Upload
laird-research
View
701
Download
1
Embed Size (px)
Citation preview
....Laird Research - Economics
June 13, 2016
Where we are now . . . . . . . . . . . . . . . . . . . . . . . . 1
Indicators for US Economy . . . . . . . . . . . . . . . . . . . 2
Global Financial Markets . . . . . . . . . . . . . . . . . . . . 4
US Key Interest Rates . . . . . . . . . . . . . . . . . . . . . . 9
US Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
QE Taper Tracker . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 12
US Banking Indicators . . . . . . . . . . . . . . . . . . . . . . 13
US Employment Indicators . . . . . . . . . . . . . . . . . . . 14
US Business Activity Indicators . . . . . . . . . . . . . . . . 16
US Consumption Indicators . . . . . . . . . . . . . . . . . . 17
US Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Global Housing . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Global Business Indicators . . . . . . . . . . . . . . . . . . . 22
Canadian Indicators . . . . . . . . . . . . . . . . . . . . . . . 24
European Indicators . . . . . . . . . . . . . . . . . . . . . . . 26
Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 28
Global Climate Change . . . . . . . . . . . . . . . . . . . . . 29
Where we are now
The Laird Report presents a selection of economic data from aroundthe world to help figure where we are today. It was originally designedto be read on the train - 1 page per minute on my 30 minute morningcommute.
The US reported poor job numbers for May, adding only 38,000 – anumber far short of expectations. At the same time, the US continuesto see shrinking initial unemployment claims and the unemploymentrate is at multi-year lows.
Adding to this, corporate profit margins are declining from theirgenerational highs of the prior few years. I’ve seen a number of reportslinking lower job additions to falling profit margins – and this unholyunion is also seen as a predictor of an oncoming recession. It seemsreasonable that the decline in profitability would affect hiring, but thatprocess is clearly in its early stages as hiring conditions remain tight(i.e. businesses report its still hard to find good people).
One scary aspect is the degree to which US companies have loadedup on debt to drive earnings growth (on a per share basis) – this finan-
cial engineering is a different phenomenon than profit margin expansion.By loading up on debt to buy back shares (making the remaining sharesmore valuable), companies have also reduced their ability to withstandshocks to their own business. That is also a factor making companiesmore reticent to increase hiring as global growth slows.
Globally, we are seeing a cooling economy. In PMI reports, Japanand China report new orders are declining, while South Korea (a majorglobal trading economy) saw flat orders. Each of these economies hasbeen showing pressure for at least the past six months. One bright spotin the month has been Germany, which is reporting increases in neworders and production demand.
Formatting Notes The grey bars on the various charts are OECDrecession indicators for the respective countries.
Subscription Info For a FREE subscription to this monthly re-port, please visit sign up at our website: www.lairdresearch.com
Laird Research, June 13, 2016
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; trucking indices showing de-mand for transport; new order and housing permit indicies and con-sumer sentiment (how consumers are feeling about their own financialsituation and the economy in general). Red dots are points where anew trend has started.
Leading Index for the US
Inde
x: E
st. 6
mon
th g
row
th
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
−2
−1
01
23
median: 1.54Apr 2016: 1.46
Growth
Contraction
Initial Unemployment Claims
1000
's o
f Cla
ims
per
Wee
k
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
200
300
400
500
600
median: 348.25Jun 2016: 269.50
Manufacturing Ave. Weekly Hours Worked
Hou
rs w
orke
d pe
r W
eek
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
3940
4142
4344 median: 40.60
May 2016: 41.80
ISM Manfacturing − PMI
Inde
x: S
tead
y S
tate
= 5
0
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
3040
5060
70 median: 53.20May 2016: 51.30expanding economy
contracting economy
www.lairdresearch.com June 13, 2016 Page 2
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; trucking indices showing de-mand for transport; new order and housing permit indicies and con-sumer sentiment (how consumers are feeling about their own financialsituation and the economy in general). Red dots are points where anew trend has started.
Durable Goods: Manufacturers New Orders
Bill
ions
of D
olla
rs
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
150
200
250
median: 185.56Apr 2016: 236.20
Index of Truck Tonnage
Inde
x
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
100
110
120
130
median: 113.00Mar 2016: 134.70
Capex (ex. Defense & Planes)
Bill
ions
of D
olla
rs
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
4050
6070
median: 58.15Apr 2016: 62.72
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 16
5060
7080
9010
011
0
median: 88.90May 2016: 94.70
www.lairdresearch.com June 13, 2016 Page 3
Global Financial Markets
Global Stock Market Returns
Country Index Name Close Date CurrentValue
WeeklyChange
MonthlyChange
3 monthChange
12month
Change
Corr toS&P500
Corr toTSX
North AmericaUSA S&P 500 Jun 10 2,096.1 -0.1% t 0.6% s 5.4% s -0.4% t 1.00 0.69USA NASDAQ Composite Jun 10 4,894.5 -1.0% t 1.8% s 5.0% s -3.6% t 0.93 0.57USA Wilshire 5000 Total Market Jun 10 21,688.8 -0.2% t 0.7% s 6.0% s -2.6% t 0.99 0.74Canada S&P TSX Jun 10 14,037.5 -1.3% t 1.9% s 4.9% s -5.7% t 0.69 1.00Europe and RussiaFrance CAC 40 Jun 10 4,306.7 -2.6% t -0.7% t -1.0% t -12.7% t 0.65 0.58Germany DAX Jun 10 9,834.6 -2.7% t -2.1% t 3.5% s -12.7% t 0.62 0.49United Kingdom FTSE Jun 10 6,115.8 -1.5% t -0.7% t 1.3% s -10.5% t 0.68 0.66Russia Market Vectors Russia ETF Jun 10 17.2 0.6% s 1.8% s 9.3% s -4.3% t 0.61 0.78AsiaTaiwan TSEC weighted index Jun 08 8,715.5 1.4% s 7.2% s 0.6% s -7.0% t 0.25 0.25China Shanghai Composite Index Jun 08 2,927.2 0.5% s 3.4% s 0.9% s -43.0% t 0.25 0.22Japan NIKKEI 225 Jun 10 16,601.4 -0.2% t 0.2% s -1.5% t -17.2% t 0.02 0.11Hong Kong Hang Seng Jun 10 21,042.6 0.5% s 4.0% s 5.3% s -21.2% t 0.24 0.28Korea Kospi Jun 10 2,017.6 1.6% s 1.8% s 2.5% s -1.6% t 0.17 0.24South Asia and AustrailiaIndia Bombay Stock Exchange Jun 10 26,635.8 -0.8% t 3.3% s 8.2% s -0.8% t 0.41 0.38Indonesia Jakarta Jun 10 4,848.1 -0.1% t 1.8% s 1.1% s -1.7% t -0.03 0.26Malaysia FTSE Bursa Malaysia KLCI Jun 10 1,641.2 0.3% s 0.3% s -2.9% t -5.4% t 0.26 0.34Australia All Ordinaries Jun 10 5,391.6 -0.0% t -0.2% t 3.5% s -1.7% t 0.10 0.28New Zealand NZX 50 Index Gross Jun 10 6,971.8 -0.7% t 0.9% s 7.1% s 20.1% s -0.06 0.07South AmericaBrasil IBOVESPA Jun 10 49,422.0 -2.4% t -6.9% t -0.3% t -8.3% t 0.48 0.58Argentina MERVAL Buenos Aires Jun 10 13,324.4 4.2% s -1.0% t 1.2% s 17.2% s 0.56 0.66Mexico Bolsa index Jun 10 45,177.5 -1.6% t -1.1% t 1.9% s 1.3% s 0.64 0.63MENA and AfricaEgypt Market Vectors Egypt ETF Jun 10 39.1 1.2% s 1.4% s 7.1% s -23.2% t 0.42 0.45(Gulf States) Market Vectors Gulf States ETF Jun 10 21.7 1.7% s -2.3% t 0.1% s -18.1% t 0.25 0.26South Africa iShares MSCI South Africa Index Jun 10 52.1 -3.8% t 3.8% s 6.9% s -16.3% t 0.70 0.77(Africa) Market Vectors Africa ETF Jun 10 20.3 -2.4% t 1.6% s 10.1% s -17.0% t 0.45 0.63CommoditiesUSD Spot Oil West Texas Int. Jun 06 $49.7 1.2% s 11.5% s 31.2% s -14.5% t 0.44 0.68USD Gold LME Spot Jun 10 $1,266.6 4.6% s 0.1% s 1.6% s 6.8% s -0.11 0.00
Note: Correlations are based on daily arithmetic returns for the most recent 100 trading days.
www.lairdresearch.com June 13, 2016 Page 4
S&P 500 Composite Index
The S&P 500 Composite Index is widely regarded as the best singlegauge of the large cap U.S. equities market. A key figure is the valua-tion level of the S&P500 as measured by the Price/Earnings ratio. Wepresent two versions: (1) a 12-month trailing earnings version which
reflects current earnings but is skewed by short term variances and (2)a cyclically adjusted version which looks at the inflation adjusted earn-ings over a 10 year period (i.e. at least one business cycle). Forecastedearnings numbers are estimates provided by S&P.
S&P 500 Profit Margins and Overall Corporate Profit Margins (Trailing 12 months)
Per
cent
63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
02468
101214
02468101214
Per
cent
Total Corporate Profits (% of GDP) − median: 6.2%, Q1/16: 9.2%Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.7%, Q1/16: 7.7%
S&P Quarterly Earnings (USD$ Inflation Adjusted to current prices)
63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
−5.00 0.00 5.0010.0015.0020.0025.0030.0035.0040.00
−5.00 0.00 5.0010.0015.0020.0025.0030.0035.0040.00
Tech BubbleJapanese Asset Bubble
House BubbleAsian Financial Crisis
US Financial Crisis
Eurozone crisis
Oil Crisis I Oil Crisis II
Gulf WarSavings and Loans Crisis
High Inflation Period
Afganistan/Iraq WarVietnam War
Reported EarningsOperating Earnings
Trailing P/E Ratios for S&P500
63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
0
10
20
30
40
50
0
10
20
30
40
50
Mul
tiple
Mul
tiple
12−month P/E ( median = 17.5, Jun = 23.4)10−year CAPE ( median = 19.6, Jun = 26.0)
www.lairdresearch.com June 13, 2016 Page 5
S&P 500 Composite Distributions
This is a view of the price performance of the S&P 500 index com-panies. The area of each box is proportional to the company’s marketcap, while the colour is determined by the percentage change in price
over the past month. In addition, companies are sorted according totheir industry group.
AAPL+6.2%
GOOG+3%
MSFT+1.7%
FB−1.6%
V+2.2%
ORCL−3.9%
INTC+5.6%
IBM+5.9%
CSCO+6.1%
MA
QCOM ACN
AVGO
TXN+7%
CRM
EMC
ADBE
PYPL
NFLX
ADP
CTSH
YHOO
HPE
FIS
EA
TEL
ADI
CA
MU
MSI
WFC−3.7%
JPM+0.078%
BAC−6.4%
C−6%
USB GS SPG
AXP−1.1%
AIG−2.8%
CB BLK MS
MET AMT BK
PNC PSA
SCHW
COF
MMC
TRV
PRU
CCI
ICE
AON AFL
BBT
PLD
HCN
SYF
ALL
EQR
STT
DFS
VTR
WY
BEN BXP
HIG
O
FITB
ESS
L
RF
IVZ
SLG XL
JNJ+3.8%
PFE+7.6%
MRK+2.7%
UNH+5.4%
BMYMDT+8%
AMGN−2.6%
GILD−5.1%
ABBV
AGN+10%
CELG−2%
LLY
TMO
ABT
BIIB−10%
ESRX
SYK
AET
MCK
BDX
ANTM
CI
BSX
HCA
ALXN
HUM
EW
ABC
A
PRGO
LH
CNC
AMZN+5%
HD−5.3%
DIS−6.7%
CMCSA MCD
NKE
SBUX−4%
LOW+2.9%
PCLN−2.8%
TWX−2.2%
FOX−4.1%
F
TJX
GM
CCL
YUM
UA
JCI
VFC
DG
ORLY
CBS
AZO
DLTR
ROST
OMC
LB
VIAB
RCL
ULTA
MHK
GPC
NWL
HOT
DHI
M
DRI
RL
WMT+5.3%
PG+2.8%
KO+2.2%
PM+2.8%
PEP
MO+4.8%
CVS
KHC WBA RAI
MDLZ+1.6%
COST+2.6%
CL
KMB
GIS KR
EL
STZ
K
TSN
TAPHRL
SJM
DPS
CLX
MJN
CHD
GE−2.8%
MMM
UPSHON
+1.8%
UTX BA
UNP
LMT+3.1%
DHR
GD FDX
RTN NOC
ITW
EMR
DAL
ETN
LUV
DE CSX
AAL
TYC
IR
PH
LLL
AYI
CTAS
XOM+0.95% CVX
−1.3%
SLB−1.1%
OXY−1.2%
COP
EOG
PSX
KMI HALAPC
PXD
VLO SE
APA BHI
MPC
DVN
CXO
NOV
NEE−79%
DUK+2.9%
SO
D
AEP
EXC
PCG
SRE
PPL EIX
ED PEG
XEL
WEC
ES
FENITE
DOW
DD
ECL
LYB
PX
APD
PPG
SHW
NEM
IP
NUE
FCX
AA
BLL
MOS
CF
T+3.1%
VZ+2.6%
Information Technology
Financials
Health Care
Consumer Discretionary
Consumer Staples Industrials
Energy Utilities
Materials
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 2, 2016 to Jun 10, 2016
Average Median Median MedianSector Change P/Sales P/Book P/EInformation Technology 3.6% s 3.5 4.4 24.0Consumer Staples 2.4% s 2.6 6.1 28.4Telecommunications Services 2.2% s 1.6 1.8 14.0Health Care 2.1% s 3.5 3.8 27.2Materials 1.1% s 1.5 4.4 25.5
Average Median Median MedianSector Change P/Sales P/Book P/EIndustrials 0.2% s 1.6 3.8 20.5Energy -0.1% t 2.4 2.4 35.7Financials -1.4% t 3.0 1.7 17.2Consumer Discretionary -2.3% t 1.6 3.8 19.2Utilities -4.4% t 2.1 2.0 21.8
www.lairdresearch.com June 13, 2016 Page 6
US Equity Valuations
A key valuation metric is Tobin’s q: the ratio between the marketvalue of the entire US stock market versus US net assets at replacementcost (ie. what you pay versus what you get). Warren Buffet famouslyfollows stock market value as a percentage of GNP, which is highly(93%) correlated to Tobin’s q.
We can also take the reverse approach: assume the market hasvaluations correct, we can determine the required returns of future es-
timated earnings. These are quoted for both debt (using BAA ratedsecurities as a proxy) and equity premiums above the risk free rate (10year US Treasuries). These figures are alternate approaches to under-standing the current market sentiment - higher premiums indicate ademand for greater returns for the same price and show the level ofrisk-aversion in the market.
Tobin's q (Market Equity / Market Net Worth) and S&P500 Price/Sales
63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
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 = 0.97)S&P 500 Price/Sales (median = 1.35, Mar = 1.79)
Equity and Debt Risk Premiums: Spread vs. Risk Free Rate (10−year US Treasury)
63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
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 = 4.1%, Jun = 4.9%)Debt (BAA) Premium (median = 2.0%, Jun = 2.8%)
www.lairdresearch.com June 13, 2016 Page 7
US Mutual Fund Flows
Fund flows describe the net investments in equity and bond mutualfunds in the US market, as described in ICI’s “Trends in Mutual FundInvesting” report. Note however that this is only part of the story as
it does not include ETF fund flows - part of the changes are investorsentering or leaving the market, and part is investors shifting to ETF’sfrom mutual funds.
US Net New Investment Cash Flow to Mutual Funds
US
$ bi
llion
s (m
onth
ly)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
−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 2016
−60
−40
−20
020
4060
Flows to EquityFlows to BondsNet Market Flows
www.lairdresearch.com June 13, 2016 Page 8
US Key Interest Rates
Interest rates are often leading indicators of stress in the financialsystem. The yield curve show the time structure of interest rates ongovernment bonds - Usually the longer the time the loan is outstanding,the higher the rate charged. However if a recession is expected, thenthe fed cuts rates and this relationship is inverted - leading to negativespreads where short term rates are higher than long term rates.
Almost every recession in the past century has been preceeded by an
inversion - though not every inversion preceeds a recession (just mostof the time).
For corporate bonds, the key issue is the spread between bond rates(i.e. AAA vs BAA bonds) or between government loans (LIBOR vsFedfunds - the infamous “TED Spread”). Here a spike correlates to anaversion to risk, which is an indication that something bad is happen-ing.
US Treasury Yield Curves
For
war
d In
stan
tane
ous
Rat
es (
%)
15 16 17 18 19 20 21 22 23 24 25 26
0.0
0.5
1.0
1.5
2.0
2.5
0.0
0.5
1.0
1.5
2.0
2.5Jun 9, 2016 (Today)May 9, 2016 (1 mo ago)Mar 9, 2016 (3 mo ago)09 Jun 2015 (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 16
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 16
median: 91.00Jun 2016: 105.00
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 16
median: 36.38Jun 2016: 42.22
0100200300
0100200300
Spr
ead
(bps
)
www.lairdresearch.com June 13, 2016 Page 9
US Inflation
Generally, the US Fed tries to anchor long run inflation expectationsto approximately 2%. Inflation can be measured with the ConsumerPrice Index (CPI) or the Personal Consumption Expenditures (PCE)index.
In both cases, it makes sense to exclude items that vary quickly likeFood and Energy to get a clearer picture of inflation (usually called
Core Inflation). The Fed seems to think PCI more accurately reflectsthe entire basket of goods and services that households purchase.
Finally, we can make a reasonable estimate of future inflation ex-pectations by comparing real return and normal bonds to construct animputed forward inflation expectation. The 5y5y chart shows expected5 year inflation rates at a point 5 years in the future. Neat trick that.
Consumer Price Index
Per
cent
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
−1%
0%
1%
2%
3%
4%
5%
6%
−1%
0%
1%
2%
3%
4%
5%
6%
US Inflation Rate YoY% (Apr = 1.1%)US Inflation ex Food & Energy YoY% (Apr = 2.1%)
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 16
−1
01
23
45
6
PCE Inflation Rate YoY% (Apr = 1.1%)PCE Core Inflation YoY% (Apr = 1.6%)
5−Year, 5−Year Forward Inflation Expectation Rate
Per
cent
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
−1
01
23
45
6
5 year forward Inflation ExpectationActual 5yr Inflation (CPI measure)Actual 5yr Inflation (PCE Measure)
www.lairdresearch.com June 13, 2016 Page 10
QE Taper Tracker
The US has been using the program of Quantitative Easing to pro-vide monetary stimulous to its economy. The Fed has engaged in aseries of programs (QE1, QE2 & QE3) designed to drive down longterm rates and improve liquidity though purchases of treasuries, mor-gage backed securites and other debt from banks.
The higher demand for long maturity securities would drive up theirprice, but as these securities have a fixed coupon, their yield would bedecreased (yield ≈ coupon / price) thus driving down long term rates.
In 2011-2012, “Operation Twist” attempted to reduce rates withoutincreasing liquidity. They went back to QE in 2013.
The Fed chairman suggested in June 2013 the economy was recover-ing enough that they could start slowing down purchases (“tapering”).The Fed backed off after a brief market panic. The Fed announced inDec 2013 that it was starting the taper, a decision partly driven byseeing key targets of inflation around 2% and unemployment being lessthan 6.5%. In Oct 2014, they announced the end of purchases.
QE Asset Purchases to Date (Treasury & Mortgage Backed Securities)
Trill
ions
0.00.51.01.52.02.5
0.00.51.01.52.02.5
QE1 QE2 Operation Twist QE3 TaperTreasuries
Mortgage Backed Securities
Total Monthly Asset Purchases (Treasury + Mortgage Backed Securities)
Bill
ions
−100−50
050
100150200
−100−50050100150200
Month to date Jun 08: $0.3
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 13, 2016 Page 11
Exchange Rates
10 Week Moving Average CAD Exchange Rates
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
0.62
0.71
0.81
0.90
1.00
1.09
US
A /
CA
D
0.55
0.61
0.66
0.72
0.77
0.82
Eur
o / C
AD
59.
16 7
4.71
90.
2610
5.81
121.
3613
6.91
Japa
n / C
AD
0.38
0.44
0.49
0.55
0.61
0.67
U.K
. / C
AD
0.59
1.10
1.60
2.11
2.61
3.12
Bra
zil /
CA
D
CAD Appreciating
CAD Depreciating
Change in F/X: May 2 2016 to Jun 3 2016(Trade Weighted Currency Index of USD Trading Partners)
−3.0%
−1.5%
1.5%
3.0%
Euro−0.8%
UK−1.4%
Japan−2.0%
South Korea 0.1%
China−1.1%
India−1.5%
Brazil−1.6%
Mexico 5.3%
Canada 0.7%
USA 2.5%
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 6.2%
AUS−5.4%
BRA 1.8%
CHN−4.7%
IND−3.5%
RUS 3.2%
USA−3.7%
EUR−2.8%
JPY1.7%
KRW0.0%
MXN−8.3%
ZAR−3.3%
www.lairdresearch.com June 13, 2016 Page 12
US Banking Indicators
The banking and finance industry is a key indicator of the healthof the US economy. It provides crucial liquidity to the economy in theform of credit, and the breakdown of that system is one of the exac-erbating factors of the 2008 recession. Key figures to track are the
Net Interest Margins which determine profitability (ie. the differencebetween what a bank pays to depositors versus what the bank is paidby creditors), along with levels of non-performing loans (i.e. loan lossreserves and actual deliquency rates).
US Banks Net Interest Margin
Per
cent
3.0
3.5
4.0
4.5
median: 3.932016 Q1: 3.02
Repos Outstanding with Fed. Reserve
Bill
ions
of D
olla
rs
020
040
060
0
median: 58.96Jun 2016: 285.04
Bank ROE − Assets between $300M−$1B
Per
cent
05
1015
median: 12.812016 Q1: 9.57
Consumer Credit Outstanding
% Y
early
Cha
nge
−5
05
1015
20
median: 7.51Apr 2016: 6.23
Total Business Loans%
Yea
rly C
hang
e
−20
010
20median: 8.64May 2016: 10.25
US Nonperforming Loans
Per
cent
12
34
5
median: 1.982016 Q1: 1.57
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 16
02
46
median: 0.094Jun 2016: −1.01
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 16
1.0
1.4
1.8
2.2
median: 1.32Jun 2016: 1.05
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 16
24
68
10
median: 2.342016 Q1: 4.84
www.lairdresearch.com June 13, 2016 Page 13
US Employment Indicators
Unemployment rates are considered the “single best indicator ofcurrent labour conditions” by the Fed. The pace of payroll growth ishighly correlated with a number of economic indicators.Payroll changesare another way to track the change in unemployment rate.
Unemployment only captures the percentage of people who are inthe labour market who don’t currently have a job - another measure
is what percentage of the whole population wants a job (employed ornot) - this is the Participation Rate.
The Beveridge Curve measures labour market efficiency by lookingat the relationship between job openings and the unemployment rate.The curve slopes downward reflecting that higher rates of unemploy-ment occur coincidentally with lower levels of job vacancies.
Unemployment Rate
Per
cent
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
median: 6.10May 2016: 4.704
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 2016Apr 2016
Participation Rate
Per
cent
of P
op.
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
6364
6566
67
median: 66.00May 2016: 62.60
Total Nonfarm Payroll Change
Mon
thly
Cha
nge
(000
s)
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
−50
00
500
median: 167May 2016: 38
www.lairdresearch.com June 13, 2016 Page 14
There are a number of other ways to measure the health of employ-ment. The U6 Rate includes people who are part time that want afull-time job - they are employed but under-utilitized. Temporary helpdemand is another indicator of labour market tightness or slack.
The large chart shows changes in private industry employment lev-els over the past year, versus how well those job segments typically pay.Lots of hiring in low paying jobs at the expense of higher paying jobsis generally bad, though perhaps not unsurprising in a recovery.
Median Duration of Unemployment
Wee
ks
510
1520
25 median: 8.70May 2016: 10.70
(U6) Unemployed + PT + Marginally Attached
Per
cent
810
1214
16
median: 9.80May 2016: 9.70
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 16
5010
015
020
0
median: 107.07Jun 2016: 82.86
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 16
01
23
45
67
median: 0.81May 2016: 1.89
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 16
1.5
2.0
2.5
3.0
median: 2.27May 2016: 2.88
−200 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 2015 − May 2016)
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 13, 2016 Page 15
US Business Activity Indicators
Business activity is split between manufacturing activity and non-manufacturing activity. We are focusing on forward looking business
indicators like new order and inventory levels to give a sense of thecurrent business environment.
Manufacturing: Real Output
YoY
Per
cent
Cha
nge
−10
010
20
median: 8.19Jan 2016: 2.96
ISM Manufacturing − PMI
3040
5060
70
May 2016: 51.30
manufac. expanding
manufac. contracting
ISM Manufacturing: New Orders Index
3040
5060
7080 May 2016: 55.70
Increase in new orders
Decrease in new orders
Non−Manufac. New Orders: Capital Goods
Bill
ions
of D
olla
rs
4050
6070
median: 58.15Apr 2016: 62.72
Average Weekly Hours: Manufacturing
3940
4142
43
median: 41.20May 2016: 41.80
Industrial Production: Manufacturing
YoY
Per
cent
Cha
nge
−15
−5
05
10
median: 3.00Apr 2016: 0.54
Inventory to Sales Ratio
Rat
io
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
1.1
1.2
1.3
1.4
1.5
1.6
median: 1.37Mar 2016: 1.41
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 16
−0.
50.
00.
5 Apr 2016: 0.00Above ave growth
Below ave growth
ISM Non−Manufacturing Bus. Activity Index
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
3545
5565
May 2016: 55.10
Growth
Contraction
www.lairdresearch.com June 13, 2016 Page 16
US Consumption Indicators
Variations in consumer activity are a leading indicator of thestrength of the economy. We track consumer sentiment (their expec-
tations about the future), consumer loan activity (indicator of newpurchase activity), and new orders and sales of consumer goods.
U. Michigan: Consumer Sentiment
Inde
x 19
66 Q
1 =
100
5060
7080
9011
0
median: 88.90May 2016: 94.70
Consumer Loans (All banks)
YoY
% C
hang
e
−10
010
2030
40
median: 7.53May 2016: 7.65
AccountingChange
Deliquency Rate on Consumer Loans
Per
cent
age
2.0
3.0
4.0
median: 3.45Jan 2016: 1.99
New Orders: Durable Consumer Goods
YoY
% C
hang
e
−20
020
median: 4.54Apr 2016: 1.10
New Orders: Non−durable Consumer Goods
YoY
% C
hang
e
−20
010
20
median: 3.87Apr 2016: −7.47
Personal Consumption & Housing Index
Inde
x
−0.
40.
00.
20.
4
median: 0.02Apr 2016: −0.07above 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 16
1012
1416
1820
22
median: 14.85May 2016: 17.37
Personal Saving Rate
Per
cent
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
24
68
10
median: 5.50Apr 2016: 5.40
Retail Food and Service Sales
YoY
% C
hang
e (R
eal)
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
−10
−5
05
median: 2.46Apr 2016: 1.83
www.lairdresearch.com June 13, 2016 Page 17
US Housing
Housing construction is only about 5-8% of the US economy, how-ever a house is typically the largest asset owned by a household. Sincepersonal consumption is about 70% of the US economy and house val-ues directly impact household wealth, housing is an important indicatorin the health of the overall economy. In particular, housing investment
was an important driver of the economy getting out of the last fewrecessions (though not this one so far). Here we track housing pricesand especially indicators which show the current state of the housingmarket.
15 20 25 30 35
150
200
250
300
Personal Income vs. Housing Prices (Inflation adjusted values)
New
Hom
e P
rice
(000
's)
Disposable Income Per Capita (000's)
April 2016
r2 : 89.5%Range: Jan 1959 − Apr 2016Blue 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: 1.34Apr 2016: 1.13
New Home Median Sale Price
Sal
e P
rice
$000
's
100
200
300
Apr 2016: 321.10
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 16
4050
6070
80 median: 66.50Jan 2016: 57.80
New Homes: Median Months on the Market
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
46
810
1214 median: 4.90
Apr 2016: 4.30
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 16
46
810
12 median: 5.80Apr 2016: 4.70
www.lairdresearch.com June 13, 2016 Page 18
US Housing - FHFA Quarterly Index
The Federal Housing Finance Agency provides a quarterly surveyon house prices, based on sales prices and appraisal data. This gener-ates a housing index for 355 municipal areas in the US from 1979 topresent. We have provided an alternative view of this data looking atthe change in prices from the peak in the 2007 time frame.
The goal is to provide a sense of where the housing markets are
weak versus strong.The colours represent gain or losses since the startof the housing crisis (defined as the maximum price between 2007-2009for each city). The circled dots are the cities in the survey, while thebackground colours are interpolated from these points using a loesssmoother.
Change from 2007 Peak − Q1 2016
−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 2016
−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 13, 2016 Page 19
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 2016: 134.69
Chile − All Dwellings
Jun 2015: 127.92
Peru (Lima) − All Dwellings
Dec 2015: 193.62
−40
020
40
Mexico − All Dwellings
Q1
2011
= 1
00
6080
100
140 Dec 2015: 126.60
China (Beijing) − All Dwellings
Dec 2015: 131.55
Hong Kong − Residential Prices
Feb 2016: 165.55
−40
020
40
Indonesia − Major Cities housing
Q1
2011
= 1
00
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
6080
100
140 Dec 2015: 135.71
India − Major Cities housing
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Dec 2015: 207.97
Singapore − All Dwellings
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Mar 2016: 98.81
−40
020
40
www.lairdresearch.com June 13, 2016 Page 20
Philippines (Manila) − FlatsQ
1 20
11 =
100
6080
120
Dec 2015: 146.25
Japan − All Dwellings
Jan 2016: 107.10
Australia − All Dwellings
Dec 2015: 127.17
−40
020
40
New Zealand − All Dwellings Big Cities
Q1
2011
= 1
00
6080
120
Dec 2015: 150.39
Turkey − All Dwellings
Feb 2016: 195.53
South Africa − Residential
Mar 2016: 119.91
−40
020
40
Israel − All Dwellings
Q1
2011
= 1
00
6080
120
Jan 2016: 134.86
Korea − All Dwellings
Mar 2016: 113.99
Russia − All Dwellings (Urban)
Dec 2015: 121.92
−40
020
40
Euro zone − All Dwellings
Q1
2011
= 1
00
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
6080
120
Dec 2015: 99.49
Canada − New Houses
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Feb 2016: 109.79
US − New Single Family Houses
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Mar 2016: 125.61
−40
020
40
www.lairdresearch.com June 13, 2016 Page 21
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 2016
<40.0 42.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0 >60.0
Steady ExpandingContracting
Eurozone51.5
Global PMI50.0
TWN48.5MEX
53.6
KOR50.1
JPN47.7
VNM52.7
IDN50.6
ZAF50.2
AUS51.0
BRA41.6
CAN52.1
CHN49.2
IND50.7
RUS49.6
SAU54.8
USA50.7
Global M−PMI Monthly Change
<−5.0 −4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 >5.0
PMI Change ImprovingDeteriorating
Eurozone−0.2
Global PMI−0.1
TWN−1.2MEX
1.2
KOR0.1
JPN−0.5
VNM0.4
IDN−0.3
ZAF2.3
AUS−2.4
BRA−1.0
CAN−0.1
CHN−0.2
IND 0.2
RUS 1.6
SAU 0.6
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 16
3040
5060
70
3040
5060
70
Business Conditions Contracting
Business Conditions Expanding
www.lairdresearch.com June 13, 2016 Page 22
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
14
Jun
14
Jul 1
4
Aug
14
Sep
14
Oct
14
Nov
14
Dec
14
Jan
15
Feb
15
Mar
15
Apr
15
May
15
Jun
15
Jul 1
5
Aug
15
Sep
15
Oct
15
Nov
15
Dec
15
Jan
16
Feb
16
Mar
16
Apr
16
May
16
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 52.2 52.6 52.4 52.6 52.2 52.2 51.8 51.6 51.7 52.0 51.7 51.0 51.2 51.0 51.0 50.7 50.7 51.3 51.2 50.7 50.9 50.0 50.6 50.1 50.0
56.4 57.3 55.8 57.9 57.5 55.9 54.8 53.9 53.9 55.1 55.7 54.1 54.0 53.6 53.8 53.0 53.1 54.1 52.8 51.2 52.4 51.3 51.5 50.8 50.7
52.2 53.5 54.3 54.8 53.5 55.3 55.3 53.9 51.0 48.7 48.9 49.0 49.8 51.3 50.8 49.4 48.6 48.0 48.6 47.5 49.3 49.4 51.5 52.2 52.1
51.9 51.8 51.5 52.1 52.6 53.3 54.3 55.3 56.6 54.4 53.8 53.8 53.3 52.0 52.9 52.4 52.1 53.0 53.0 52.4 52.2 53.1 53.2 52.4 53.6
48.8 48.7 49.1 50.2 49.3 49.1 48.7 50.2 50.7 49.6 46.2 46.0 45.9 46.5 47.2 45.8 47.0 44.1 43.8 45.6 47.4 44.5 46.0 42.6 41.6
52.2 51.8 51.8 50.7 50.3 50.6 50.1 50.6 51.0 51.0 52.2 52.0 52.2 52.5 52.4 52.3 52.0 52.3 52.8 53.2 52.3 51.2 51.6 51.7 51.5
53.6 52.3 53.5 51.7 52.2 53.0 54.6 53.6 54.1 52.2 52.5 54.0 55.5 56.2 56.0 53.9 53.0 53.7 53.5 53.4 52.4 51.7 53.6 52.6 52.7
55.0 55.3 55.4 57.3 55.7 56.6 56.2 56.9 55.1 57.5 56.8 55.8 57.1 54.6 56.7 53.6 53.8 53.6 53.3 54.2 54.3 52.9 54.9 52.6 51.5
50.8 50.3 49.4 49.0 49.5 51.2 53.2 52.8 55.2 55.1 54.8 54.0 52.4 54.3 54.5 51.1 50.9 52.2 52.1 52.1 50.9 52.8 53.8 51.0 52.1
52.9 54.6 53.9 52.8 52.6 52.6 54.7 53.8 54.7 54.2 54.3 54.2 55.8 54.5 53.6 53.2 51.7 51.3 53.1 53.0 55.4 54.1 53.4 53.5 51.8
57.3 54.7 56.5 54.3 55.6 54.4 55.6 53.3 56.1 55.6 56.1 54.7 55.5 56.9 57.5 56.6 55.5 54.0 54.2 55.6 56.9 55.5 54.3 53.6 53.3
53.2 52.6 51.9 49.8 50.7 49.0 49.0 48.4 49.9 51.9 53.3 53.8 54.8 54.1 55.3 53.8 52.7 54.1 54.9 55.6 53.2 52.2 53.5 53.9 52.4
49.6 48.2 47.8 46.9 48.8 48.5 48.4 47.5 49.2 47.6 48.8 48.0 49.4 50.7 49.6 48.3 50.6 50.6 50.6 51.4 50.0 50.2 49.6 48.0 48.4
52.3 52.0 52.4 51.4 49.9 51.4 49.5 51.2 50.9 51.1 52.8 52.1 51.1 51.9 51.8 53.3 52.3 52.1 52.9 53.2 52.3 50.5 50.7 51.8 52.1
51.0 49.4 48.7 50.1 48.4 48.8 49.1 49.4 48.3 48.4 48.9 46.5 48.0 46.9 30.2 39.1 43.3 47.3 48.1 50.2 50.0 48.4 49.0 49.7 48.4
57.0 57.5 55.4 52.5 51.6 53.2 53.5 52.5 53.1 54.1 54.4 51.9 52.0 51.4 51.9 51.6 51.8 55.5 52.7 51.9 52.9 50.8 50.7 49.2 50.1
48.9 49.1 51.0 51.0 50.4 50.3 51.7 48.9 47.6 49.7 48.1 48.9 47.6 48.7 48.3 47.9 49.1 50.2 50.1 48.7 49.8 49.3 48.3 48.0 49.6
50.1 48.8 48.5 50.3 50.4 51.5 52.2 51.4 49.8 49.6 48.0 48.5 50.2 49.0 50.1 49.3 48.0 49.5 50.9 52.2 50.9 50.3 49.2 48.9 49.4
57.0 59.2 60.1 60.7 61.8 59.1 57.6 57.9 57.8 58.5 60.1 58.3 57.0 56.1 57.5 58.7 56.5 55.7 56.3 54.4 53.9 54.4 54.5 54.2 54.8
44.3 46.6 45.9 49.0 50.7 52.7 50.5 50.2 49.8 50.0 51.6 51.5 50.1 49.2 48.9 49.3 47.9 47.5 49.6 49.1 49.6 49.1 47.0 47.9 50.2
49.9 51.5 50.5 52.5 51.7 52.4 52.0 52.0 52.2 51.6 50.3 49.9 50.9 50.1 51.2 51.7 51.0 52.4 52.6 52.6 52.3 50.1 49.1 48.2 47.7
49.5 48.4 49.3 50.3 48.8 48.7 49.0 49.9 51.1 51.1 49.2 48.8 47.8 46.1 47.6 47.9 49.2 49.1 49.1 50.7 49.5 48.7 49.5 50.0 50.1
49.4 50.7 51.7 50.2 50.2 50.4 50.0 49.6 49.7 50.7 49.6 48.9 49.2 49.4 47.8 47.3 47.2 48.3 48.6 48.2 48.4 48.0 49.7 49.4 49.2
52.4 54.0 55.8 56.1 53.3 52.0 51.4 50.0 51.7 52.1 51.0 49.2 49.3 46.3 47.1 46.1 46.9 47.8 49.5 51.7 50.6 49.4 51.1 49.7 48.5
52.5 52.3 51.7 50.3 51.7 51.0 52.1 52.7 51.5 51.7 50.7 53.5 54.8 52.2 52.6 51.3 49.5 50.1 49.4 51.3 51.5 50.3 50.7 52.3 52.7
52.4 52.7 52.7 49.5 50.7 49.2 48.0 47.6 48.5 47.5 46.4 46.7 47.1 47.8 47.3 48.4 47.4 47.8 46.9 47.8 48.9 48.7 50.6 50.9 50.6
51.4 51.5 53.0 52.4 51.0 51.6 53.3 54.5 52.9 51.2 52.1 51.3 52.6 51.3 52.7 52.3 51.2 50.7 50.3 49.1 51.1 51.1 52.4 50.5 50.7
49.2 48.9 50.7 47.3 46.5 49.4 50.1 46.9 49.0 45.4 46.3 48.0 52.3 44.2 50.4 51.7 52.1 50.2 52.5 51.9 51.5 53.5 58.1 53.4 51.0
www.lairdresearch.com June 13, 2016 Page 23
Canadian Indicators
Retail Trade (SA)
YoY
Per
cent
Cha
nge
−5
05
10
median: 4.65Mar 2016: 3.17
Total Manufacturing Sales Growth
YoY
Per
cent
Gro
wth
−20
−10
010
20
median: 3.77Mar 2016: −1.62
Manufacturing New Orders Growth
YoY
Per
cent
Gro
wth
−30
−10
010
2030
median: 4.07Mar 2016: −6.66
1yr vs. 10yr Canada Bond Yields
Yie
ld (
Per
cent
)
02
46
810
median: 5.65May 2016: 1.38
10 yr bond1 yr bond
Manufacturing PMI
4850
5254
May 2016: 52.10
Sales and New Orders (SA)
YoY
Per
cent
Cha
nge
−20
−10
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 16
−1
01
23
4
median: 1.30May 2016: 0.85
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 16
−1
01
23
4
median: 1.87Apr 2016: 1.66
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 16
1.3
1.4
1.5
1.6
median: 1.35Mar 2016: 1.43
www.lairdresearch.com June 13, 2016 Page 24
6.6 6.8 7.0 7.2 7.4 7.6
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
Beveridge Curve (Mar 2011 − Feb 2016)
as.numeric(can.bev$ui.rate)
as.n
umer
ic(c
an.b
ev$v
acan
cies
) Mar 2011 − Dec 2012Jan 2013 − Jan 2016Feb 2016
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 16
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 6.9%Alberta 7.8%Ontario 6.6%
Debt Service Ratios (SA)
Per
cent
02
46
810
Total Debt: 6.2%Mortgage: 3.1%Consumer Debt: 6.3%
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 16
−40
−20
020
40
PermitsStarts
www.lairdresearch.com June 13, 2016 Page 25
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 16
05
1015
2025
30
FR
DEGB
IT
GR
ES
EU
Business Employment Expectations
Inde
x
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
−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 16
−60
−40
−20
020
Country EmploymentExpect.
Unempl.(%)
Bond Yields(%)
RetailTurnover
ManufacturingTurnover
Inflation(YoY %)
IndustryOrderbook
PMI
Series Dates May 2016 Apr 2016 May 2016 Apr 2016 Apr 2016 Apr 2016 May 2016 May 2016� France -6.8 s 9.9 t 0.51 u 111.7 s 105.2 t -0.1 u -11.2 t 48.4 s� Germany -2.3 s 4.2 u 0.13 u NA 114.9 s -0.3 t -10.0 s 52.1 s� United Kingdom -1.2 s 4.9 t 1.43 t 113.9 s NA 0.3 t -7.2 s 50.1 s� Italy -2.5 t 11.7 s 1.53 s 99.8 t NA -0.4 t -14.0 s 52.4 t� Greece -7.4 t 24.2 t 7.64 t NA NA -0.4 s -24.1 s 48.4 t� Spain 3.1 t 20.1 t 1.57 s NA NA -1.2 t -5.4 t 51.8 t� Eurozone (EU28) -2.0 s 8.7 t 1.18 t 107.7 t 109.0 t -0.2 t -12.0 s NA
www.lairdresearch.com June 13, 2016 Page 26
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 16
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 16
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 16
−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 16
median: 1.90Apr 2016: −0.20
−1
0
1
2
3
4
5
6
7
Harmonized Inflation: Mar 2016
AUT 0.6%
BGR−2.5%
DEU−0.3%
ESP−1.2%
FIN 0.3%
FRA−0.1%
GBR 0.3%
GRC−0.4%
HRV−0.9%
HUN 0.3%
IRL−0.2%
ISL 0.4%
ITA−0.4%
NOR 3.5%
POL−0.5%
ROU−2.6%
SWE 1.0%
<−1.0%0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% >7.0%
YoY % Change in Prices
PMI: May 2016
<40.042.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0>60.0
Steady ExpandingContracting
BRA41.6
CAN52.1
DEU52.1
ESP51.8
FRA48.4
GBR50.1
GRC48.4
IRL51.5
ITA52.4
MEX53.6
POL52.1
SAU54.8
TUR49.4
USA50.7
RUS49.6
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−0.1
DEU 0.3
ESP−1.7
FRA 0.4
GBR 0.9
GRC−1.3
IRL−1.1
ITA−1.5
POL 1.1
TUR 0.5
USA−0.1
RUS1.6
www.lairdresearch.com June 13, 2016 Page 27
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 16
4045
5055
60
May 2016: 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 16
010
0030
0050
00
Jun 2016: 2927.16
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 16
1000
2000
3000
5000
Apr 2016: 4444.00
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 16
9810
010
210
410
610
811
0
median: 103.85Apr 2016: 101.00
Exports
YoY
Per
cent
Cha
nge
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
−20
020
4060
80
median: 18.20May 2016: −4.10
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 16
1015
20
median: 12.90Apr 2016: 10.10
www.lairdresearch.com June 13, 2016 Page 28
Global Climate Change
Temperature and precipitation data are taken from the US NationalClimatic Data Center and presented as the average monthly anomalyfrom the previous 6 months. Anomalies are defined as the difference
from the average value over the period from 1971-2000 for the tem-perature map and over the 20th century for the global temparaturechart.
Average Temperature Anomalies from Nov 2015 - Apr 2016
<−4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 >4.0Anomalies in Celcius WarmerCooler Anomalies in Celcius
−4 −2 0 2 4
Historic Global Temperature Deviations
Deg
rees
Cel
cius
Dev
iatio
ns
−0.
50.
00.
51.
0
Apr 2016: 1.10
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
www.lairdresearch.com June 13, 2016 Page 29