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....Laird Research - Economics
June 11, 2015
Where we are now . . . . . . . . . . . . . . . . . . . . . . . . 1
Indicators for US Economy . . . . . . . . . . . . . . . . . . . 4
Global Financial Markets . . . . . . . . . . . . . . . . . . . . 5
US Key Interest Rates . . . . . . . . . . . . . . . . . . . . . . 10
US Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
QE Taper Tracker . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 13
US Banking Indicators . . . . . . . . . . . . . . . . . . . . . . 14
US Employment Indicators . . . . . . . . . . . . . . . . . . . 15
US Business Activity Indicators . . . . . . . . . . . . . . . . 17
US Consumption Indicators . . . . . . . . . . . . . . . . . . 18
US Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Global Housing . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Global Business Indicators . . . . . . . . . . . . . . . . . . . 23
Canadian Indicators . . . . . . . . . . . . . . . . . . . . . . . 26
European Indicators . . . . . . . . . . . . . . . . . . . . . . . 28
Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 30
Global Climate Change . . . . . . . . . . . . . . . . . . . . . 31
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.
It looks like inflation is coming back, at least in the US. More im-portantly, wage inflation is coming back - note the recent news articlesabout Walmart giving wage hikes etc. Quit rates and job openningsin the US are both up and the unemployment rate continues to drop.Participation rates – the portion of the population working or lookingfor work – are still at historic lows but holding steady, making year overyear comparisons more appropriate.
US wages grew 2.3% year over year. This is a big deal because oneof the major items holding down inflation was excess labour supply - itshard to ask for a raise when you can be easily replaced with lower costworkers. That seems to have changed. The Employment Cost Indexis showing an uptick indicating that those annecdotal data points arepart of a larger trend.
The other thing to consider is capacity utilization rates - basically,how close businesses are to running out of the ability to make more with
the fixed assets they have. That rate has been slowly climbing over thepast three years, but has dropped a bit (note as well that GDP for Q1in the US was hit by record low temperatures which may explain partof that).
There’s a cascade effect that is expected: higher wages and busi-nesses close to capacity translate into higher prices - but this is poten-tially masked by lower oil prices and global commodity prices (thanksfor slowing down for us China!). You can look at the inflation charts tosee that overall CPI crashed, but if you exclude food and oil, it’s hum-ming along nicely at about 2% - the consensus rate for the“appropriate”amount of inflation.
Further, higher wages also translate into more disposible income,more spending and a hotter economy - both of those things seem to behappening now. So, we get a period of low prices, good domestic econ-omy (US PMI is at highs right now), growing wages and low interestrates.
Employment Cost IndexYo
Y %
Cha
nge
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
1.5
2.0
2.5
3.0
3.5
median: 2.462015 Q1: 2.68
Capacity Utilization
% o
f Max
Cap
acity
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
7075
8085
median: 80.492015 Q1: 78.88
This is why we are seeing so many articles about the US Fed raisinginterest rates. The Fed’s job is to get ahead of inflation - there seem tobe more factors pointing to inflation coming than away from it.
The Non-Accelerating Inflation Rate Of Unemployment (NAIRU) isthe Fed’s best guess at the level of unemployment which doesn’t causeinflation to rise. Their target was recently dropped from 5.3% to 5.1%- they seem nervous about actually raising rates and uncertain aboutwhether the recovery is sturdy enough to withstand normal interestrates again. Thus they keep moving the target to give themselves morewiggle room. See also their inflation targets.
Once rates go up, then in theory the US dollar is more expensive,which makes exports more expensive (and imports cheaper) and thecost of capital will go up, which cools investment – negative factors forthe US. The rest of the world will be happy to see that happen - theUS consumer’s appetite for imported goodies has bailed out the globaleconomy before – it is still the world’s biggest economy.
We are also seeing lots of global currency games as variouseconomies try to devalue their currencies against one another to boosttheir economies. I’m looking at you Japan. And you too Germany -how such a strong export economy gets away with a depressed currencyis beyond me. I guess that’s why the rest of Europe is there [waves to
Greece and Spain].
Unfortunately, currency manipulation is a zero sum game so thatonly works if one of their trading partners is willing to see their currencyappreciate. The net result of this game would be a much stronger USdollar against the asian currencies. Again, the whole world is watchingthe US Fed because of all the ripple effects on currencies, imports etc.that happen as a result.
We are seeing slower growth from China, but perhaps the biggestunknown is the EU. Their Quantitative Easing (QE) program is in placewhich should increase the money supply and simultaneously lower bondyields (more money in the system and it costs less to borrow = a boostfor the Eurozone economy). However, a Greece debt default and Eu-rozone exit is a big question mark, more because of the uncertainty itcreates than any specific impact - Greece is a low single digit percentageof the Eurozone economy.
More importantly, we need to see that inflation is returning to theEurozone - they are currently deflating, in part from a sputtering econ-omy and in part from lower crude prices. I’m not sure the impact ofsaber rattling from Putin on Europe - it actually seems to be nothing,though war is a consistent destroyer of value. Employment is improvingthere and the business outlook is happier - but there is still an enormous
www.lairdresearch.com June 11, 2015 Page 2
amount of risk in the European economy.An observation: note that much of the discussion of government in-
tervention is actually done through central banks and monetary policy- literally trillions of dollars (and Euros) of assets are being bought andeventually sold through extraordinary measures like QE. And this is af-ter interest rates have been basically dropped to zero. There was a timewhen monetary policy was paired with fiscal policy - the governmentwould run a deficit and spend on some project or another and monetarypolicy would match it. It is historically odd that major economies havetossed aside all fiscal levers in favour of monetary strategies.
Note that the issue with Greece is all about the appropriate levelof austerity and restructuring that needs to happen - at the same timetheir central bank is engaging in a huge round of asset buying and rate
cutting to try to get their economies going again. Those monetary pol-icy battles were fought and lost in Ireland, Spain and Portugal already(not quite sure what the Italians are doing). Mark the moment: thepast 5 years have been a global science fair project to figure out theabsolute limits of monetary policy in a recession.
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, June 11, 2015
www.lairdresearch.com June 11, 2015 Page 3
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: 1.38Apr 2015: 1.12
Growth
Contraction
Initial Unemployment Claims
1000
's o
f Cla
ims
per
Wee
k
200
400
600 median: 350.25
Jun 2015: 278.75
Manufacturing Ave. Weekly Hours Worked
Hou
rs
3940
4142
4344 median: 40.60
May 2015: 41.80
ISM Manfacturing − PMI
Inde
x: S
tead
y S
tate
= 5
0
3040
5060
70 median: 53.40May 2015: 52.80
expanding economy
contracting economy
Manufacturers' New Orders: Durable GoodsB
illio
ns o
f Dol
lars
150
200
250
300
median: 183.82Apr 2015: 234.39
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: 112.70Mar 2015: 134.80
Capex (ex. Defense & Planes)
Per
cent
cha
nge
(3 m
onth
s)
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
−15
−5
05
10
median: 1.29Apr 2015: −3.81
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: 0.075Apr 2015: −0.15
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: 88.40May 2015: 90.70
www.lairdresearch.com June 11, 2015 Page 4
Global Financial Markets
Global Stock Market Returns
Country Index Name Close Date CurrentValue
WeeklyChange
MonthlyChange
3 monthChange
YearlyChange
Corr toS&P500
Corr toTSX
North AmericaUSA S&P 500 Jun 11 2,108.9 0.6% s 0.2% s 3.4% s 8.5% s 1.00 0.70USA NASDAQ Composite Jun 11 5,082.5 0.5% s 1.8% s 4.8% s 17.3% s 0.93 0.65USA Wilshire 5000 Total Market Jun 11 22,310.0 0.7% s 0.4% s 3.3% s 8.2% s 1.00 0.71Canada S&P TSX Jun 11 14,830.9 -1.3% t -2.1% t 0.6% s -0.4% t 0.70 1.00Europe and RussiaFrance CAC 40 Jun 11 4,971.4 -0.3% t -1.1% t -0.5% t 9.1% s 0.48 0.48Germany DAX Jun 11 11,332.8 -0.1% t -2.9% t -4.0% t 13.9% s 0.46 0.39United Kingdom FTSE Jun 11 6,846.7 -0.2% t -2.6% t 1.9% s 0.1% s 0.57 0.53Russia Market Vectors Russia ETF Jun 11 18.4 4.1% s -9.3% t 11.4% s -27.9% t 0.39 0.49AsiaTaiwan TSEC weighted index Jun 11 9,302.5 -0.5% t -3.7% t -2.3% t 0.8% s 0.13 0.09China Shanghai Composite Index Jun 05 5,023.1 2.3% s 16.9% s 54.6% s 146.1% s 0.03 -0.03Japan NIKKEI 225 Jun 11 20,383.0 -0.5% t 3.9% s 8.9% s 35.3% s -0.10 -0.07Hong Kong Hang Seng Jun 11 26,907.8 -2.3% t -2.9% t 13.4% s 15.7% s 0.08 0.12Korea Kospi Jun 11 2,056.6 -0.8% t -1.9% t 3.8% s 2.1% s -0.20 -0.08South Asia and AustrailiaIndia Bombay Stock Exchange Jun 11 26,371.0 -1.7% t -4.1% t -8.0% t 3.5% s 0.21 0.23Indonesia Jakarta Jun 11 4,928.8 -3.3% t -4.7% t -9.1% t -0.9% t -0.01 0.04Malaysia FTSE Bursa Malaysia KLCI Jun 11 1,734.8 -0.4% t -3.9% t -2.4% t -7.6% t 0.03 0.14Australia All Ordinaries Jun 11 5,562.6 0.9% s -1.2% t -3.5% t 2.4% s 0.03 0.10New Zealand NZX 50 Index Gross Jun 11 5,858.4 -0.1% t 1.9% s -0.1% t 13.1% s -0.27 -0.18South AmericaBrasil IBOVESPA Jun 11 53,689.0 1.4% s -6.1% t 9.8% s -2.6% t 0.42 0.46Argentina MERVAL Buenos Aires Jun 11 11,363.9 1.0% s -6.1% t 12.2% s 40.7% s 0.35 0.42Mexico Bolsa index Jun 11 44,624.7 0.1% s -1.2% t 3.2% s 3.9% s 0.56 0.44MENA and AfricaEgypt Market Vectors Egypt ETF Jun 11 51.8 -2.9% t -3.1% t -11.6% t -22.7% t 0.18 0.26(Gulf States) Market Vectors Gulf States ETF Jun 11 27.5 -1.5% t -1.4% t 2.9% s -13.0% t 0.33 0.37South Africa iShares MSCI South Africa Index Jun 11 63.6 2.9% s -6.5% t -0.5% t -5.5% t 0.61 0.51(Africa) Market Vectors Africa ETF Jun 11 24.9 -0.8% t -5.6% t 0.6% s -22.7% t 0.41 0.39CommoditiesUSD Spot Oil West Texas Int. Jun 08 $58.1 -3.5% t -2.1% t 16.4% s -44.7% t 0.08 0.21USD Gold LME Spot Jun 11 $1,180.5 -0.2% t -0.4% t 1.9% s -6.5% t 0.06 0.14
Note: Correlations are based on daily arithmetic returns for the most recent 100 trading days.
www.lairdresearch.com June 11, 2015 Page 5
S&P 500 Composite Index
The S&P 500 Composite Index is widely regarded as the best singlegauge of the large cap U.S. equities market. A key figure is the valua-tion level of the S&P500 as measured by the Price/Earnings ratio. Wepresent two versions: (1) a 12-month trailing earnings version which
reflects current earnings but is skewed by short term variances and (2)a cyclically adjusted version which looks at the inflation adjusted earn-ings over a 10 year period (i.e. at least one business cycle). Forecastedearnings numbers are estimates provided by S&P.
S&P 500 Profit Margins and Overall Corporate Profit Margins (Trailing 12 months)
Per
cent
63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
02468
101214
02468101214
Per
cent
Total Corporate Profits (% of GDP) − median: 6.2%, Q1/15: 10.7%Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.6%, Q1/15: 8.6%
S&P Quarterly Earnings (USD$ 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 5.0010.0015.0020.0025.0030.0035.0040.00
−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
0
10
20
30
40
50
0
10
20
30
40
50
Mul
tiple
Mul
tiple
12−month P/E ( median = 17.4, Jun = 21.3)10−year CAPE ( median = 19.5, Jun = 26.1)
www.lairdresearch.com June 11, 2015 Page 6
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+0.14%
MSFT−4.6%
GOOG−0.61%
FB+3.6%
ORCL−0.2%
V+5.9%
IBM−2.1%
INTC−4%
CSCO−0.93%
QCOM
MA+3.6%
EBAY
ACN
HPQ
TXN
CRM
NFLX
ADBE
ADP
CTSH
YHOO
INTU TEL
MU
ADI
EA
ADS
FIS
STX
XRX
WU
BRK−A−1.8%
WFC+4.5%
JPM+7.7%
BAC+8.6%
C+6.5%
GS
AIG AXP
USB MS
MET
BLK
SPG
PNC
BK
COF
PRU
AMT
ACE CME
STT PSA
TRV
MMC
BEN
BBT
MHFI
ICE ALL
CCI
AFL
DFS
HCN GGP
STI
CB
BXP
VNO
IVZ
MTB
WY
PGR
L
RF
XLO
JNJ−0.89%
PFE+2%
GILD+13%
MRK−1.6%
AMGN−1.5%
ACT+4.2%
UNH+5.4%
BMY+1.8%
ABBV+5.8%
MDT+0.82%
BIIB LLY
CELG ABT
ESRX MCK
TMO REGN
AET BAX
SYK MYL
CI
HCA
ALXN
HUM
VRTX
CAH
BDX
PRGO
ZTS
ZMH
ISRG
MNK
AUHS
LH
AMZN+2.4%
DIS+0.09%
CMCSA+0.6%
HD+1.6%
MCD−2.3%
NKE+3.1%
SBUX+4.7%
TWX+1.2%
FOXA LOW
PCLN F
GM
TGT
TWC+14%
DTV
TJX YUM CCL
JCI
CBS
VIAB
DLPH
LB
M DG
ORLY MAR
ROST
CMG
OMC
UA
HOT
JWN
GPC HBI
TIF RL
SNIIPG
GE+0.73%
UTX
MMM+1.4%
BA
UPS UNP
HON
DHR
LMTCAT
FDX
GD
EMR
ITW
CSX
DAL
RTN
DE
LUV
WM
IR
ROP
APH
TYC
ROK PH
AME
LLL
URI
WMT−6.6%
PG−1.1%
KO−2%
PEP−1.5%
PM−1.4%
CVS+2.2%
MO WBA
MDLZ
COST
CL
KMB RAI
KR
EL
GIS
ADM
LO
STZ
K
MJN
CAG
HRL
CPB
XOM−4.2%
CVX−7.3%
SLB−2.5%
KMI−7.8%
COPOXY−2%
EOG APC
PSX
HAL
BHI
DVN
PXD
SE
APA
HES NBL
DD
DOW
MON
LYB
PX
ECL
APD
SHWIP
FCX
SIAL NUE
CFAAVMC
DUK
NEE
D
SO EIX ED
ES
NI FE
VZ−5.3%
T+1.3%
Information Technology
Financials
Health Care
Consumer Discretionary
Industrials
ConsumerStaples
Energy Materials
Utilities
TelecommunicationsServices
<−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 May 1, 2015 to Jun 11, 2015
Average Median Median MedianSector Change P/Sales P/Book P/EHealth Care 3.8% s 3.7 4.1 27.4Financials 3.1% s 3.2 1.6 18.7Consumer Discretionary 0.5% s 1.8 4.3 21.1Information Technology 0.4% s 3.6 4.6 22.1Industrials -0.1% t 1.6 3.7 19.5
Average Median Median MedianSector Change P/Sales P/Book P/EMaterials -1.4% t 1.6 4.4 24.5Consumer Staples -1.6% t 2.3 6.0 25.2Telecommunications Services -2.6% t 1.4 2.1 31.4Utilities -4.3% t 1.5 1.6 17.1Energy -6.7% t 1.7 1.6 14.3
www.lairdresearch.com June 11, 2015 Page 7
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
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 = 1.33, Mar = 1.80)
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%
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%, May = 4.7%)Debt (BAA) Premium (median = 2.0%, May = 2.8%)
www.lairdresearch.com June 11, 2015 Page 8
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 June 11, 2015 Page 9
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 25
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
3.0Jun 10, 2015 (Today)May 11, 2015 (1 mo ago)Mar 10, 2015 (3 mo ago)10 Jun 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: 91.00Jun 2015: 91.00
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: 36.53Jun 2015: 25.89
0100200300
0100200300
Spr
ead
(bps
)
www.lairdresearch.com June 11, 2015 Page 10
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% (Apr = −0.11%)US Inflation ex Food & Energy YoY% (Apr = 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% (Apr = 0.12%)PCE Core Inflation YoY% (Apr = 1.2%)
5−Year, 5−Year Forward Inflation Expectation Rate
Per
cent
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 June 11, 2015 Page 11
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 Jun 10: $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 June 11, 2015 Page 12
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
0.99
1.39
1.79
2.19
2.58
Bra
zil /
CA
D
CAD Appreciating
CAD Depreciating
Change in F/X: May 1 2015 to Jun 5 2015(Trade Weighted Currency Index of USD Trading Partners)
−3.0%
−1.5%
1.5%
3.0%
Euro−0.7%
UK−2.3%
Japan 2.9%
South Korea 2.2%
China 0.3%
India−1.3%
Brazil 3.3%
Mexico 1.9%
Canada 0.9%
USA 1.5%
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−5.7%
AUS−1.8%
BRA−1.7%
CHN−2.2%
IND−5.0%
RUS 8.7%
USA−2.8%
EUR2.0%
JPY−3.8%
KRW0.0%
MXN−2.6%
ZAR−4.1%
www.lairdresearch.com June 11, 2015 Page 13
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 Q1: 2.95
Repos Outstanding with Fed. Reserve
Bill
ions
of D
olla
rs
010
030
050
0
median: 55.62Jun 2015: 226.20
Bank ROE − Assets between $300M−$1B
Per
cent
05
1015
median: 12.822015 Q1: 9.50
Consumer Credit Outstanding
% Y
early
Cha
nge
−5
05
1015
20
median: 7.62Apr 2015: 6.63
Total Business Loans%
Yea
rly C
hang
e
−20
010
20median: 8.57Apr 2015: 12.10
US Nonperforming Loans
Per
cent
12
34
5
median: 2.262015 Q1: 1.83
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: 0.069Jun 2015: −1.03
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: 1.34Jun 2015: 0.97
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: 2.312015 Q1: 6.14
www.lairdresearch.com June 11, 2015 Page 14
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: 6.20May 2015: 5.504
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 − Mar 2015Apr 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: 66.00May 2015: 62.90
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: 164.00May 2015: 280.00
www.lairdresearch.com June 11, 2015 Page 15
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: 8.70May 2015: 11.60
(U6) Unemployed + PT + Marginally Attached
Per
cent
810
1214
16
median: 9.70May 2015: 10.80
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: 107.69Jun 2015: 85.70
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: 0.79May 2015: 2.50
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: 2.25May 2015: 2.90
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 (May 2014 − May 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 June 11, 2015 Page 16
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: 6.222015 Q1: 9.12
ISM Manufacturing − PMI
Inde
x
3040
5060
70
May 2015: 52.80
manufac. expanding
manufac. contracting
ISM Manufacturing: New Orders Index
Inde
x
3040
5060
7080 May 2015: 55.80
Increase in new orders
Decrease in new orders
Non−Manufac. New Orders: Capital Goods
Bill
ions
of D
olla
rs
4050
6070
median: 57.72Apr 2015: 68.33
Average Weekly Hours: Manufacturing
Hou
rs
3940
4142
43
median: 41.10May 2015: 41.80
Industrial Production: Manufacturing
YoY
Per
cent
Cha
nge
−15
−5
05
10
median: 3.32Apr 2015: 2.56
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: 1.36Apr 2015: 1.36
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 Apr 2015: 0.00Above 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
May 2015: 59.50
Growth
Contraction
www.lairdresearch.com June 11, 2015 Page 17
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: 88.40May 2015: 90.70
Consumer Loans (All banks)
YoY
% C
hang
e
−10
010
2030
40
median: 7.71Apr 2015: 4.63
AccountingChange
Deliquency Rate on Consumer Loans
Per
cent
2.0
3.0
4.0
median: 3.472015 Q1: 2.00
New Orders: Durable Consumer Goods
YoY
% C
hang
e
−20
020
median: 4.08Apr 2015: 6.06
New Orders: Non−durable Consumer Goods
YoY
% C
hang
e
−20
010
20
median: 4.24Apr 2015: −12.98
Personal Consumption & Housing Index
Inde
x
−0.
40.
00.
20.
4
median: 0.02Apr 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: 14.80May 2015: 17.71
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: 5.60Apr 2015: 5.60
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: 2.51Apr 2015: 1.63
www.lairdresearch.com June 11, 2015 Page 18
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)
Apr 2015
r2 : 89.4%Range: Jan 1959 − Apr 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: 1.35Apr 2015: 1.14
New Home Median Sale Price
Sal
e P
rice
$000
's
100
150
200
250
300
Apr 2015: 297.30
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
Apr 2015: 4.00
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: 5.90Apr 2015: 4.80
www.lairdresearch.com June 11, 2015 Page 19
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 − Q1 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 − Q1 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 June 11, 2015 Page 20
Global Housing
The Bank for International Settlements has begun collecting globalhousing indicies, which are useful for showing what has been happeningwith global house prices. Note that these are not all the same data set -
each country measures housing prices in slightly different ways, so theyare only broadly comparable. Black lines are the data series, blue barson the right axis show the year over year percent change.
Brazil − Metro All Dwellings
Q1
2011
= 1
00
6080
100
140 Jan 2015: 148.01
Chile − All Dwellings
Dec 2013: 127.12
Peru (Lima) − All Dwellings
Dec 2014: 177.50
−40
020
40
Mexico − All Dwellings
Q1
2011
= 1
00
6080
100
140 Dec 2014: 118.60
China (Beijing) − All Dwellings
Mar 2015: 119.13
Hong Kong − Residential Prices
Feb 2015: 163.06
−40
020
40
Indonesia − Major Cities housing
Q1
2011
= 1
00
03 04 05 06 07 08 09 10 11 12 13 14 15
6080
100
140 Dec 2014: 130.00
India − Major Cities housing
03 04 05 06 07 08 09 10 11 12 13 14 15
Dec 2014: 185.55
Singapore − All Dwellings
03 04 05 06 07 08 09 10 11 12 13 14 15
Mar 2015: 102.25
−40
020
40
www.lairdresearch.com June 11, 2015 Page 21
Philippines (Manila) − FlatsQ
1 20
11 =
100
6080
120
Dec 2014: 139.96
Japan − All Dwellings
Dec 2014: 102.50
Australia − All Dwellings
Dec 2014: 117.14
−40
020
40
New Zealand − All Dwellings Big Cities
Q1
2011
= 1
00
6080
120
Dec 2014: 134.35
Turkey − All Dwellings
Feb 2015: 167.95
South Africa − Residential
Apr 2015: 108.62
−40
020
40
Israel − All Dwellings
Q1
2011
= 1
00
6080
120
Jan 2015: 125.57
Korea − All Dwellings
Mar 2015: 109.77
Russia − All Dwellings (Urban)
Dec 2014: 125.83
−40
020
40
Euro zone − All Dwellings
Q1
2011
= 1
00
03 04 05 06 07 08 09 10 11 12 13 14 15
6080
120
Dec 2014: 96.99
Canada − New Houses
03 04 05 06 07 08 09 10 11 12 13 14 15
Feb 2015: 107.87
US − New Single Family Houses
03 04 05 06 07 08 09 10 11 12 13 14 15
Dec 2014: 127.21
−40
020
40
www.lairdresearch.com June 11, 2015 Page 22
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 − May 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
Eurozone52.5
Global PMI51.2
TWN49.3MEX
53.3
KOR47.8
JPN50.9
VNM54.8
IDN47.1
ZAF50.1
AUS52.3
BRA45.9
CAN49.8
CHN49.2
IND52.6
RUS47.6
SAU57.0
USA54.0
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
Eurozone0.5
Global PMI0.2
TWN0.1MEX
−0.5
KOR−1.0
JPN1.0
VNM1.3
IDN0.4
ZAF−1.4
AUS 4.3
BRA−0.1
CAN 0.8
CHN 0.3
IND 1.3
RUS−1.3
SAU−1.3
USA−0.1
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 June 11, 2015 Page 23
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.
May
13
Jun
13
Jul 1
3
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
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 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 52.6 52.4 52.6 52.2 52.2 51.8 51.6 51.7 52.0 51.7 51.0 51.2
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 55.8 57.9 57.5 55.9 54.8 53.9 53.9 55.1 55.7 54.1 54.0
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 54.3 54.8 53.5 55.3 55.3 53.9 51.0 48.7 48.9 49.0 49.8
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 51.5 52.1 52.6 53.3 54.3 55.3 56.6 54.4 53.8 53.8 53.3
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 49.1 50.2 49.3 49.1 48.7 50.2 50.7 49.6 46.2 46.0 45.9
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 51.8 50.7 50.3 50.6 50.1 50.6 51.0 51.0 52.2 52.0 52.5
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 53.5 51.7 52.2 53.0 54.6 53.6 54.1 52.2 52.5 54.0 55.5
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 55.4 57.3 55.7 56.6 56.2 56.9 55.1 57.5 56.8 55.8 57.1
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 49.4 49.0 49.5 51.2 53.2 52.8 55.2 55.1 54.8 54.0 52.4
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 53.9 52.8 52.6 52.6 54.7 53.8 54.7 54.2 54.3 54.2 55.8
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 56.5 54.3 55.6 54.4 55.6 53.3 56.1 55.6 56.1 54.7 55.5
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 51.9 49.8 50.7 49.0 49.0 48.4 49.9 51.9 53.3 53.8 54.8
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 47.8 46.9 48.8 48.5 48.4 47.5 49.2 47.6 48.8 48.0 49.4
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 52.4 51.4 49.9 51.4 49.5 51.2 50.9 51.1 52.8 52.1 51.1
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 48.7 50.1 48.4 48.8 49.1 49.4 48.3 48.4 48.9 46.5 48.0
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 55.4 52.5 51.6 53.2 53.5 52.5 53.1 54.1 54.4 51.9 52.0
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 51.0 51.0 50.4 50.3 51.7 48.9 47.6 49.7 48.1 48.9 47.6
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 48.5 50.3 50.4 51.5 52.2 51.4 49.8 49.6 48.0 48.5 50.2
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 60.1 60.7 61.8 59.1 57.6 57.9 57.8 58.5 60.1 58.3 57.0
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 45.9 49.0 50.7 52.7 50.5 50.2 49.8 50.0 51.6 51.5 50.1
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 50.5 52.5 51.7 52.4 52.0 52.0 52.2 51.6 50.3 49.9 50.9
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 49.3 50.3 48.8 48.7 49.0 49.9 51.1 51.1 49.2 48.8 47.8
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 51.7 50.2 50.2 50.4 50.0 49.6 49.7 50.7 49.6 48.9 49.2
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 55.8 56.1 53.3 52.0 51.4 50.0 51.7 52.1 51.0 49.2 49.3
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 51.7 50.3 51.7 51.0 52.1 52.7 51.5 51.7 50.7 53.5 54.8
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 52.7 49.5 50.7 49.2 48.0 47.6 48.5 47.5 46.4 46.7 47.1
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 53.0 52.4 51.0 51.6 53.3 54.5 52.9 51.2 52.1 51.3 52.6
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 50.7 47.3 46.5 49.4 50.1 46.9 49.0 45.4 46.3 48.0 52.3
www.lairdresearch.com June 11, 2015 Page 24
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
020406080
Bal
ance
08 09 10 11 12 13 14 15
020406080
100
US (Feb 2015)
YoY
Cha
nge
−60−40−20
02040
Bal
ance
08 09 10 11 12 13 14 15
−60−40−20
0
Canada (Dec 2014)
YoY
Cha
nge
−15−10−5
05
10
Bal
ance
08 09 10 11 12 13 14 15
−20246
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)Yo
Y C
hang
e
−30−20−10
01020
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
05
1015
Bal
ance
08 09 10 11 12 13 14 15
−4−2
02468
10
India (Feb 2015)
YoY
Cha
nge
−10−5
05
1015
Bal
ance
08 09 10 11 12 13 14 15
−15−10−5
0
Australia (Jan 2015)
YoY
Cha
nge
−6−4−2
0246
Bal
ance
08 09 10 11 12 13 14 15
−2−1
01234
Eurozone (Nov 2013)
YoY
Cha
nge
−80−60−40−20
02040
Bal
ance
08 09 10 11 12 13 14 15
−100
1020
www.lairdresearch.com June 11, 2015 Page 25
Canadian Indicators
Retail Trade (SA)
YoY
Per
cent
Cha
nge
−5
05
10
median: 4.70Mar 2015: 3.08
Total Manufacturing Sales Growth
YoY
Per
cent
Gro
wth
−20
010
20
median: 4.14Mar 2015: 0.26
Manufacturing New Orders Growth
YoY
Per
cent
Gro
wth
−30
−10
010
2030
median: 4.54Mar 2015: 1.47
10yr Government Bond Yields
02
46
810
median: 5.75May 2015: 1.67
Manufacturing PMI
4951
5355
May 2015: 49.80
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: 1.33May 2015: 1.04
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: 1.93Apr 2015: 0.80
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: 1.35Mar 2015: 1.41
www.lairdresearch.com June 11, 2015 Page 26
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 − Feb 2015)
as.numeric(can.bev$ui.rate)
as.n
umer
ic(c
an.b
ev$v
acan
cies
) Mar 2011 − Dec 2012Jan 2013 − Jan 2015Feb 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 6.8%Alberta 5.8%Ontario 6.5%
Debt Service Ratios (SA)
Per
cent
46
810
Total Debt: 6.7%Mortgage: 3.4%Consumer Debt: 6.4%
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 June 11, 2015 Page 27
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 May 2015 Apr 2015 Apr 2015 Apr 2015 Apr 2015 Apr 2015 May 2015 May 2015� France -10.9 s 10.5 u 0.44 t 104.7 s 109.5 s 0.1 s -18.5 t 49.4 s� Germany 1.5 s 4.7 u 0.12 t NA 115.9 s 0.3 -8.0 t 51.1 t� United Kingdom 4.8 s 5.4 u 1.65 s 113.0 s NA 0.0 u -1.0 t 52.0 s� Italy -0.4 s 12.4 t 1.36 s 100.0 s NA -0.1 t -10.9 t 54.8 s� Greece -0.6 s 25.6 u 12.00 s NA NA -1.8 s -27.4 s 48.0 s� Spain 2.4 t 22.7 t 1.31 s NA NA -0.7 s -1.9 s 55.8 s� Eurozone (EU28) -0.4 s 9.7 u 1.26 t 106.2 s 109.5 s -0.1 s -10.7 t NA
www.lairdresearch.com June 11, 2015 Page 28
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: 1.90Mar 2015: −0.10−1
0
1
2
3
4
5
6
7 Euro AreaUS
Harmonized Inflation: Mar 2015
AUT 0.9%
BGR−0.9%
DEU 0.3%
ESP−0.7%
FIN−0.1%
FRA 0.1%
GBR 0.0%
GRC−1.8%
HRV−0.1%
HUN 0.0%
IRL−0.4%
ISL−0.3%
ITA−0.1%
NOR 1.8%
POL−0.9%
ROU 0.6%
SWE 0.5%
<−1.0%0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% >7.0%
YoY % Change in Prices
PMI: May 2015
<40.042.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0>60.0
Steady ExpandingContracting
BRA45.9
CAN49.8
DEU51.1
ESP55.8
FRA49.4
GBR52.0
GRC48.0
IRL57.1
ITA54.8
MEX53.3
POL52.4
SAU57.0
TUR50.2
USA54.0
RUS47.6
PMI Change: Apr − May
<−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 0.8
DEU−1.0
ESP 1.6
FRA 1.4
GBR 0.1
GRC 1.5
IRL 1.3
ITA 1.0
POL−1.6
TUR 1.7
USA−0.1
RUS−1.3
www.lairdresearch.com June 11, 2015 Page 29
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
May 2015: 49.20
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
Jun 2015: 5023.10
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
Apr 2015: 4450.00
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: 103.70Apr 2015: 107.60
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: 18.60May 2015: −2.50
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: 13.00May 2015: 10.10
www.lairdresearch.com June 11, 2015 Page 30
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 1961-1990 for precipitationand 1971-2000 for temperature.
Average Temperature Anomalies from Nov 2014 - Apr 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
Average 6 month Precipitation Anomalies from Oct 2014 - Mar 2015
<−40.0 −30.0 −20.0 −10.0 0.0 10.0 20.0 30.0 >40.0Anomalies in millimeters WetterDrier Anomalies in millimeters
−40 −20 0 20 40
www.lairdresearch.com June 11, 2015 Page 31