop was driven by a 48% drop in production of electronic production. It seems likely that most of this drop, and perhaps also the previous increases, were driven by erratic, temporary factors.

By contrast, Latvia saw industrial production rise by 1.2% compared to the previous month and 9.6% a year earlier. Lithuania's GDP growth rose according to preliminary estimates in the third quarter to 6.6% compared to 6.5% in the previous quarters.

-Preliminary third quarter GDP in Taiwan fell by 0.3% (1.1% at an annualized rate), reducing the annual gain to 3.4%.

Devaluation Not (Main) Cause Of Argentina's Boom

After suffering a deep contraction in 1999-2002 (GDP down by 11% in 2002 alone), Argentina had according to official statistics a strong boom in the 2003-07 period, with growth at 9% per year. Some argue that this strong recovery proves that the devaluation in early 2002 was a great success and that it shows that devaluation can boost the economy, and so if Greece and others were able to re-introduce their currencies and devalue them then they would recover too.

It should be acknowledged that under certain conditions, devaluation can boost growth, namely if deflation causes real interest rates to rise above the natural interest rate level, something that we saw during the Great Depression. Argentina had deflation in 1999-2001, but because deflation was so moderate (1-2% per year compared to the 10% deflation during the Great Depression), it played at most a very small role.

But why did it grow so fast then? Well, first of all it should be noted that official statistics in Argentina exaggerates growth. Although the government angrily denies it and even prosecutes some who points it out, it is widely known that it has in recent years systematically underestimated inflation. And given a level of nominal growth, a too low estimate of inflation means a too high estimate of real growth.

Still, although not as high as the official numbers there is little doubt that the economy has grown fast since 2002. However, that is mainly due to the commodity price boom since 2002. Argentina's exports consists mainly of commodities, particularly agricultural commodities like soy beans, wheat, corn and beef, but also for example oil and gold. Soy beans for example, which alone is 25% of total exports has increased by 150% since 2002.

The story behind Argentina's boom is thus pretty much the same as that of North Dakota's, whose boom is obviously not due to devaluation since its U.S. dollars has had the same 1:1 exchange rate to U.S. dollars in the other 49 states during the period.

"Occupy Wall Street" & Green Crony Capitalism

I previously discussed how "Occupy Wall Street", if they're serious about fighting inequality, should target the Fed and its inflationary policies.

Here Todd Myers points to how certain environmenalist policies similarly exacerbate inequality. He focuses on the effects of the "cap and trade" scheme, which would be a massive government give-away to Wall Street, but one could also mention how government subsidies further enrich already rich people like Al Gore.

As with monetary policy, "Occupy Wall Street" faces a choice between their love for big government and environmentalism and their professed opposition to inequality.

Statistical Notes Tuesday November 1

-British quarterly growth rose according to preliminary estimates from 0.1% in the second quarter to 0.5% (2% at an annualized rate) in the third quarter. However, much of this increase was probably due to temporary factors in the second quarter like the royal wedding and yearly growth was only 0.5%.

Meanwhile, the British manufacturing PMI fell to a new low of 47.4 in October, down from 50.8 in September, suggesting that fourth quarter growth will probably be non-existent or perhaps even negative.

-Monthly GDP in Canada rose by 0.3% in August, following increases of 0.4% in July and 0.2% in June.

-The U.S. manufacturing survey also dropped but by less, from 51.6 to 50.8. September construction spending rose by 0.2%, but the level for the previous month was downwardly revised by 1.7%, meaning that September construction spending was actually 1.5% below the previously reported August level.

-The Swedish manufacturing PMI rose by contrast, but is at 49.8 still slightly below the 50 threshold for expansion.

-Spain's current account deficit fell in August to €1.45 billion from €2.7 billion a year earlier. The decline in the entire January to August period was however more moderate, falling to €30.4 billion from €34.8 billion a year earlier.

-Italy's current account deficit also fell in August, but by less, from €5.95 billion last year to €5.4 billion this year. Also, unlike in Spain, the yearly change is negative.

-Retail sales in Hong Kong increased in September by 24.1% in nominal terms and 15.2% in real terms. That is a slower rate of increase than in previous months, but still faster than just about everywhere else.