Global Economics Update - September 2015
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Transcript of Global Economics Update - September 2015
....Laird Research - Economics
September 13, 2015
Where we are now . . . . . . . . . . . . . . . . . . . . . . . . 1
Indicators for US Economy . . . . . . . . . . . . . . . . . . . 3
Global Financial Markets . . . . . . . . . . . . . . . . . . . . 4
US Key Interest Rates . . . . . . . . . . . . . . . . . . . . . . 9
US Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
QE Taper Tracker . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 12
US Banking Indicators . . . . . . . . . . . . . . . . . . . . . . 13
US Employment Indicators . . . . . . . . . . . . . . . . . . . 14
US Business Activity Indicators . . . . . . . . . . . . . . . . 16
US Consumption Indicators . . . . . . . . . . . . . . . . . . 17
US Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Global Business Indicators . . . . . . . . . . . . . . . . . . . 20
Canadian Indicators . . . . . . . . . . . . . . . . . . . . . . . 23
European Indicators . . . . . . . . . . . . . . . . . . . . . . . 25
Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 27
Global Climate Change . . . . . . . . . . . . . . . . . . . . . 28
Where we are now
Welcome to the Laird Report. We present a selection economic datafrom around the world to help figure where we are today.
The prevailing theme now is “headwinds”. The US data shows thattheir economy continues to tick over with multiyear lows in unemploy-ment – the US consumer seems to be back, with a job and a steadyappetite for housing.
One odd point: sales/inventory ratios are increasing - either USbusinesses are getting ready for some kind of massive uptick in demandor they are effectively “stuffing the channel” with extra products andwill be caught out as a result. We can see that all the usual metricsindicate that businesses are scaling up production (temp help hoursare increasing, job openings are at their multi-year highs) but some-how this feels premature given that the rest of the world (in particularChina) seems to be sputtering. The US consumer isn’t strong enoughto shoulder the burden themselves.
Note that the US Fed still has a tonne of unconventional debt on its
balance sheet (QE meant that they were buying up mortgage debt etc)and that needs to be unwound at some point. While QE was a boost tothe economy, its unwinding will be a drag by cranking up interest rates- selling debt means they (1) take money out of the system and (2) re-duce the value of the debt by increasing supply which raises yields. Atthe same time, we are overdue for an interest rate hike - which wouldbe the same thing.
Canada is chugging along on no cylinders (cf. the unemploymentjump in Alberta while at the same time the crash in the dollar hasn’tmoved the needle at all in the Ontario manufacturing industry).
China is uncertain - we just don’t have good data on what is hap-pening there (ie. no data untouched by government hands). We cansee the effect on the surrounding countries however – Korea and Tai-wan are seeing weakening trade and manufacturing indicators. Aus-tralia is stronger PMI-wise however and that’s the usual canary in thecoalmine as it is a commodity based economy heavily reliant upon Chi-
nese trade, though this is a short term indicator - most of the Chinacrash has worked its way through earlier in the year so that may simplybe saying it’s not getting worse.
The best indicator still seems to be commodity prices - we shouldhave a good report on that next time, but I’m sure everyone is awareof the price of oil these days.
One interesting article from Bloomberg highlighted that this may bemore than a cyclical change. Maybe This Global Slowdown is Differentis worth reading - it posits that global trade was a dynamo of growthin previous decades, but that its effects may be peaking - there’s noreason to assume that trade per capita continues to grow as strongly as
the past and as economies like China and the US shift more to services,it is much less resource intensive. That changes the tea leaves that weshould be reading to look at the health of the economy.
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).
Subscription Info For a FREE subscription to this monthly re-port, please visit sign up at our website: www.lairdresearch.com
Laird Research, September 13, 2015
US Total Business: Inventories to Sales Ratio
Rat
io
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
1.25
1.30
1.35
1.40
1.45
1.50
1.55
median: 1.36Jun 2015: 1.37
www.lairdresearch.com September 13, 2015 Page 2
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). Red dotsare points where a new trend has started.
Leading Index for the US
Inde
x: E
st. 6
mon
th g
row
th
−3
−1
01
23
median: 1.52Jul 2015: 1.57
Growth
Contraction
Initial Unemployment Claims
1000
's o
f Cla
ims
per
Wee
k
200
400
600 median: 349.75
Sep 2015: 275.75
Manufacturing Ave. Weekly Hours Worked
Hou
rs
3940
4142
4344 median: 40.60
Aug 2015: 41.80
ISM Manfacturing − PMI
Inde
x: S
tead
y S
tate
= 5
0
3040
5060
70 median: 53.40Aug 2015: 51.10
expanding economy
contracting economy
Manufacturers' New Orders: Durable GoodsB
illio
ns o
f Dol
lars
150
200
250
300
median: 183.99Jul 2015: 241.70
Index of Truck Tonnage
Truc
k To
nnag
e In
dex
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
100
120
median: 112.95Jun 2015: 132.10
Capex (ex. Defence & Planes)
Bill
ions
of D
olla
rs
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
4050
6070
median: 57.78Jul 2015: 70.01
Chicago Fed National Activity Index
Inde
x V
alue
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−4
−2
02
median: 0.08Jul 2015: 0.34
U. Michigan: Consumer Sentiment
Inde
x 19
66 Q
1 =
100
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
5070
9011
0
median: 88.45Aug 2015: 91.90
www.lairdresearch.com September 13, 2015 Page 3
Global Financial Markets
Global Stock Market Returns
Country Index Name Close Date CurrentValue
WeeklyChange
MonthlyChange
3 monthChange
12month
Change
Corr toS&P500
Corr toTSX
North AmericaUSA S&P 500 Sep 11 1,961.1 2.1% s -5.9% t -7.0% t -1.8% t 1.00 0.81USA NASDAQ Composite Sep 11 4,822.3 3.0% s -4.3% t -5.1% t 5.0% s 0.97 0.80USA Wilshire 5000 Total Market Sep 11 20,691.7 1.9% s -5.6% t -7.3% t -2.3% t 1.00 0.82Canada S&P TSX Sep 11 13,461.5 -0.1% t -6.6% t -9.2% t -13.3% t 0.81 1.00Europe and RussiaFrance CAC 40 Sep 11 4,548.7 0.6% s -10.8% t -8.5% t 2.4% s 0.52 0.59Germany DAX Sep 11 10,123.6 0.9% s -10.4% t -10.7% t 4.5% s 0.52 0.58United Kingdom FTSE Sep 11 6,117.8 1.2% s -8.2% t -10.6% t -10.0% t 0.53 0.62Russia Market Vectors Russia ETF Sep 11 15.8 2.7% s -5.0% t -14.3% t -32.6% t 0.65 0.68AsiaTaiwan TSEC weighted index Sep 11 8,305.8 3.8% s -1.1% t -10.7% t -10.9% t 0.41 0.53China Shanghai Composite Index Sep 11 3,200.2 3.9% s -18.5% t -37.5% t 38.4% s 0.32 0.34Japan NIKKEI 225 Sep 11 18,264.2 2.7% s -11.9% t -10.4% t 14.8% s 0.40 0.38Hong Kong Hang Seng Sep 11 21,504.4 3.2% s -12.2% t -20.1% t -12.8% t 0.37 0.44Korea Kospi Sep 11 1,941.4 2.9% s -2.3% t -5.6% t -4.6% t 0.43 0.47South Asia and AustrailiaIndia Bombay Stock Exchange Sep 11 25,610.2 1.6% s -8.1% t -2.9% t -5.1% t 0.44 0.53Indonesia Jakarta Sep 11 4,360.5 -1.2% t -5.7% t -11.5% t -15.1% t 0.40 0.46Malaysia FTSE Bursa Malaysia KLCI Sep 11 1,603.6 0.9% s -2.0% t -7.6% t -14.1% t 0.27 0.37Australia All Ordinaries Sep 11 5,096.3 0.7% s -6.9% t -8.4% t -8.1% t 0.37 0.46New Zealand NZX 50 Index Gross Sep 11 5,648.2 1.8% s -3.0% t -3.6% t 7.3% s 0.12 0.23South AmericaBrasil IBOVESPA Sep 11 46,401.0 -0.2% t -5.4% t -13.6% t -20.5% t 0.62 0.63Argentina MERVAL Buenos Aires Sep 11 10,887.9 -0.4% t -6.1% t -4.2% t -0.7% t 0.59 0.62Mexico Bolsa index Sep 11 42,780.7 0.1% s -3.6% t -4.1% t -6.3% t 0.68 0.71MENA and AfricaEgypt Market Vectors Egypt ETF Sep 11 39.2 -1.2% t -13.2% t -24.2% t -43.5% t 0.37 0.35(Gulf States) Market Vectors Gulf States ETF Sep 11 25.4 1.6% s -6.4% t -7.5% t -22.5% t 0.39 0.50South Africa iShares MSCI South Africa Index Sep 11 54.3 2.3% s -12.1% t -13.8% t -19.3% t 0.63 0.53(Africa) Market Vectors Africa ETF Sep 11 19.9 0.1% s -10.4% t -20.2% t -36.7% t 0.59 0.55CommoditiesUSD Spot Oil West Texas Int. Sep 08 $45.9 1.2% s 2.2% s -21.0% t -50.4% t 0.32 0.45USD Gold LME Spot Sep 11 $1,106.3 -1.7% t -0.6% t -6.3% t -11.3% t -0.23 -0.24
Note: Correlations are based on daily arithmetic returns for the most recent 100 trading days.
www.lairdresearch.com September 13, 2015 Page 4
S&P 500 Composite Index
The S&P 500 Composite Index is widely regarded as the best singlegauge of the large cap U.S. equities market. A key figure is the valua-tion level of the S&P500 as measured by the Price/Earnings ratio. Wepresent two versions: (1) a 12-month trailing earnings version which
reflects current earnings but is skewed by short term variances and (2)a cyclically adjusted version which looks at the inflation adjusted earn-ings over a 10 year period (i.e. at least one business cycle). Forecastedearnings numbers are estimates provided by S&P.
S&P 500 Profit Margins and Overall Corporate Profit Margins (Trailing 12 months)
Per
cent
63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
02468
101214
02468101214
Per
cent
Total Corporate Profits (% of GDP) − median: 6.2%, Q2/15: 10.2%Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.6%, Q2/15: 8.3%
S&P Quarterly Earnings (USD$ 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 17
−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 17
0
10
20
30
40
50
0
10
20
30
40
50
Mul
tiple
Mul
tiple
12−month P/E ( median = 17.4, Sep = 20.7)10−year CAPE ( median = 19.5, Sep = 23.9)
www.lairdresearch.com September 13, 2015 Page 5
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.
AAPL−3.1%
GOOG−0.86%
MSFT−7.1%
FB−2.2%
V−6.5%
ORCL−4.5%
IBM−6.4%
INTC+2.3%
CSCO−8.3%
MA−6.3%
QCOM ACN
TXN
HPQ
EMC
CRM
NFLX
PYPL
ADBE
CTSH
ADP
AVGO
BRCM
TEL
EA
ATVI
FIS
MU
ADI
RHT
WU
BRK−A−7.1%
WFC−8.5%
JPM−8.7%
BAC−9.7%
C−13%
GS
AXP AIG
USB MS
SPG
MET
BLK
PNC
BK
COF
AMT
PRU
PSA ACE
CME
TRV
MMC
CB ICE
BBT CCI
EQR
MHFI
AON
DFS GGP STI
PGR
VTRBXP
HCP
MTB
FITB
PFG
ESS
L
RF
XL
O
SLG LUK
JNJ−7.1%
PFE−8.1%
GILD−8.3%
MRK−12%
AGN−12%
AMGN−12%
UNH−1.8%
MDT−10%
BMY−9.4%
ABBV−15%
CELG−5.7%
LLY−2.2%
BIIB
ABT−14%
ESRX
REGN TMO
MCK
AET
ALXN
SYK CI
HCA BDX
PRGO
BXLT
MYL
BSX
EWUHS
A
AMZN−1%
DIS−14%
HD−1.2%
CMCSA−11%
NKE−2.6%
MCD−2%
PCLN+4%
LOW
TWX−20%
F
FOXA
TWC
TGT
TJX
GM CCL YUM
VFC LB
JCI CMG
CBS
UA DG
ROST
M
VIAB
JWN
GPS
BBY
AAP
GPC
HOT
HBI
DHI
SIG
DRI
AN
WMT−9.8%
PG−10%
KO−8.2%
PEP−6%
PM−7.2%
CVS−10%
MO
WBA−5.4%
KHC−8.2%
COST RAI
CL−9.5%
KMB
KR GIS
EL
ADM
STZ
SYY
K
TSN
HRL
MJN
GE−3.6%
BA
MMM−5.9%
UPS−4.7%
UTX−6.5%
HON−4.9%
UNP
LMT DHR
GD
CAT
FDX
DAL
RTN
PCP NOC ITW
EMR
AAL
CSX
ETN
DE
LUV
NSC
WM
CMI APH
PH
IRLLL
XOM−6%
CVX
SLB−10%
KMI COP
OXY PSX
EOG APC
WMB
HAL
VLO
BHI
SE
PXD
DVN
NOV
FTI
DOW
DD
MON
LYB
PX APD
PPG
SHW
IP
WRK
MOS
NUE
VMC
AA
DUK NEE
D SO
AEP
EXC
PCG
SRE
PEG
PPL
EIX
ED
ES
DTE
FEETR
T−5.6%
VZ−2.6%
LVLT CTL
Information Technology
Financials
Health Care
Consumer Discretionary
Consumer Staples
Industrials
Energy Materials UtilitiesTelecommunications
Services
<−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 3, 2015 to Sep 11, 2015
Average Median Median MedianSector Change P/Sales P/Book P/EInformation Technology -4.2% t 3.3 4.4 23.4Telecommunications Services -4.5% t 1.4 2.0 26.6Industrials -4.5% t 1.4 3.5 18.1Consumer Discretionary -5.1% t 1.6 3.8 19.5Utilities -6.0% t 1.5 1.6 16.6
Average Median Median MedianSector Change P/Sales P/Book P/EMaterials -6.1% t 1.4 3.3 20.2Energy -6.7% t 1.3 1.7 18.3Health Care -7.6% t 3.1 3.6 25.1Financials -8.2% t 2.9 1.5 16.9Consumer Staples -8.3% t 2.1 5.8 24.7
www.lairdresearch.com September 13, 2015 Page 6
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 17
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 = 0.76, Mar = 1.06)S&P 500 Price/Sales (median = 1.34, Jun = 1.83)
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 17
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%Implied Equity Premium (median = 4.2%, Jul = 4.6%)Debt (BAA) Premium (median = 2.0%, Jul = 3.0%)
www.lairdresearch.com September 13, 2015 Page 7
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 2015
−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 2015
−60
−40
−20
020
4060
Flows to EquityFlows to BondsNet Market Flows
www.lairdresearch.com September 13, 2015 Page 8
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 (
%)
14 15 16 17 18 19 20 21 22 23 24 250.0
0.5
1.0
1.5
2.0
2.5
0.0
0.5
1.0
1.5
2.0
2.5Sep 10, 2015 (Today)Aug 10, 2015 (1 mo ago)Jun 10, 2015 (3 mo ago)10 Sep 2014 (1 yr ago)
3 Month & 10 Yr Treasury Yields
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
0%
1%
2%
3%
4%
5%
6%
7%
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
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
median: 91.00Sep 2015: 122.00
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
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
median: 36.50Sep 2015: 31.20
0100200300
0100200300
Spr
ead
(bps
)
www.lairdresearch.com September 13, 2015 Page 9
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 16
−1%
0%
1%
2%
3%
4%
5%
6%
−1%
0%
1%
2%
3%
4%
5%
6%
US Inflation Rate YoY% (Jul = 0.21%)US Inflation ex Food & Energy YoY% (Jul = 1.8%)
Personal Consumption Expenditures
Per
cent
(Ye
ar o
ver
Year
)
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−1
01
23
45
6
PCE Inflation Rate YoY% (Jul = 0.3%)PCE Core Inflation YoY% (Jul = 1.2%)
5−Year, 5−Year Forward Inflation Expectation Rate
Per
cent
07 08 09 10 11 12 13 14 15 16 17 18 19 20
−1
01
23
45
6
5 year forward Inflation ExpectationActual 5yr Inflation (CPI measure)Actual 5yr Inflation (PCE Measure)
www.lairdresearch.com September 13, 2015 Page 10
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%. In Oct 2014, they announced the end of purchases.
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 09: $0.2
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 2015
Short Term Rates:Once at zero, Fed moved to QE
Long Term Rates:Moving up in anticipation of Taper?
www.lairdresearch.com September 13, 2015 Page 11
Exchange Rates
10 Week Moving Average CAD Exchange Rates
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
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
1.05
1.50
1.96
2.41
2.87
Bra
zil /
CA
D
CAD Appreciating
CAD Depreciating
Change in F/X: Aug 3 2015 to Sep 4 2015(Trade Weighted Currency Index of USD Trading Partners)
−3.0%
−1.5%
1.5%
3.0%
Euro−3.1%
UK 0.9%
Japan−5.7%
South Korea 0.6%
China 0.5%
India 2.4%
Brazil 8.5%
Mexico 2.9%
Canada−0.8%
USA 1.8%
Country vs. Average
AppreciatingDepreciating
% 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 4.1%
AUS −1.1%
BRA−13.7%
CHN 3.4%
IND 4.2%
RUS−12.5%
USA 7.8%
EUR8.8%
JPY10.0%
KRW0.0%
MXN−1.5%
ZAR−1.3%
www.lairdresearch.com September 13, 2015 Page 12
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
3.0
3.5
4.0
4.5
median: 3.942015 Q2: 2.97
Repos Outstanding with Fed. Reserve
Bill
ions
of D
olla
rs
010
030
050
0
median: 56.09Sep 2015: 228.05
Bank ROE − Assets between $300M−$1B
Per
cent
05
1015
median: 12.822015 Q2: 9.85
Consumer Credit Outstanding
% Y
early
Cha
nge
−5
05
1015
20
median: 7.62Jul 2015: 6.81
Total Business Loans%
Yea
rly C
hang
e
−20
010
20median: 8.59Aug 2015: 11.21
US Nonperforming Loans
Per
cent
12
34
5
median: 2.192015 Q2: 1.69
St. Louis Financial Stress Index
Inde
x
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
02
46
median: 0.085Sep 2015: −0.59
Commercial Paper Outstanding
Trill
ions
of D
olla
rs
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
1.0
1.4
1.8
2.2
median: 1.34Sep 2015: 1.04
Residential Morgage Delinquency Rate
Per
cent
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
24
68
10
median: 2.322015 Q2: 5.77
www.lairdresearch.com September 13, 2015 Page 13
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 16
median: 6.10Aug 2015: 5.104
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 2015Jul 2015
Participation Rate
Per
cent
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
6364
6566
67
median: 66.00Aug 2015: 62.60
Total Nonfarm Payroll Change
Mon
thly
Cha
nge
(000
s)
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−50
00
500
median: 166.00Aug 2015: 173.00
www.lairdresearch.com September 13, 2015 Page 14
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: 8.70Aug 2015: 12.10
(U6) Unemployed + PT + Marginally Attached
Per
cent
810
1214
16
median: 9.75Aug 2015: 10.30
4−week moving average of Initial Claims
Jan
1995
= 1
00
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
5010
015
020
0
median: 107.53Sep 2015: 84.78
Unemployed over 27 weeks
Mill
ions
of P
erso
ns
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
01
23
45
67
median: 0.79Aug 2015: 2.18
Services: Temp Help
Mill
ions
of P
erso
ns
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
1.5
2.0
2.5
median: 2.25Aug 2015: 2.91
0 200 400 600
15
20
25
30
35
40
Annual Change in Employment Levels (000s of Workers)
Ave
rage
wag
es (
$/ho
ur)
Private Industry Employment Change (Aug 2014 − Aug 2015)
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 September 13, 2015 Page 15
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: 9.412015 Q2: 6.38
ISM Manufacturing − PMI
Inde
x
3040
5060
70
Aug 2015: 51.10
manufac. expanding
manufac. contracting
ISM Manufacturing: New Orders Index
Inde
x
3040
5060
7080 Aug 2015: 51.70
Increase in new orders
Decrease in new orders
Non−Manufac. New Orders: Capital Goods
Bill
ions
of D
olla
rs
4050
6070
median: 57.78Jul 2015: 70.01
Average Weekly Hours: Manufacturing
Hou
rs
3940
4142
43
median: 41.10Aug 2015: 41.80
Industrial Production: Manufacturing
YoY
Per
cent
Cha
nge
−15
−5
05
10
median: 3.12Jul 2015: 1.76
Total Business: Inventories to Sales Ratio
Rat
io
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
1.1
1.2
1.3
1.4
1.5
1.6
median: 1.36Jun 2015: 1.37
Chicago Fed: Sales, Orders & Inventory
Inde
x
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−0.
50.
00.
5 Jul 2015: 0.01Above ave growth
Below ave growth
ISM Non−Manufacturing Bus. Activity Index
Inde
x
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
3545
5565
Aug 2015: 63.90
Growth
Contraction
www.lairdresearch.com September 13, 2015 Page 16
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: 88.45Aug 2015: 91.90
Consumer Loans (All banks)
YoY
% C
hang
e
−10
010
2030
40
median: 7.64Aug 2015: 4.61
AccountingChange
Deliquency Rate on Consumer Loans
Per
cent
2.0
3.0
4.0
median: 3.462015 Q2: 1.96
New Orders: Durable Consumer Goods
YoY
% C
hang
e
−20
020
median: 4.13Jul 2015: 4.15
New Orders: Non−durable Consumer Goods
YoY
% C
hang
e
−20
010
20
median: 4.22Jul 2015: −11.55
Personal Consumption & Housing Index
Inde
x
−0.
40.
00.
20.
4
median: 0.02Jul 2015: −0.06above ave growth
below ave growth
Light Cars and Trucks Sales
Mill
ions
of U
nits
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
1012
1416
1820
22
median: 14.82Aug 2015: 17.72
Personal Saving Rate
Per
cent
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
24
68
10
median: 5.60Jul 2015: 4.90
Real Retail and Food Services Sales
YoY
% C
hang
e
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−10
−5
05
median: 2.47Jul 2015: 2.21
www.lairdresearch.com September 13, 2015 Page 17
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 2015
r2 : 89.4%Range: Jan 1959 − Jul 2015Blue dots > +5% change in next yearRed dots < −5% change in next year
New Housing Units Permits Authorized
Mill
ions
of U
nits
0.5
1.0
1.5
2.0
2.5
median: 1.35Jul 2015: 1.13
New Home Median Sale Price
Sal
e P
rice
$000
's
100
150
200
250
300
Jul 2015: 285.90
Homeowner's Equity Level
Per
cent
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
4050
6070
80 median: 66.472015 Q1: 55.60
New Homes: Median Months on the Market
Mon
ths
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
46
810
1214 median: 5.00
Jul 2015: 3.60
US Monthly Supply of Homes
Mon
ths
Sup
ply
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
46
810
12 median: 5.90Jul 2015: 5.20
www.lairdresearch.com September 13, 2015 Page 18
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 2015
−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 2015
−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 September 13, 2015 Page 19
Global Business Indicators
Global Manufacturing 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 M−PMI − August 2015
<40.0 42.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0 >60.0
Steady ExpandingContracting
Eurozone52.3
Global PMI50.7
TWN46.1MEX
52.4
KOR47.9
JPN51.7
VNM51.3
IDN48.4
ZAF49.3
AUS51.7
BRA45.8
CAN49.4
CHN47.1
IND52.3
RUS47.9
SAU58.7
USA53.0
Global M−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−0.1
Global PMI−0.3
TWN−1.0MEX
−0.5
KOR0.3
JPN0.5
VNM−1.3
IDN1.1
ZAF0.4
AUS 1.3
BRA−1.4
CAN−1.4
CHN−0.7
IND−0.4
RUS−0.4
SAU 1.2
USA−0.8
Purchase Managers Index (Manufacturing) − China, Japan, USA, Canada, France, Germany, Italy, UK, Australia
04 05 06 07 08 09 10 11 12 13 14 15
3040
5060
70
3040
5060
70
Business Conditions Contracting
Business Conditions Expanding
www.lairdresearch.com September 13, 2015 Page 20
Global Manufacturing 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
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
Sep
14
Oct
14
Nov
14
Dec
14
Jan
15
Feb
15
Mar
15
Apr
15
May
15
Jun
15
Jul 1
5
Aug
15
Australia
India
Indonesia
Viet Nam
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 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 52.2 52.2 51.8 51.6 51.7 52.0 51.7 51.0 51.2 51.0 51.0 50.7
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 57.5 55.9 54.8 53.9 53.9 55.1 55.7 54.1 54.0 53.6 53.8 53.0
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 53.5 55.3 55.3 53.9 51.0 48.7 48.9 49.0 49.8 51.3 50.8 49.4
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 52.6 53.3 54.3 55.3 56.6 54.4 53.8 53.8 53.3 52.0 52.9 52.4
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 49.3 49.1 48.7 50.2 50.7 49.6 46.2 46.0 45.9 46.5 47.2 45.8
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 50.3 50.6 50.1 50.6 51.0 51.0 52.2 52.0 52.2 52.5 52.4 52.3
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 52.2 53.0 54.6 53.6 54.1 52.2 52.5 54.0 55.5 56.2 56.0 53.9
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 55.7 56.6 56.2 56.9 55.1 57.5 56.8 55.8 57.1 54.6 56.7 53.6
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 49.5 51.2 53.2 52.8 55.2 55.1 54.8 54.0 52.4 54.3 54.5 51.1
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 52.6 52.6 54.7 53.8 54.7 54.2 54.3 54.2 55.8 54.5 53.6 53.2
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 55.6 54.4 55.6 53.3 56.1 55.6 56.1 54.7 55.5 56.9 57.5 56.6
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 50.7 49.0 49.0 48.4 49.9 51.9 53.3 53.8 54.8 54.1 55.3 53.8
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 48.8 48.5 48.4 47.5 49.2 47.6 48.8 48.0 49.4 50.7 49.6 48.3
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 49.9 51.4 49.5 51.2 50.9 51.1 52.8 52.1 51.1 51.9 51.8 53.3
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 48.4 48.8 49.1 49.4 48.3 48.4 48.9 46.5 48.0 46.9 30.2 39.1
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 51.6 53.2 53.5 52.5 53.1 54.1 54.4 51.9 52.0 51.4 51.9 51.5
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 50.4 50.3 51.7 48.9 47.6 49.7 48.1 48.9 47.6 48.7 48.3 47.9
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 50.4 51.5 52.2 51.4 49.8 49.6 48.0 48.5 50.2 49.0 50.1 49.3
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 61.8 59.1 57.6 57.9 57.8 58.5 60.1 58.3 57.0 56.1 57.5 58.7
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 50.7 52.7 50.5 50.2 49.8 50.0 51.6 51.5 50.1 49.2 48.9 49.3
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 51.7 52.4 52.0 52.0 52.2 51.6 50.3 49.9 50.9 50.1 51.2 51.7
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 48.8 48.7 49.0 49.9 51.1 51.1 49.2 48.8 47.8 46.1 47.6 47.9
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 50.2 50.4 50.0 49.6 49.7 50.7 49.6 48.9 49.2 49.4 47.8 47.1
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 53.3 52.0 51.4 50.0 51.7 52.1 51.0 49.2 49.3 46.3 47.1 46.1
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 51.7 51.0 52.1 52.7 51.5 51.7 50.7 53.5 54.8 52.2 52.6 51.3
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 50.7 49.2 48.0 47.6 48.5 47.5 46.4 46.7 47.1 47.8 47.3 48.4
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 51.0 51.6 53.3 54.5 52.9 51.2 52.1 51.3 52.6 51.3 52.7 52.3
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 46.5 49.4 50.1 46.9 49.0 45.4 46.3 48.0 52.3 44.2 50.4 51.7
www.lairdresearch.com September 13, 2015 Page 21
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 (Mar 2015)
YoY
Cha
nge
−40
−20
0
20
40
60
80
Bal
ance
08 09 10 11 12 13 14 15
020406080
100
Germany (Feb 2015)
YoY
Cha
nge
−40
−20
0
20
Bal
ance
08 09 10 11 12 13 14 15
05
1015202530
Japan (Feb 2015)
YoY
Cha
nge
−30
−20
−10
0
10
20
Bal
ance
08 09 10 11 12 13 14 15
−15−10−5
05
10
South Korea (Feb 2015)
YoY
Cha
nge
−15
−10
−5
0
5
10
15
Bal
ance
08 09 10 11 12 13 14 15
−4−2
02468
10
www.lairdresearch.com September 13, 2015 Page 22
Canadian Indicators
Retail Trade (SA)
YoY
Per
cent
Cha
nge
−5
05
10
median: 4.69Jun 2015: 1.39
Total Manufacturing Sales Growth
YoY
Per
cent
Gro
wth
−20
010
20
median: 4.06Jun 2015: −3.06
Manufacturing New Orders Growth
YoY
Per
cent
Gro
wth
−30
−10
010
2030
median: 4.46Jun 2015: −5.87
10yr Government Bond Yields
02
46
810
median: 5.73Aug 2015: 1.45
Manufacturing PMI
4951
5355
Aug 2015: 49.40
Sales and New Orders (SA)
YoY
Per
cent
Cha
nge
−20
010
20
SalesNew Orders (smoothed)
Tbill Yield Spread (10 yr − 3mo)
Spr
ead
(Per
cent
)
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−1
01
23
4
median: 1.32Aug 2015: 1.08
Inflation (total and core)
YoY
Per
cent
Cha
nge
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−1
01
23
4
median: 1.93Jul 2015: 1.27
TotalCore
Inventory to Sales Ratio (SA)
Rat
io
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
1.3
1.4
1.5
1.6
median: 1.35Jun 2015: 1.42
www.lairdresearch.com September 13, 2015 Page 23
6.6 6.8 7.0 7.2 7.4 7.6
1.3
1.4
1.5
1.6
1.7
1.8
1.9
Beveridge Curve (Mar 2011 − May 2015)
as.numeric(can.bev$ui.rate)
as.n
umer
ic(c
an.b
ev$v
acan
cies
) Mar 2011 − Dec 2012Jan 2013 − Apr 2015May 2015
Unemployment Rate
Job
Vac
ancy
rat
e (I
ndus
tria
l)
Ownership/Rental Price Ratio
Rat
io o
f Acc
omod
atio
n O
wne
rshi
p/R
ent R
atio
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
9010
011
012
013
014
015
0
CalgaryMontrealVancouverToronto
Note: Using prices relative to 2002 as base year
Ownership relatively moreexpensive vs 2002
Rent relatively more expensive vs 2002
Unemployment Rate (SA)
Per
cent
34
56
78
910
Canada 7.0%Alberta 6.0%Ontario 6.8%
Debt Service Ratios (SA)
Per
cent
24
68
10
Total Debt: 6.4%Mortgage: 3.3%Consumer Debt: 6.1%
Housing Starts and Building Permits (smoothed)
YoY
Per
cent
Cha
nge
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−40
−20
020
40
PermitsStarts
www.lairdresearch.com September 13, 2015 Page 24
European Indicators
Unemployment Rates
Per
cent
age
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
05
1015
2025
30
Business Employment Expectations
Inde
x
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−40
−20
010
Industrial Orderbook Levels
Inde
x
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−60
−40
−20
020
Country EmploymentExpect.
Unempl.(%)
Bond Yields(%)
RetailTurnover
ManufacturingTurnover
Inflation(YoY %)
IndustryOrderbook
PMI
Series Dates Aug 2015 Aug 2015 Jul 2015 Jul 2015 Jul 2015 Jul 2015 Aug 2015 Aug 2015� France -9.5 s 10.4 s 1.11 t 105.3 t 110.5 u 0.2 t -14.4 s 48.3 t� Germany -1.1 t 4.7 u 0.71 t NA 117.0 s 0.1 u -10.3 t 53.3 s� United Kingdom 9.2 s 5.6 u 2.03 t 112.9 t NA 0.0 t -4.8 s 51.5 t� Italy 0.3 s 12.0 t 2.04 t 100.8 s NA 0.3 s -14.7 t 53.8 t� Greece -37.1 t 25.2 s 11.43 s 74.6 t NA -1.3 t -43.4 t 39.1 s� Spain 5.0 s 22.2 t 2.10 t NA NA 0.0 u -3.9 s 53.2 t� Eurozone (EU28) -0.9 s 9.5 t 1.26 t 106.4 t 111.2 s 0.1 t -12.4 u NA
www.lairdresearch.com September 13, 2015 Page 25
Government Bond YieldsLo
ng T
erm
Yie
lds
%
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
02
46
810
Economic Sentiment
Inde
x
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
6070
8090
110
130
Consumer Confidence
Inde
x
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−10
0−
60−
200
20Inflation (Harmonized Prices)
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
median: 1.90Jun 2015: 0.20−1
0
1
2
3
4
5
6
7 Euro AreaUS
Harmonized Inflation: Jun 2015
AUT 1.0%
BGR−1.0%
DEU 0.1%
ESP 0.0%
FIN−0.1%
FRA 0.2%
GBR 0.0%
GRC−1.3%
HRV−0.2%
HUN 0.5%
IRL 0.2%
ISL 0.5%
ITA 0.3%
NOR 1.5%
POL−0.5%
ROU−1.4%
SWE 0.8%
<−1.0%0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% >7.0%
YoY % Change in Prices
PMI: August 2015
<40.042.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0>60.0
Steady ExpandingContracting
BRA45.8
CAN49.4
DEU53.3
ESP53.2
FRA48.3
GBR51.5
GRC39.1
IRL53.6
ITA53.8
MEX52.4
POL51.1
SAU58.7
TUR49.3
USA53.0
RUS47.9
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−1.4
DEU 1.5
ESP−0.4
FRA−1.3
GBR−0.4
GRC 8.9
IRL−3.1
ITA−1.5
POL−3.4
TUR−0.8
USA−0.8
RUS−0.4
www.lairdresearch.com September 13, 2015 Page 26
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 15
4045
5055
60
Aug 2015: 47.10
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 15
010
0030
0050
00
Sep 2015: 3200.23
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 15
1000
2000
3000
5000
Jul 2015: 5090.00
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 15
9810
010
210
410
610
811
0
median: 103.80Jul 2015: 104.48
Exports
YoY
Per
cent
Cha
nge
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−20
020
4060
80
median: 18.50Aug 2015: −5.50
Retail Sales Growth
YoY
Per
cent
Cha
nge
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
1015
20
median: 13.00Aug 2015: 10.80
www.lairdresearch.com September 13, 2015 Page 27
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 1971-2000 for the tem-perature map and over the 20th century for the global temparaturechart.
Average Temperature Anomalies from Feb 2015 - Jul 2015
<−4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 >4.0Anomalies in Celcius WarmerCooler Anomalies in Celcius
−4 −2 0 2 4
Historic Global Temperature Deviations
Deg
rees
Cel
cius
Dev
iatio
ns
−0.
50.
00.
5
Jul 2015: 0.81
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
www.lairdresearch.com September 13, 2015 Page 28