global economics update - january 2016

....Laird Research - Economics

January 11, 2016

Where we are now . . . . . . . . . . . . . . . . . . . . . . . . 1

Indicators for US Economy . . . . . . . . . . . . . . . . . . . 3

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 Business Indicators . . . . . . . . . . . . . . . . . . . 20

Canadian Indicators . . . . . . . . . . . . . . . . . . . . . . . 22

European Indicators . . . . . . . . . . . . . . . . . . . . . . . 24

Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 26

Global Climate Change . . . . . . . . . . . . . . . . . . . . . 27

Where we are now

Welcome to the Laird Report. We present a selection of economicdata from around the world to help figure where we are today.

Immediately after last month’s report, a real chill swept over themarkets. The focus seems to be the bond market in the US where junkbonds especially have taken the brunt of the fear. This is/was driven bythe energy sector - with oil prices dropping significantly, this has put amajor crimp on profitability and the industry seems to be girding itselffor defaults.

The chart on the next page shows S&P 500 operating ratios for thepast several years by sector. The Energy sector has fallen to negativeterritory in a dramatic reversal that started in 2014. The other laggardis Materials - this is more concerning given it is a broader reflection ofa slowdown across a number of industries.

A brief aside: I started my career as an equity analyst in 1998. Atthat time, the tech boom was in full swing and I focused my time onthe minutia of the industry, trying to figure out relative performance.

By the time 2001 rolled around, everything was falling off of a cliff –and nothing I looked at previously gave any indication that the wheelswere coming off. In hindsight, the best indicator was the bond market.When credit dries up, industries fail – in this case, telcos who were someof the biggest customers for companies like Nortel could no longer getdebt in the summer of 2000 and it all started falling apart from there.Watching pricing would have been an excellent indicator.

Bond prices rising, and people leaving the debt market is definitelya negative indicator. The other chart to consider is the AAA vs. BAAspreads - how much more does a company have to pay to get financingif its credit rating goes down? When times are good, lenders get com-petitive and spreads drop. In bad times, those spreads rise, sometimesdramatically - but beyond pricing, there are lots of companies who can’tget financing at all as rates go up. The spread chart indicates thosespreads are going up. For comparison, remember the nervousness in2011/2012

The rest of the report doesn’t show anything dramatically different(nor will it ever on a month-to-month basis). But it is interesting to seeglobal PMI’s are so negative when the rest of the data seems positive.

Formatting Notes The grey bars on the various charts are OECDrecession indicators for the respective countries. In many cases, the last

available 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, January 11, 2016

S&P 500 Operating Ratios

11 12 13 14 15

−10

−5

05

1015

Energy

Materials

Industrial

ConsumerStaples

Healthcare

FinancialsIT

TelcoUtilities

SP500

AAA vs BAA Interest Rate Spreads

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

median: 91.00Jan 2016: 150.00

0

100

200

0

100

200

Spr

ead

(bps

)

www.lairdresearch.com January 11, 2016

http://www.lairdresearch.com/

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: 1.53Nov 2015: 1.57

Growth

Contraction

Initial Unemployment Claims

1000

's o

f Cla

ims

per

Wee

k

200

400

600 median: 349.25

Jan 2016: 275.75

Manufacturing Ave. Weekly Hours Worked

Hou

rs

3940

4142

4344 median: 40.60

Dec 2015: 41.70

ISM Manfacturing − PMI

Inde

x: S

tead

y S

tate

= 5

0

3040

5060

70 median: 53.35Dec 2015: 48.20

expanding economy

contracting economy

Manufacturers' New Orders: Durable GoodsB

illio

ns o

f Dol

lars

150

200

250

300

median: 185.08Nov 2015: 238.59

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 16

100

120

median: 113.00Oct 2015: 135.10

Capex (ex. Defence & 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: 57.83Nov 2015: 69.34

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 16

−4

−2

02

median: 0.07Nov 2015: −0.30

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

5070

9011

0

median: 88.65Dec 2015: 92.60


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 Jan 08 1,922.0 -4.5% t -6.9% t -4.5% t -6.8% t 1.00 0.80USA NASDAQ Composite Jan 08 4,643.6 -5.3% t -8.9% t -3.5% t -2.0% t 0.97 0.76USA Wilshire 5000 Total Market Jan 08 19,867.1 -4.7% t -7.0% t -6.0% t -8.3% t 1.00 0.82Canada S&P TSX Jan 08 12,445.5 -3.7% t -3.7% t -11.0% t -13.9% t 0.80 1.00Europe and RussiaFrance CAC 40 Jan 08 4,333.8 -4.2% t -7.4% t -7.3% t 1.7% s 0.58 0.63Germany DAX Jan 08 9,849.3 -4.2% t -7.7% t -1.4% t 0.1% s 0.55 0.57United Kingdom FTSE Jan 08 5,912.4 -3.0% t -3.6% t -7.3% t -10.0% t 0.61 0.69Russia Market Vectors Russia ETF Jan 08 13.3 -6.3% t -9.9% t -20.1% t -12.6% t 0.68 0.72AsiaTaiwan TSEC weighted index Jan 08 7,894.0 -2.7% t -5.4% t -6.5% t -14.5% t 0.32 0.39China Shanghai Composite Index Jan 08 3,186.4 -3.3% t -8.2% t -3.1% t -3.3% t 0.34 0.34Japan NIKKEI 225 Jan 08 17,698.0 -4.1% t -9.2% t -2.4% t 3.1% s 0.33 0.26Hong Kong Hang Seng Jan 08 20,453.7 -4.1% t -6.6% t -8.5% t -14.2% t 0.37 0.42Korea Kospi Jan 08 1,917.6 -0.1% t -1.6% t -5.0% t 0.7% s 0.40 0.43South Asia and AustrailiaIndia Bombay Stock Exchange Jan 08 24,934.3 -2.7% t -1.5% t -7.1% t -8.6% t 0.46 0.52Indonesia Jakarta Jan 08 4,546.3 0.5% s 1.8% s 1.2% s -12.8% t 0.41 0.44Malaysia FTSE Bursa Malaysia KLCI Jan 08 1,657.6 0.3% s -0.7% t -2.0% t -4.1% t 0.25 0.29Australia All Ordinaries Jan 08 5,049.4 -5.1% t -2.1% t -3.7% t -5.8% t 0.28 0.32New Zealand NZX 50 Index Gross Jan 08 6,158.1 -1.3% t 2.0% s 9.5% s 10.5% s 0.20 0.23South AmericaBrasil IBOVESPA Jan 08 40,612.0 -3.6% t -8.6% t -17.3% t -18.7% t 0.49 0.48Argentina MERVAL Buenos Aires Jan 08 11,305.5 -1.8% t -15.0% t 0.2% s 34.7% s 0.57 0.54Mexico Bolsa index Jan 08 40,265.4 -4.4% t -4.7% t -8.6% t -5.0% t 0.70 0.72MENA and AfricaEgypt Market Vectors Egypt ETF Jan 08 36.8 -0.9% t 1.2% s -6.6% t -35.4% t 0.36 0.40(Gulf States) Market Vectors Gulf States ETF Jan 08 20.7 -3.7% t -2.4% t -14.2% t -17.9% t 0.43 0.49South Africa iShares MSCI South Africa Index Jan 08 41.3 -9.5% t -15.4% t -30.1% t -35.9% t 0.67 0.57(Africa) Market Vectors Africa ETF Jan 08 16.8 -5.0% t -6.4% t -18.9% t -33.6% t 0.69 0.69CommoditiesUSD Spot Oil West Texas Int. Jan 04 $36.8 1.2% s -8.0% t -20.5% t -26.5% t 0.36 0.54USD Gold LME Spot Jan 08 $1,097.5 2.3% s 2.4% s -4.0% t -9.0% t -0.11 -0.06

Note: Correlations are based on daily arithmetic returns for the most recent 100 trading days.


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

02468

101214

02468101214

Per

cent

Total Corporate Profits (% of GDP) − median: 6.2%, Q3/15: 9.9%Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.6%, Q3/15: 8.0%

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

−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

0

10

20

30

40

50

0

10

20

30

40

50

Mul

tiple

Mul

tiple

12−month P/E ( median = 17.4, Jan = 20.6)10−year CAPE ( median = 19.5, Jan = 24.7)


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−17%

GOOG−6.9%

MSFT−5.2%

FB−9.1%

V

INTC−10%

ORCL−12%

IBM−6.8%

CSCO−10%

MA−8.2%

ACN

TXN

CRM

EMC

ADBE

PYPL

ADP

AVGO

CTSH

ATVI TEL

EA HPQ ADI

MU

CA

HRS

STX

XRXWU

BRK−A−5.4%

WFC−11%

JPM−13%

BAC−14%

C−16%

GS

AIG−10%

USB−10%

AXP

SPG−1.4%

MS−20%

BLK MET

PNC

PSA

BK

AMT

ACE

COF

PRU TRV

CB

ICE

EQR

CCI MMC

BBT AVB

AFL

HCN

SYF

MHFI

AON

GGP ALL

STI

VTRBXP HIG

ESS MTB

O

L

XL

KIM HRB

JNJ−4.1%

PFE−7.8%

MRK−5.6%

GILD−8.9%

AGN−7.1%

AMGN−7%

BMY−6.8%

UNH−4.8%

MDT−3.6%

ABBV−5.7%

LLY CELG

BIIB

ABT−11%

ESRX

TMO−2.9%

REGN

ALXN

AET

CI

ANTM

SYK

BDX

CAH

VRTX

BXLT

HCA

ILMN ZBH

BAX

STJ

BCR

A

AMZN−11%

DIS−14%

HD

CMCSA−11%

MCD+0.9%

NKE−56%

SBUX−7.7%

LOW

TWX PCLN

TWC FOX

F

GM TJX

TGT

CCL

YUM

LB

JCI

DG

RCL

DLTR

UA

MAR

SWK

MHK

HBI

M

HOT

RL

TIF

PG+0.04%

WMT+8.6%

KO−3.2%

PEP−3.1%

PM−1.2%

MO+0.6%

CVS−2%

WBA KHC

RAI+3%

COST

MDLZ−7.5%

CL−5%

KMB

KR

GIS EL

STZ

K

SYY

HRL ADM

CPB

MJN

SJM

GE−5.7%

BA−12%

MMM−10%

UPS

UTX−6.5%

HON−5.5%

LMT

UNP DHR GD

FDX CAT

DAL RTN

NOC

PCP

ITW

EMR

LUV

AAL

WM

DE NSC

CSX ETN

GLW

UAL

ROP

IR

LLL PNR R

XOM−8.8%

CVX−11% SLB

−17%

COP

OXY PSX

EOG KMI

VLO

HAL

MPC

APC

BHI

PXD

SE

WMB

FTI

DUK

NEE

SO

D

AEP

SRE ED

PEG EIX

XEL

WEC

ES

DTE

FE

TE

DOW DD

LYB ECL PX

APD

PPG

IP

AA BLL

IFF

CF

T−0.68%

VZ−1.6%

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 Dec 1, 2015 to Jan 8, 2016

Average Median Median MedianSector Change P/Sales P/Book P/EUtilities 1.0% s 1.7 1.6 17.8Consumer Staples -0.4% t 2.4 6.2 25.9Telecommunications Services -1.7% t 1.4 1.7 26.9Health Care -5.8% t 3.2 3.7 26.5Industrials -8.7% t 1.4 3.5 17.0

Average Median Median MedianSector Change P/Sales P/Book P/EInformation Technology -9.7% t 3.3 4.1 23.2Financials -10.3% t 2.6 1.5 16.0Consumer Discretionary -11.1% t 1.5 3.7 18.2Materials -12.2% t 1.2 3.5 19.9Energy -15.9% t 1.2 1.6 18.1


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

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 = 1.05)S&P 500 Price/Sales (median = 1.35, Sep = 1.71)

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

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%, Dec = 4.6%)Debt (BAA) Premium (median = 2.0%, Dec = 3.2%)


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


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 24 250.0

0.5

1.0

1.5

2.0

2.5

0.0

0.5

1.0

1.5

2.0

2.5Jan 7, 2016 (Today)Dec 7, 2015 (1 mo ago)Oct 7, 2015 (3 mo ago)07 Jan 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: 91.00Jan 2016: 150.00

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: 36.38Dec 2015: 45.27

0100200300

0100200300

Spr

ead

(bps

)


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% (Nov = 0.44%)US Inflation ex Food & Energy YoY% (Nov = 2.0%)

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% (Nov = 0.39%)PCE Core Inflation YoY% (Nov = 1.3%)

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)


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 Jan 06: $−0.05

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?


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: Nov 2 2015 to Dec 31 2015(Trade Weighted Currency Index of USD Trading Partners)

−3.0%

−1.5%

1.5%

3.0%

Euro−1.3%

UK 1.7%

Japan−3.1%

South Korea−0.3%

China−0.3%

India−1.9%

Brazil−0.0%

Mexico 1.5%

Canada 2.8%

USA 2.9%

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−25.1%

AUS 3.8%

BRA 2.4%

CHN 5.5%

IND 6.0%

RUS−10.4%

USA 9.5%

EUR5.3%

JPY12.0%

KRW9.1%

MXN0.3%

ZAR−10.4%


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 Q3: 2.99

Repos Outstanding with Fed. Reserve

Bill

ions

of D

olla

rs

020

040

060

0

median: 57.56Jan 2016: 344.96

Bank ROE − Assets between $300M−$1B

Per

cent

05

1015

median: 12.812015 Q3: 9.26

Consumer Credit Outstanding

% Y

early

Cha

nge

−5

05

1015

20

median: 7.59Nov 2015: 6.83

Total Business Loans%

Yea

rly C

hang

e

−20

010

20median: 8.62Nov 2015: 11.48

US Nonperforming Loans

Per

cent

12

34

5

median: 2.122015 Q3: 1.60

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: 0.093Jan 2016: −0.61

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: 1.33Jan 2016: 1.08

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: 2.332015 Q3: 5.45


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: 6.10Dec 2015: 5.004

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 − Sep 2015Oct 2015

Participation Rate

Per

cent

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

6364

6566

67

median: 66.00Dec 2015: 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: 166.00Dec 2015: 292.00


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: 8.70Dec 2015: 10.50

(U6) Unemployed + PT + Marginally Attached

Per

cent

810

1214

16

median: 9.80Dec 2015: 9.90

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: 107.38Jan 2016: 84.78

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: 0.80Dec 2015: 2.02

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: 2.26Dec 2015: 2.96

−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 (Dec 2014 − Dec 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


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: 9.232015 Q3: 7.40

ISM Manufacturing − PMI

Inde

x

3040

5060

70

Dec 2015: 48.20

manufac. expanding

manufac. contracting

ISM Manufacturing: New Orders Index

Inde

x

3040

5060

7080 Dec 2015: 49.20

Increase in new orders

Decrease in new orders

Non−Manufac. New Orders: Capital Goods

Bill

ions

of D

olla

rs

4050

6070

median: 57.83Nov 2015: 69.34

Average Weekly Hours: Manufacturing

Hou

rs

3940

4142

43

median: 41.15Dec 2015: 41.70

Industrial Production: Manufacturing

YoY

Per

cent

Cha

nge

−15

−5

05

10

median: 3.10Nov 2015: 1.01

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 16

1.1

1.2

1.3

1.4

1.5

1.6

median: 1.36Oct 2015: 1.38

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 Nov 2015: −0.02Above 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 16

3545

5565

Dec 2015: 58.70

Growth

Contraction


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: 88.65Dec 2015: 92.60

Consumer Loans (All banks)

YoY

% C

hang

e

−10

010

2030

40

median: 7.53Nov 2015: 5.31

AccountingChange

Deliquency Rate on Consumer Loans

Per

cent

2.0

3.0

4.0

median: 3.452015 Q3: 1.99

New Orders: Durable Consumer Goods

YoY

% C

hang

e

−20

020

median: 4.25Nov 2015: 7.70

New Orders: Non−durable Consumer Goods

YoY

% C

hang

e

−20

010

20

median: 4.20Nov 2015: −10.98

Personal Consumption & Housing Index

Inde

x

−0.

40.

00.

20.

4

median: 0.02Nov 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 16

1012

1416

1820

22

median: 14.84Nov 2015: 18.05

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: 5.50Nov 2015: 5.50

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 16

−10

−5

05

median: 2.46Nov 2015: 0.91


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)

Nov 2015

r2 : 89.5%Range: Jan 1959 − Nov 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: 1.34Nov 2015: 1.28

New Home Median Sale Price

Sal

e P

rice

$000

's

100

150

200

250

300

Nov 2015: 305.00

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: 66.502015 Q3: 56.70

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 16

46

810

1214 median: 4.90

Nov 2015: 3.00

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 16

46

810

12 median: 5.90Nov 2015: 5.70


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 − Q3 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 − Q3 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%


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 − December 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

Eurozone53.2

Global PMI50.9

TWN51.7MEX

52.4

KOR50.7

JPN52.6

VNM51.3

IDN47.8

ZAF49.1

AUS51.9

BRA45.6

CAN47.5

CHN48.2

IND49.1

RUS48.7

SAU54.4

USA51.2

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

Eurozone0.4

Global PMI−0.3

TWN2.2MEX

−0.6

KOR1.6

JPN0.0

VNM1.9

IDN0.9

ZAF−0.5

AUS−0.6

BRA 1.8

CAN−1.1

CHN−0.4

IND−1.2

RUS−1.4

SAU−1.9

USA−1.6

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


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.

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

Jun

15

Jul 1

5

Aug

15

Sep

15

Oct

15

Nov

15

Dec

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 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 51.0 51.0 50.7 50.7 51.3 51.2 50.9

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 53.6 53.8 53.0 53.1 54.1 52.8 51.2

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 51.3 50.8 49.4 48.6 48.0 48.6 47.5

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 52.0 52.9 52.4 52.1 53.0 53.0 52.4

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 46.5 47.2 45.8 47.0 44.1 43.8 45.6

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 52.2 52.5 52.4 52.3 52.0 52.3 52.8 53.2

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 56.2 56.0 53.9 53.0 53.7 53.5 53.4

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 54.6 56.7 53.6 53.8 53.6 53.3 54.2

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 54.3 54.5 51.1 50.9 52.2 52.1 52.1

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 54.5 53.6 53.2 51.7 51.3 53.1 53.0

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 56.9 57.5 56.6 55.5 54.0 54.2 55.6

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 54.1 55.3 53.8 52.7 54.1 54.9 55.6

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 50.7 49.6 48.3 50.6 50.6 50.6 51.4

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 51.9 51.8 53.3 52.3 52.1 52.9 53.2

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 46.9 30.2 39.1 43.3 47.3 48.1 50.2

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 51.4 51.9 51.6 51.8 55.5 52.7 51.9

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 48.7 48.3 47.9 49.1 50.2 50.1 48.7

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 49.0 50.1 49.3 48.0 49.5 50.9 52.2

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 56.1 57.5 58.7 56.5 55.7 56.3 54.4

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 49.2 48.9 49.3 47.9 47.5 49.6 49.1

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 50.1 51.2 51.7 51.0 52.4 52.6 52.6

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 46.1 47.6 47.9 49.2 49.1 49.1 50.7

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 49.4 47.8 47.3 47.2 48.3 48.6 48.2

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 46.3 47.1 46.1 46.9 47.8 49.5 51.7

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 52.2 52.6 51.3 49.5 50.1 49.4 51.3

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 47.8 47.3 48.4 47.4 47.8 46.9 47.8

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 51.3 52.7 52.3 51.2 50.7 50.3 49.1

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 44.2 50.4 51.7 52.1 50.2 52.5 51.9


Canadian Indicators

Retail Trade (SA)

YoY

Per

cent

Cha

nge

−5

05

10

median: 4.67Oct 2015: 1.87

Total Manufacturing Sales Growth

YoY

Per

cent

Gro

wth

−20

−10

010

20

median: 3.87Oct 2015: −3.23

Manufacturing New Orders Growth

YoY

Per

cent

Gro

wth

−30

−10

010

2030

median: 4.25Oct 2015: −6.71

10yr Government Bond Yields

02

46

810

median: 5.70Dec 2015: 1.40

Manufacturing PMI

4850

5254

Dec 2015: 47.50

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: 1.31Dec 2015: 0.88

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: 1.92Nov 2015: 1.36

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: 1.35Oct 2015: 1.46


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 − Sep 2015)

as.numeric(can.bev$ui.rate)

as.n

umer

ic(c

an.b

ev$v

acan

cies

) Mar 2011 − Dec 2012Jan 2013 − Aug 2015Sep 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 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 7.1%Alberta 7.0%Ontario 6.7%

Debt Service Ratios (SA)

Per

cent

02

46

810

Total Debt: 6.3%Mortgage: 3.3%Consumer Debt: 6.2%

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


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 Dec 2015 Dec 2015 Nov 2015 Nov 2015 Nov 2015 Nov 2015 Dec 2015 Dec 2015� France -5.1 t 10.1 t 0.88 s 103.4 t 108.8 t 0.1 t -11.5 s 51.4 s� Germany -1.8 t 4.5 u 0.52 u NA 112.8 t 0.3 s -8.2 s 53.2 s� United Kingdom 2.4 s 5.2 t 1.94 s 114.8 s NA -0.1 u -12.5 s 51.9 t� Italy -0.3 t 11.3 t 1.57 t 100.5 t NA 0.2 t -11.5 t 55.6 s� Greece -6.2 s 24.5 t 7.41 t NA NA -0.1 u -31.7 s 50.2 s� Spain 5.8 s 21.4 t 1.72 t NA NA -0.4 s 2.4 s 53.0 t� Eurozone (EU28) -0.4 s 9.1 t 1.44 s 106.6 s 109.3 t 0.0 s -10.4 s NA


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: 1.90Nov 2015: 0.20

−1

0

1

2

3

4

5

6

7 Euro AreaUS

Harmonized Inflation: Oct 2015

AUT 0.5%

BGR−0.9%

DEU 0.3%

ESP−0.4%

FIN−0.2%

FRA 0.1%

GBR−0.1%

GRC−0.1%

HRV−0.4%

HUN 0.6%

IRL−0.1%

ISL 0.5%

ITA 0.2%

NOR 2.7%

POL−0.5%

ROU−0.9%

SWE 0.8%

<−1.0%0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% >7.0%

YoY % Change in Prices

PMI: December 2015

<40.042.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0>60.0

Steady ExpandingContracting

BRA45.6

CAN47.5

DEU53.2

ESP53.0

FRA51.4

GBR51.9

GRC50.2

IRL54.2

ITA55.6

MEX52.4

POL52.1

SAU54.4

TUR52.2

USA51.2

RUS48.7

PMI Change: Nov − Dec

<−5.0−4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 >5.0

PMI Change ImprovingDeteriorating

CAN−1.1

DEU 0.3

ESP−0.1

FRA 0.8

GBR−0.8

GRC 2.1

IRL 0.9

ITA 0.7

POL 0.0

TUR 1.3

USA−1.6

RUS−1.4


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

Dec 2015: 48.20

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

Jan 2016: 3186.41

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

Nov 2015: 4660.00

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: 103.90Nov 2015: 104.10

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: 18.40Nov 2015: −6.80

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: 12.90Nov 2015: 11.20


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 Jun 2015 - Nov 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

Historic Global Temperature Deviations

Deg

rees

Cel

cius

Dev

iatio

ns

−0.

50.

00.

51.

0

Nov 2015: 0.97

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020


global economics update - january 2016

Economy & Finance