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World Economics Update - July 2014

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A monthly summary of global economic performance including employment, trade, business conditions, leading indicators and regional data.

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World Economics Update - July 2014

  1. 1. .... Laird Research - Economics Jul 17, 2014 Where we are now . . . . . . . . . . . . . . . . . . . . . . . . 1 Indicators for US Economy . . . . . . . . . . . . . . . . . . . 2 Global Financial Markets . . . . . . . . . . . . . . . . . . . . 3 US Key Interest Rates . . . . . . . . . . . . . . . . . . . . . . 8 US Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 QE Taper Tracker . . . . . . . . . . . . . . . . . . . . . . . . . 10 Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 11 US Banking Indicators . . . . . . . . . . . . . . . . . . . . . . 12 US Employment Indicators . . . . . . . . . . . . . . . . . . . 13 US Business Activity Indicators . . . . . . . . . . . . . . . . 15 US Consumption Indicators . . . . . . . . . . . . . . . . . . 16 US Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Global Business Indicators . . . . . . . . . . . . . . . . . . . 19 Canadian Indicators . . . . . . . . . . . . . . . . . . . . . . . 22 European Indicators . . . . . . . . . . . . . . . . . . . . . . . 23 Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 25 Global Climate Change . . . . . . . . . . . . . . . . . . . . . 26 Where we are now Welcome to the Laird Report. It’s job is to stick a the pin on the global economy’s map that says ”You are here”. We present a com- pendium of economic data from around the world to help figure this out. With the US economy continuing to improve, the US Fed has indi- cated that they will bring the taper down to zero. Both unemployment and inflation seem to be meeting their target levels. However, looking at treasury yields, there still seems to be very little movement in long term rates. It is hard to reconcile this with growth - that would seem to imply a return to the historically higher interest rates. If the job of the central bank is to take away the punch bowl before the party gets out of hand - the market seems to think that the party is just getting started. S&P corporate profit margins are still very high relative to history - with significant growth since the recovery started. How this matches with market growth expectations is not clear. Formatting Notes The grey bars on the various charts are OECD recession indicators for the respective countries. In many cases, the last available value is listed, along with the median value (measured from as 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, Jul 17, 2014
  2. 2. Indicators for US Economy Leading indicators are indicators that usually change before the economy as a whole changes. They are useful as short-term predictors of the economy. Our list includes the Philly Fed’s Leading Index which summarizes 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 in the system) and consumer sentiment (how consumers are feeling about their own financial situation and the economy in general). Leading Index for the US Index:Est.6monthgrowth −3−1123 median: 1.41 May 2014: 1.65 Growth Contraction Initial Unemployment Claims 1000'sofClaimsperWeek 200400600 median: 352.50 Jul 2014: 311.50 Manufacturing Ave. Weekly Hours Worked Hours 394041424344 median: 40.60 Jun 2014: 42.10 ISM Manfacturing − PMI Index:SteadyState=50 3040506070 median: 53.20 Jun 2014: 55.30 expanding economy contracting economy Manufacturers' New Orders: Durable Goods BillionsofDollars 120160200240 median: 182.32 May 2014: 238.33 ISM Manufacturing: Supplier Deliveries Index 40506070 median: 51.55 Jun 2014: 51.90 Slower Deliveries Faster Deliveries Capex (ex. Defense & Planes) Percentchange(3months) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −10−505 median: 0.86 May 2014: 1.23 Chicago Fed National Activity Index IndexValue 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −4−202 median: 0.08 May 2014: 0.21 U. Michigan: Consumer Sentiment Index1966Q1=100 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 507090110 median: 88.35 Jun 2014: 82.50 www.lairdresearch.com Jul 17, 2014 Page 2
  3. 3. Global Financial Markets Global Stock Market Returns Country Index Name Close Date Current Value Weekly Change Monthly Change 3 month Change Yearly Change Corr to S&P500 Corr to TSX North America USA S&P 500 Jul 16 1,981.6 0.4% I 2.3% I 6.4% I 18.2% I 1.00 0.66 USA NASDAQ Composite Jul 16 4,426.0 0.2% I 2.4% I 8.3% I 23.0% I 0.92 0.63 USA Wilshire 5000 Total Market Jul 16 20,934.2 0.1% I 1.8% I 5.8% I 17.9% I 0.99 0.67 Canada S&P TSX Jul 16 15,226.3 0.1% I 1.2% I 5.4% I 21.6% I 0.66 1.00 Europe and Russia France CAC 40 Jul 16 4,369.1 0.2% I -3.1% J -0.8% J 13.5% I 0.57 0.34 Germany DAX Jul 16 9,859.3 0.5% I -0.3% J 5.8% I 20.2% I 0.52 0.36 United Kingdom FTSE Jul 16 6,784.7 1.0% I 0.4% I 3.0% I 3.5% I 0.51 0.36 Russia Market Vectors Russia ETF Jul 16 26.6 -2.2% J 1.8% I 17.7% I 1.6% I 0.37 0.31 All Europe Euro Stoxx 50 Jul 04 3,270.5 1.3% I 1.0% I 1.2% I 23.6% I 0.57 0.39 Asia Taiwan TSEC weighted index Jul 16 9,484.7 -0.1% J 3.1% I 6.3% I 14.8% I -0.04 -0.11 China Shanghai Composite Index Jul 04 2,059.4 1.1% I 1.7% I 0.0% I 2.7% I -0.10 0.10 Japan NIKKEI 225 Jul 16 15,379.3 0.5% I 3.0% I 6.7% I 5.3% I 0.05 0.05 Hong Kong Hang Seng Jul 16 23,523.3 1.5% I 1.0% I 3.6% I 10.4% I 0.01 0.07 Korea Kospi Jul 16 2,013.5 0.6% I 1.0% I 1.1% I 7.9% I -0.15 -0.16 South Asia and Austrailia India Bombay Stock Exchange Jul 16 25,549.7 0.4% I 1.4% I 14.7% I 28.7% I 0.12 0.02 Indonesia Jakarta Jul 16 5,113.9 0.3% I 4.7% I 4.9% I 10.1% I 0.02 -0.07 Malaysia FTSE Bursa Malaysia KLCI Jul 16 1,886.7 -0.2% J 0.8% I 2.2% I 5.6% I -0.01 -0.19 Australia All Ordinaries Jul 16 5,504.5 1.1% I 2.1% I 1.7% I 10.8% I -0.06 0.01 New Zealand NZX 50 Index Gross Jul 16 5,114.2 -0.2% J -1.2% J 0.5% I 11.7% I 0.10 0.18 South America Brasil IBOVESPA Jul 16 55,717.0 2.1% I 2.0% I 8.8% I 18.9% I 0.05 0.14 Argentina MERVAL Buenos Aires Jul 16 8,548.5 -1.7% J 18.2% I 32.5% I 151.8% I 0.24 0.09 Mexico Bolsa index Jul 16 44,009.2 0.7% I 3.3% I 7.6% I 11.0% I 0.48 0.41 MENA and Africa Egypt Market Vectors Egypt ETF Jul 16 69.0 0.1% I -0.8% J 2.2% I 56.3% I 0.28 0.25 (Gulf States) Market Vectors Gulf States ETF Jul 16 32.9 3.8% I 4.5% I -0.2% J 33.0% I 0.34 0.07 South Africa iShares MSCI South Africa Index Jul 16 70.2 0.7% I 3.2% I 6.7% I 20.2% I 0.47 0.36 (Africa) Market Vectors Africa ETF Jul 16 33.5 0.4% I 1.5% I 4.8% I 19.7% I 0.57 0.49 Commodities USD Spot Oil West Texas Int. Jul 14 $101.7 -2.4% J -5.4% J -2.2% J -4.2% J -0.05 0.08 USD Gold LME Spot Jul 16 $1,297.5 -1.9% J 1.2% I -0.1% J 0.9% I -0.26 -0.13 Note: Correlations are based on daily arithmetic returns for the most recent 100 trading days. www.lairdresearch.com Jul 17, 2014 Page 3
  4. 4. S&P 500 Composite Index The S&P 500 Composite Index is widely regarded as the best single gauge of the large cap U.S. equities market. A key figure is the valua- tion level of the S&P500 as measured by the Price/Earnings ratio. We present two versions: (1) a 12-month trailing earnings version which reflects current earnings but is skewed by short term variances and (2) a cyclically adjusted version which looks at the inflation adjusted earn- ings over a 10 year period (i.e. at least one business cycle). Forecasted earnings numbers are estimates provided by S&P. S&P 500 Profit Margins and Overall Corporate Profit Margins (Trailing 12 months) Percent 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 0 2 4 6 8 10 12 14 0 2 4 6 8 10 12 14 Percent Total Corporate Profits (% of GDP) − median: 6.2%, Q1/14: 11.2% Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.6%, Q2/14: 9.1% S&P Quarterly Earnings (USD$ Inflation Adjusted to current prices) 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 −5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 −5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 Tech Bubble Japanese Asset Bubble House BubbleAsian Financial Crisis US Financial Crisis Eurozone crisis Oil Crisis I Oil Crisis II Gulf War Savings and Loans Crisis High Inflation Period Afganistan/Iraq WarVietnam War Reported Earnings Operating Earnings Trailing P/E Ratios for S&P500 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 0 10 20 30 40 50 0 10 20 30 40 50 Multiple Multiple 12−month P/E ( median = 17.4, Jul = 18.9) 10−year CAPE ( median = 19.4, Jul = 25.0) www.lairdresearch.com Jul 17, 2014 Page 4
  5. 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 market cap, while the colour is determined by the percentage change in price over the past month. In addition, companies are sorted according to their industry group. AAPL 5.5% GOOG 5.2% MSFT 8.1% IBM 3.6% ORCL −3.8% FB 7.3% INTC 27% V 4.3% QCOM CSCO MA EBAY HPQ EMC TXN ACN ADP MU ADBE CRM STX MSI FIS BRK−A 0.17% WFC 0.16% JPM 6.8% BAC 1.7% C 4.3% AXP AIG GS MET MS BLK SPG COF PNC BK PRU BEN ACE TRV STT PSA DFS BBT AON CME EQR AMP STI WY HST L RF XL JNJ 0.049% PFE 4.2% MRK GILD 6.7% UNH BMY BIIB CELG LLY ABT ESRX AGN TMO BAX COV AET CI A BSX AMZN 15% DIS 1.3% CMCSA HD MCD FOXA F NKE GM LOW DTV TGT TJX YUM VIAB JCI CBS CCL VFC M LB DG RL TIF GE 1.5% UTX UPS MMM 2.7% BA UNP CAT GD ITW DE DAL TYC WM IR XOM 3.8% CVX 7.1% SLB 12% COP 9.1% OXY EOG HAL APC PSX APA KMI DVN SE RIG FTI HP WMT 0.13% PG 1.5% KO PEP 3.8% PM −3.1% CVS MO WAG MDLZ CL RAI EL KR K LO TAP MON DOW DD LYB FCX PX PPG APD IP AA CF DUK NEE D SO ED FE NI VZ 2.9% T 4.2% Information Technology Financials Health Care Consumer Discretionary Industrials Energy Consumer Staples Materials Utilities Telecommunications 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 Jun 01, 2014 to Jul 16, 2014 Average Median Median Median Sector Change P/Sales P/Book P/E Energy 6.2% I 2.3 1.9 19.1 Information Technology 5.6% I 3.3 4.0 23.4 Telecommunications Services 3.4% I 1.2 2.0 21.0 Financials 3.2% I 3.0 1.5 18.9 Consumer Discretionary 3.1% I 1.6 4.3 20.1 Average Median Median Median Sector Change P/Sales P/Book P/E Health Care 2.7% I 3.4 3.9 27.0 Materials 2.0% I 1.6 3.6 23.4 Industrials 1.2% I 1.7 3.4 21.7 Utilities 1.1% I 1.4 1.6 18.0 Consumer Staples 1.0% I 2.0 5.2 21.7 www.lairdresearch.com Jul 17, 2014 Page 5
  6. 6. US Equity Valuations A key valuation metric is Tobin’s q: the ratio between the market value of the entire US stock market versus US net assets at replacement cost (ie. what you pay versus what you get). Warren Buffet famously follows 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 has valuations correct, we can determine the required returns of future es- timated earnings. These are quoted for both debt (using BAA rated securities as a proxy) and equity premiums above the risk free rate (10 year US Treasuries). These figures are alternate approaches to under- standing the current market sentiment - higher premiums indicate a demand for greater returns for the same price and show the level of risk-aversion in the market. Tobin's q (Market Equity / Market Net Worth) and S&P500 Price/Sales 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 0.25 0.50 0.75 1.00 1.25 1.50 1.75 0.25 0.50 0.75 1.00 1.25 1.50 1.75 Buying assets at a discount Paying up for growth Tobin Q (median = 0.75, Mar = 1.11) S&P 500 Price/Sales (median = 1.32, Jun = 1.72) Equity and Debt Risk Premiums: Spread vs. Risk Free Rate (10−year US Treasury) 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 0% 2% 4% 6% 8% 10% 0% 2% 4% 6% 8% 10% Implied Equity Premium (median = 4.2%, Jun = 4.8%) Debt (BAA) Premium (median = 2.0%, Jun = 2.3%) www.lairdresearch.com Jul 17, 2014 Page 6
  7. 7. US Mutual Fund Flows Fund flows describe the net investments in equity and bond mutual funds in the US market, as described in ICI’s “Trends in Mutual Fund Investing” report. Note however that this is only part of the story as it does not include ETF fund flows - part of the changes are investors entering or leaving the market, and part is investors shifting to ETF’s from mutual funds. US Net New Investment Cash Flow to Mutual Funds US$billions(monthly) 2007 2008 2009 2010 2011 2012 2013 2014 −40−2002040 Domestic Equity World Equity Taxable Bonds Municipal Bonds US Net New Investment Cash Flow to Mutual Funds US$billions(Monthly) 2007 2008 2009 2010 2011 2012 2013 2014 −60−40−200204060 Flows to Equity Flows to Bonds Net Market Flows www.lairdresearch.com Jul 17, 2014 Page 7
  8. 8. US Key Interest Rates Interest rates are often leading indicators of stress in the financial system. The yield curve show the time structure of interest rates on government bonds - Usually the longer the time the loan is outstanding, the higher the rate charged. However if a recession is expected, then the fed cuts rates and this relationship is inverted - leading to negative spreads 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 most of 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 vs Fedfunds - the infamous “TED Spread”). Here a spike correlates to an aversion to risk, which is an indication that something bad is happen- ing. US Treasury Yield Curves ForwardInstantaneousRates(%) 13 14 15 16 17 18 19 20 21 22 23 24 0.0 0.5 1.0 1.5 2.0 2.5 3.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Jul 15, 2014 (Today) Jun 16, 2014 (1 mo ago) Apr 15, 2014 (3 mo ago) 15 Jul 2013 (1 yr ago) 3 Month & 10 Yr Treasury Yields 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 0% 1% 2% 3% 4% 5% 6% 7% 10 Yr Treasury 3 Mo Treasury Spread AAA vs. BAA Bond Spreads 4% 5% 6% 7% 8% 9% 4% 5% 6% 7% 8% 9% Percent AAA BAA 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 median: 91.00 Jul 2014: 57.00 0 100 200 300 0 100 200 300 Spread(bps) LIBOR vs. Fedfunds Rate 0% 1% 2% 3% 4% 5% 6% 7% 0% 1% 2% 3% 4% 5% 6% 7% Percent 3 mos t−bill LIBOR 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 median: 37.00 Jul 2014: 21.36 0 100 200 300 0 100 200 300 Spread(bps) www.lairdresearch.com Jul 17, 2014 Page 8
  9. 9. US Inflation Generally, the US Fed tries to anchor long run inflation expectations to approximately 2%. Inflation can be measured with the Consumer Price Index (CPI) or the Personal Consumption Expenditures (PCE) index. In both cases, it makes sense to exclude items that vary quickly like Food and Energy to get a clearer picture of inflation (usually called Core Inflation). The Fed seems to think PCI more accurately reflects the 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 an imputed forward inflation expectation. The 5y5y chart shows expected 5 year inflation rates at a point 5 years in the future. Neat trick that. Consumer Price Index Percent 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −1% 0% 1% 2% 3% 4% 5% 6% −1% 0% 1% 2% 3% 4% 5% 6% US Inflation Rate YoY% (May = 2.1%) US Inflation ex Food & Energy YoY% (May = 1.9%) Personal Consumption Expenditures Percent(YearoverYear) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −10123456 PCE Inflation Rate YoY% (May = 1.8%) PCE Core Inflation YoY% (May = 1.5%) 5−Year, 5−Year Forward Inflation Expectation Rate Percent 08 09 10 11 12 13 14 15 16 17 18 19 −10123456 5 year forward Inflation Expectation Actual 5yr Inflation (CPI measure) Actual 5yr Inflation (PCE Measure www.lairdresearch.com Jul 17, 2014 Page 9
  10. 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 a series of programs (QE1, QE2 & QE3) designed to drive down long term 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 their price, but as these securities have a fixed coupon, their yield would be decreased (yield ≈ coupon / price) thus driving down long term rates. In 2011-2012, “Operation Twist” attempted to reduce rates without increasing 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 in Dec 2013 that it was starting the taper, a decision partly driven by seeing key targets of inflation around 2% and unemployment being less than 6.5%. These charts track that progress. QE Asset Purchases to Date (Treasury & Mortgage Backed Securities) Trillions 0.0 0.5 1.0 1.5 2.0 2.5 0.0 0.5 1.0 1.5 2.0 2.5 QE1 QE2 Operation Twist QE3 TaperTreasuries Mortgage Backed Securities Total Monthly Asset Purchases (Treasury + Mortgage Backed Securities) Billions −100 −50 0 50 100 150 200 −100 −50 0 50 100 150 200 Month to date Jul 09: $11.5 Inflation and Unemployment − Relative to Targets Percent 0 2 4 6 8 10 0 2 4 6 8 10 Target Unemployment 6.5% Target Inflation 2% U.S. 10 Year and 3 Month Treasury Constant Maturity Yields Percent 0 1 2 3 4 5 0 1 2 3 4 5 2008 2009 2010 2011 2012 2013 2014 Short Term Rates: Once at zero, Fed moved to QE Long Term Rates: Moving up in anticipation of Taper? www.lairdresearch.com Jul 17, 2014 Page 10
  11. 11. Exchange Rates 10 Week Moving Average CAD Exchange Rates 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 0.620.710.810.901.001.09 USA/CAD 0.550.610.660.720.770.82 Euro/CAD 59.1674.7190.26105.81121.36136.91 Japan/CAD 0.380.440.490.550.610.67 U.K./CAD 0.590.981.361.742.122.51 Brazil/CAD CAD Appreciating CAD Depreciating 1 Month Change in Rates versus Average −3.0% −1.5% 1.5% 3.0% Euro 0.7% UK −1.6% Japan −0.1% South Korea 0.2% China −0.3% India 1.9% Brazil −0.4% Mexico 1.3% Canada −1.0% USA −0.4% % 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 −3.9% AUS −2.2% BRA −1.4% CHN −2.0% IND −1.6% RUS 2.7% USA −2.1% EUR −4.1% JPY −1.7% KRW −1.4% MXN −1.2% ZAR −3.5% www.lairdresearch.com Jul 17, 2014 Page 11
  12. 12. US Banking Indicators The banking and finance industry is a key indicator of the health of the US economy. It provides crucial liquidity to the economy in the form 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 difference between what a bank pays to depositors versus what the bank is paid by creditors), along with levels of non-performing loans (i.e. loan loss reserves and actual deliquency rates). US Banks Net Interest Margin Percent 3.54.04.5 median: 3.95 2014 Q1: 3.10 Repos Outstanding with Fed. Reserve BillionsofDollars 50150250 median: 50.42 Jul 2014: 248.25 Bank ROE − Assets between $300M−$1B Percent 051015 median: 12.85 2014 Q1: 8.89 Consumer Credit Outstanding %YearlyChange −505101520 median: 7.06 May 2014: 6.16 Total Business Loans %YearlyChange −2001020 median: 7.83 Jun 2014: 9.42 US Nonperforming Loans Percent 12345 median: 2.39 2014 Q1: 2.50 St. Louis Financial Stress Index Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 0246 median: −0.043 Jul 2014: −1.35 Commercial Paper Outstanding TrillionsofDollars 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1.01.41.82.2 median: 1.36 Jul 2014: 1.04 Residential Morgage Delinquency Rate Percent 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 246810 median: 2.30 2014 Q1: 7.79 www.lairdresearch.com Jul 17, 2014 Page 12
  13. 13. US Employment Indicators Unemployment rates are considered the “single best indicator of current labour conditions” by the Fed. The pace of payroll growth is highly correlated with a number of economic indicators.Payroll changes are another way to track the change in unemployment rate. Unemployment only captures the percentage of people who are in the labour market who don’t currently have a job - another measure is what percentage of the whole population wants a job (employed or not) - this is the Participation Rate. The Beverage Curve measures labour market efficiency by looking at 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 Percent 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 median: 6.30 Jun 2014: 6.10 4 5 6 7 8 9 10 11 4 5 6 7 8 9 10 11 Percent 4 5 6 7 8 9 10 2.02.53.03.54.0 Beverage Curve (Unemployment vs. Job Openings) Unemployment Rate (%) JobOpenings(%totalEmployment) Dec 2000 − Dec 2008 Jan 2009 − Apr 2014 May 2014 Participation Rate Percent 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 6364656667 median: 66.10 Jun 2014: 62.80 Total Nonfarm Payroll Change MonthlyChange(000s) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −5000500 median: 161.00 Jun 2014: 288.00 www.lairdresearch.com Jul 17, 2014 Page 13
  14. 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 a full-time job - they are employed but under-utilitized. Temporary help demand 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 jobs is generally bad, though perhaps not unsurprising in a recovery. Median Duration of Unemployment Weeks 510152025 median: 8.60 Jun 2014: 13.10 (U6) Unemployed + PT + Marginally Attached Percent 810121416 median: 9.65 Jun 2014: 12.10 4−week moving average of Initial Claims Jan1995=100 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 50100150200 median: 108.38 Jul 2014: 95.77 Unemployed over 27 weeks MillionsofPersons 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 01234567 median: 0.78 Jun 2014: 3.00 Services: Temp Help MillionsofPersons 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1.52.02.5 median: 2.24 Jun 2014: 2.87 0 200 400 600 15 20 25 30 35 Annual Change in Employment Levels (000s of Workers) Averagewages($/hour) Private Industry Employment Change (1 year) Construction Durable Goods Education Financial Activities Health Services Information Leisure and Hospitality Manufacturing Mining and Logging Nondurable Goods Other Services Professional & Business Services Retail Trade Transportation Utilities Wholesale Trade Circle size relative to total employees in industry www.lairdresearch.com Jul 17, 2014 Page 14
  15. 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 the current business environment. Manufacturing Sector: Real Output YoYPercentChange −15−5515 median: 6.64 2014 Q1: 10.06 ISM Manufacturing − PMI Index 3040506070 Jun 2014: 55.30 manufac. expanding manufac. contracting ISM Manufacturing: New Orders Index Index 304050607080 Jun 2014: 58.90 Increase in new orders Decrease in new orders Non−Manufac. New Orders: Capital Goods BillionsofDollars 40506070 median: 57.08 May 2014: 70.71 Average Weekly Hours: Manufacturing Hours 3940414243 median: 41.10 Jun 2014: 42.10 Industrial Production: Manufacturing YoYPercentChange −15−50510 median: 3.30 Jun 2014: 3.63 Total Business: Inventories to Sales Ratio Ratio 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1.11.21.31.41.51.6 median: 1.37 May 2014: 1.29 Chicago Fed: Sales, Orders & Inventory Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −0.50.00.5 May 2014: 0.04 Above ave growth Below ave growth ISM Non−Manufacturing Bus. Activity Index Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 35455565 Jun 2014: 57.50 Growth Contraction www.lairdresearch.com Jul 17, 2014 Page 15
  16. 16. US Consumption Indicators Variations in consumer activity are a leading indicator of the strength of the economy. We track consumer sentiment (their expec- tations about the future), consumer loan activity (indicator of new purchase activity), and new orders and sales of consumer goods. U. Michigan: Consumer Sentiment Index1966Q1=100 5060708090110 median: 88.35 Jun 2014: 82.50 Consumer Loans (All banks) YoY%Change 0102030 median: 7.13 Jun 2014: 2.87 Accounting Change Deliquency Rate on Consumer Loans Percent 2.53.03.54.04.5 median: 3.48 2014 Q1: 2.31 New Orders: Durable Consumer Goods YoY%Change −30−101030 median: 3.86 May 2014: 3.56 New Orders: Non−durable Consumer Goods YoY%Change −2001020 median: 3.94 May 2014: 4.28 Personal Consumption & Housing Index Index −0.40.00.2 median: 0.02 May 2014: −0.12above ave growth below ave growth Light Cars and Trucks Sales MillionsofUnits 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 10121416182022 median: 14.73 Jun 2014: 16.92 Personal Saving Rate Percent 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 246810 median: 5.50 May 2014: 4.80 Real Retail and Food Services Sales YoY%Change 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −10−505 median: 2.36 May 2014: 2.15 www.lairdresearch.com Jul 17, 2014 Page 16
  17. 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. Since personal consumption is about 70% of the US economy and house val- ues directly impact household wealth, housing is an important indicator in the health of the overall economy. In particular, housing investment was an important driver of the economy getting out of the last few recessions (though not this one so far). Here we track housing prices and especially indicators which show the current state of the housing market. 15 20 25 30 35 150200250300 Personal Income vs. Housing Prices (Inflation adjusted values) NewHomePrice(000's) Disposable Income Per Capita (000's) Mar 2014 r2 : 88.4% Range: Jan 1964 − Mar 2014 New Housing Units Permits Authorized MillionsofUnits 0.51.01.52.02.5 median: 1.36 May 2014: 1.00 New Home Median Sale Price SalePrice$000's 100150200250 Mar 2014: 290.00 Homeowner's Equity Level Percent 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 4050607080 median: 66.52 2014 Q1: 53.64 New Homes: Median Months on the Market Months 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 468101214 median: 5.00 May 2014: 3.30 US Monthly Supply of Homes MonthsSupply 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 4681012 median: 5.90 May 2014: 4.50 www.lairdresearch.com Jul 17, 2014 Page 17
  18. 18. US Housing - FHFA Quarterly Index The Federal Housing Finance Agency provides a quarterly survey on house prices, based on sales prices and appraisal data. This gener- ates a housing index for 355 municipal areas in the US from 1979 to present. We have provided an alternative view of this data looking at the 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 start of the housing crisis (defined as the maximum price between 2007-2009 for each city). The circled dots are the cities in the survey, while the background colours are interpolated from these points using a loess smoother. Change from 2007 Peak − Q1 2014 −50% −40% −30% −20% −10% 0% 10% 20% 30% 40% 50% Today's Home Prices Percentage Change from 2007−2009 Peak Frequency −75% −50% −25% 0% 25% 50% 75% Year over Year Change − Q1 2014 −10% −8% −6% −4% −2% 0% 2% 4% 6% 8% 10% YoY Change in this quarter YoY Percent Change Frequency −15% −5% 5% 15% www.lairdresearch.com Jul 17, 2014 Page 18
  19. 19. Global Business Indicators Global PMI Reports The Purchasing Managers’ Index (PMI) is an indicator reflecting purchasing managers’ acquisition of goods and services. An index read- ing of 50.0 means that business conditions are unchanged, a number over 50.0 indicates an improvement while anything below 50.0 suggests a decline. The further away from 50.0 the index is, the stronger the change over the month. The chart at the bottom shows a moving av- erage of a number of PMI’s, along with standard deviation bands to show a global average. Global PMI − June 2014 <40.0 42.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0 >60.0 Steady ExpandingContracting Eurozone 51.8 Global PMI 52.7 TWN 54.0MEX 51.8 KOR 48.4 JPN 51.5 VNM 52.3 IDN 52.7 ZAF 46.6 AUS 48.9 BRA 48.7 CAN 53.5 CHN 50.7 IND 51.5 RUS 49.1 SAU 59.2 USA 57.3 Global PMI Monthly Change <−5.0 −4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 >5.0 PMI Change ImprovingDeteriorating Eurozone −0.4 Global PMI 0.5 TWN 1.6MEX −0.1 KOR −1.1 JPN 1.6 VNM −0.2 IDN 0.3 ZAF 2.3 AUS −0.3 BRA −0.1 CAN 1.3 CHN 1.3 IND 0.1 RUS 0.2 SAU 2.2 USA 0.9 Purchase Managers Index (Manufacturing) − China, Japan, USA, Canada, France, Germany, Italy, UK, Australia 04 05 06 07 08 09 10 11 12 13 14 3040506070 3040506070 Business Conditions Contracting Business Conditions Expanding www.lairdresearch.com Jul 17, 2014 Page 19
  20. 20. Global PMI Chart This is an alternate view of the global PMI reports. Here, we look at all the various PMI data series in a single chart and watch their evolution over time. Red numbers indicate contraction (as estimated by PMI) while green numbers indicate expansion. Jun12 Jul12 Aug12 Sep12 Oct12 Nov12 Dec12 Jan13 Feb13 Mar13 Apr13 May13 Jun13 Jul13 Aug13 Sep13 Oct13 Nov13 Dec13 Jan14 Feb14 Mar14 Apr14 May14 Jun14 Australia India Indonesia Vietnam Taiwan China Korea Japan South Africa Saudi Arabia Turkey Russia United Kingdom Greece Germany France Italy Czech Republic Spain Poland Ireland Netherlands Eurozone Brazil Mexico Canada United States Global PMI 49.7 48.8 48.7 48.7 48.9 49.6 50.0 51.5 50.9 51.2 50.4 50.6 50.6 50.8 51.6 51.8 52.1 53.1 53.3 53.0 53.2 52.4 51.9 52.2 52.7 52.5 51.4 51.5 51.1 51.0 52.8 56.1 55.8 54.3 54.6 52.1 52.3 52.0 53.7 53.1 52.8 51.8 54.7 55.0 53.7 57.1 55.5 55.4 56.4 57.3 54.8 53.1 53.0 52.4 51.4 50.4 50.4 50.5 51.7 49.3 50.1 53.2 52.4 52.0 52.1 54.2 55.6 55.3 53.5 51.7 52.9 53.3 52.9 52.2 53.5 55.9 55.2 55.1 54.4 55.5 55.6 57.1 55.0 53.4 52.2 51.7 51.7 51.3 49.7 50.8 50.0 50.2 51.9 52.6 54.0 52.0 51.7 51.8 51.9 51.8 48.5 48.7 49.3 49.8 50.2 52.2 51.1 53.2 52.5 51.8 50.8 50.4 50.4 48.5 49.4 49.9 50.2 49.7 50.5 50.8 50.4 50.6 49.3 48.8 48.7 45.1 46.5 46.3 46.1 45.4 46.8 46.1 47.9 47.9 46.8 46.7 48.3 48.8 50.3 51.4 51.1 51.3 51.6 52.7 54.0 53.2 53.0 53.4 52.2 51.8 48.9 48.9 49.7 50.7 48.9 48.2 49.6 50.2 49.0 48.0 48.2 48.7 48.8 50.8 53.5 55.8 54.4 56.8 57.0 54.8 55.2 53.7 53.4 53.6 52.3 53.1 53.9 50.9 51.8 52.1 52.4 51.4 50.3 51.5 48.6 48.0 49.7 50.3 51.0 52.0 52.7 54.9 52.4 53.5 52.8 52.9 55.5 56.1 55.0 55.3 48.0 49.7 48.3 47.0 47.3 48.2 48.5 48.6 48.9 48.0 46.9 48.0 49.3 51.1 52.6 53.1 53.4 54.4 53.2 55.4 55.9 54.0 52.0 50.8 50.3 41.1 42.3 44.0 44.5 43.5 45.3 44.6 46.1 46.8 44.2 44.7 48.1 50.0 49.8 51.1 50.7 50.9 48.6 50.8 52.2 52.5 52.8 52.7 52.9 54.6 49.4 49.5 48.7 48.0 47.2 48.2 46.0 48.3 49.9 49.1 49.5 50.1 51.0 52.0 53.9 53.4 54.5 55.4 54.7 55.9 56.5 55.5 56.5 57.3 54.7 44.6 44.3 43.6 45.7 45.5 45.1 46.7 47.8 45.8 44.5 45.5 47.3 49.1 50.4 51.3 50.8 50.7 51.4 53.3 53.1 52.3 52.4 54.0 53.2 52.6 45.2 43.4 46.0 42.7 43.7 44.5 44.6 42.9 43.9 44.0 44.4 46.4 48.4 49.7 49.7 49.8 49.1 48.4 47.0 49.3 49.7 52.1 51.2 49.6 48.2 45.0 43.0 44.7 47.4 46.0 46.8 46.0 49.8 50.3 49.0 48.1 49.4 48.6 50.7 51.8 51.1 51.7 52.7 54.3 56.5 54.8 53.7 54.1 52.3 52.0 40.1 41.9 42.1 42.2 41.0 41.8 41.4 41.7 43.0 42.1 45.0 45.3 45.4 47.0 48.7 47.5 47.3 49.2 49.6 51.2 51.3 49.7 51.1 51.0 49.4 48.4 45.2 49.6 48.1 47.3 49.2 51.2 50.5 47.9 48.6 50.2 51.3 52.9 54.8 57.2 56.3 56.5 58.4 57.3 56.7 56.2 55.3 57.3 57.0 57.5 51.0 52.0 51.0 52.4 52.9 52.3 50.0 52.0 52.0 50.8 50.6 50.4 51.7 49.2 49.4 49.4 51.8 49.4 48.8 48.0 48.5 48.3 48.5 48.9 49.1 51.4 49.4 50.0 52.2 52.5 51.6 53.1 54.0 53.5 52.3 51.3 51.1 51.2 49.8 50.9 54.0 53.3 55.0 53.5 52.7 53.4 51.7 51.1 50.1 48.8 59.8 57.0 58.9 58.1 58.5 58.9 58.0 57.3 56.6 56.6 57.5 58.7 56.7 57.1 58.7 59.7 58.6 57.0 58.5 57.0 59.2 47.1 49.5 47.4 49.1 53.6 49.3 50.5 50.4 51.6 52.2 56.5 49.1 51.5 51.6 50.5 50.3 51.5 50.3 47.4 44.3 46.6 49.9 47.9 47.7 48.0 46.9 46.5 45.0 47.7 48.5 50.4 51.1 51.5 52.3 50.7 52.2 52.5 54.2 55.1 55.2 56.6 55.5 53.9 49.4 49.9 51.5 47.2 49.4 47.5 45.7 47.4 48.2 50.1 49.9 50.9 52.0 52.6 51.1 49.4 47.2 47.5 49.7 50.2 50.4 50.8 50.9 49.8 50.4 50.2 49.5 48.4 50.2 50.1 49.2 49.8 50.2 50.6 51.5 50.4 50.4 51.6 50.4 49.2 48.2 47.7 50.1 50.2 50.9 50.8 50.5 49.5 48.5 48.0 48.1 49.4 50.7 49.2 47.5 46.1 45.6 47.8 47.4 50.6 51.5 50.2 51.2 50.7 47.1 49.5 48.6 50.0 52.0 53.0 53.4 55.2 55.5 54.7 52.7 52.3 52.4 54.0 46.6 43.6 47.9 49.2 48.7 50.5 49.3 50.1 48.3 50.8 51.0 48.8 46.4 48.5 49.4 51.5 51.5 50.3 51.8 52.1 51.0 51.3 53.1 52.5 52.3 50.2 51.4 51.6 50.5 51.9 51.5 50.7 49.7 50.5 51.3 51.7 51.6 51.0 50.7 48.5 50.2 50.9 50.3 50.9 51.0 50.5 50.1 51.1 52.4 52.7 55.0 52.9 52.8 52.8 52.9 53.7 54.7 53.2 54.2 52.0 51.0 50.1 50.3 50.1 48.5 49.6 49.6 51.3 50.7 51.4 52.5 51.3 51.3 51.4 51.5 47.2 40.3 45.3 44.1 45.2 44.3 44.3 40.2 45.6 44.4 36.7 43.8 49.6 42.0 46.4 51.7 53.2 47.7 47.6 46.7 48.6 47.9 44.8 49.2 48.9 www.lairdresearch.com Jul 17, 2014 Page 20
  21. 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 US dollars. 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 imports on a year-over-year basis, while the bottom part shows the difference between exports and imports for that given month (i.e. the trade bal- ance) China YoYChange −40 −20 0 20 40 Balance 08 09 10 11 12 13 14 −10 0 10 20 30 40 US YoYChange −60 −40 −20 0 20 40 Balance 08 09 10 11 12 13 14 −80 −60 −40 −20 0 Canada YoYChange −15 −10 −5 0 5 10 Balance 08 09 10 11 12 13 14 −2 0 2 4 6 Germany YoYChange −40 −20 0 20 Balance 08 09 10 11 12 13 14 0 5 10 15 20 25 30 JapanYoYChange −30 −20 −10 0 10 20 Balance 08 09 10 11 12 13 14 −10 −5 0 5 10 South Korea YoYChange −15 −10 −5 0 5 10 15 Balance 08 09 10 11 12 13 14 −4 −2 0 2 4 6 India YoYChange −10 −5 0 5 10 15 Balance 08 09 10 11 12 13 14 −15 −10 −5 0 Australia YoYChange −6 −4 −2 0 2 4 6 Balance 08 09 10 11 12 13 14 −2 −1 0 1 2 3 4 Eurozone YoYChange −80 −60 −40 −20 0 20 40 Balance 08 09 10 11 12 13 14 −10 0 10 20 www.lairdresearch.com Jul 17, 2014 Page 21
  22. 22. Canadian Indicators Unemployment rate Percent 67891011 median: 7.40 Jun 2014: 7.10 Permits issued for Dwelling YoYPercentChange −50050100 Jun 2014: 2.34 Retail Sales YoYPercentChange −50510 median: 4.82 Apr 2014: 5.06 Inflation rate YoYPercentChangeinCPI −1012345 median: 1.68 May 2014: 2.28 Emp. Particiaption Rate 62636465666768 median: 65.90 Jun 2014: 66.10 Housing Prices YoYPercentChange −5051015 median: 1.96 May 2014: 1.55 Money Supply (M2) YoYPercentChange 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 051015 median: 5.88 May 2014: 5.58 PMI: Manufacturing 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 40506070 median: 56.50 Jun 2014: 53.50 Retail Sales Performance YoYPercentChange 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −50510 median: 4.28 Apr 2014: 3.23 www.lairdresearch.com Jul 17, 2014 Page 22
  23. 23. European Indicators Unemployment Rates Percentage 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 05101520 Business Employment Expectations Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −40−20010 Volume of Retail Sales (ex−cars) Index(Jan2010=100) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 60708090110130 Manufacturing Turnover Index(Jan2010=100) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 60708090110130 Building Permits Index(Jan2010=100) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 0100200300400500 Industrial Orderbook Levels Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −60−40−20020 Country Employment Expect. Unempl. (%) Bond Yields (%) Retail Turnover Manufacturing Turnover Building Permits Industry Orderbook PMI Series Dates Jun 2014 May 2014 Jun 2014 May 2014 May 2014 May 2014 Jun 2014 Jun 2014 France -12.2 10.1 1.71 105.1 109.7 68.94 -25.6 48.2 Germany -1.4 5.1 1.26 101.4 113.3 140.58 -8.5 52 United Kingdom 10.3 6.6 2.35 104.84 105.87 NA 9.5 57.5 Italy -5.6 12.6 2.92 93.18 97.87 NA -18.9 52.6 Greece -4.1 26.8 5.93 74.05 98.8 13.41 -20.8 49.4 Spain -5.5 25.1 2.72 82.61 102.53 68.97 -19.1 54.6 Eurozone -2.6 10.3 2.93 99.34 109.75 NA -13.5 NA www.lairdresearch.com Jul 17, 2014 Page 23
  24. 24. Government Bond YieldsLongTermYields% 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 0246810 Economic Sentiment Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 60708090110130 Consumer Confidence Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −100−60−20020 Production of Total Industry: Dec 2013 <−10.0%−7.5%−5.0%−2.5% 0.0% 2.5% 5.0% 7.5%>10.0% YoY % Difference increasingdecreasing AUT 0.44% DEU 3.86% ESP 2.39% FIN −3.84% FRA 0.71% GBR 1.89% GRC −1.77% HUN 4.64% IRL −6.86% ITA −0.87% NOR −2.71% POL 4.68% RUS 0.09% SWE −2.91% Inflation: Dec 2013 AUT 1.9% DEU 1.4% ESP 0.3% FIN 1.6% FRA 0.7% GBR 2.0% GRC −1.7% HUN 0.4% IRL 0.2% ITA 0.7% NOR 2.0% POL 0.7% SWE 0.1% <−1.0%0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% >7.0% YoY % Change in Prices PMI: June 2014 <40.042.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0>60.0 Steady ExpandingContracting BRA 48.7 CAN 53.5 DEU 52.0 ESP 54.6 FRA 48.2 GBR 57.5 GRC 49.4 IRL 55.3 ITA 52.6 MEX 51.8 POL 50.3 SAU 59.2 TUR 48.8 USA 57.3 PMI Change: May − Jun <−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 1.3 DEU −0.3 ESP 1.7 FRA −1.4 GBR 0.5 GRC −1.6 IRL 0.3 ITA −0.6 POL −0.5 TUR −1.3 USA 0.9 www.lairdresearch.com Jul 17, 2014 Page 24
  25. 25. Chinese Indicators Tracking the Chinese economy is a tricky. As reported in the Finan- cial Times, Premier Li Keqiang, confided to US officials in 2007 that gross 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 and differs slightly from an HSBC version. Finally we include the Shanghai Composite 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 4045505560 Jun 2014: 50.70 Shanghai Composite Index IndexValue(MonthlyHigh/Low) 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 100020003000400050006000 Jul 2014: 2059.38 Electricity Generated 100MillionKWH(logscale) 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1000200030005000 May 2014: 4416.00 Electricity Generated Long Term Trend Short Term Average Consumer Confidence Index Index 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 98100102104106108 median: 102.90 May 2014: 102.30 Exports YoYPercentChange 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −20020406080 median: 19.40 Jun 2014: 7.20 Retail Sales Change YoYPercentChange 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 101520 median: 13.20 Jun 2014: 12.40 www.lairdresearch.com Jul 17, 2014 Page 25
  26. 26. Global Climate Change Temperature and precipitation data are taken from the US National Climatic Data Center and presented as the average monthly anomaly from the previous 6 months. Anomalies are defined as the difference from the average value over the period from 1961-1990 for precipitation and 1971-2000 for temperature. Average Temperature Anomalies from Dec 2013 - May 2014 <−4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 >4.0 Anomalies in Celcius WarmerCooler Anomalies in Celcius −4 −2 0 2 4 Average 6 month Precipitation Anomalies from Jan 2014 - Jun 2014 <−40.0 −30.0 −20.0 −10.0 0.0 10.0 20.0 30.0 >40.0 Anomalies in millimeters WetterDrier Anomalies in millimeters −40 −20 0 20 40 www.lairdresearch.com Jul 17, 2014 Page 26

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