Every month SYZ Asset Management publishes “1 month in 10 snapshots” a review of global economic activity. Since an image can be more telling than words, every month we select 10 charts illustrating the key data that has marked economic and financial activity over the month, decoding their meaning with a brief explanation.

1. February 2013
Every month SYZ Asset Management publishes “1 month in 10 snapshots” a review of global economic
activity. Since an image can be more telling than words, every month we select 10 charts illustrating the key
data that has marked economic and financial activity over the month, decoding their meaning with a brief
explanation.
A publication of the Research & Analysis team – SYZ Asset Management - Tel. +41 (0)58 799 10 00 - info@syzgroup.com
Author: Adrien Pichoud
This document is based on graphics the data of which were collected during January 2013.
Index
1. United States – Domestic demand takes over
2. United States – Mortgage rates at a low
3. United States – A deceptive decrease in GDP
4. Euro zone – Household sentiment has also hit a low
5. Germany – 2013, recovery in sight
6. Japan – The Bank of Japan “cautiously aggressive”
7. Japan – Repercussions of the slide in the yen
8. China – After the “soft landing”, the “soft recovery”
9. Foreign-exchange – Pressure eases on the Swiss franc
10. Bonds – The euro zone’s 10-year rate at an all-time low
1. United States – Domestic demand takes over
• The US economy has finally avoided the ACTIVITY INDICES IN SERVICES AND INDUSTRY
famous “fiscal cliff”. Thanks to a last-minute
agreement on the “tax” issues and the 65
“spending cuts” issues, the much-feared
sudden tightening of budgetary policy has
given way to a more moderate tightening,
which puts the public deficit on the reduction
60
track but without breaking a still-fragile
growth dynamic.
• Thus the favourable trend that appeared in 55
summer 2012 seems set to last: the trend
towards firmer domestic demand and in
particular private consumption, which is
gradually taking over from investment and
50
exports as the engine of growth.
• The drop in the unemployment rate since the
summer, real-estate prices that are at last 45
rising, historically advantageous financing
terms and the clear-cut fall in gasoline prices
have supported consumption and the services
40
sector. Conversely, activity in industry, which
is more dependent on exports and
investment, has marked time. This transition
is important to ensure sustainable growth of 35
the economy, which in 2012 may have 00 01 02 03
US ISM NO N MANUF ACT URING
04 05 06 07 08 09 10 11 12
emerged from a long phase of “recovery” US ISM MANUFACTURING
begun at the end of 2009. Source: T homson Reuters Datastream
This document has been produced purely for the purpose of information and does not therefore constitute an offer or a recommendation to
invest or to purchase or sell shares, nor is it a contractual document. The opinions expressed reflect our judgement on the date on which it was
written and are therefore liable to be altered at any time without notice. We refuse to accept any liability in the event of any direct or indirect
losses, caused by using the information supplied in this document.

2. February 2013
2. United States – Mortgage rates at a low
• The major operation to reflate the US MORTGAGE APPLICATIONS (REFINANCINGS AND PURCHASES)
AND AVERAGE 30 YEAR RATE (INVERTED)
economy undertaken by the Fed after the
bursting of the real-estate bubble at last 900 3
appears to be bearing fruit. Three successive
quantitative easing operations (part of the last 800
of which directly concerns securities that 4
finance mortgages) have pushed mortgage 700
rates down to all-time lows (around 3.5% for
a 30-year loan).
600 5
• The first consequence of this interest-rate 500
slide is that refinancings of mortgages have 6
increased, allowing households to reduce their
400
financial burdens. This trend accelerated in
2012 with the return of rising house prices.
300 7
• The mix of “a fall in unemployment/low 200
interest rates/rising prices” is even causing an
8
embryonic recovery of applications for loans
100
to buy a house. Five years after the bubble 0 9
burst, the real-estate market at last appears 00 01 02 03 04 05 06 07 08 09 10 11 12
to be gradually returning to life.
US W EEKLY MO RT G AG E APPLI CAT I O NS - REF I NANCING (52 W EEKS AVERAG E)
US W EEKLY MO RT G AG E APPLI CAT I O NS - PURCHASES (52 W EEKS AVERAG E)
US F REDDI E MAC 30 YEAR F IXED RAT E(R. H. SCALE) Source: T homson Reut ers Dat ast ream
3. United States – A deceptive decrease in GDP
• The first estimation of US GDP growth for the QUARTERLY CHANGE IN GDP AND PRIVATE DEMAND
4th quarter of 2012 looks like a very 6
unpleasant surprise: for the first time since
spring 2009, the US economy posted a 4
negative growth rate (-0.1%).
• Yet the growth dynamic was much better than 2
the figure may lead us to believe: household
consumption firmed up (+2.2% in 4Q12),
residential construction again accelerated
0
(+15.3%) and corporate investment re-
bounded (+8.4%) following the summer soft -2
patch. Thus in actual fact private domestic
demand clearly accelerated in the 4th quarter! -4
• It is in fact a substantial inventory reduction
trend among companies (which will be -6
favourable for production in early 2013) and
the drop in public spending in the defence -8
sector that are to blame for this decrease in 2009
US - REAL G DP Q oQ %
2010 2011 2012
GDP, with a combined impact of -2.6%. US - F I NAL PRI VAT E CO NSUMPT IO N & I NVEST MENT Q oQ %
Source: T homson Reut ers Dat ast ream
4. Euro zone – Household sentiment has also hit a low
• Since last summer, market sentiment and CONSUMER CONFIDENCE, RETAIL SALES AND GDP
more generally corporate sentiment have
improved in the euro zone. 5 6
• But households, which are not very sensitive
to the measures taken in response to the 0
4
financial aspect of the crisis, have seen their
situation continue to deteriorate. The -5
consumer confidence index has thus fallen 2
again, to reach in November its lowest level -10
since May 2009.
• However, the same index has since -15 0
rebounded, suggesting that even on the
households’ front, sentiment may have -20
bottomed out. However, we are still far from -2
being able to expect an imminent recovery of -25
consumption! The widespread tightening of
fiscal policies and record unemployment rates -30
-4
will continue to weigh on spending.
• But after the appearance of a similar trend
among companies, it appears that the
-35 -6
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
situation has also stopped deteriorating on the RET AIL SALES - 3MMA YoY %(R. H. SCALE)
EURO AREA - G DP YoY %(R. H. SCALE)
households’ front. EURO AREA - CO NSUMER CO NF I DENCE Source: T homson Reut ers Dat ast ream
This document has been produced purely for the purpose of information and does not therefore constitute an offer or a recommendation to
invest or to purchase or sell shares, nor is it a contractual document. The opinions expressed reflect our judgement on the date on which it was
written and are therefore liable to be altered at any time without notice. We refuse to accept any liability in the event of any direct or indirect
losses, caused by using the information supplied in this document.

3. February 2013
5. Germany – 2013, recovery in sight
ACTIVITY INDICES IN INDUSTRY AND SERVICES AND COMPANY
• According to the IMF, German GDP growth in HEADS’ BUSINESS EXPECTATIONS
2013 is unlikely to exceed that of 2012: 65 120
+0.9% in both cases. However, the dynamic
appears to be more encouraging for this new
year than it was last year. 60
110
• In 2012, the exacerbation of the euro-zone 55
crisis and the slowdown of growth in the 100
emerging world had weighed heavily on
50
German industry, which is highly dependent
on its exports. This weakness had ended up 90
spreading to the sectors more geared to 45
domestic demand, even causing a (slight) rise 80
in unemployment. Thus the quarterly growth 40
rate had constantly declined in 2012.
70
• However, the clear-cut recovery of the activity 35
indices, particularly in services, and the rise in
business expectations again observed in 30 60
2005 2006 2007 2008 2009 2010 2011 2012 2013
January appear to signal that the trend has
PMI m anufacturing PMI se rv ice s
been reversed for 2013. IFO busine ss e x pe ctations So urc e: SYZ A M , B lo o m berg
6. Japan – The Bank of Japan “cautiously aggressive”
• For its first meeting of 2013 the Bank of Japan BOJ BALANCE SHEET (% OF GDP) AND ANNUAL INFLATION
has announced some substantial measures, RATE
even though some of them are less aggressive 36% 0.8%
than what may have been expected.
• The aim is now clearly to move out of the 34%
0.6%
deflation in which the economy has been
32%
bogged down for almost 20 years. To do so,
the BoJ has set an inflation target of 2% and 0.4%
30%
intends to ease its monetary policy until this
target is achieved. 28% 0.2%
• In addition to holding interest rates at close to
0% (which has been the case since 1995), the 26% 0.0%
BoJ will proceed to make massive liquidity
injections (Quantitative Easing): JPY 13 trillion 24%
per month (≈USD 140 bn), which, over one -0.2%
year, is equivalent to 30% of Japan’s GDP! 22%
But all this will not begin before January -0.4%
2014… Until then it is the current programme 20%
of JPY 3 trillion per month that will be
maintained. An already-substantial easing 18% -0.6%
2005 2007 2009 2011 2013
(comparable to what the Fed is currently
BoJ balance sheet (% of GD P)
doing) but until now insufficient to take the Inflation rate (YoY %) So urce: SYZ A M , B lo o m berg, D atastream
Archipelago out of deflation.
7. Japan – Repercussions of the slide in the yen
TRADE BALANCE, EXPORTS AND IMPORTS
• Since the March 2011 earthquake, Japan’s 000'S
trade balance has swung into deficit. The 15 75
blame can be placed on the increase in energy
imports when exports were decreasing owing 60
to the decline in global growth, the 10
Archipelago’s loss of competitiveness and the
tensions with China.
40
• However, the recent slide in the yen will not 5
necessarily be beneficial for the trend in the
20
foreign trade balance: while it should favour a
recovery of exports, it will also lead to an 0 0
increase in the value of imports. The famous
J-shaped curve…
-20
• We should therefore probably not expect an -5
imminent return to a trade surplus in Japan.
On the other hand, increasing activity in -40
industry and more expensive imports head in -10 -50
the direction of the Bank of Japan’s objective
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
JAP T rade Balance (sum 12 m, bn yen)
– an exit from deflation… JAP Exports (3m MAV YoY %)(R.H. SCALE)
JAP I mports (3m MAV YoY %)(R.H. SCALE) Source: T homson Reut ers Dat ast ream
This document has been produced purely for the purpose of information and does not therefore constitute an offer or a recommendation to
invest or to purchase or sell shares, nor is it a contractual document. The opinions expressed reflect our judgement on the date on which it was
written and are therefore liable to be altered at any time without notice. We refuse to accept any liability in the event of any direct or indirect
losses, caused by using the information supplied in this document.

4. February 2013
8. China – After the “soft landing”, the “soft recovery”
• The fear of a marked slowdown in the Chinese ANNUAL CHANGE IN GDP AND EXPORTS
economy had haunted investors in 2012. 15 100
However, most of the activity indices
stabilized during the autumn, giving 14
substance to the soft landing for growth at a 80
less brisk, but supposedly sustainable, pace. 13
• The rebound of annual GDP growth to 7.8% in 12
60
the 4th quarter (following 7.4% the previous
quarter) merely confirms the apparent end of 11
40
the virtually uninterrupted slowdown observed
since 2010. 10
20
• But that does not mean we should expect a 9
marked rebound of activity. A stabilization of
GDP growth at around 8% appears to be the 8 0
best that can be expected in China, provided
that exports continue to increase. And 7
although the trend today is less worrying, the
-20
risks connected with the necessary 6 -30
rebalancing towards domestic consumption
00 01 02 03 04 05 06 07 08 09 10 11 12
CHI NA - G DP (YoY %)
have still not disappeared…
CHI NA - EXPO RT S (YoY % 3M MAV)(R. H. SCALE)
Source: T homson Reut ers Dat ast ream
9. Foreign-exchange – Pressure eases on the Swiss franc
• And what if the Swiss National Bank were a DOLLAR AGAINST SWISS FRANC: RELATIVE CHANGE IN THE
few moves ahead in the “currencies war” that BALANCE SHEETS OF THE SNB AND THE FED
the central banks of the developed economies 1.9 5
appear to be waging on each other? 1.8
• By accumulating substantial foreign-exchange 1.7 4.5
reserves in defending the 1.20 threshold for 1.6
the Swiss franc against the euro, the Swiss
1.5
National Bank has inflated its balance sheet so 4
much that it exceeds 80% of Switzerland's 1.4
national GDP. Which is a much faster rate of 1.3
3.5
liquidity creation than any other central bank 1.2
in the world! 1.1
• Today, the upward pressure on the franc has 1
3
diminished with the decline in tensions in the
0.9
euro zone, which has enabled the SNB to stop
2.5
intervening in the foreign-exchange market. 0.8
The scale of the liquidity created since 0.7
summer 2011 now gives rise to the threat of a 0.6 2
downward correction of the Swiss currency, 2000 2002 2004 2006 2008 2010 2012
against both the euro and the dollar. US D /C HF S NB /FED So urc e: SYZ A M , B lo o m berg, D atas tream
10. Bonds – The euro zone’s 10-year rate at an all-time low
• In spring 2012 the interest-rate on the 10- AVERAGE 10-YEAR GOVERNMENT BOND RATE (WEIGHTED BY
year German government bond had reached GDP) OF THE EURO ZONE AND THE GERMAN BUND
an all-time low. But it was a reaction to rising 6.0
interest rates in the peripheral European
countries, against a backdrop of fears that the 5.5
monetary union might break up. 5.0
• Since then, German interest rates, despite
some signs of tension since the beginning of 4.5
the year, have remained extremely low while
a spectacular easing movement was taking 4.0
place on Spanish and Italian interest rates. 3.5
• As a consequence, the average government
bond interest-rate in the euro zone - in other 3.0
words the governments’ average financing
rate (weighted by the size of the economies) – 2.5
fell at the turn of 2012 and 2013 to its lowest 2.0
level since the monetary union was created,
below 3%. An illustration of the mix between 1.5
“recession/lack of inflation/the ECB’s very
accommodative monetary policy” even if this 1.0
2000 2002 2004 2006 2008 2010 2012
rate still remains higher than inflation, unlike So urc e: SYZ A M , B lo o m berg, IM F
EMU 10y ra te G ER 10y ra te
in the United States.
This document has been produced purely for the purpose of information and does not therefore constitute an offer or a recommendation to
invest or to purchase or sell shares, nor is it a contractual document. The opinions expressed reflect our judgement on the date on which it was
written and are therefore liable to be altered at any time without notice. We refuse to accept any liability in the event of any direct or indirect
losses, caused by using the information supplied in this document.