GlobalChartbook+_+January+2010

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This report is available on wellsfargo.com/research and on Bloomberg WFEC

January 14, 2010

Economics Group

Executive Summary: Will the Global Economy Expand in 2010?The seizing of financial markets that followed Lehman Brothers’ failure caused the globaleconomy to fall into its deepest recession in decades. By the spring of 2009 industrial productionin the 30 countries that comprise the Organisation for Economic Cooperation and Development

(OECD) had plunged more than 15 percent from year-earlier levels (Figure 1).Incredibly, it could have been far worse. The governments of the world’s major countries avertedcatastrophe at the height of the crisis by taking steps to prevent a wholesale collapse of theirfinancial systems via recapitalization, loan guarantees and increased deposit insurance. Inaddition, major central banks slashed policy rates to unprecedented levels, and manyimplemented programs of “quantitative easing” to provide further stimulus. Governments in mostmajor countries opened the fiscal taps. There are signs that the medicine is having its desiredeffects and that growth is returning to most economies. Industrial production in the OECDnations rose 5 percent from its nadir in March 2009 to September, although it remains 13 percent

below its February 2008 peak.

Figure 1

OECD Industrial ProductionYear-over-Year Percent Change

-20%

-15%

-10%

-5%

0%

5%

10%

81 85 89 93 97 01 05 09

-20%

-15%

-10%

-5%

0%

5%

10%

OECD Industrial Production: Oct @ -8.1%

Figure 2

U.S. Trade Weighted Dollar Major Index March 1973=100

65

70

75

80

85

90

95

100

105

110

115

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

65

70

75

80

85

90

95

100

105

110

115

Major Currency Index: Jan @ 74.4

Source: IHS Global Insight, Organisation for Economic Cooperation and Development, Bloomberg LPand Wells Fargo Securities, LLC

The global recovery is being led by Asia where growth turned positive again last year. Thefinancial systems of most Asian economies were not nearly as levered as their westerncounterparts, so banks in the region were able to ramp up lending again. In addition, most Asiangovernments responded to the crisis with expansionary fiscal policy. The year-over-year GDPgrowth rate in China rebounded to a strong 9 percent in the third quarter of 2009, but theexpansion is not confined to only China. Many other countries in the region, including the largeeconomies of Japan, Korea and Taiwan, are posting positive growth rates again.

Special Commentary

Global Chartbook: January 2010

Contents Pa

World .....................United States .........

Euro-zone ..............Japan......................United Kingdom ....

Australia.................Canada ...................

Norway...................Singapore................South Korea ...........Sweden...................Switzerland............Taiwan ...................

Argentina ...............Brazil......................

Chile.......................China......................India.......................Mexico....................Poland ....................Russia.....................South Africa ...........Turkey....................

Dollar .....................Energy.....................


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Global Chartbook: January 2010 WELLS FARGO SECURITIES, LLCJanuary 14, 2010 ECONOMICS GROUP

Major economies appear to be stabilizing as well. The U.S. economy expanded at an annualizedrate of 2.2 percent in the third quarter, and monthly indicators point to growth in excess of4 percent in the fourth quarter. The temporary effects of fiscal stimulus certainly played a role inthe positive outturn in the third quarter, but recent increases in core measures of retail sales andcapital spending indicate that there is more to the story than simply fiscal stimulus. Both theEuro-zone and Japan registered modest increases in real GDP in the third quarter, and growth

likely remained positive in the fourth quarter.

Will the global economy slip back into recession again? Probably not. Production was slashedmuch faster than final demand in most economies, which led to sharp declines in inventories. Theunprecedented liquidation of inventories appears to be coming to an end, and producers shouldcontinue to boost production to bring output back into alignment with final sales. In that regard,stimulus measures enacted late in 2008 and in 2009 are helping to boost activity. Most westerneconomies should post positive growth rates over the next few quarters. That said, the modestglobal upturn that appears to be underway remains fragile, and self-sustaining recoveriesespecially in the most advanced economies, have not yet been firmly established.

On a purchasing power parity basis, global GDP probably contracted 1 percent or so in 2009. Weproject that the global economy will grow close to its long-run average of 3.6 percent in 2010

before accelerating to roughly 4 percent in 2011. Relative to 2004-2007, however, when globa

GDP grew nearly 5 percent per annum, the global recovery that we project over the next few yearsmay seem a bit sluggish. Indeed, we forecast that growth in the United States and in some western European economies will be held back by slow growth in consumer spending asindividuals attempt to delever and repair battered balance sheets.

Inflation rates in most countries shot higher in the first half of 2008 and commodity prices wentthrough the roof. On a global basis, CPI inflation rose to 6 percent in 2008, the highest rate inabout 10 years. However, the global downturn caused commodity prices to collapse, and globainflation receded significantly last year. Despite unprecedented amounts of monetary stimulusinflation should not really be an issue until the global economy truly strengthens. Due to the slowrecovery that we project, we believe that inflation in most countries will largely remain benignover the next few years.

The Dollar Should Appreciate Modestly versus Major CurrenciesThe dollar strengthened significantly in late 2008/early 2009 as risk aversion spiked. U.STreasury securities are considered to be the safest assets in the world, and massive buying of U.S.government bonds by foreign investors contributed to the dollar’s strength. However, thegreenback gave up most of its gains over the balance of 2009 as investors turned less risk averse.

With stock markets rising in most countries and corporate bonds rallying, the safety of low- yielding U.S. Treasury securities is not as compelling as it was in early 2009 when worst-casescenarios did not seem farfetched.

Looking ahead, the currency strategy team of Wells Fargo projects that the dollar will trendmodestly higher against most major currencies. Investors suspect that most major central banks,including the Federal Reserve, the European Central Bank and the Bank of England, will be onhold until the second half of 2010. Therefore, expected changes in short-term interest rates willnot have as much of an influence on exchange rates as in the past. As the U.S. recovery gatherssteam, foreign investment flows into long-term securities (e.g., corporate bonds and equities) and

direct investment inflows should resume, helping to lift the greenback. In addition, the decline inthe U.S. current account deficit will exert fewer headwinds on the greenback than it did earlierthis decade when the dollar was trending lower. The dollar has already bounced back a bit sinceearly December as U.S. economic data have been stronger than expected on balance.

However, most “commodity” and emerging market currencies should continue to trend higher versus the greenback in the quarters ahead. The global recovery will likely cause most commodityprices to drift higher, which should help to support “commodity” currencies (e.g., the Aussiedollar). In addition, rising levels of risk tolerance will clear the way for capital to flow to “risky”developing countries, which should put upward pressure on many of those currencies.

2


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3

WorldOECD Industrial Production

Index, 2005=100

40

60

80

100

120

1981 1985 1989 1993 1997 2001 2005 2009

40

60

80

100

120

OECD Industrial Production: Oct @ 93.9

Global Purchasing Manager IndicesDiffusion Index

30

35

40

45

50

55

60

65

2004 2005 2006 2007 2008 2009

30

35

40

45

50

55

60

65

Global PMI Manufacturing: Dec @ 55.0

Global PMI Services: Dec @ 52.1

Courtesy of J.P. Morgan

The global economy is starting to bounce backfrom its deepest recession in decades, although

industrial production in the OECD nationsremains well below the peak that was reached inearly 2008. That said, purchasing managerindices generally remained in expansionterritory in the fourth quarter, suggesting thatthe expansion remains intact. Most regions ofthe world are starting to grow again with Asiaclearly in the vanguard.

The major governments of the world avertedcatastrophe in the fall of 2008 by taking steps toprevent the global financial system fromcollapsing. In addition, most majorgovernments enacted fiscal stimulus programs

to shore up economic activity. Not only have interest rates been reduced to

unprecedented lows, but major central bankshave enacted “quantitative easing” programs viaunconventional purchases of private sectorassets. Central banks in some countries (e.g.,

Australia and Norway) have started to hike ratesagain, but the Fed, the ECB and the Bank ofJapan remain firmly on hold.

The deep global recession and the collapse incommodity prices caused inflationary pressuresto recede significantly. Commodity prices haverisen off their lows, but elevated unemployment

rates have kept a lid on wage inflation. Although we forecast that CPI inflation rates will trendhigher this year, we do not project a return torunaway global inflation à la the 1970s. Central Bank Policy Rates

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

ECB: Jan @ 1.00%

Bank of Canada: Jan @ 0.25%

US Federal Reserve: Jan @ 0.25%

Bank of England: Jan @ 0.50%

Global CPIYear-over-Year Percent Change

0%

2%

4%

6%

8%

10%

12%

14%

16%

1995 1998 2001 2004 2007 2010

0%

2%

4%

6%

8%

10%

12%

14%

16%

Forecast

Source: Bloomberg LP, Federal Reserve Board, IHS Global Insight,International Monetary Fund and Wells Fargo Securities,LLC


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United StatesReal GDP

Bars = CAGR Line = Yr/Yr Percent Change

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2000 2002 2004 2006 2008 2010

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

GDPR - CAGR: Q3 @ 2.2%

GDPR - Yr/Yr Percent Change: Q3 @ -2.6%

Forecast

Retail Sales Ex. Motor Vehicles3-Month Moving Average

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

96 97 98 99 00 01 02 03 04 05 06 07 08 09-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Year-over-Year Percent Change: Nov @ -2.2%

3-Month Annual Rate: Nov @ 6.1%

The United States endured its deepest recessionin decades as the economy contracted about4 percent between the second quarter of 2008and the second quarter of 2009. However, realGDP rose at an annualized rate of 2.2 percent inthe third quarter and monthly indicators pointto growth in excess of 5 percent in the fourthquarter.

Some of the lift in the third quarter reflected thetemporary effects of government stimulus, suchas “Cash for Clunkers” and the first-time home

buyer tax credit. However, growth in other areasof private spending shows there is more to thecurrent upturn than simply governmentstimulus. Retail sales excluding autos havestrengthened over the past few months, andcore measures of capital spending have alsoturned positive.

Despite the rise in real GDP in the third quarter,a self-sustaining recovery has not yet truly takenhold. Unemployment has shot up to the highestrate since the early 1980s, and it will likelyclimb a bit further in the months ahead.

The pace of growth probably will remain veryslow for the next year or so. Many consumersneed to de-lever further, which will likelyconstrain growth in consumer spending for theforeseeable future. The Fed has acknowledged

that is will be on hold “for an extended period,”and we do not look for it to begin normalizingpolicy until the second half of 2010, at theearliest. NonDefense Capital Goods Orders, Ex-Aircraft

Series are 3-Month Moving Averages

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

93 95 97 99 01 03 05 07 09

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

3-Month Annual Rate: Nov @ 5.5%

Year-Over-Year Percent Change: Nov @ -12.8%

Unemployment RateSeasonally Adjusted

2%

4%

6%

8%

10%

12%

60 65 70 75 80 85 90 95 00 05

2%

4%

6%

8%

10%

12%

Unemployment Rate: Dec @ 10.0%

Source: U.S. Department of Commerce, U.S. Department of Laborand Wells Fargo Securities, LLC

4


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5

Euro-zoneEuro-zone Real GDP

Bars = Compound Annual Rate Line = Yr/Yr % Change

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Compound Annual Growth: Q3 @ 1.7%

Year-over-Year Percent Change: Q3 @ -4.0%

Euro-zone Purchasing Manager IndicesIndex

30

35

40

45

50

55

60

65

1998 2000 2002 2004 2006 200830

35

40

45

50

55

60

65

E.Z. Manufacturing: Dec @ 51.6

E.Z. Services: Dec @ 53.6

Most continental European economies sufferedtheir worst recession in decades last year.Between Q1 2008 and Q2 2009 real GDP in theEuro-zone plunged 5 percent. However, theeconomy managed to eke out a modest positivegrowth rate in the third quarter.

Monthly data suggest that economic growthremained positive in the fourth quarter. Forexample, the purchasing managers’ indices for

both the manufacturing and service sectorsremained in expansion territory throughout thefourth quarter. That said, “hard” data show thatindustrial production in October was flatrelative to the third quarter. In other words, therecovery is far from robust at present.

Indeed, we believe that the recovery in theEuro-zone will prove to be frustratingly slow.There are a few important economies in theoverall euro area in which consumers becamehighly geared. In our view, sluggish growth inconsumer spending in these economies willrestrain the overall GDP growth rate in theEuro-zone. In addition, economic weakness ineastern Europe should constrain growth inexports from many western Europeaneconomies.

The European Central Bank slashed its main

policy rate to 1.00 percent in May, and it has

been on hold subsequently. With a fragilerecovery and with few inflationary pressures atpresent, we project that the ECB will refrainfrom tightening policy until the second half ofthe year.

Household Liabilitites in the Euro-zoneAs a Percent of GDP

0%

20%

40%

60%

80%

100%

120%

Aus tria Belgium Finland France Germany Greece It aly Net h. Port . Spain

0%

20%

40%

60%

80%

100%

120%

1999

2007Euro-zone Consumer Price Inflation

Year-over-Year Percent Change

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

1997 1999 2001 2003 2005 2007 2009

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Core CPI: Nov @ 1.0%

CPI: Nov @ 0.5%

Source: Bank of England, EuroStat, IHS Global Insight, StatisticsCanada and Wells Fargo Securities, LLC


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JapanJapanese Real GDP


-15%

-10%

-5%

0%

5%

10%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-15%

-10%

-5%

0%

5%

10%



Japanese Consumer Price IndexYear-over-Year Percent Change

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

1997 1999 2001 2003 2005 2007 2009-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

"Core" CPI: Nov @ -1.0%

CPI: Nov @ -1.9%

Japan’s economy is gradually emerging from adeep recession. Third quarter GDP rose at a 1.3percent annualized rate, according to the secondpreliminary release. This was a sharp downwardrevision from the initial estimate of a 4.8percent annualized rate of growth. A largedownward revision in non-residential fixedinvestment and inventory accumulationaccounted for the bulk of the revision. Manykey components of Japan’s GDP continued topost respectable growth rates, indicating thatJapan’s recovery, while less robust than hoped,does appear sustainable over this year.

Consumer spending increased at a healthy 3.8

annualized rate in Q3, and exports reboundedsmartly as U.S. and Chinese demand recovered.Consumer spending is not likely sustainable atthis pace, but it will not have to be as businessinvestment stabilizes, and export andgovernment spending growth continues.

Deflation remains the biggest threat to the

economic recovery. Japan’s consumer priceindex is on track to decline 1.3 percent in 2009,and we expect deflation to continue in 2010 asthe CPI declines another 0.6 percent. Ifconsumers and businesses decide deflation will

be prolonged they may begin to delaypurchases, waiting for cheaper prices andintensifying the economic malaise.

Japan’s exports to China have surpassed thoseto the United States consistently since March oflast year. This is a huge and perhaps structuralshift in Japan’s trading relationships.

Japanese ExportsBillions USD, 3-Month Moving Average

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

1996 1998 2000 2002 2004 2006 2008

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

Exports to United States: Nov @ 0.9B USD

Exports to China: Nov @ 1.0B USDVolume of Japanese Foreign TradeYear-over-Year Percent Change

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

1997 1999 2001 2003 2005 2007 2009

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Export Volume: Nov @ -2.0%

Import Volume: Nov @ -9.3%

Source: Bloomberg LP, IHS Global Insight and Wells Fargo Securities, LLC

6


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7

United KingdomU.K. Real GDP


-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

2000 2002 2004 2006 2008

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Compound Annual Growth: Q3 @ -1.6%


United Kingdom Retail SalesYear-over-Year Percent Change

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

1999 2001 2003 2005 2007 2009-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Retail Sales: Nov @ 2.7%

3-Month Moving Average: Nov @ 2.5%

Real GDP in the United Kingdom has declinedfor six consecutive quarters. Since peaking inthe first quarter of 2008 British real GDP hasplunged 6 percent, making the current slump asdeep as the horrendous downturn in the late1970s/early 1980s. N0t only have exportstanked, but domestic demand has taken asizable hit as well.

Recent indicators suggest that growth resumedagain in the fourth quarter. Although industrialproduction remains depressed, retail spendinghas strengthened over the past few months. Inaddition, the purchasing managers’ indexsuggests that activity in the nation’s servicesector is expanding again. Most indices of houseprices have risen from their lows of earlier in2009.

In our view, the U.K. economy will expandthroughout 2010. However, continueddeleveraging by the household sector likely willrestrain the pace of recovery.

The Bank of England reduced its policy rate toonly 0.50 percent and it took other steps, suchas purchasing assets directly from the bankingsystem, to support the economy. Although CPIinflation has bounced up recently, the modestpace of recovery and high unemploymentshould keep inflationary forces largely at bay.

Therefore, we expect the Monetary PolicyCommittee to refrain from raising rates until thesecond half of 2010.

UK Purchasing Manager IndicesIndex

30

35

40

45

50

55

60

65

2000 2002 2004 2006 2008

30

35

40

45

50

55

60

65

UK Manufacturing: Dec @ 54.1

UK Services: Dec @ 56.8

U.K. Consumer Price IndexYear-over-Year Percent Change

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1997 1999 2001 2003 2005 2007 2009

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

CPI: Nov @ 1.9%

Source: Bank of England, EuroStat, IHS Global Insight, Bloomberg,LP and Wells Fargo Securities, LLC


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AustraliaAustralian Real GDP


-4%

-2%

0%

2%

4%

6%

8%

10%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-4%

-2%

0%

2%

4%

6%

8%

10%


Year-over-Year Percent Change: Q3 @ 0.5%

Australian Unemployment RateSeasonally Adjusted

3%

4%

5%

6%

7%

8%

9%

1998 2000 2002 2004 2006 20083%

4%

5%

6%

7%

8%

9%

Unemployment Rate: Nov @ 5.7%

The downturn in Australia was relatively mildcompared to what was experienced in manyother foreign economies. Following only one

quarter of contraction in economic activity inthe fourth quarter of 2008, real GDP posted itsthird consecutive quarter of expansion in thethird quarter led by gains in governmentspending and consumer spending.

Public infrastructure spending is helping to

jumpstart the economy and three consecutivemonths of payroll growth has started to sparkdomestic demand. Retail sales have posted twostraight months of gains, and the 1.4 percent

jump in November was much stronger than the0.3 percent gain that the consensus hadexpected.

In mid-December, the deputy governor of theReserve Bank of Australia (RBA) indicated thatmonetary policy has moved into a "neutral"range, which has led some investors to question

whether the RBA would hike rates again at itsnext policy meeting on Feb 2. We maintain thata 25-bp hike may still be on the table. The

Australian economy continues to show signs ofgrowth. Home-building approvals shot up 5.9percent in November. This may have beendriven to some extent by the looming year-enddeadline for first-time homebuyer grants. Still,given the strength in retail sales and relative

improvements in residential construction, theRBA could make a case for another hike.

Australian Retail Sales and HousingYear-over-Year Percent Change, 3-Month Moving Average

0.0%

1.5%

3.0%

4.5%

6.0%

7.5%

9.0%

10.5%

12.0%

1998 2000 2002 2004 2006 2008

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

Retail Sales: Nov @ 6.4% (Left Axis)

Housing Approvals: Nov @ 20.8% (Right Axis)Central Bank Policy Rates

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

US Federal Reserve: Jan @ 0.25%

Bank of England: Jan @ 0.50%

Reserve Bank of Australia: Jan @ 3.25%


8


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9

CanadaCanadian Real GDP


-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%



Canadian EmploymentMonth-over-Month Change in Employment, In Thousands

-150

-125

-100

-75

-50

-25

0

25

50

75

100

125

2000 2002 2004 2006 2008-150

-125

-100

-75

-50

-25

0

25

50

75

100

125

Change in Employment: Dec @ -2.6K

6-Month Moving Average: Dec @ 7.8K

After contracting for three straight quarters,real GDP in Canada managed to grow0.4 percent at an annualized rate in the thirdquarter as Canada emerged from the deepestdownturn since the early 1980s.

The recovery in the third quarter was fueled by a3.1 percent annualized increase in consumerspending. Recent developments in the labormarket may be helping to support consumerspending. The Canadian economy reportedlycreated 79,000 jobs in November, before giving

back 2,600 jobs in December. Monthly payrollchanges can be volatile in any given month butemployment has clearly stabilized and less direprospects in the labor market may beencouraging consumers to open their walletsagain.

The strength of the Canadian consumer ispropelling real imports, which surged 36percent in the third quarter. Although grossexports rose at a solid rate of 15 percent, the big

jump in gross imports caused net exports toslice more than seven percentage points off ofthe overall growth rate, suggesting growth inCanada is actually stronger than the headlineGDP number might suggest.

Currently, the core rate of inflation is near the

bottom of the Bank of Canada’s target range of 1

to 3 percent. We do not look for the bank tostart tightening policy anytime soon. Howeveras the recovery gains some traction next year,the bank will likely begin to tighten policy asearly as late summer.

Canadian Merchandise Trade BalanceMillions of Canadian Dollars, Seasonally Adjusted

-C$4,000

-C$2,000

C$0

C$2,000

C$4,000

C$6,000

C$8,000

C$10,000

1997 1999 2001 2003 2005 2007 2009

-C$4,000

-C$2,000

C$0

C$2,000

C$4,000

C$6,000

C$8,000

C$10,000

Merchandise Trade Balance: Nov @ -344M CAD

Canadian Consumer Price IndexYear-over-Year Percent Change

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

"Headline": Nov @ 1.0%

"Core": Nov @ 0.8%



10/29


NorwayNorwegian Real GDP


-8.0%

-4.0%

0.0%

4.0%

8.0%

12.0%

16.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-8.0%

-4.0%

0.0%

4.0%

8.0%

12.0%

16.0%

Compound Annual Growth Rate: Q3 @ 3.5%


Volume of Norwegian Retail SalesYear-over-Year Percent Change

-2%

0%

2%

4%

6%

8%

10%

2001 2003 2005 2007 2009-2%

0%

2%

4%

6%

8%

10%


After contracting more than 2 percent on apeak-to-trough basis, which was mild comparedto the 5 percent slump suffered in theEuro-zone, real GDP in Norway rose 0.9 percent(not annualized) in the third quarter. A reboundin the country’s non-oil exports helped to boostgrowth in the third quarter. Growth inconsumer spending was also strong, althoughcapital expenditures continued to decline.

Real GDP growth likely remained positive in thefourth quarter due, at least in part, to continuedsolid growth in consumer spending. Althoughproduction in the nation’s petroleum sectorremained sluggish, the value of non-oil exportscontinued to climb.

CPI inflation in Norway is beginning to trendhigher. Not only has the overall rate turnedhigher, but the core rate of inflation currently is2.4 percent, which is slightly above the central

bank’s target. With the unemployment rateremaining relatively low (2.7 percent at present)

wage inflation could pick up as the economystrengthens.

Norges Bank, the country’s central bank,slashed its main policy rate from 5.75 percent inthe autumn of 2008 to only 1.25 percent inJune. The relative resilience of the economy,however, has led Norges Bank to conclude that

extremely low interest rates are no longerappropriate. It has hiked its main policy rate by50 bps since October, and further tighteningseems likely in the months ahead. Norwegian Industrial Production Index


-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1997 1999 2001 2003 2005 2007 2009

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

IPI: Nov @ -0.8%


Norwegian Consumer Price IndexYear-over-Year Percent Change

-2%

0%

2%

4%

6%

1997 1999 2001 2003 2005 2007 2009

-2%

0%

2%

4%

6%

CPI: Dec @ 2.0%


10


11/29


11

SingaporeSingapore Real GDPYear-over-Year Percent Change

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2000 2002 2004 2006 2008

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%


Singaporean Industrial Production IndexManufacturing Production, Year-over-Year Percent Change

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

1997 1999 2001 2003 2005 2007 2009-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%


Singapore’s economy took a stutter step back inthe fourth quarter coming off of two strongconsecutive quarters of growth. GDP contractedat a 6.8 percent annualized rate in the fourthquarter, but year-on-year growth advanced to3.5 percent. The fourth-quarter decline waslead by biomedical manufacturing, which tendsto be volatile month to month. Servicescontinued to expand at a robust clip, rising 7.2percent at an annualized rate in the fourthquarter, suggesting the economy will continueto recover at a moderate pace in 2010. GDPdropped 2.1 percent in 2009, and is expected togrow 5.0 percent to 6.0 percent in 2010.

Singapore industrial production has clearly hit arough patch, however. November industrialproduction unexpectedly slipped 3.6 percent inNovember after dropping 7.2 percent inOctober. Biomedical production dropped 48.8percent year over year. Excluding this category,production rose 2.4 percent in November.Singapore’s manufacturing PMI currentlyhovers well above expansion territory at 53.3.

Rebounding vehicle sales pushed October retailsales up 6 percent from the month before andnarrowed the year-on-year decline to4.4 percent. Outside of vehicles, sales remainedsluggish.

November non-petroleum exports continued to build on recent gains, jumping 19.8 percent onthe month and higher than a year ago by 8.7percent. Pharmaceutical exports held up well in2009 after a disappointing 2008.

Singapore Retail SalesYear-over-Year Percent Change

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Retail Sales: Oct @ -4.5%

Singapore Non-Petroleum Trade3-Month Moving Average, Year-over-Year Percent Change

-40.0%

-20.0%

0.0%

20.0%

40.0%

1997 1999 2001 2003 2005 2007 2009

-40.0%

-20.0%

0.0%

20.0%

40.0%

Exports: Nov @ -2.0

Imports: Nov @ -11.8



12/29


South KoreaSouth Korean Real GDP


-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2001 2002 2003 2004 2005 2006 2007 2008 2009

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%



South Korean Rates3-M Bill, 10-Yr Government

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

2004 2005 2006 2007 2008 20091.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

3-Month Government: Jan @ 2.28%

South Korean 10-Yr Government: Jan @ 5.54%

South Korea’s economy continues to rebound ata blistering pace from 2008’s stunning declines,leading to another round of forecast upgrades.Third-quarter GDP shot up at an annualizedrate of 12.3 percent, which was much strongerthan expected. These gains built on the 11.0percent pace of growth in the second quarter.South Korea’s GDP growth is now positive on a

year-over-year basis. Broad-based gains areoccurring in exports, domestic consumption and

business investment.

South Korea’s export gains are outpacing theregion as global and regional trade recoversfrom depression-like levels. Key productmarkets, such as electronics and vehicleproduction, have bounced back smartly, andshipbuilding backlogs remain supportive.

Korean industrial production (IP) continues tooutperform expectations. Not only has the year-over-year growth rate in production returned topositive territory, but the level of IP is now morethan 30 percent above the January low.

Korea’s labor market is visibly improved withunemployment easing to 3.4 percent in Octoberfrom 4.0 percent in June, the highest level ineight years. Employment is up 0.4 percent froma year ago, but monthly job gains remainsluggish.

The Bank of Korea kept its repo rate at2.00 percent at the October policy meeting. It ispossible that Korea will start raising rates if thecurrent pace of expansion continues. South Korean Consumer Prices


-2%

0%

2%

4%

6%

8%

10%

1997 1999 2001 2003 2005 2007 2009

-2%

0%

2%

4%

6%

8%

10%

CPI: Dec @ 2.8%

Core CPI: Dec @ 2.2%South Korean Exchange RateKRW per USD

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1999 2001 2003 2005 2007 2009

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

KRW per USD: Jan @ 1,166.2


12


13/29


13

SwedenSwedish Real GDP


-20%

-15%

-10%

-5%

0%

5%

10%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-20%

-15%

-10%

-5%

0%

5%

10%



Swedish Manufacturing PMI

30

35

40

45

50

55

60

65

70

2002 2003 2004 2005 2006 2007 2008 200930

35

40

45

50

55

60

65

70

Swedish Manufacturing PMI: Dec @ 58.2%

The Swedish economy tanked last year as realGDP plunged more than 6 percent between thefirst quarter of 2008 and the first quarter of2009, a deep recession by any measure. Growth

was positive in the second and third quarters, but the upturn can hardly be characterized as vigorous thus far. Continued declines in exportsand business fixed investment spending arerestraining overall GDP growth.

Overall GDP growth may have remainedpositive in the fourth quarter, but it appears thatthe upturn continues to lack vigor. On one hand,the manufacturing PMI has returned toexpansion territory. However, the values ofexports and retail sales were more or less flatthrough November and industrial productionhas yet to exhibit a convincing recovery. Inaddition, the labor market remains very weak.

Due to the rise in energy prices over the past year the overall inflation rate returned topositive territory in December, and it shouldsoon rise above the core rate of inflation(currently around 2 percent), at least on atemporary basis.

The policy objective of the Swedish Riksbank(the country’s central bank) is to keep theoverall rate of inflation close to 2 percent perannum. Due to ongoing economic weakness, the

Riksbank does not expect inflation to become aproblem. Therefore, the Riksbank has publiclystated its intention to maintain its main policyrate at only 0.25 percent until autumn, 2010. Swedish Unemployment Rate

Not Seasonally Adjusted

4%

6%

8%

10%

12%

1997 1999 2001 2003 2005 2007

4%

6%

8%

10%

12%


Unemployment Rate: Nov @ 8.9%Swedish Consumer Price IndexYear-over-Year Percent Change

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

1997 1999 2001 2003 2005 2007 2009

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

CPI: Dec @ 0.9%



14/29


SwitzerlandSwiss Real GDP


-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%



Swiss Manufacturing PMIDiffusion Index

30

35

40

45

50

55

60

65

70

1997 1999 2001 2003 2005 2007 200930

35

40

45

50

55

60

65

70

Swiss Manufacturing PMI: Dec @ 54.6

Like most major economies, Switzerland hassuffered through a deep recession over the past

year or so. However, real GDP growth turnedpositive again as the economy grew at anannualized rate of 1.2 percent in the thirdquarter. Real exports, which had tumbled morethan 11 percent from their peak in early 2008,rebounded nearly three percentage points.Consumer spending and business fixedinvestment spending also grew at solid rates inthe third quarter.

Available indicators suggest that growthremained positive in the fourth quarter. Forexample, the manufacturing PMI remained inexpansion territory through December, and the

value of exports jumped nearly 3 percent inOctober relative to the previous month.

Although the unemployment rate has risen to an11-year high of 4.2 percent, it appears to be inthe process of leveling out.

CPI inflation has returned to positive territoryagain as energy prices have rebounded.However, the core rate of inflation continues totrend lower due to economic weakness.

The Swiss National Bank (SNB) cut its target forthe Swiss franc LIBOR rate to only 25 bps lastMarch, and it probably will remain on hold forat least the next few months due to benign

inflation. In addition, the strength of the Swissfranc, especially vis-à-vis the euro, also shouldinduce the SNB to refrain from raising rates inthe near term. Swiss Consumer Price Index


-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

1997 1999 2001 2003 2005 2007 2009

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

CPI: Dec @ 0.2%Swiss Exchange Rate

CHF per USD

0.900

1.000

1.100

1.200

1.300

1.400

1.500

1.600

1.700

1.800

1.900

2001 2002 2003 2004 2005 2006 2007 2008 2009

0.900

1.000

1.100

1.200

1.300

1.400

1.500

1.600

1.700

1.800

1.900

CHF per USD: Jan @ 1.035


14


15/29


15

TaiwanTaiwanese Real GDPYear-over-Year Percent Change

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%


Taiwanese Industrial Production IndexYear-over-Year Percent Change

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

1997 1999 2001 2003 2005 2007 2009-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

IPI: Nov @ 31.5%


Taiwan’s economy continued to improve on itssecond quarter performance, expanding at a8.25 percent annualized rate in the thirdquarter, while the GDP decline from a year agonarrowed to -1.29 percent. The improvementexceeded analyst expectations. Privateconsumption is growing again, up 2.2 percentfrom a year ago, while declines in businessinvestment and exports continue to narrow.Based in part on these improving trends, thegovernment revised up its forecast for Taiwangrowth in 2009 and 2010 to -2.5 percent and4.8 percent, respectively.

Taiwan’s industrial production and export

orders stood 31.5 percent and 37.1 percent,respectively, above the previous year’s level inNovember, boosted by base effects coming off ofthe steep declines registered at the same time in2008.

Retail sales have rebounded into positiveterritory year on year, indicating that Taiwan’srecovery isn’t only being driven bymanufacturing and export growth. Strong carsales, in particular, have been an importantfactor in the retail sales recovery.

Taiwan’s exports have jumped 46.9 percent

from a year ago, and have risen for seven of thepast eight months. Japan, South Korea and

China have seen similar rebounds in exports.Electronic shipments have been especiallystrong, rising 71.9 percent from a year ago,indicating a V-shaped recovery in this sector. Taiwanese Retail Sales


-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2001 2003 2005 2007 2009

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Retail Sales: Dec @ 9.2%

6-Month Moving Average: Oct @ 2.1%

Taiwanese Merchandise Trade BalanceBillions of New Taiwan Dollars, Not Seasonally Adjusted

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

1997 1999 2001 2003 2005 2007 2009

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Merchandise Trade Balance: Dec @ 51.1 TWD

12-Month Moving Average: Dec @ 78.7 TWD



16/29


ArgentinaArgentine Economic Activity Index


-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1997 1999 2001 2003 2005 2007 2009

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Economic Activity: Oct @ 0.6%

Argentine Consumer Price IndexYear-over-Year Percent Change

0%

2%

4%

6%

8%

10%

12%

14%

2004 2005 2006 2007 2008 20090%

2%

4%

6%

8%

10%

12%

14%

Consumer Price Index: Nov @ 7.1%

The standoff between Argentine PresidentCristina Fernandez de Kirchner and central

bank President Martín Redrado has exacerbatedpolitical tensions and added uncertainty to thenation’s already-shaky financial markets. Thedonnybrook stems over the central bankpresident’s opposition to using more than$6 billion of central bank reserves.

November’s consumer prices increased by0.8 percent, taking the year-over-year rate ofinflation to 7.1 percent. Meanwhile, wholesaleprices increased by 0.9 percent to take the year-over-year rate to 8.5 percent in Novembercompared to 7.2 percent during the year endedin October.

The Argentine currency is one of the fewcurrencies of the region that continues todepreciate versus the U.S. dollar. This trendmay accelerate if economic and politicalconditions deteriorate further. The crisis

between the executive branch and the central bank could be a sign of further depreciation ofthe currency in the near term.

On a year-over-year basis, Argentine exportseked out a modest gain in November 2009, afterfalling more than 20 percent in the prior month.Meanwhile, imports dropped 12.1 percentduring the same period after posting a drop of

28.7 percent in October. This put the monthlytrade balance at $1.28 billion and the year-to-date surplus at $16.59 billion.

Argentine Exchange RateBRL per USD

2.50

2.70

2.90

3.10

3.30

3.50

3.70

3.90

03 04 04 05 06 07 08

2.50

2.70

2.90

3.10

3.30

3.50

3.70

3.90ARS per USD: Jan @ 3.801Argentine Merchandise Trade Balance

Millions of USD, Not Seasonally Adjusted

-$2,000

-$1,000

$0

$1,000

$2,000

$3,000

1997 1999 2001 2003 2005 2007 2009

-$2,000

-$1,000

$0

$1,000

$2,000

$3,000

Merchandise Trade Balance: Nov @ $1,288


16


17/29


17

BrazilBrazilian Real GDP


-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%



Brazilian Retail SalesYear-over-Year Percent Change

-8%

-4%

0%

4%

8%

12%

2001 2002 2003 2004 2005 2006 2007 2008 2009-8%

-4%

0%

4%

8%

12%

Retail Sales: Oct @ 8.4%

6-Month Moving Average: Oct @ 5.5%

Brazilian industrial production posted its first year-over-year increase in November,expanding by 5.1 percent. However, industrialproduction dropped by 0.2 percent compared toOctober on a seasonally adjusted basis, the firstsuch drop since December 2008. The Novemberincrease in industrial production was fueled by a22.9 percent year-over-year increase in theproduction of automobiles. We expect the autosector to continue to drive industrial productionin the coming months.

Brazilian exports dropped by only 0.7 percent inDecember 2009 compared to a year earlier. This

was the smallest year-over-year decline in 12months and could be signaling a slow recoveryin the country’s exports during this year.Meanwhile, imports increased by 6.7 percent,taking the monthly surplus to $1.4 billion andthe annual surplus to $24.6 billion.

Brazilian retail sales surged by 8.4 percentduring October 2009 compared to the samemonth a year earlier. This is likely a signal thatthe government’s efforts to reinvigoratedomestic consumption have been successful.

With exports recovering from last year’s slumpand domestic consumption accelerating, therisks for higher inflation in the coming months

will likely increase. Consumer prices increased

by 0.41 percent in November to 4.22 percent year over year. On the positive side, wholesaleprices dropped again, by 0.29 percent inDecember and by 4.1 percent year over year. Brazilian Industrial Production Index


-20%

-15%

-10%

-5%

0%

5%

10%

15%

1997 1999 2001 2003 2005 2007 2009

-20%

-15%

-10%

-5%

0%

5%

10%

15%

IPI: Nov @ 4.0%

3-Month Moving Average: Nov @ -2.2%

Brazilian Exchange RateBRL per USD

1.00

1.50

2.00

2.50

3.00

3.50

4.00

99 00 01 02 03 04 05 06 07 08 09 10

1.00

1.50

2.00

2.50

3.00

3.50

4.00

BRL per USD: Jan @ 1.744



18/29


ChileChilean Real GDP


-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%



Chilean Consumer Price IndexYear-over-Year Percent Change

-4%

0%

4%

8%

12%

1997 1999 2001 2003 2005 2007 2009-4%

0%

4%

8%

12%

CPI: Dec @ -1.4%

The IMACEC index, which measures economicactivity in the country, increased in November2009 for the first time in 12 months. The indexincreased by 3.1 percent year over year and wascomplemented by a 1.2 percent increasecompared to October on a seasonally adjusted

basis. This suggests that the Chilean economyhas started its recovery.

Consumer prices dropped again in December,this time by 0.3 percent to take the year-over-

year inflation rate to -1.4 percent, up from a -2.3percent rate recorded for the 12 months endedin November. The strong appreciation of theChilean peso is probably one of the reasons forthis result even as the economy enters arecovery path.

The Chilean peso ended 2009 at 506.4 pesosper U.S. dollar, an appreciation of 26 percentcompared to December 2008 when the pesostood at 638 pesos per dollar. However, onaverage, the peso actually depreciated by 4.4percent during 2009 compared to the previous

year. The difference between these measuresgives an account of the severity of the drop ofthe peso and the rapid recovery afterwards.

Chilean exports continued to accelerate on a

year-over-year basis. Exports surged by 51.9percent in December. Meanwhile, imports

increased by 2.2 percent during the sameperiod. The country achieved a trade surplus of$13.3 billion during 2009, a 50.5 percentimprovement from the $8.8 billion surplusrecorded in 2008.

Chilean Economic Activity IndexYear-over-Year Percent Change

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2004 2006 2008

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Economic Activity: Nov @ 3.1%

Chilean Exchange RateBRL per USD

400

500

600

700

800

99 00 01 02 03 04 05 06 07 08 09 10

400

500

600

700

800

CLP per USD: Jan @ 507.450


18


19/29


19

ChinaChina Real GDP


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2000 2002 2004 2006 2008

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%


Chinese Industrial Production IndexYear-over-Year Percent Change of 3-Month Moving Average

0%

5%

10%

15%

20%

25%

1999 2001 2003 2005 2007 20090%

5%

10%

15%

20%

25%

Year-over-Year Industrial Production: Nov @ 19.2%


The year-over-year rate of real GDP growthslowed to only 6 percent in the first quarter of2009, but it subsequently rebounded to about9 percent in the third quarter. Availablemonthly indicators (e.g., industrial production)point to further acceleration in economicactivity in the fourth quarter.

Unlike most western countries, China’s financialsystem was not overly leveraged in the yearsleading up to the global credit meltdown.Therefore, Chinese banks had the ability tocontinue lending. The Chinese governmentremoved most lending restrictions that were putin place when inflation was raging two yearsago. In addition, the government stimulated theeconomy via acceleration of plannedinfrastructure spending.

Will China soon crash due to excessively stronglending growth? Although a number of loansthat have been made over the past year willundoubtedly go bad, we do not look for a

bursting of a credit market bubble in the next year or two because the Chinese financialsystem is not overly levered at present.

The overall rate of CPI inflation is very low atpresent—only 0.6 percent in November—andthe core rate of inflation is still slightly negative.

Although Chinese authorities are in no hurry to

slam on the brakes, the economy no longerneeds excessive stimulus. The Chinesegovernment probably will start to tighten policyover the next few months. Chinese Loan Growth


0%

5%

10%

15%

20%

25%

30%

35%

99 01 03 05 07 09

0%

5%

10%

15%

20%

25%

30%

35%

Chinese Loan Growth: Nov @ 33.9%

Chinese CPI InflationYear-over-Year Percent Change

-4%

-2%

0%

2%

4%

6%

8%

10%

2001 2002 2003 2004 2005 2006 2007 2008 2009

-4%

-2%

0%

2%

4%

6%

8%

10%

Overall CPI: Nov @ 0.6%

Non-food CPI: Nov @ -0.7%



20/29


IndiaIndian Real GDP


0%

3%

6%

9%

12%

2000 2002 2004 2006 2008

0%

3%

6%

9%

12%


Indian Industrial Production IndexYear-over-Year Percent Change

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

1997 1999 2001 2003 2005 2007 2009-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

15.0%3-Month Moving Average: Nov @ 10.6%

The Indian economy felt the effects of the globalrecession early in 2009 as economic growthslowed noticeably. However, the overall rate ofreal GDP growth bounced back to 7.9 percent inthe third quarter, and recent data suggest thatthe expansion continued into the fourth quarter.Growth in industrial production returned todouble-digit territory in November, and themanufacturing PMI remained strong throughDecember.

A rebound in exports is playing a role in theacceleration in the Indian economy as exportshave trended higher since their nadir in early2009. However, domestic demand is doing itspart as well. For example, auto sales, were upnearly 15 percent in 2009 relative to theirselling rate during the previous year.

Wholesale price inflation, which is the benchmark inflation gauge in India, has moved back into positive territory. With recoverytaking hold and inflation starting to trendhigher, the RBI will probably start to take backsome of its rate cuts in the near term.

Agricultural output, which accounts for nearly20 percent of Indian GDP, has been depressed

by the drier-than-normal monsoon in 2009. Although the bad monsoon will not derail theentire economy, the year-over-year GDP growth

rate could be restrained a bit over the nextquarter or two. Moreover, food price inflationhas risen sharply over the past few months.

Indian Wholesale Price InflationYear-over-Year Percent Change

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Wholesale Price Inflation: Nov @ 4.8%Indian Real GDP


-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

2000 2002 2004 2006 2008

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Overall GDP: Q3 @ 7.9% (Left Axis)

Agricultural Output: Q3 @ 0.9% (Right Axis)


20


21/29


21

MexicoMexican Real GDP


-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2004 2005 2006 2007 2008 2009

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%


Industrial Production IndicesYear-over-Year Percent Change

-15%

-10%

-5%

0%

5%

10%

1999 2001 2003 2005 2007 2009-15%

-10%

-5%

0%

5%

10%

Mexico, 3-Month Moving Average: Oct @ -6.2%

U.S.: Nov @ -5.1%

The Mexican economy improved itsperformance during the third quarter of 2009even though the country’s GDP still posted alarge drop of 6.2 percent versus a year ago.However, this compares positively with the dropof 10.1 percent recorded during the secondquarter. While we are envisioning a gradualrecovery in economic activity, we still expect anegative reading for the last quarter of the year.

Mexican exports increased for the first time in13 months, posting a 10.0 percent year-over-

year increase in November 2009. Meanwhile,imports dropped by 3.2 percent during the sameperiod. The year-to-date trade deficit stood at$6.58 billion, down from $9.35 billion at theend of October. We expect exports to continueto recover but for the recovery to be slow.

In 2009, the Mexican peso increased in value versus the U.S. dollar in terms of where it endedin 2008 and where it ended in 2009. However,the peso actually depreciated versus the dollar

when considered by comparing average trading value between the two years. We expect the pesoto remain strong in 2010 as the economycontinues to recover.

While Mexican consumer price growth is finally

within the Central Bank’s target, the “core”inflation rate has remained stubbornly high and

could threaten overall prices in the comingmonths. Furthermore, the government hasdecided to increase gasoline prices, and thiscould further pressure on inflation. Mexican Consumer Price Index


2%

4%

6%

8%

10%

12%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2%

4%

6%

8%

10%

12%

CPI: Dec @ 3.6%

Mexican Exchange RateMXN per USD

8.00

9.00

10.00

11.00

12.00

13.00

14.00

15.00

16.00

1999 2001 2003 2005 2007 2009

8.00

9.00

10.00

11.00

12.00

13.00

14.00

15.00

16.00

MXN per USD: Jan @ 13.10



22/29


PolandPolish Real GDP


0.0%

3.0%

6.0%

9.0%

1995 1997 1999 2001 2003 2005 2007 2009

0.0%

3.0%

6.0%

9.0%


Polish Industrial Production IndexYear-over-Year Percent Change

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Jan 2008 Jul 2008 Jan 2009 Jul 2009-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

IPI: Nov @ 9.8%

Poland remains the diamond in the rough in thecentral European region. Real GDP rose 1.7percent year-over-year in the third quarter, andnever saw negative year-over-year growthduring the global slowdown. Third-quartergrowth was driven by a 0.8 percent quarter-over-quarter increase in private consumption.The contribution from trade moderated asexports rose 2.3 percent, while imports rose astronger 4.8 percent. The sharp depreciation ofthe zloty at the beginning of the year helped toshore up the trade balance and support growth,

but its appreciation over the last several monthsis now starting to have an adverse impact ontrade. Gross investment was a drag on growth,falling 3.2 percent.

The manufacturing sector is reflecting Poland’srelative economic strength. Industrialproduction jumped 9.8 percent year-over-yearin November, the biggest increase since April2008. Meanwhile, the manufacturing PMI

jumped to 52.4 in November, posting the largestmonthly gain since January 2008 and the firstexpansionary reading since April 2008, andheld that mark in December. The survey’semployment index also showed expansion forthe first time since April 2008.

Inflation remains above target, coming in at 3.3percent year-over-year in November. However,

the zloty’s recent appreciation, falling real wagesand weak lending have allowed the central bankto keep interest rates at record lows since June.

A neutral stance is expected for most of 2010. Polish Merchandise Trade BalanceMillions of USD, Not Seasonally Adjusted

-$11,000

-$10,000

-$9,000

-$8,000

-$7,000

-$6,000

-$5,000

-$4,000

-$3,000

-$2,000

-$1,000

$0

1997 1999 2001 2003 2005 2007 2009

-$11,000

-$10,000

-$9,000

-$8,000

-$7,000

-$6,000

-$5,000

-$4,000

-$3,000

-$2,000

-$1,000

$0

Merchandise Trade Balance: Oct @ -$5,046 M

Polish Consumer Price IndexYear-over-Year Percent Change

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

CPI: Nov @ 3.3%


22


23/29


23

RussiaRussian Real GDP


-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2001 2002 2003 2004 2005 2006 2007 2008 2009

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%


Russian Merchandise Trade BalanceBillions of USD, Seasonally Adjusted

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

1999 2001 2003 2005 2007 2009$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20Merchandise Trade Balance: Oct @ $11.1B

Russian real GDP was down 8.9 percent year0ver year in the third quarter. This was animprovement over the 10.9 percent drop in theprevious quarter. The decline was led by asharp 11.6 percent plunge in householdconsumption as consumers continue to grapple

with high unemployment, and falling real wagesand tight credit conditions. Tight credit alsocurbed gross capital formation, which was down33.1 percent. Trade contributed to growth asexports were down only 2.1 percent compared toan 18.9 percent drop in the second quarter,

while imports were still down 30.1 percent.Higher oil prices have fueled export growth,

while lackluster fixed investment has held downimports of machinery and equipment.

More recent data on the production front have been mixed. Industrial production rose 2.0percent in November from October, and the 1.5percent growth from a year earlier was the firstsuch positive figure in 13 months. While a low

basis for comparison was certainly a factor, theincrease is a welcome sign nonetheless.However, a drop in the December PMI to 48.8shows that the recovery remains fragile.

Continued slack in the economy led to a furtherdecline in inflation in December, coming in at8.9 percent year over year, the lowest in morethan two years. This has allowed the central

bank to continue its accommodative monetarypolicy, and the rate was cut for the 10th time in2009 to a record-low 8.75 percent in December.

Russian Industrial Production IndexYear-over-Year Percent Change

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2003 2004 2005 2006 2007 2008 2009

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

IPI: Nov @ 1.5%


Russian Consumer Price IndexYear-over-Year Percent Change

6%

8%

10%

12%

14%

16%

18%

20%

2002 2003 2004 2005 2006 2007 2008 2009

6%

8%

10%

12%

14%

16%

18%

20%

CPI: Dec @ 8.9%



24/29


South AfricaSouth African Real GDP


-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%



South African Merchandise Trade BalanceBillions of Rand, Not Seasonally Adjusted

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

1997 1999 2001 2003 2005 2007 2009-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

Merchandise Trade Balance: Nov @ -24,745.7

Positive economic growth returned to South Africa in the third quarter as GDP grew at anannualized rate of 0.9 percent. The buddingrecovery was led by gains in manufacturing andgovernment infrastructure as Africa’s biggesteconomy prepares to host soccer’s World Cuplater this year.

South Africa’s trade gap narrowed more thanthe consensus had expected in November asimports reflected weak domestic demand.Exports—particularly exports of preciousminerals and stones—increased. While tradefigures have a tendency to be choppy, we do notexpect imports to begin to strengthen until therecovery builds momentum and the South

African consumer begins spending in earnest.

Despite the strength in exports, the rest of theeconomy remains rather weak. Wholesale andretail trade both weighed on third quarter GDPgrowth. Year-over-year retail sales numbershave been in negative territory since February of2009. A recovery outside of governmentsubsidies and exports has yet to materialize in asubstantial way.

South Africa’s inflation rate remained within theReserve Bank’s 3 percent to 6 percent target

band for a second month in November, furtheradding to expectations that the Reserve Bank

will leave the repurchase rate unchanged at7.00 percent. With unemployment still north of20 percent in South Africa, the bank remainsunder a fair amount of pressure to keep policyaccommodative.

Real South African Retail SalesYear-over-Year Percent Change

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

2003 2004 2005 2006 2007 2008 2009

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

Wholesale & Retail Sales: Oct @ -6.5%

South African Consumer Price IndexYear-over-Year Percent Change

0%

3%

6%

9%

12%

15%

2003 2005 2007 2009

0%

3%

6%

9%

12%

15%

CPI: Nov @ 5.8%


24


25/29


25

TurkeyTurkish Real GDP

Year-over-Year Percentage Change

-15.0%

-12.5%

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-15.0%

-12.5%

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%


Turkish Industrial Production IndexYear-over-Year Percent Change

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1997 1999 2001 2003 2005 2007 2009-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

IPI: Nov @ -2.2%


The year-over-year contraction in Turkish GDPslowed to just 3.3 percent in the third quarter of2009. Inventory replenishment had a positivecontribution to GDP. Both exports and importssaw smaller year-over-year declines as globaltrade recovers. Government spending alsoprovided a boost, rising 5.2 percent.

Without an IMF agreement in place, thegovernment had more flexibility to expand fiscaland monetary policy to support the economy.This may have provided some positive offset tofalling household consumption, which wasdown only 0.2 percent from the prior year.

Turkish industrial production rose 6.5 percent year over year in October, before giving back

2.2 percent in November, leaving thethree-month moving average at -1.6 percent.The relative improvement has largely beendriven by external demand as domestic demandremains constrained by high unemploymentand tight credit conditions.

Inflation has started to accelerate, rising 6.5percent year-over-year in December, but someof this can be attributed to lower than averageprices a year ago, which creates a low basis forcomparison. Still, prices did rise 1.3 percentmonth-over-month. Combined with the

budding recovery this may have been what

caused the central bank to end its rate easingcycle in December.

Market rates could rise if heavy domesticgovernment borrowing continues. Turkish Unemployment Rate

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

2005 2006 2007 2008 2009

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

Unemployment Rate: Sep @ 13.4%Turkish Consumer Price Index


0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

1997 1999 2001 2003 2005 2007 2009

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

CPI: Dec @ 6.5%



26/29


Dollar Exchange RatesU.S. Trade Weighted Dollar Major Index

March 1973=100

65

70

75

80

85

90

95

100

105

110

115

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

65

70

75

80

85

90

95

100

105

110

115

Major Currency Index: Jan @ 74.4

U.S. Total Net Capital InflowsBillions of Dollars

-$200

-$150

-$100

-$50

$0

$50

$100

$150

$200

$250

$300

2003 2004 2005 2006 2007 2008 2009-$200

-$150

-$100

-$50

$0

$50

$100

$150

$200

$250

$300

Net Capital Inflows: Oct @ -$13.9B

The weighted-average value of the dollar fellabout 5 percent last year. Although thegreenback rose sharply in late 2008/early 2009as risk aversion spiked, it gave up its gains overthe remainder of the year as investors becameless risk averse.

Net capital inflows weakened throughout mostof 2009 as extremely low rates of returnreduced the attractiveness of U.S. fixed incomesecurities. Foreign investors also eschewedexposure to the U.S. housing market throughnet redemptions of agency securities andsecuritized fixed income products. In addition,U.S. purchases of foreign securitiesstrengthened in 2009 as American investorssought higher rates of return abroad.

The U.S current account deficit has narrowedconsiderably from its peak in 2006. Not only didpetroleum imports decline sharply, but non-oilimports also weakened because of the deeprecession. Exports also declined, but by lessthan imports.

Wells Fargo projects that the dollar willappreciate modestly over the next few quarters

versus most major currencies as the U.S.economic recovery prompts foreign buying ofhigher yielding U.S. assets. However,“commodity” and emerging market currencies

likely will appreciate further on a trend basis ascommodity prices continue to grind higher andas increasing levels of risk tolerance causescapital to flow to those countries. U.S. Purchases of Foreign Securities

Billions of Dollars

-$45

-$30

-$15

$0

$15

$30

$45

$60

2004 2005 2006 2007 2008 2009

-$45

-$30

-$15

$0

$15

$30

$45

$60

Purchases of Foreign Securities: Oct @ $23B

3-Month Moving Average: Oct @ $14B

Current Account DeficitQuarterly in Billions of Dollars, Seasonally Adjusted

-$240

-$200

-$160

-$120

-$80

-$40

$0

$40

92 94 96 98 00 02 04 06 08

-$240

-$200

-$160

-$120

-$80

-$40

$0

$40

Balance on Current Account: Q3 @ $-108.0 B

Source: Bloomberg LP, Federal Reserve Board, IHS Global Insight,Intl. Monetary Fund and Wells Fargo Securities, LLC

26


27/29


27

EnergyCrude Oil

NYMEX Front-Month Contract, Dollars per Barrel

$0

$20

$40

$60

$80

$100

$120

$140

$160

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

$0

$20

$40

$60

$80

$100

$120

$140

$160

Crude Oil: Jan @ $82.75

Crude Oil InventoryYear-over-Year Percent Change

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Oil Inventory: Dec @ 2.3%

After collapsing from their all-time high inJuly 2008, oil prices have trended higher overthe past year. The recent upturn in globaleconomic activity is helping to spur a modestrecovery in petroleum demand. More recently,colder-than-usual weather in North America hashelped to boost demand.

Global supply has declined a bit, which is alsohelping to support prices. The combination ofslightly higher demand and the marginalreduction in supply has caused stocks ofpetroleum products to drop. Although crude oilinventories are still a bit higher than they werelast year at this time, excess stocks have beenpared back significantly over the past fewmonths. Distillate inventories, which rosesignificantly in the second half of last year, arestarting to retreat. Stocks of gasoline remain

well contained.

We project that oil prices will grind slowlyhigher in the quarters ahead. Oil demandshould rise further as the global economycontinues to recover.

Natural gas prices are beginning to rise againafter hitting a seven-year low in September. Themodest increase in U.S. industrial productionsince summer is helping to lift demand from

very depressed levels, and the recent cold snap

in the United States has also helped to boostprices. Natural gas in storage is ample atpresent, but storage is not as excessive currentlyas it was in early 2009. Natural Gas

Henry Hub Spot, Dollars per MMBTU

$0

$2

$4

$6

$8

$10

$12

$14

$16

2005 2006 2007 2008 2009 2010

$0

$2

$4

$6

$8

$10

$12

$14

$16

Natural Gas: Jan @ $6.05

Natural Gas StorageYear-over-Year Percent Change

-30%

-15%

0%

15%

30%

45%

2005 2006 2007 2008 2009 2010

-30%

-15%

0%

15%

30%

45%

Natural Gas Storage: Dec @ 13.9%



28/29


29/29

Wells Fargo Securities, LLC Economics Group

Diane Schumaker-Krieg Global Head of Research& Economics

(704) 715-8437(212) 214-5070

[email protected]

John E. Silvia, Ph.D. Chief Economist (704) 374-7034 [email protected]

Mark Vitner Senior Economist (704) 383-5635 [email protected]

Jay Bryson, Ph.D. Global Economist (704) 383-3518 [email protected]

Scott Anderson, Ph.D. Senior Economist (612) 667-9281 [email protected]

Eugenio Aleman, Ph.D. Senior Economist (612) 667-0168 [email protected]

Sam Bullard Economist (704) 383-7372 [email protected]

Anika Khan Economist (704) 715-0575 [email protected]

Azhar Iqbal Econometrician (704) 383-6805 [email protected]

Adam G. York Economist (704) 715-9660 [email protected]

Ed Kashmarek Economist (612) 667-0479 [email protected]

Tim Quinlan Economic Analyst (704) 374-4407 [email protected]

Kim Whelan Economic Analyst (704) 715-8457 [email protected]

Yasmine Kamaruddin Economic Analyst (704) 374-2992 [email protected]

Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer

registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and theSecurities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and throughsubsidiaries including, but not limited to, Wells Fargo & Company, Wachovia Bank N.A., Wells Fargo Bank N.A,

Wells Fargo Advisors, LLC, and Wells Fargo Securities International Limited. The information and opinions herein arefor general information use only. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nordoes Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person uponany such information or opinions. Such information and opinions are subject to change without notice, are for generalinformation only and are not intended as an offer or solicitation with respect to the purchase or sales of any security oras personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated

banks and is a wholly owned subsidiary of Wells Fargo & Company © 2010 Wells Fargo Securities, LLC.

SECURITIES: NOT FDIC-INSURED NOT BANK-GUARANTEED MAY LOSE VALUE

GlobalChartbook+_+January+2010

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