This document contains a monthly economic review and chartbook from Wells Fargo Securities. It summarizes key U.S. economic indicators from January and February 2016. Real GDP growth was slow in the fourth quarter of 2015 at 0.7% annualized. While retail sales rose slightly in January, manufacturing activity continues to show weakness, with declines in new orders and employment. Business and consumer sentiment also declined in January.

1. U.S. Economic
Review
Monthly Chartbook
February 2016
Charts & data compiled by:
M. Yıldırım Aktuğan
Source: Wells Fargo Securites
16.02.2016 1

2. Real GDP growth rose
at just a 0.7 percent
annualized pace in the
fourth quarter. Final
domestic spending was
positive, but trade and
inventories were drags.
Inflation remains
below the Fed’s 2
percent target.
16.02.2016 2

3. Retail sales rose a
better-than-
expected 0.2
percent in January,
while the originally
reported 0.1
percent drop
in December was
upgraded to a 0.2
percent increase.
Control sales were
up 0.6 percent.
Overall a good
report.
16.02.2016 3

4. The federal
government ran a
surplus of $55.2
billion in January. We
look for outlay growth
to outpace
revenue growth in
fiscal year 2016,
leading to a higher
budget deficit as a
share of economic
output.
16.02.2016 4

5. Job openings
rebounded in
December to 5.6
million, bringing the
opening rate back
to a series high of
3.8 percent.
Turnover improved,
with the quit rate
rising to the highest
point in the current
cycle.
16.02.2016 5

6. Small business
optimism declined
more than expected
in January, falling
1.3 points to 93.9.
The index is now
at its lowest level
since February
2014. January’s
drop may have been
influenced by the
slide in equity
prices.
16.02.2016 6

7. The Dodge
Momentum Index
(DMI) posted a
126.4 reading in
January, rising 2.4
percent from a
downwardly-
revised December.
Gains were broadly
based, with
commercial and
institutional
planning up on the
month.
16.02.2016 7

8. For 2016, monthly
job gains were
expected to slow
and labor costs to
rise. Today’s gain of
151,000 jobs and
rising unit labor
costs reported
earlier this week are
consistent with this
theme. The Great
Divide continues.
16.02.2016 8

9. The U.S. trade deficit
widened from $42.2
billion in November to
$43.4 billion in
December. Weakness
in exports was broad
based in December
while a sharp rise in
auto imports helped
to pull up total
imports. Net exports
likely will continue to
act as a headwind on
overall U.S. GDP
growth.
16.02.2016 9

10. The roughest
edges of last week’s
durable goods
report were sanded
down a bit, but the
read on the factory
sector is still firmly
negative. Core
capital shipments
were up in
December, but
orders are falling
off sharply.
16.02.2016 10

11. Reflecting a
substantial
slowdown in output
growth and a sizable
gain in hours
worked, nonfarm
productivity
dropped at a 3.0
percent annualized
rate in Q4 2015.
Concurrently, ULC
jumped on the
quarter.
16.02.2016 11

12. The ISM non-
manufacturing index
came in weaker than
expected in January.
While the drop
indicates a
broadening slowdown
in the economy, growth
remains stronger than
readings on industrial
activity imply?
16.02.2016 12

13. The ISM manufacturing
index edged up ever-so-
slightly in January, but at
48.2 continues to signal
weakness.
Employment and
inventories are firmly
negative, but new orders
suggest some modest relief
ahead. Employment
conditions in
manufacturing
deteriorated more quickly,
with the index falling to
45.9—the lowest reading
this cycle
16.02.2016 13

14. A strong 0.3 percent
increase in personal
income was not
followed by strong
consumption in
December as
personal spending was
flat. However, personal
spending was revised
up in November, from
0.3 to 0.5 percent.
16.02.2016 14

15. Durable goods dropped
5.1 percent in
December. Spending
cuts on aircraft played
a big role but steep
declines
in a number of other
key sectors suggest
business spending
could be much weaker
than expected.
16.02.2016 15