Global Economics Report - September 2014

....Laird Research - Economics

Sep 15, 2014

Where we are now . . . . . . . . . . . . . . . . . . . . . . . . 1

Indicators for US Economy . . . . . . . . . . . . . . . . . . . 2

Global Financial Markets . . . . . . . . . . . . . . . . . . . . 3

US Key Interest Rates . . . . . . . . . . . . . . . . . . . . . . 8

US Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

QE Taper Tracker . . . . . . . . . . . . . . . . . . . . . . . . . 10

Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 11

US Banking Indicators . . . . . . . . . . . . . . . . . . . . . . 12

US Employment Indicators . . . . . . . . . . . . . . . . . . . 13

US Business Activity Indicators . . . . . . . . . . . . . . . . 15

US Consumption Indicators . . . . . . . . . . . . . . . . . . 16

US Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Global Business Indicators . . . . . . . . . . . . . . . . . . . 19

Canadian Indicators . . . . . . . . . . . . . . . . . . . . . . . 22

European Indicators . . . . . . . . . . . . . . . . . . . . . . . 24

Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 26

Global Climate Change . . . . . . . . . . . . . . . . . . . . . 27

Where we are now

Welcome to the Laird Report. It’s job is to stick a the pin on theglobal economy’s map that says ”You are here”. We present a com-pendium of economic data from around the world to help figure thisout.

The Great Divergence seems to be the new theme in economics.North America seems to be in good shape with inflation ticking up tothe goldilocks zone of 2% and employment slowly recovering. Europecontinues to be a mess, though again we are seeing some recovery inemployment. The challenge with Europe continues to be deflation -prices simply aren’t strengthening the way that policy makers hoped.

The vaunted Quantitative Easing program which is currently beingwound down by the US is actually being picked up by the Europeans.Europe-wide data shows inflation is still very low. The headwinds of theeconomy now seem to be pointing to deflation in a number of countries.QE in the US was brought in because of fiscal paralysis, so the Fed gavethe economy a monetary boost – Europe seems to be indicating they

will try the same thing.

China also continues to slow. Chinese officials were concerned aboutbubbles and have been slowly been letting the steam out of the systemto catch up with the rest of the world. The retail sales growth numbersare slowing down, and other measures like industrial production andfixed asset investment are weak. Australia is a good proxy for what isgoing on in China because it is heavily resource driven and the maincustomer is China - and Australia is being hit as well.

Formatting Notes The grey bars on the various charts are OECDrecession indicators for the respective countries. In many cases, the lastavailable value is listed, along with the median value (measured fromas much of the data series as is available).

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Laird Research, Sep 15, 2014

Indicators for US Economy

Leading indicators are indicators that usually change before theeconomy as a whole changes. They are useful as short-term predictorsof the economy. Our list includes the Philly Fed’s Leading Index whichsummarizes multiple indicators; initial jobless claims and hours worked(both decrease quickly when demand for employee services drops and

vice versa); purchasing manager indicies; new order and housing per-mit indicies; delivery timings (longer timings imply more demand inthe system) and consumer sentiment (how consumers are feeling abouttheir own financial situation and the economy in general).

Leading Index for the US

Inde

x: E

st. 6

mon

th g

row

th

−3

−1

12

3

median: 1.40Jul 2014: 1.57

Growth

Contraction

Initial Unemployment Claims

1000

's o

f Cla

ims

per

Wee

k

200

400

600

median: 352.00Sep 2014: 304.00

Manufacturing Ave. Weekly Hours Worked

Hou

rs

3940

4142

4344

median: 40.60Aug 2014: 42.00

ISM Manfacturing − PMI

Inde

x: S

tead

y S

tate

= 5

0

3040

5060

70 median: 53.20Aug 2014: 59.00

expanding economy

contracting economy

Manufacturers' New Orders: Durable GoodsB

illio

ns o

f Dol

lars

150

200

250

300

median: 182.51Jul 2014: 300.22

ISM Manufacturing: Supplier Deliveries

Inde

x

4050

6070

median: 51.60Aug 2014: 53.90Slower Deliveries

Faster Deliveries

Capex (ex. Defense & Planes)

Per

cent

cha

nge

(3 m

onth

s)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−10

−5

05

median: 0.86Jul 2014: 2.64

Chicago Fed National Activity Index

Inde

x V

alue

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−4

−2

02

median: 0.08Jul 2014: 0.39

U. Michigan: Consumer Sentiment

Inde

x 19

66 Q

1 =

100

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

5070

9011

0

median: 88.30Aug 2014: 82.50

www.lairdresearch.com Sep 15, 2014 Page 2

Global Financial Markets

Global Stock Market Returns

Country Index Name Close Date CurrentValue

WeeklyChange

MonthlyChange

3 monthChange

YearlyChange

Corr toS&P500

Corr toTSX

North AmericaUSA S&P 500 Sep 12 1,985.5 -1.1% t 2.7% s 2.9% s 17.9% s 1.00 0.57USA NASDAQ Composite Sep 12 4,567.6 -0.3% t 4.1% s 6.3% s 22.9% s 0.90 0.49USA Wilshire 5000 Total Market Sep 12 21,041.4 -1.1% t 2.8% s 2.8% s 17.4% s 0.99 0.57Canada S&P TSX Sep 12 15,531.6 -0.2% t 1.7% s 4.2% s 22.3% s 0.57 1.00Europe and RussiaFrance CAC 40 Sep 12 4,441.7 -1.0% t 6.7% s -2.5% t 8.2% s 0.55 0.31Germany DAX Sep 12 9,651.1 -1.0% t 6.4% s -2.9% t 13.6% s 0.57 0.42United Kingdom FTSE Sep 12 6,807.0 -0.7% t 2.6% s -0.5% t 3.3% s 0.47 0.37Russia Market Vectors Russia ETF Sep 12 24.6 -3.0% t 2.3% s -6.5% t -9.8% t 0.49 0.25AsiaTaiwan TSEC weighted index Sep 12 9,223.2 -2.0% t 0.7% s 0.2% s 12.1% s 0.22 0.11China Shanghai Composite Index Sep 05 2,326.4 4.9% s 4.8% s 13.4% s 9.6% s -0.05 0.14Japan NIKKEI 225 Sep 12 15,948.3 1.8% s 5.2% s 6.5% s 10.9% s -0.06 0.07Hong Kong Hang Seng Sep 12 24,595.3 -2.6% t -0.4% t 6.1% s 7.2% s -0.02 0.23Korea Kospi Sep 12 2,041.9 -0.4% t 0.0% s 1.5% s 1.9% s -0.13 -0.03South Asia and AustrailiaIndia Bombay Stock Exchange Sep 12 27,061.0 0.1% s 4.6% s 5.8% s 36.8% s 0.07 0.09Indonesia Jakarta Sep 12 5,143.7 -1.4% t 0.2% s 4.2% s 18.1% s 0.16 -0.00Malaysia FTSE Bursa Malaysia KLCI Sep 12 1,855.6 -0.7% t 0.3% s -1.0% t 4.7% s -0.04 -0.07Australia All Ordinaries Sep 12 5,532.3 -1.2% t 0.2% s 2.3% s 5.6% s -0.12 0.11New Zealand NZX 50 Index Gross Sep 12 5,224.0 -0.6% t 3.3% s 0.6% s 12.5% s 0.04 0.21South AmericaBrasil IBOVESPA Sep 12 56,928.0 -6.2% t 0.9% s 3.9% s 6.8% s 0.28 0.32Argentina MERVAL Buenos Aires Sep 12 11,054.1 6.1% s 30.7% s 37.0% s 151.5% s 0.28 0.15Mexico Bolsa index Sep 12 45,799.7 -0.9% t 2.4% s 7.5% s 12.3% s 0.46 0.30MENA and AfricaEgypt Market Vectors Egypt ETF Sep 12 73.6 -3.4% t -0.1% t 5.1% s 58.8% s -0.04 0.11(Gulf States) Market Vectors Gulf States ETF Sep 12 34.3 0.4% s 4.6% s 3.9% s 41.5% s 0.18 -0.01South Africa iShares MSCI South Africa Index Sep 12 68.2 -6.2% t -5.0% t -0.2% t 10.1% s 0.53 0.33(Africa) Market Vectors Africa ETF Sep 12 32.2 -4.4% t -4.2% t -1.9% t 13.3% s 0.57 0.56CommoditiesUSD Spot Oil West Texas Int. Sep 08 $92.6 -0.3% t -5.1% t -11.8% t -15.5% t 0.18 0.26USD Gold LME Spot Sep 12 $1,237.2 -2.1% t -5.6% t -1.9% t -7.7% t -0.07 -0.10

Note: Correlations are based on daily arithmetic returns for the most recent 100 trading days.

www.lairdresearch.com Sep 15, 2014 Page 3

S&P 500 Composite Index

The S&P 500 Composite Index is widely regarded as the best singlegauge of the large cap U.S. equities market. A key figure is the valua-tion level of the S&P500 as measured by the Price/Earnings ratio. Wepresent two versions: (1) a 12-month trailing earnings version which

reflects current earnings but is skewed by short term variances and (2)a cyclically adjusted version which looks at the inflation adjusted earn-ings over a 10 year period (i.e. at least one business cycle). Forecastedearnings numbers are estimates provided by S&P.

S&P 500 Profit Margins and Overall Corporate Profit Margins (Trailing 12 months)

Per

cent

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

02468

101214

02468101214

Per

cent

Total Corporate Profits (% of GDP) − median: 6.2%, Q2/14: 10.6%Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.6%, Q2/14: 9.0%

S&P Quarterly Earnings (USD$ Inflation Adjusted to current prices)

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−5.00 0.00 5.0010.0015.0020.0025.0030.0035.0040.00

−5.00 0.00 5.0010.0015.0020.0025.0030.0035.0040.00

Tech BubbleJapanese Asset Bubble

House BubbleAsian Financial Crisis

US Financial Crisis

Eurozone crisis

Oil Crisis I Oil Crisis II

Gulf WarSavings and Loans Crisis

High Inflation Period

Afganistan/Iraq WarVietnam War

Reported EarningsOperating Earnings

Trailing P/E Ratios for S&P500

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

0

10

20

30

40

50

0

10

20

30

40

50

Mul

tiple

Mul

tiple

12−month P/E ( median = 17.4, Sep = 18.5)10−year CAPE ( median = 19.4, Sep = 24.9)

www.lairdresearch.com Sep 15, 2014 Page 4

S&P 500 Composite Distributions

This is a view of the price performance of the S&P 500 index com-panies. The area of each box is proportional to the company’s marketcap, while the colour is determined by the percentage change in price

over the past month. In addition, companies are sorted according totheir industry group.

AAPL6%

GOOG2.7%

MSFT10%

FB7.7%

IBM2%

ORCL2.7%

INTC4.5%

V1.7%

CSCO QCOM

MA

HPQ

EBAY

EMC

TXN

YHOO

ADP

CRM

ADBE

MU

STX

FIS

BRK−A9.3%

WFC3.2%

JPM5.8%

BAC11%

C8.6%

AXP

GS AIG

USB MS

MET

BLK

SPG

PNC

COF

BK

AMT

ACE

BEN

TRV

STT

PSA

DFS

AFL CME

CB

HCN

VTR

HST

L

RF

JNJ5.4%

PFE2.7%

MRK

GILD16%

UNH BMY BIIB

LLY

MDT

ABT ACT

TMO

MCK

COV

SYK AET

CI

AMYL

DIS5.4%

AMZN7.6%

HD12%

MCD

NKE

TWX F GM

DTV

TWC

TJX

TGT JCI

M

DG

LB

RL

UA TIF

GE2.6%

UTX

UNP11%

MMM3.6%

BA

UPS

CAT

FDX

GD ITW

PCP

NSC

DAL

ETN

RTN DE

GLW

NOC

CMI

LUV

WM IR

WMT4.2%

PG4.8%

KO

PEP4.8%

PM3.2%

CVS

MO

WAG

MDLZ

CL

COST

KMB

ADM

GIS

EL

KR K

SYY

XOM−1.1%

CVX

SLB−2.9%

COP

OXY

HAL EOG

APC

PSX

WMB

HES

BHI

SE

VLO

NBL

RIG

DOW

DD

MON

LYB

PX

PPG

APDIP

AA

CF

DUK

NEE

D

SO

EIX ED

NI

VZ−1.6%

T−1.4%

Information Technology

Financials

Health Care

Consumer Discretionary

Industrials Consumer Staples

EnergyMaterials Utilities

TelecommunicationsServices

<−25.0% −20.0% −15.0% −10.0% −5.0% 0.0% 5.0% 10.0% 15.0% 20.0% >25.0%

% Change in Price from Aug 01, 2014 to Sep 11, 2014

Average Median Median MedianSector Change P/Sales P/Book P/EHealth Care 5.7% s 3.3 4.0 23.6Financials 5.5% s 3.0 1.5 18.3Information Technology 5.0% s 3.3 4.0 21.7Industrials 4.7% s 1.6 3.3 20.4Consumer Discretionary 4.7% s 1.6 4.2 20.5

Average Median Median MedianSector Change P/Sales P/Book P/EConsumer Staples 4.7% s 1.9 5.3 20.4Utilities 4.0% s 1.4 1.6 17.0Materials 2.8% s 1.6 3.4 23.2Energy -0.6% t 2.0 1.8 18.8Telecommunications Services -1.1% t 1.4 2.0 23.1

www.lairdresearch.com Sep 15, 2014 Page 5

US Equity Valuations

A key valuation metric is Tobin’s q: the ratio between the marketvalue of the entire US stock market versus US net assets at replacementcost (ie. what you pay versus what you get). Warren Buffet famouslyfollows stock market value as a percentage of GNP, which is highly(93%) correlated to Tobin’s q.

We can also take the reverse approach: assume the market hasvaluations correct, we can determine the required returns of future es-

timated earnings. These are quoted for both debt (using BAA ratedsecurities as a proxy) and equity premiums above the risk free rate (10year US Treasuries). These figures are alternate approaches to under-standing the current market sentiment - higher premiums indicate ademand for greater returns for the same price and show the level ofrisk-aversion in the market.

Tobin's q (Market Equity / Market Net Worth) and S&P500 Price/Sales

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

0.25

0.50

0.75

1.00

1.25

1.50

1.75

0.25

0.50

0.75

1.00

1.25

1.50

1.75

Buying assets at a discount

Paying up for growth

Tobin Q (median = 0.75, Mar = 1.11)S&P 500 Price/Sales (median = 1.32, Jun = 1.72)

Equity and Debt Risk Premiums: Spread vs. Risk Free Rate (10−year US Treasury)

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

0%

2%

4%

6%

8%

10%

0%

2%

4%

6%

8%

10%Implied Equity Premium (median = 4.2%, Aug = 4.9%)Debt (BAA) Premium (median = 2.0%, Aug = 2.3%)

www.lairdresearch.com Sep 15, 2014 Page 6

US Mutual Fund Flows

Fund flows describe the net investments in equity and bond mutualfunds in the US market, as described in ICI’s “Trends in Mutual FundInvesting” report. Note however that this is only part of the story as

it does not include ETF fund flows - part of the changes are investorsentering or leaving the market, and part is investors shifting to ETF’sfrom mutual funds.

US Net New Investment Cash Flow to Mutual Funds

US

$ bi

llion

s (m

onth

ly)

2007 2008 2009 2010 2011 2012 2013 2014

−40

−20

020

40

Domestic EquityWorld EquityTaxable BondsMunicipal Bonds

US Net New Investment Cash Flow to Mutual Funds

US

$ bi

llion

s (M

onth

ly)

2007 2008 2009 2010 2011 2012 2013 2014

−60

−40

−20

020

4060

Flows to EquityFlows to BondsNet Market Flows

www.lairdresearch.com Sep 15, 2014 Page 7

US Key Interest Rates

Interest rates are often leading indicators of stress in the financialsystem. The yield curve show the time structure of interest rates ongovernment bonds - Usually the longer the time the loan is outstanding,the higher the rate charged. However if a recession is expected, thenthe fed cuts rates and this relationship is inverted - leading to negativespreads where short term rates are higher than long term rates.

Almost every recession in the past century has been preceeded by an

inversion - though not every inversion preceeds a recession (just mostof the time).

For corporate bonds, the key issue is the spread between bond rates(i.e. AAA vs BAA bonds) or between government loans (LIBOR vsFedfunds - the infamous “TED Spread”). Here a spike correlates to anaversion to risk, which is an indication that something bad is happen-ing.

US Treasury Yield Curves

For

war

d In

stan

tane

ous

Rat

es (

%)

13 14 15 16 17 18 19 20 21 22 23 240.0

0.5

1.0

1.5

2.0

2.5

3.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0Sep 11, 2014 (Today)Aug 11, 2014 (1 mo ago)Jun 11, 2014 (3 mo ago)11 Sep 2013 (1 yr ago)

3 Month & 10 Yr Treasury Yields

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

0%

1%

2%

3%

4%

5%

6%

7% 10 Yr Treasury3 Mo TreasurySpread

AAA vs. BAA Bond Spreads

4%

5%

6%

7%

8%

9%

4%

5%

6%

7%

8%

9%

Per

cent

AAABAA

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

median: 91.00Sep 2014: 66.00

0100200300

0100200300

Spr

ead

(bps

)

LIBOR vs. Fedfunds Rate

0%

1%

2%

3%

4%

5%

6%

7%

0%

1%

2%

3%

4%

5%

6%

7%

Per

cent

3 mos t−billLIBOR

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

median: 37.00Sep 2014: 21.23

0100200300

0100200300

Spr

ead

(bps

)

www.lairdresearch.com Sep 15, 2014 Page 8

US Inflation

Generally, the US Fed tries to anchor long run inflation expectationsto approximately 2%. Inflation can be measured with the ConsumerPrice Index (CPI) or the Personal Consumption Expenditures (PCE)index.

In both cases, it makes sense to exclude items that vary quickly likeFood and Energy to get a clearer picture of inflation (usually called

Core Inflation). The Fed seems to think PCI more accurately reflectsthe entire basket of goods and services that households purchase.

Finally, we can make a reasonable estimate of future inflation ex-pectations by comparing real return and normal bonds to construct animputed forward inflation expectation. The 5y5y chart shows expected5 year inflation rates at a point 5 years in the future. Neat trick that.

Consumer Price Index

Per

cent

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

−1%

0%

1%

2%

3%

4%

5%

6%

−1%

0%

1%

2%

3%

4%

5%

6%

US Inflation Rate YoY% (Jul = 2.0%)US Inflation ex Food & Energy YoY% (Jul = 1.9%)

Personal Consumption Expenditures

Per

cent

(Ye

ar o

ver

Year

)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−1

01

23

45

6

PCE Inflation Rate YoY% (Jul = 1.6%)PCE Core Inflation YoY% (Jul = 1.5%)

5−Year, 5−Year Forward Inflation Expectation Rate

Per

cent

08 09 10 11 12 13 14 15 16 17 18 19

−1

01

23

45

6

5 year forward Inflation ExpectationActual 5yr Inflation (CPI measure)Actual 5yr Inflation (PCE Measure

www.lairdresearch.com Sep 15, 2014 Page 9

QE Taper Tracker

The US has been using the program of Quantitative Easing to pro-vide monetary stimulous to its economy. The Fed has engaged in aseries of programs (QE1, QE2 & QE3) designed to drive down longterm rates and improve liquidity though purchases of treasuries, mor-gage backed securites and other debt from banks.

The higher demand for long maturity securities would drive up theirprice, but as these securities have a fixed coupon, their yield would bedecreased (yield ≈ coupon / price) thus driving down long term rates.

In 2011-2012, “Operation Twist” attempted to reduce rates withoutincreasing liquidity. They went back to QE in 2013.

The Fed chairman suggested in June 2013 the economy was recover-ing enough that they could start slowing down purchases (“tapering”).The Fed backed off after a brief market panic. The Fed announced inDec 2013 that it was starting the taper, a decision partly driven byseeing key targets of inflation around 2% and unemployment being lessthan 6.5%. These charts track that progress.

QE Asset Purchases to Date (Treasury & Mortgage Backed Securities)

Trill

ions

0.00.51.01.52.02.5

0.00.51.01.52.02.5

QE1 QE2 Operation Twist QE3 TaperTreasuries

Mortgage Backed Securities

Total Monthly Asset Purchases (Treasury + Mortgage Backed Securities)

Bill

ions

−100−50

050

100150200

−100−50050100150200

Month to date Sep 10: $4.7

Inflation and Unemployment − Relative to Targets

Per

cent

02468

10

0246810

Target Unemployment 6.5%Target Inflation 2%

U.S. 10 Year and 3 Month Treasury Constant Maturity Yields

Per

cent

012345

012345

2008 2009 2010 2011 2012 2013 2014

Short Term Rates:Once at zero, Fed moved to QE

Long Term Rates:Moving up in anticipation of Taper?

www.lairdresearch.com Sep 15, 2014 Page 10

Exchange Rates

10 Week Moving Average CAD Exchange Rates

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

0.62

0.71

0.81

0.90

1.00

1.09

US

A /

CA

D

0.55

0.61

0.66

0.72

0.77

0.82

Eur

o / C

AD

59.

16 7

4.71

90.

2610

5.81

121.

3613

6.91

Japa

n / C

AD

0.38

0.44

0.49

0.55

0.61

0.67

U.K

. / C

AD

0.59

0.98

1.36

1.74

2.12

2.51

Bra

zil /

CA

D

CAD Appreciating

CAD Depreciating

1 Month Change in Rates versus Average

−3.0%

−1.5%

1.5%

3.0%

Euro 2.6%

UK 2.8%

Japan 1.4%

South Korea−1.0%

China−1.2%

India−1.2%

Brazil−1.8%

Mexico−2.0%

Canada−0.7%

USA 0.7%

% Change over 3 months vs. Canada

<−10.0% −8.0% −6.0% −4.0% −2.0% 0.0% 2.0% 4.0% 6.0% 8.0% >10.0%

CAD depreciatingCAD appreciating

ARG−0.2%

AUS−1.8%

BRA−0.9%

CHN 2.2%

IND−0.3%

RUS−7.0%

USA 2.2%

EUR−2.2%

JPY−3.0%

KRW2.9%

MXN0.3%

ZAR−0.6%

www.lairdresearch.com Sep 15, 2014 Page 11

US Banking Indicators

The banking and finance industry is a key indicator of the healthof the US economy. It provides crucial liquidity to the economy in theform of credit, and the breakdown of that system is one of the exac-erbating factors of the 2008 recession. Key figures to track are the

Net Interest Margins which determine profitability (ie. the differencebetween what a bank pays to depositors versus what the bank is paidby creditors), along with levels of non-performing loans (i.e. loan lossreserves and actual deliquency rates).

US Banks Net Interest Margin

Per

cent

3.5

4.0

4.5

median: 3.952014 Q2: 3.10

Repos Outstanding with Fed. Reserve

Bill

ions

of D

olla

rs

5015

025

0

median: 52.86Sep 2014: 267.60

Bank ROE − Assets between $300M−$1B

Per

cent

05

1015

median: 12.842014 Q2: 9.42

Consumer Credit Outstanding

% Y

early

Cha

nge

−5

05

1015

20

median: 7.05Jul 2014: 6.50

Total Business Loans%

Yea

rly C

hang

e

−20

010

20median: 7.83Aug 2014: 11.41

US Nonperforming Loans

Per

cent

12

34

5

median: 2.342014 Q2: 2.26

St. Louis Financial Stress Index

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

02

46 median: −0.0085

Sep 2014: −1.28

Commercial Paper Outstanding

Trill

ions

of D

olla

rs

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1.0

1.4

1.8

2.2

median: 1.36Sep 2014: 1.05

Residential Morgage Delinquency Rate

Per

cent

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

24

68

10

median: 2.302014 Q2: 7.39

www.lairdresearch.com Sep 15, 2014 Page 12

US Employment Indicators

Unemployment rates are considered the “single best indicator ofcurrent labour conditions” by the Fed. The pace of payroll growth ishighly correlated with a number of economic indicators.Payroll changesare another way to track the change in unemployment rate.

Unemployment only captures the percentage of people who are inthe labour market who don’t currently have a job - another measure

is what percentage of the whole population wants a job (employed ornot) - this is the Participation Rate.

The Beveridge Curve measures labour market efficiency by lookingat the relationship between job openings and the unemployment rate.The curve slopes downward reflecting that higher rates of unemploy-ment occur coincidentally with lower levels of job vacancies.

Unemployment Rate

Per

cent

79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

median: 6.25Aug 2014: 6.104

56789

1011

4567891011

Per

cent

4 5 6 7 8 9 10

2.0

2.5

3.0

3.5

4.0

Beveridge Curve (Unemployment vs. Job Openings)

Unemployment Rate (%)

Job

Ope

ning

s (%

tota

l Em

ploy

men

t)

Dec 2000 − Dec 2008Jan 2009 − Jun 2014Jul 2014

Participation Rate

Per

cent

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

6364

6566

67

median: 66.10Aug 2014: 62.80

Total Nonfarm Payroll Change

Mon

thly

Cha

nge

(000

s)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−50

00

500

median: 161.00Aug 2014: 142.00

www.lairdresearch.com Sep 15, 2014 Page 13

There are a number of other ways to measure the health of employ-ment. The U6 Rate includes people who are part time that want afull-time job - they are employed but under-utilitized. Temporary helpdemand is another indicator of labour market tightness or slack.

The large chart shows changes in private industry employment lev-els over the past year, versus how well those job segments typically pay.Lots of hiring in low paying jobs at the expense of higher paying jobsis generally bad, though perhaps not unsurprising in a recovery.

Median Duration of Unemployment

Wee

ks

510

1520

25 median: 8.60Aug 2014: 13.20

(U6) Unemployed + PT + Marginally Attached

Per

cent

810

1214

16

median: 9.70Aug 2014: 12.00

4−week moving average of Initial Claims

Jan

1995

= 1

00

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

5010

015

020

0

median: 108.22Sep 2014: 93.47

Unemployed over 27 weeks

Mill

ions

of P

erso

ns

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

01

23

45

67

median: 0.78Aug 2014: 2.97

Services: Temp Help

Mill

ions

of P

erso

ns

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1.5

2.0

2.5

median: 2.24Aug 2014: 2.90

0 200 400 600

15

20

25

30

35

Annual Change in Employment Levels (000s of Workers)

Ave

rage

wag

es (

$/ho

ur)

Private Industry Employment Change (1 year)

ConstructionDurable Goods

Education

Financial Activities

Health Services

Information

Leisure and Hospitality

Manufacturing

Mining and Logging

Nondurable GoodsOther Services

Professional &Business Services

Retail Trade

Transportation

Utilities

Wholesale Trade

Circle size relative to total employees in industry

www.lairdresearch.com Sep 15, 2014 Page 14

US Business Activity Indicators

Business activity is split between manufacturing activity and non-manufacturing activity. We are focusing on forward looking business

indicators like new order and inventory levels to give a sense of thecurrent business environment.

Manufacturing Sector: Real Output

YoY

Per

cent

Cha

nge

−10

010

20

median: 6.072014 Q2: 10.45

ISM Manufacturing − PMI

Inde

x

3040

5060

70

Aug 2014: 59.00

manufac. expanding

manufac. contracting

ISM Manufacturing: New Orders Index

Inde

x

3040

5060

7080 Aug 2014: 66.70

Increase in new orders

Decrease in new orders

Non−Manufac. New Orders: Capital Goods

Bill

ions

of D

olla

rs

4050

6070

median: 57.22Jul 2014: 72.44

Average Weekly Hours: Manufacturing

Hou

rs

3940

4142

43

median: 41.10Aug 2014: 42.00

Industrial Production: Manufacturing

YoY

Per

cent

Cha

nge

−15

−5

05

10

median: 3.30Jul 2014: 5.29

Total Business: Inventories to Sales Ratio

Rat

io

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1.1

1.2

1.3

1.4

1.5

1.6

median: 1.37Jul 2014: 1.29

Chicago Fed: Sales, Orders & Inventory

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−0.

50.

00.

5 Jul 2014: 0.05Above ave growth

Below ave growth

ISM Non−Manufacturing Bus. Activity Index

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

3545

5565

Aug 2014: 65.00

Growth

Contraction

www.lairdresearch.com Sep 15, 2014 Page 15

US Consumption Indicators

Variations in consumer activity are a leading indicator of thestrength of the economy. We track consumer sentiment (their expec-

tations about the future), consumer loan activity (indicator of newpurchase activity), and new orders and sales of consumer goods.

U. Michigan: Consumer Sentiment

Inde

x 19

66 Q

1 =

100

5060

7080

9011

0

median: 88.30Aug 2014: 82.50

Consumer Loans (All banks)

YoY

% C

hang

e

010

2030

median: 7.10Aug 2014: 3.42

AccountingChange

Deliquency Rate on Consumer Loans

Per

cent

2.5

3.0

3.5

4.0

4.5 median: 3.48

2014 Q2: 2.26

New Orders: Durable Consumer Goods

YoY

% C

hang

e

−30

−10

1030

median: 3.86Jul 2014: 7.82

New Orders: Non−durable Consumer Goods

YoY

% C

hang

e

−20

010

20

median: 3.87Jul 2014: 0.12

Personal Consumption & Housing Index

Inde

x

−0.

40.

00.

20.

4

median: 0.02Jul 2014: −0.10above ave growth

below ave growth

Light Cars and Trucks Sales

Mill

ions

of U

nits

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1012

1416

1820

22

median: 14.76Aug 2014: 17.45

Personal Saving Rate

Per

cent

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

24

68

10

median: 5.60Jul 2014: 5.70

Real Retail and Food Services Sales

YoY

% C

hang

e

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−10

−5

05

median: 2.36Jul 2014: 2.43

www.lairdresearch.com Sep 15, 2014 Page 16

US Housing

Housing construction is only about 5-8% of the US economy, how-ever a house is typically the largest asset owned by a household. Sincepersonal consumption is about 70% of the US economy and house val-ues directly impact household wealth, housing is an important indicatorin the health of the overall economy. In particular, housing investment

was an important driver of the economy getting out of the last fewrecessions (though not this one so far). Here we track housing pricesand especially indicators which show the current state of the housingmarket.

15 20 25 30 35

150

200

250

300

Personal Income vs. Housing Prices (Inflation adjusted values)

New

Hom

e P

rice

(000

's)

Disposable Income Per Capita (000's)

Jul 2014

r2 : 88.5%Range: Jan 1964 − Jul 2014

New Housing Units Permits Authorized

Mill

ions

of U

nits

0.5

1.0

1.5

2.0

2.5

median: 1.36Jul 2014: 1.06

New Home Median Sale Price

Sal

e P

rice

$000

's

100

150

200

250

Jul 2014: 269.80

Homeowner's Equity Level

Per

cent

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

4050

6070

80 median: 66.522014 Q1: 53.64

New Homes: Median Months on the Market

Mon

ths

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

46

810

1214 median: 5.00

Jul 2014: 3.50

US Monthly Supply of Homes

Mon

ths

Sup

ply

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

46

810

12 median: 5.90Jul 2014: 6.00

www.lairdresearch.com Sep 15, 2014 Page 17

US Housing - FHFA Quarterly Index

The Federal Housing Finance Agency provides a quarterly surveyon house prices, based on sales prices and appraisal data. This gener-ates a housing index for 355 municipal areas in the US from 1979 topresent. We have provided an alternative view of this data looking atthe change in prices from the peak in the 2007 time frame.

The goal is to provide a sense of where the housing markets are

weak versus strong.The colours represent gain or losses since the startof the housing crisis (defined as the maximum price between 2007-2009for each city). The circled dots are the cities in the survey, while thebackground colours are interpolated from these points using a loesssmoother.

Change from 2007 Peak − Q2 2014

−50%

−40%

−30%

−20%

−10%

0%

10%

20%

30%

40%

50%

Today's Home Prices

Percentage Change from 2007−2009 Peak

Fre

quen

cy

−75% −50% −25% 0% 25% 50% 75%

Year over Year Change − Q2 2014

−10%

−8%

−6%

−4%

−2%

0%

2%

4%

6%

8%

10%

YoY Change in this quarter

YoY Percent Change

Fre

quen

cy

−15% −10% −5% 0% 5% 10% 15%

www.lairdresearch.com Sep 15, 2014 Page 18

Global Business Indicators

Global PMI Reports

The Purchasing Managers’ Index (PMI) is an indicator reflectingpurchasing managers’ acquisition of goods and services. An index read-ing of 50.0 means that business conditions are unchanged, a numberover 50.0 indicates an improvement while anything below 50.0 suggests

a decline. The further away from 50.0 the index is, the stronger thechange over the month. The chart at the bottom shows a moving av-erage of a number of PMI’s, along with standard deviation bands toshow a global average.

Global PMI − August 2014

<40.0 42.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0 >60.0

Steady ExpandingContracting

Eurozone50.7

Global PMI52.6

TWN56.1MEX

52.1

KOR50.3

JPN52.5

VNM50.3

IDN49.5

ZAF49.0

AUS47.3

BRA50.2

CAN54.8

CHN50.2

IND52.4

RUS51.0

SAU60.7

USA57.9

Global PMI Monthly Change

<−5.0 −4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 >5.0

PMI Change ImprovingDeteriorating

Eurozone−1.1

Global PMI0.2

TWN0.3MEX

0.6

KOR1.0

JPN2.0

VNM−1.4

IDN−3.2

ZAF3.1

AUS−3.4

BRA 1.1

CAN 0.5

CHN−1.5

IND−0.6

RUS 0.0

SAU 0.6

USA 2.1

Purchase Managers Index (Manufacturing) − China, Japan, USA, Canada, France, Germany, Italy, UK, Australia

04 05 06 07 08 09 10 11 12 13 14

3040

5060

70

3040

5060

70

Business Conditions Contracting

Business Conditions Expanding

www.lairdresearch.com Sep 15, 2014 Page 19

Global PMI Chart

This is an alternate view of the global PMI reports. Here, we lookat all the various PMI data series in a single chart and watch theirevolution over time.

Red numbers indicate contraction (as estimated by PMI) whilegreen numbers indicate expansion.

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

Jun

13

Jul 1

3

Aug

13

Sep

13

Oct

13

Nov

13

Dec

13

Jan

14

Feb

14

Mar

14

Apr

14

May

14

Jun

14

Jul 1

4

Aug

14

Australia

India

Indonesia

Vietnam

Taiwan

China

Korea

Japan

South Africa

Saudi Arabia

Turkey

Russia

United Kingdom

Greece

Germany

France

Italy

Czech Republic

Spain

Poland

Ireland

Netherlands

Eurozone

Brazil

Mexico

Canada

United States

Global PMI 48.7 48.7 48.9 49.6 50.0 51.5 50.9 51.2 50.4 50.6 50.6 50.8 51.6 51.8 52.1 53.1 53.3 53.0 53.2 52.4 51.9 52.2 52.6 52.4 52.6

51.5 51.1 51.0 52.8 56.1 55.8 54.3 54.6 52.1 52.3 52.0 53.7 53.1 52.8 51.8 54.7 55.0 53.7 57.1 55.5 55.4 56.4 57.3 55.8 57.9

53.0 52.4 51.4 50.4 50.4 50.5 51.7 49.3 50.1 53.2 52.4 52.0 52.1 54.2 55.6 55.3 53.5 51.7 52.9 53.3 52.9 52.2 53.5 54.3 54.8

55.1 54.4 55.5 55.6 57.1 55.0 53.4 52.2 51.7 51.7 51.3 49.7 50.8 50.0 50.2 51.9 52.6 54.0 52.0 51.7 51.8 51.9 51.8 51.5 52.1

49.3 49.8 50.2 52.2 51.1 53.2 52.5 51.8 50.8 50.4 50.4 48.5 49.4 49.9 50.2 49.7 50.5 50.8 50.4 50.6 49.3 48.8 48.7 49.1 50.2

46.3 46.1 45.4 46.8 46.1 47.9 47.9 46.8 46.7 48.3 48.8 50.3 51.4 51.1 51.3 51.6 52.7 54.0 53.2 53.0 53.4 52.2 51.8 51.8 50.7

49.7 50.7 48.9 48.2 49.6 50.2 49.0 48.0 48.2 48.7 48.8 50.8 53.5 55.8 54.4 56.8 57.0 54.8 55.2 53.7 53.4 53.6 52.3 53.5 51.7

50.9 51.8 52.1 52.4 51.4 50.3 51.5 48.6 48.0 49.7 50.3 51.0 52.0 52.7 54.9 52.4 53.5 52.8 52.9 55.5 56.1 55.0 55.3 55.4 57.3

48.3 47.0 47.3 48.2 48.5 48.6 48.9 48.0 46.9 48.0 49.3 51.1 52.6 53.1 53.4 54.4 53.2 55.4 55.9 54.0 52.0 50.8 50.3 49.4 49.0

44.0 44.5 43.5 45.3 44.6 46.1 46.8 44.2 44.7 48.1 50.0 49.8 51.1 50.7 50.9 48.6 50.8 52.2 52.5 52.8 52.7 52.9 54.6 53.9 52.8

48.7 48.0 47.2 48.2 46.0 48.3 49.9 49.1 49.5 50.1 51.0 52.0 53.9 53.4 54.5 55.4 54.7 55.9 56.5 55.5 56.5 57.3 54.7 56.5 54.3

43.6 45.7 45.5 45.1 46.7 47.8 45.8 44.5 45.5 47.3 49.1 50.4 51.3 50.8 50.7 51.4 53.3 53.1 52.3 52.4 54.0 53.2 52.6 51.9 49.8

46.0 42.7 43.7 44.5 44.6 42.9 43.9 44.0 44.4 46.4 48.4 49.7 49.7 49.8 49.1 48.4 47.0 49.3 49.7 52.1 51.2 49.6 48.2 47.8 46.9

44.7 47.4 46.0 46.8 46.0 49.8 50.3 49.0 48.1 49.4 48.6 50.7 51.8 51.1 51.7 52.7 54.3 56.5 54.8 53.7 54.1 52.3 52.0 52.4 51.4

42.1 42.2 41.0 41.8 41.4 41.7 43.0 42.1 45.0 45.3 45.4 47.0 48.7 47.5 47.3 49.2 49.6 51.2 51.3 49.7 51.1 51.0 49.4 48.7 50.1

49.6 48.1 47.3 49.2 51.2 50.5 47.9 48.6 50.2 51.3 52.9 54.8 57.2 56.3 56.5 58.4 57.3 56.7 56.2 55.3 57.3 57.0 57.5 55.4 52.5

51.0 52.4 52.9 52.3 50.0 52.0 52.0 50.8 50.6 50.4 51.7 49.2 49.4 49.4 51.8 49.4 48.8 48.0 48.5 48.3 48.5 48.9 49.1 51.0 51.0

50.0 52.2 52.5 51.6 53.1 54.0 53.5 52.3 51.3 51.1 51.2 49.8 50.9 54.0 53.3 55.0 53.5 52.7 53.4 51.7 51.1 50.1 48.8 48.5 50.3

59.8 57.0 58.9 58.1 58.5 58.9 58.0 57.3 56.6 56.6 57.5 58.7 56.7 57.1 58.7 59.7 58.6 57.0 58.5 57.0 59.2 60.1 60.7

47.1 49.5 47.4 49.1 53.6 49.3 50.5 50.4 51.6 52.2 56.5 49.1 51.5 51.6 50.5 50.3 51.5 50.3 47.4 44.3 46.6 45.9 49.0

47.7 48.0 46.9 46.5 45.0 47.7 48.5 50.4 51.1 51.5 52.3 50.7 52.2 52.5 54.2 55.1 55.2 56.6 55.5 53.9 49.4 49.9 51.5 50.5 52.5

47.5 45.7 47.4 48.2 50.1 49.9 50.9 52.0 52.6 51.1 49.4 47.2 47.5 49.7 50.2 50.4 50.8 50.9 49.8 50.4 50.2 49.5 48.4 49.3 50.3

49.2 49.8 50.2 50.6 51.5 50.4 50.4 51.6 50.4 49.2 48.2 47.7 50.1 50.2 50.9 50.8 50.5 49.5 48.5 48.0 48.1 49.4 50.7 51.7 50.2

46.1 45.6 47.8 47.4 50.6 51.5 50.2 51.2 50.7 47.1 49.5 48.6 50.0 52.0 53.0 53.4 55.2 55.5 54.7 52.7 52.3 52.4 54.0 55.8 56.1

47.9 49.2 48.7 50.5 49.3 50.1 48.3 50.8 51.0 48.8 46.4 48.5 49.4 51.5 51.5 50.3 51.8 52.1 51.0 51.3 53.1 52.5 52.3 51.7 50.3

51.6 50.5 51.9 51.5 50.7 49.7 50.5 51.3 51.7 51.6 51.0 50.7 48.5 50.2 50.9 50.3 50.9 51.0 50.5 50.1 51.1 52.4 52.7 52.7 49.5

52.8 52.8 52.9 53.7 54.7 53.2 54.2 52.0 51.0 50.1 50.3 50.1 48.5 49.6 49.6 51.3 50.7 51.4 52.5 51.3 51.3 51.4 51.5 53.0 52.4

45.3 44.1 45.2 44.3 44.3 40.2 45.6 44.4 36.7 43.8 49.6 42.0 46.4 51.7 53.2 47.7 47.6 46.7 48.6 47.9 44.8 49.2 48.9 50.7 47.3

www.lairdresearch.com Sep 15, 2014 Page 20

OECD International Trade Data

The OECD calculates import and export values for member coun-tries. Figures are seasonally adjusted and measured in billions of USdollars. Red lines indicate exports, while blue lines indicate imports.Green lines indicate the zero level.

The top part of the graph shows the changes in exports and importson a year-over-year basis, while the bottom part shows the differencebetween exports and imports for that given month (i.e. the trade bal-ance)

China

YoY

Cha

nge

−40−20

02040

Bal

ance

08 09 10 11 12 13 14

−100

10203040

US

YoY

Cha

nge

−60−40−20

02040

Bal

ance

08 09 10 11 12 13 14

−80−60−40−20

0

Canada

YoY

Cha

nge

−15−10−5

05

10

Bal

ance

08 09 10 11 12 13 14

−20246

Germany

YoY

Cha

nge

−40

−20

0

20

Bal

ance

08 09 10 11 12 13 14

05

1015202530

JapanYo

Y C

hang

e

−30−20−10

01020

Bal

ance

08 09 10 11 12 13 14

−10−5

05

10

South Korea

YoY

Cha

nge

−15−10−5

05

1015

Bal

ance

08 09 10 11 12 13 14

−4−2

0246

India

YoY

Cha

nge

−10−5

05

1015

Bal

ance

08 09 10 11 12 13 14

−15−10−5

0

Australia

YoY

Cha

nge

−6−4−2

0246

Bal

ance

08 09 10 11 12 13 14

−2−1

01234

Eurozone

YoY

Cha

nge

−80−60−40−20

02040

Bal

ance

08 09 10 11 12 13 14

−100

1020

www.lairdresearch.com Sep 15, 2014 Page 21

Canadian Indicators

Retail Trade (SA)

YoY

Per

cent

Cha

nge

−5

05

10

median: 4.76Jun 2014: 5.90

Total Manufacturing Sales Growth

YoY

Per

cent

Gro

wth

−20

010

20

median: 4.13Jun 2014: 6.88

Manufacturing New Orders Growth

YoY

Per

cent

Gro

wth

−30

−10

010

2030

median: 4.46Jun 2014: 1.62

Sales and New Orders (SA)

YoY

Per

cent

Cha

nge

−20

010

20

SalesNew Orders (smoothed)

10yr Government Bond Yields

02

46

810

median: 5.80Aug 2014: 2.00

Manufacturing PMI

5051

5253

5455

Aug 2014: 54.80

Tbill Yield Spread 3mo vs 10 yr

Spr

ead

(10y

r −

3m

o)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−1

01

23

4

median: 1.36Aug 2014: 1.06

Inflation (total and core)

YoY

Per

cent

Cha

nge

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−1

01

23

4

median: 1.94Jul 2014: 2.11

TotalCore

Inventory to Sales Ratio (SA)

Rat

io

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1.3

1.4

1.5

1.6

median: 1.35Jun 2014: 1.39

www.lairdresearch.com Sep 15, 2014 Page 22

6.9 7.0 7.1 7.2 7.3 7.4 7.5 7.6

1.3

1.5

1.7

1.9

Beveridge Curve (Mar 2011 − May 2014)

Unemployment Rate

Vac

ancy

rat

e (I

ndus

tria

l)

Mar 2011 − Dec 2012Jan 2013 − Apr 2014May 2014

50 100 150

4060

8010

0

Property vs. Rent Prices

Owned Property Price Index

Ren

t Pric

e In

dex

CalgaryMontrealVancouverToronto

Unemployment Rate (SA)

Per

cent

34

56

78

910

Canada 7.0%Alberta 4.9%Ontario 7.4%

Debt Service Ratios (SA)

Per

cent

46

810

Canada 7.0%Alberta 4.9%Ontario 7.4%

Housing Starts and Building Permits (smoothed)

YoY

Per

cent

Cha

nge

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−40

−20

020

40

PermitsStarts

www.lairdresearch.com Sep 15, 2014 Page 23

European Indicators

Unemployment Rates

Per

cent

age

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

05

1015

2025

30

Business Employment Expectations

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−40

−20

010

Industrial Orderbook Levels

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−60

−40

−20

020

Country EmploymentExpect.

Unempl.(%)

Bond Yields(%)

RetailTurnover

ManufacturingTurnover

Inflation(YoY %)

IndustryOrderbook

PMI

Series Dates Aug 2014 Aug 2014 Aug 2014 Jul 2014 Jul 2014 Jul 2014 Aug 2014 Aug 2014� France -10.0 s 10.3 s 1.41 t 105.3 t 110.0 s 0.6 u -22.2 s 46.9 t� Germany -2.8 t 4.9 t 0.95 t NA 113.9 s 0.8 t -10.5 t 51.4 t� United Kingdom 6.8 t 6.4 u 2.12 t 111.7 t NA 1.9 s 8.9 s 52.5 t� Italy -8.1 t 12.6 s 2.63 t NA NA 0.0 t -23.2 t 49.8 t� Greece 1.0 t 27.0 t 6.09 t NA NA -0.8 s -16.8 t 50.1 s� Spain -6.4 t 24.5 t 2.17 t NA NA -0.4 t -12.2 s 52.8 t� Eurozone (EU28) -2.8 t 10.2 u 1.97 t 104.6 t 108.6 t 0.7 s -13.1 s NA

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Government Bond YieldsLo

ng T

erm

Yie

lds

%

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

02

46

810

Economic Sentiment

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

6070

8090

110

130

Consumer Confidence

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−10

0−

60−

200

20Inflation (Harmonized Prices)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

02

46

median: 2.00Jun 2014: 0.50

Euro AreaUS

Harmonized Inflation: Jun 2014

AUT 1.7%

BGR−1.1%

DEU 0.8%

ESP−0.4%

FIN 1.0%

FRA 0.6%

GBR 1.9%

GRC−0.8%

HUN 0.5%

IRL 0.5%

ISL 2.3%

ITA 0.0%

NOR 2.2%

POL 0.0%

ROU 1.5%

SWE 0.4%

<−1.0%0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% >7.0%

YoY % Change in Prices

PMI: August 2014

<40.042.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0>60.0

Steady ExpandingContracting

BRA50.2

CAN54.8

DEU51.4

ESP52.8

FRA46.9

GBR52.5

GRC50.1

IRL57.3

ITA49.8

MEX52.1

POL49.0

SAU60.7

TUR50.3

USA57.9

PMI Change: Jul − Aug

<−5.0−4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 >5.0

PMI Change ImprovingDeteriorating

CAN 0.5

DEU−1.0

ESP−1.1

FRA−0.9

GBR−2.9

GRC 1.4

IRL 1.9

ITA−2.1

POL−0.4

TUR 1.8

USA 2.1

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Chinese Indicators

Tracking the Chinese economy is a tricky. As reported in the Fi-nancial Times, Premier Li Keqiang confided to US officials in 2007 thatgross domestic product was “man made” and “for reference only”. In-stead, he suggested that it was much more useful to focus on three alter-native indicators: electricity consumption, rail cargo volumes and bank

lending (still tracking down that last one). We also include the PMI- which is an official version put out by the Chinese government anddiffers slightly from an HSBC version. Finally we include the ShanghaiComposite Index as a measure of stock performance.

Manufacturing PMI

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

4045

5055

60

Aug 2014: 50.20

Shanghai Composite Index

Inde

x V

alue

(M

onth

ly H

igh/

Low

)

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1000

2000

3000

4000

5000

6000

Aug 2014: 2217.20

Electricity Generated

100

Mill

ion

KW

H (

log

scal

e)

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1000

2000

3000

5000

Aug 2014: 4959.00

Electricity GeneratedLong Term TrendShort Term Average

Consumer Confidence Index

Inde

x

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

9810

010

210

410

610

8

median: 103.00Jul 2014: 104.40

Exports

YoY

Per

cent

Cha

nge

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−20

020

4060

80

median: 19.30Aug 2014: 9.40

Retail Sales Growth

YoY

Per

cent

Cha

nge

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1015

20

median: 13.15Aug 2014: 11.90

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Global Climate Change

Temperature and precipitation data are taken from the US NationalClimatic Data Center and presented as the average monthly anomalyfrom the previous 6 months. Anomalies are defined as the difference

from the average value over the period from 1961-1990 for precipitationand 1971-2000 for temperature.

Average Temperature Anomalies from Jan 2014 - Jun 2014

<−4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 >4.0

Anomalies in Celcius WarmerCooler Anomalies in Celcius

−4 −2 0 2 4

Average 6 month Precipitation Anomalies from Feb 2014 - Jul 2014

<−40.0 −30.0 −20.0 −10.0 0.0 10.0 20.0 30.0 >40.0

Anomalies in millimeters WetterDrier Anomalies in millimeters

−40 −20 0 20 40

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