global economics update - september 2015

....Laird Research - Economics

September 13, 2015

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 . . . . . . . . . . . . . . . . . . . . . . . 23

European Indicators . . . . . . . . . . . . . . . . . . . . . . . 25

Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 27

Global Climate Change . . . . . . . . . . . . . . . . . . . . . 28

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.

The prevailing theme now is “headwinds”. The US data shows thattheir economy continues to tick over with multiyear lows in unemploy-ment – the US consumer seems to be back, with a job and a steadyappetite for housing.

One odd point: sales/inventory ratios are increasing - either USbusinesses are getting ready for some kind of massive uptick in demandor they are effectively “stuffing the channel” with extra products andwill be caught out as a result. We can see that all the usual metricsindicate that businesses are scaling up production (temp help hoursare increasing, job openings are at their multi-year highs) but some-how this feels premature given that the rest of the world (in particularChina) seems to be sputtering. The US consumer isn’t strong enoughto shoulder the burden themselves.

Note that the US Fed still has a tonne of unconventional debt on its

balance sheet (QE meant that they were buying up mortgage debt etc)and that needs to be unwound at some point. While QE was a boost tothe economy, its unwinding will be a drag by cranking up interest rates- selling debt means they (1) take money out of the system and (2) re-duce the value of the debt by increasing supply which raises yields. Atthe same time, we are overdue for an interest rate hike - which wouldbe the same thing.

Canada is chugging along on no cylinders (cf. the unemploymentjump in Alberta while at the same time the crash in the dollar hasn’tmoved the needle at all in the Ontario manufacturing industry).

China is uncertain - we just don’t have good data on what is hap-pening there (ie. no data untouched by government hands). We cansee the effect on the surrounding countries however – Korea and Tai-wan are seeing weakening trade and manufacturing indicators. Aus-tralia is stronger PMI-wise however and that’s the usual canary in thecoalmine as it is a commodity based economy heavily reliant upon Chi-

nese trade, though this is a short term indicator - most of the Chinacrash has worked its way through earlier in the year so that may simplybe saying it’s not getting worse.

The best indicator still seems to be commodity prices - we shouldhave a good report on that next time, but I’m sure everyone is awareof the price of oil these days.

One interesting article from Bloomberg highlighted that this may bemore than a cyclical change. Maybe This Global Slowdown is Differentis worth reading - it posits that global trade was a dynamo of growthin previous decades, but that its effects may be peaking - there’s noreason to assume that trade per capita continues to grow as strongly as

the past and as economies like China and the US shift more to services,it is much less resource intensive. That changes the tea leaves that weshould be reading to look at the health of the economy.

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, September 13, 2015

US Total Business: Inventories to Sales Ratio

Rat

io

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

1.25

1.30

1.35

1.40

1.45

1.50

1.55

median: 1.36Jun 2015: 1.37

www.lairdresearch.com September 13, 2015

http://www.bloombergview.com/articles/2015-08-31/maybe-this-global-slowdown-is-different

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: 1.52Jul 2015: 1.57

Growth

Contraction

Initial Unemployment Claims

1000

's o

f Cla

ims

per

Wee

k

200

400

600 median: 349.75

Sep 2015: 275.75

Manufacturing Ave. Weekly Hours Worked

Hou

rs

3940

4142

4344 median: 40.60

Aug 2015: 41.80

ISM Manfacturing − PMI

Inde

x: S

tead

y S

tate

= 5

0

3040

5060

70 median: 53.40Aug 2015: 51.10

expanding economy

contracting economy

Manufacturers' New Orders: Durable GoodsB

illio

ns o

f Dol

lars

150

200

250

300

median: 183.99Jul 2015: 241.70

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: 112.95Jun 2015: 132.10

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

4050

6070

median: 57.78Jul 2015: 70.01

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: 0.08Jul 2015: 0.34

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: 88.45Aug 2015: 91.90


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 Sep 11 1,961.1 2.1% s -5.9% t -7.0% t -1.8% t 1.00 0.81USA NASDAQ Composite Sep 11 4,822.3 3.0% s -4.3% t -5.1% t 5.0% s 0.97 0.80USA Wilshire 5000 Total Market Sep 11 20,691.7 1.9% s -5.6% t -7.3% t -2.3% t 1.00 0.82Canada S&P TSX Sep 11 13,461.5 -0.1% t -6.6% t -9.2% t -13.3% t 0.81 1.00Europe and RussiaFrance CAC 40 Sep 11 4,548.7 0.6% s -10.8% t -8.5% t 2.4% s 0.52 0.59Germany DAX Sep 11 10,123.6 0.9% s -10.4% t -10.7% t 4.5% s 0.52 0.58United Kingdom FTSE Sep 11 6,117.8 1.2% s -8.2% t -10.6% t -10.0% t 0.53 0.62Russia Market Vectors Russia ETF Sep 11 15.8 2.7% s -5.0% t -14.3% t -32.6% t 0.65 0.68AsiaTaiwan TSEC weighted index Sep 11 8,305.8 3.8% s -1.1% t -10.7% t -10.9% t 0.41 0.53China Shanghai Composite Index Sep 11 3,200.2 3.9% s -18.5% t -37.5% t 38.4% s 0.32 0.34Japan NIKKEI 225 Sep 11 18,264.2 2.7% s -11.9% t -10.4% t 14.8% s 0.40 0.38Hong Kong Hang Seng Sep 11 21,504.4 3.2% s -12.2% t -20.1% t -12.8% t 0.37 0.44Korea Kospi Sep 11 1,941.4 2.9% s -2.3% t -5.6% t -4.6% t 0.43 0.47South Asia and AustrailiaIndia Bombay Stock Exchange Sep 11 25,610.2 1.6% s -8.1% t -2.9% t -5.1% t 0.44 0.53Indonesia Jakarta Sep 11 4,360.5 -1.2% t -5.7% t -11.5% t -15.1% t 0.40 0.46Malaysia FTSE Bursa Malaysia KLCI Sep 11 1,603.6 0.9% s -2.0% t -7.6% t -14.1% t 0.27 0.37Australia All Ordinaries Sep 11 5,096.3 0.7% s -6.9% t -8.4% t -8.1% t 0.37 0.46New Zealand NZX 50 Index Gross Sep 11 5,648.2 1.8% s -3.0% t -3.6% t 7.3% s 0.12 0.23South AmericaBrasil IBOVESPA Sep 11 46,401.0 -0.2% t -5.4% t -13.6% t -20.5% t 0.62 0.63Argentina MERVAL Buenos Aires Sep 11 10,887.9 -0.4% t -6.1% t -4.2% t -0.7% t 0.59 0.62Mexico Bolsa index Sep 11 42,780.7 0.1% s -3.6% t -4.1% t -6.3% t 0.68 0.71MENA and AfricaEgypt Market Vectors Egypt ETF Sep 11 39.2 -1.2% t -13.2% t -24.2% t -43.5% t 0.37 0.35(Gulf States) Market Vectors Gulf States ETF Sep 11 25.4 1.6% s -6.4% t -7.5% t -22.5% t 0.39 0.50South Africa iShares MSCI South Africa Index Sep 11 54.3 2.3% s -12.1% t -13.8% t -19.3% t 0.63 0.53(Africa) Market Vectors Africa ETF Sep 11 19.9 0.1% s -10.4% t -20.2% t -36.7% t 0.59 0.55CommoditiesUSD Spot Oil West Texas Int. Sep 08 $45.9 1.2% s 2.2% s -21.0% t -50.4% t 0.32 0.45USD Gold LME Spot Sep 11 $1,106.3 -1.7% t -0.6% t -6.3% t -11.3% t -0.23 -0.24

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%, Q2/15: 10.2%Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.6%, Q2/15: 8.3%

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, Sep = 20.7)10−year CAPE ( median = 19.5, Sep = 23.9)


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−3.1%

GOOG−0.86%

MSFT−7.1%

FB−2.2%

V−6.5%

ORCL−4.5%

IBM−6.4%

INTC+2.3%

CSCO−8.3%

MA−6.3%

QCOM ACN

TXN

HPQ

EMC

CRM

NFLX

PYPL

ADBE

CTSH

ADP

AVGO

BRCM

TEL

EA

ATVI

FIS

MU

ADI

RHT

WU

BRK−A−7.1%

WFC−8.5%

JPM−8.7%

BAC−9.7%

C−13%

GS

AXP AIG

USB MS

SPG

MET

BLK

PNC

BK

COF

AMT

PRU

PSA ACE

CME

TRV

MMC

CB ICE

BBT CCI

EQR

MHFI

AON

DFS GGP STI

PGR

VTRBXP

HCP

MTB

FITB

PFG

ESS

L

RF

XL

O

SLG LUK

JNJ−7.1%

PFE−8.1%

GILD−8.3%

MRK−12%

AGN−12%

AMGN−12%

UNH−1.8%

MDT−10%

BMY−9.4%

ABBV−15%

CELG−5.7%

LLY−2.2%

BIIB

ABT−14%

ESRX

REGN TMO

MCK

AET

ALXN

SYK CI

HCA BDX

PRGO

BXLT

MYL

BSX

EWUHS

A

AMZN−1%

DIS−14%

HD−1.2%

CMCSA−11%

NKE−2.6%

MCD−2%

PCLN+4%

LOW

TWX−20%

F

FOXA

TWC

TGT

TJX

GM CCL YUM

VFC LB

JCI CMG

CBS

UA DG

ROST

M

VIAB

JWN

GPS

BBY

AAP

GPC

HOT

HBI

DHI

SIG

DRI

AN

WMT−9.8%

PG−10%

KO−8.2%

PEP−6%

PM−7.2%

CVS−10%

MO

WBA−5.4%

KHC−8.2%

COST RAI

CL−9.5%

KMB

KR GIS

EL

ADM

STZ

SYY

K

TSN

HRL

MJN

GE−3.6%

BA

MMM−5.9%

UPS−4.7%

UTX−6.5%

HON−4.9%

UNP

LMT DHR

GD

CAT

FDX

DAL

RTN

PCP NOC ITW

EMR

AAL

CSX

ETN

DE

LUV

NSC

WM

CMI APH

PH

IRLLL

XOM−6%

CVX

SLB−10%

KMI COP

OXY PSX

EOG APC

WMB

HAL

VLO

BHI

SE

PXD

DVN

NOV

FTI

DOW

DD

MON

LYB

PX APD

PPG

SHW

IP

WRK

MOS

NUE

VMC

AA

DUK NEE

D SO

AEP

EXC

PCG

SRE

PEG

PPL

EIX

ED

ES

DTE

FEETR

T−5.6%

VZ−2.6%

LVLT CTL

Information Technology

Financials

Health Care

Consumer Discretionary

Consumer Staples

Industrials

Energy Materials UtilitiesTelecommunications

Services

<−25.0% −20.0% −15.0% −10.0% −5.0% 0.0% 5.0% 10.0% 15.0% 20.0% >25.0%

% Change in Price from Aug 3, 2015 to Sep 11, 2015

Average Median Median MedianSector Change P/Sales P/Book P/EInformation Technology -4.2% t 3.3 4.4 23.4Telecommunications Services -4.5% t 1.4 2.0 26.6Industrials -4.5% t 1.4 3.5 18.1Consumer Discretionary -5.1% t 1.6 3.8 19.5Utilities -6.0% t 1.5 1.6 16.6

Average Median Median MedianSector Change P/Sales P/Book P/EMaterials -6.1% t 1.4 3.3 20.2Energy -6.7% t 1.3 1.7 18.3Health Care -7.6% t 3.1 3.6 25.1Financials -8.2% t 2.9 1.5 16.9Consumer Staples -8.3% t 2.1 5.8 24.7


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 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 = 1.06)S&P 500 Price/Sales (median = 1.34, Jun = 1.83)

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%, Jul = 4.6%)Debt (BAA) Premium (median = 2.0%, Jul = 3.0%)


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 (

%)

14 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

2.5Sep 10, 2015 (Today)Aug 10, 2015 (1 mo ago)Jun 10, 2015 (3 mo ago)10 Sep 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: 91.00Sep 2015: 122.00

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: 36.50Sep 2015: 31.20

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% (Jul = 0.21%)US Inflation ex Food & Energy YoY% (Jul = 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% (Jul = 0.3%)PCE Core Inflation YoY% (Jul = 1.2%)

5−Year, 5−Year Forward Inflation Expectation Rate

Per

cent

07 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)


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 Sep 09: $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?


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

1.05

1.50

1.96

2.41

2.87

Bra

zil /

CA

D

CAD Appreciating

CAD Depreciating

Change in F/X: Aug 3 2015 to Sep 4 2015(Trade Weighted Currency Index of USD Trading Partners)

−3.0%

−1.5%

1.5%

3.0%

Euro−3.1%

UK 0.9%

Japan−5.7%

South Korea 0.6%

China 0.5%

India 2.4%

Brazil 8.5%

Mexico 2.9%

Canada−0.8%

USA 1.8%

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 4.1%

AUS −1.1%

BRA−13.7%

CHN 3.4%

IND 4.2%

RUS−12.5%

USA 7.8%

EUR8.8%

JPY10.0%

KRW0.0%

MXN−1.5%

ZAR−1.3%


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 Q2: 2.97

Repos Outstanding with Fed. Reserve

Bill

ions

of D

olla

rs

010

030

050

0

median: 56.09Sep 2015: 228.05

Bank ROE − Assets between $300M−$1B

Per

cent

05

1015

median: 12.822015 Q2: 9.85

Consumer Credit Outstanding

% Y

early

Cha

nge

−5

05

1015

20

median: 7.62Jul 2015: 6.81

Total Business Loans%

Yea

rly C

hang

e

−20

010

20median: 8.59Aug 2015: 11.21

US Nonperforming Loans

Per

cent

12

34

5

median: 2.192015 Q2: 1.69

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: 0.085Sep 2015: −0.59

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: 1.34Sep 2015: 1.04

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: 2.322015 Q2: 5.77


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: 6.10Aug 2015: 5.104

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 − Jun 2015Jul 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: 66.00Aug 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

−50

00

500

median: 166.00Aug 2015: 173.00


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: 8.70Aug 2015: 12.10

(U6) Unemployed + PT + Marginally Attached

Per

cent

810

1214

16

median: 9.75Aug 2015: 10.30

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: 107.53Sep 2015: 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

01

23

45

67

median: 0.79Aug 2015: 2.18

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: 2.25Aug 2015: 2.91

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 (Aug 2014 − Aug 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: 9.412015 Q2: 6.38

ISM Manufacturing − PMI

Inde

x

3040

5060

70

Aug 2015: 51.10

manufac. expanding

manufac. contracting

ISM Manufacturing: New Orders Index

Inde

x

3040

5060

7080 Aug 2015: 51.70

Increase in new orders

Decrease in new orders

Non−Manufac. New Orders: Capital Goods

Bill

ions

of D

olla

rs

4050

6070

median: 57.78Jul 2015: 70.01

Average Weekly Hours: Manufacturing

Hou

rs

3940

4142

43

median: 41.10Aug 2015: 41.80

Industrial Production: Manufacturing

YoY

Per

cent

Cha

nge

−15

−5

05

10

median: 3.12Jul 2015: 1.76

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: 1.36Jun 2015: 1.37

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 Jul 2015: 0.01Above 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

Aug 2015: 63.90

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: 88.45Aug 2015: 91.90

Consumer Loans (All banks)

YoY

% C

hang

e

−10

010

2030

40

median: 7.64Aug 2015: 4.61

AccountingChange

Deliquency Rate on Consumer Loans

Per

cent

2.0

3.0

4.0

median: 3.462015 Q2: 1.96

New Orders: Durable Consumer Goods

YoY

% C

hang

e

−20

020

median: 4.13Jul 2015: 4.15

New Orders: Non−durable Consumer Goods

YoY

% C

hang

e

−20

010

20

median: 4.22Jul 2015: −11.55

Personal Consumption & Housing Index

Inde

x

−0.

40.

00.

20.

4

median: 0.02Jul 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: 14.82Aug 2015: 17.72

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: 5.60Jul 2015: 4.90

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: 2.47Jul 2015: 2.21


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)

Jul 2015

r2 : 89.4%Range: Jan 1959 − Jul 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: 1.35Jul 2015: 1.13

New Home Median Sale Price

Sal

e P

rice

$000

's

100

150

200

250

300

Jul 2015: 285.90

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

Jul 2015: 3.60

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: 5.90Jul 2015: 5.20


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 − Q2 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 − Q2 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 − August 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

Eurozone52.3

Global PMI50.7

TWN46.1MEX

52.4

KOR47.9

JPN51.7

VNM51.3

IDN48.4

ZAF49.3

AUS51.7

BRA45.8

CAN49.4

CHN47.1

IND52.3

RUS47.9

SAU58.7

USA53.0

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

Eurozone−0.1

Global PMI−0.3

TWN−1.0MEX

−0.5

KOR0.3

JPN0.5

VNM−1.3

IDN1.1

ZAF0.4

AUS 1.3

BRA−1.4

CAN−1.4

CHN−0.7

IND−0.4

RUS−0.4

SAU 1.2

USA−0.8

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


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.

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

Jun

15

Jul 1

5

Aug

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 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 51.0 51.0 50.7

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 53.6 53.8 53.0

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 51.3 50.8 49.4

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 52.0 52.9 52.4

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 46.5 47.2 45.8

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 52.2 52.5 52.4 52.3

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 56.2 56.0 53.9

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 54.6 56.7 53.6

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 54.3 54.5 51.1

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 54.5 53.6 53.2

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 56.9 57.5 56.6

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 54.1 55.3 53.8

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 50.7 49.6 48.3

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 51.9 51.8 53.3

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 46.9 30.2 39.1

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 51.4 51.9 51.5

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 48.7 48.3 47.9

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 49.0 50.1 49.3

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 56.1 57.5 58.7

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 49.2 48.9 49.3

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 50.1 51.2 51.7

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 46.1 47.6 47.9

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 49.4 47.8 47.1

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 46.3 47.1 46.1

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 52.2 52.6 51.3

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 47.8 47.3 48.4

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 51.3 52.7 52.3

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 44.2 50.4 51.7


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

0

20

40

60

80

Bal

ance

08 09 10 11 12 13 14 15

020406080

100

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)

YoY

Cha

nge

−30

−20

−10

0

10

20

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

0

5

10

15

Bal

ance

08 09 10 11 12 13 14 15

−4−2

02468

10


Canadian Indicators

Retail Trade (SA)

YoY

Per

cent

Cha

nge

−5

05

10

median: 4.69Jun 2015: 1.39

Total Manufacturing Sales Growth

YoY

Per

cent

Gro

wth

−20

010

20

median: 4.06Jun 2015: −3.06

Manufacturing New Orders Growth

YoY

Per

cent

Gro

wth

−30

−10

010

2030

median: 4.46Jun 2015: −5.87

10yr Government Bond Yields

02

46

810

median: 5.73Aug 2015: 1.45

Manufacturing PMI

4951

5355

Aug 2015: 49.40

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: 1.32Aug 2015: 1.08

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: 1.93Jul 2015: 1.27

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: 1.35Jun 2015: 1.42


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 − May 2015)

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

as.n

umer

ic(c

an.b

ev$v

acan

cies

) Mar 2011 − Dec 2012Jan 2013 − Apr 2015May 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 7.0%Alberta 6.0%Ontario 6.8%

Debt Service Ratios (SA)

Per

cent

24

68

10

Total Debt: 6.4%Mortgage: 3.3%Consumer Debt: 6.1%

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


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 Aug 2015 Aug 2015 Jul 2015 Jul 2015 Jul 2015 Jul 2015 Aug 2015 Aug 2015� France -9.5 s 10.4 s 1.11 t 105.3 t 110.5 u 0.2 t -14.4 s 48.3 t� Germany -1.1 t 4.7 u 0.71 t NA 117.0 s 0.1 u -10.3 t 53.3 s� United Kingdom 9.2 s 5.6 u 2.03 t 112.9 t NA 0.0 t -4.8 s 51.5 t� Italy 0.3 s 12.0 t 2.04 t 100.8 s NA 0.3 s -14.7 t 53.8 t� Greece -37.1 t 25.2 s 11.43 s 74.6 t NA -1.3 t -43.4 t 39.1 s� Spain 5.0 s 22.2 t 2.10 t NA NA 0.0 u -3.9 s 53.2 t� Eurozone (EU28) -0.9 s 9.5 t 1.26 t 106.4 t 111.2 s 0.1 t -12.4 u 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

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: 1.90Jun 2015: 0.20−1

0

1

2

3

4

5

6

7 Euro AreaUS

Harmonized Inflation: Jun 2015

AUT 1.0%

BGR−1.0%

DEU 0.1%

ESP 0.0%

FIN−0.1%

FRA 0.2%

GBR 0.0%

GRC−1.3%

HRV−0.2%

HUN 0.5%

IRL 0.2%

ISL 0.5%

ITA 0.3%

NOR 1.5%

POL−0.5%

ROU−1.4%

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: August 2015

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

Steady ExpandingContracting

BRA45.8

CAN49.4

DEU53.3

ESP53.2

FRA48.3

GBR51.5

GRC39.1

IRL53.6

ITA53.8

MEX52.4

POL51.1

SAU58.7

TUR49.3

USA53.0

RUS47.9

PMI Change: Jul − Aug

<−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−1.4

DEU 1.5

ESP−0.4

FRA−1.3

GBR−0.4

GRC 8.9

IRL−3.1

ITA−1.5

POL−3.4

TUR−0.8

USA−0.8

RUS−0.4


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

4045

5055

60

Aug 2015: 47.10

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

Sep 2015: 3200.23

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

Jul 2015: 5090.00

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: 103.80Jul 2015: 104.48

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: 18.50Aug 2015: −5.50

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: 13.00Aug 2015: 10.80


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 Feb 2015 - Jul 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.

5

Jul 2015: 0.81

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


global economics update - september 2015

Economy & Finance