....Laird Research - Economics

Jun 11, 2014

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

Indicators for US Economy . . . . . . . . . . . . . . . . . . . 2

Global Financial Markets . . . . . . . . . . . . . . . . . . . . 3

US Key Interest Rates . . . . . . . . . . . . . . . . . . . . . . 8

US Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

QE Taper Tracker . . . . . . . . . . . . . . . . . . . . . . . . . 10

Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 11

US Banking Indicators . . . . . . . . . . . . . . . . . . . . . . 12

US Employment Indicators . . . . . . . . . . . . . . . . . . . 13

US Business Activity Indicators . . . . . . . . . . . . . . . . 15

US Consumption Indicators . . . . . . . . . . . . . . . . . . 16

US Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Global Business Indicators . . . . . . . . . . . . . . . . . . . 19

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

European Indicators . . . . . . . . . . . . . . . . . . . . . . . 23

Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 25

Global Climate Change . . . . . . . . . . . . . . . . . . . . . 26

Where we are now

Welcome to the Laird Report. It’s job is to stick a the pin on theglobal economy’s map that says ”You are here”. We present a com-pendium of economic data from around the world to help figure thisout.

The US slipped into negative GDP territory last quarter (partiallyblamed on the horrible weather). I’m ignoring that fact - I don’t trustGDP as a measure of anything.

In theory, GDP is the value of all final goods and services producedwithin a country over a year. It’s used as a proxy for economic activ-ity and for that reason its closely followed - indeed, the definition ofa recession is tied to real GDP growth rates. 2 quarters of real GDPshrinking = recession.

However, I don’t like it for a bunch of reasons: (1) it’s always late,coming out a couple of months after the fact. (2) it’s not accurate. Ev-

ery indicator has revisions, but I find the GDP to be really egregious.It’s better to consider a large number of targeted (preferably

monthly) measures. The economy is a patient we are examining andthere are may things to consider - employment, money liquidity, inter-est rates, business activity etc. Merging all these things together into asingle number will gloss over things that might stand out on their own.So - for now, I don’t bother tracking GDP in this report.

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, Jun 11, 2014

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).

Leading Index for the US

Inde

x: E

st. 6

mon

th g

row

th

−3

−1

12

34

median: 1.42Apr 2014: 1.69

Growth

Contraction

Initial Unemployment Claims

1000

's o

f Cla

ims

per

Wee

k

200

400

600

median: 352.75May 2014: 310.25

Manufacturing Ave. Weekly Hours Worked

Hou

rs

39.0

40.0

41.0

42.0

median: 40.60May 2014: 42.10

ISM Manfacturing − PMI

Inde

x: S

tead

y S

tate

= 5

0

3040

5060

70 median: 53.30May 2014: 55.40

expanding economy

contracting economy

Manufacturers' New Orders: Durable GoodsB

illio

ns o

f Dol

lars

120

160

200

240

median: 182.30Apr 2014: 239.90

ISM Manufacturing: Supplier Deliveries

Inde

x

4050

6070

median: 51.60May 2014: 53.20Slower Deliveries

Faster Deliveries

Capex (ex. Defense & Planes)

Per

cent

cha

nge

(3 m

onth

s)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−10

−5

05

median: 0.86Apr 2014: 2.04

Chicago Fed National Activity Index

Inde

x V

alue

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−4

−2

02

median: 0.08Apr 2014: −0.32

U. Michigan: Consumer Sentiment

Inde

x 19

66 Q

1 =

100

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

5070

9011

0

median: 88.40May 2014: 81.90

www.lairdresearch.com Jun 11, 2014 Page 2

Global Financial Markets

Global Stock Market Returns

Country Index Name Close Date CurrentValue

WeeklyChange

MonthlyChange

3 monthChange

YearlyChange

Corr toS&P500

Corr toTSX

North AmericaUSA S&P 500 Jun 10 1,950.8 1.4% s 2.9% s 3.9% s 18.7% s 1.00 0.75USA NASDAQ Composite Jun 10 4,338.0 2.5% s 4.7% s 0.1% s 24.9% s 0.93 0.71USA Wilshire 5000 Total Market Jun 10 20,686.1 1.7% s 2.9% s 2.7% s 19.4% s 0.99 0.77Canada S&P TSX Jun 10 14,904.4 1.2% s 1.7% s 4.2% s 20.4% s 0.75 1.00Europe and RussiaFrance CAC 40 Jun 10 4,595.0 2.0% s 2.3% s 5.1% s 18.9% s 0.68 0.50Germany DAX Jun 10 10,028.8 1.1% s 3.4% s 8.2% s 20.7% s 0.58 0.47United Kingdom FTSE Jun 10 6,873.6 0.5% s 0.3% s 2.8% s 7.4% s 0.57 0.51Russia Market Vectors Russia ETF Jun 10 26.5 3.5% s 10.2% s 15.9% s 8.3% s 0.44 0.38All Europe Euro Stoxx 50 Jun 04 3,237.9 -0.3% t 2.1% s 3.2% s 17.5% s 0.65 0.50AsiaTaiwan TSEC weighted index Jun 10 9,222.4 1.1% s 4.7% s 6.4% s 13.0% s 0.08 0.08China Shanghai Composite Index Jun 04 2,024.8 -1.2% t -0.1% t -2.3% t -10.9% t -0.02 0.09Japan NIKKEI 225 Jun 10 14,994.8 -0.3% t 6.0% s -0.8% t 11.0% s 0.03 0.13Hong Kong Hang Seng Jun 10 23,315.7 0.1% s 4.7% s 4.7% s 7.9% s 0.09 0.19Korea Kospi Jun 10 2,011.8 0.2% s 2.4% s 2.9% s 4.1% s 0.05 0.10South Asia and AustrailiaIndia Bombay Stock Exchange Jun 10 25,583.7 2.9% s 8.6% s 16.6% s 31.6% s 0.20 0.19Indonesia Jakarta Jun 10 4,946.1 0.1% s 0.7% s 5.7% s 3.5% s 0.10 0.14Malaysia FTSE Bursa Malaysia KLCI Jun 10 1,876.6 0.2% s 0.6% s 3.0% s 5.0% s 0.09 0.02Australia All Ordinaries Jun 10 5,448.5 -0.2% t 0.4% s 0.3% s 14.7% s -0.03 0.07New Zealand NZX 50 Index Gross Jun 10 5,179.4 0.3% s 0.3% s 1.2% s 15.8% s 0.15 0.28South AmericaBrasil IBOVESPA Jun 10 54,604.0 4.9% s 1.0% s 19.9% s 6.4% s 0.26 0.32Argentina MERVAL Buenos Aires Jun 10 8,158.0 5.8% s 19.2% s 40.9% s 139.0% s 0.25 0.21Mexico Bolsa index Jun 10 43,045.3 2.2% s 2.3% s 11.3% s 5.7% s 0.47 0.43MENA and AfricaEgypt Market Vectors Egypt ETF Jun 10 69.3 6.0% s -0.0% t 2.7% s 82.3% s 0.32 0.26(Gulf States) Market Vectors Gulf States ETF Jun 10 33.0 -4.7% t -2.2% t 10.2% s 35.1% s 0.37 0.23South Africa iShares MSCI South Africa Index Jun 10 69.3 3.4% s -0.0% t 8.3% s 25.7% s 0.62 0.51(Africa) Market Vectors Africa ETF Jun 10 33.4 1.8% s 0.6% s 5.9% s 16.6% s 0.63 0.55CommoditiesUSD Spot Oil West Texas Int. Jun 09 $105.1 2.0% s 4.8% s 3.6% s 9.7% s 0.14 0.25USD Gold LME Spot Jun 11 $1,262.5 1.3% s -2.3% t -6.3% t -7.8% t -0.25 -0.12

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

www.lairdresearch.com Jun 11, 2014 Page 3

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

02468

101214

02468101214

Per

cent

Total Corporate Profits (% of GDP) − median: 6.2%, Q1/14: 11.0%Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.6%, Q1/14: 8.9%

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

−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

0

10

20

30

40

50

0

10

20

30

40

50

Mul

tiple

Mul

tiple

12−month P/E ( median = 17.4, Jun = 18.6)10−year CAPE ( median = 19.4, Jun = 24.8)

www.lairdresearch.com Jun 11, 2014 Page 4

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.

AAPL12%

GOOG5.5%

MSFT3.5%

ORCL4.1%

IBM−4.2%

V4.2%

FB7.6%

INTC7.7%

QCOM CSCO

MA

HPQ

EBAY

ACN

TXN

ADP

YHOO

CRM

MUADI

FIS

CA

WFC6.7%

JPM3.9%

BAC5.5%

BRK−A−0.61%

C3.3%

AXP

AIG

USB

GS MS

MET BLK

SPG

PNC

COF

PRU

BK

BEN

ACE

STT MMC

CCI

CME

CB

HCP

VTR

LRF

JNJ4.3%

PFE−4.4%

MRK

GILD

UNH BMY BIIB

LLY

MDT

ABT

AGN

MCK BAX

ACT

ALXN

AET FRX

CI

A

BSX

AMZN DIS

CMCSA

HD

MCD

FOXA

F

NKE

PCLN

GM

SBUX

LOW

DTV

TWC

TJX

VIAB

TGT

YUM

CBS

JCI

CCL

M

DG

XOM0.72%

GE2.4%

CVX1.2%

SLB6.1%

COP

OXY

EOG

HAL

APC

PSX WMB

BHI

PXD

HES VLO

SE

FTI

HP

WMT−3.3%

PG

KO

PM3.1%

PEP4.1%

CVS

MO6.3%

WAG

MDLZ

CL

KRFT

GIS

RAI

EL K

KR

SYY

LO

UTX BA UPS

MMM3.6%

UNP8.5%

HON CAT

LMT

EMR

FDX

GD

ITW

ETN

DE

NSC

RTN

CSX

CMI

IR

DD

DOW

LYB

PX

FCX

ECL

PPG

IP

AA

CF

D SO

EXC

AEP

SRE

PPL

ED

FE

NU

VZ4.9%

T−1.8%

Information Technology

Financials

Health Care

Consumer Discretionary

Energy Consumer Staples

IndustrialsMaterials Utilities

TelecommunicationsServices

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

% Change in Price from May 01, 2014 to Jun 10, 2014

Average Median Median MedianSector Change P/Sales P/Book P/EInformation Technology 5.9% s 3.2 3.9 23.0Industrials 5.3% s 1.7 3.4 21.9Materials 5.0% s 1.5 3.4 22.4Consumer Discretionary 4.4% s 1.5 4.2 19.4Financials 4.4% s 3.0 1.6 19.0

Average Median Median MedianSector Change P/Sales P/Book P/EEnergy 3.4% s 2.0 1.8 18.4Health Care 3.3% s 3.3 3.7 26.3Consumer Staples 2.3% s 1.9 5.2 20.2Telecommunications Services 2.0% s 1.2 2.0 20.2Utilities -1.5% t 1.4 1.6 18.2

www.lairdresearch.com Jun 11, 2014 Page 5

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

0.25

0.50

0.75

1.00

1.25

1.50

0.25

0.50

0.75

1.00

1.25

1.50

Buying assets at a discount

Paying up for growth

Tobin Q (median = 0.75, Mar = 1.11)S&P 500 Price/Sales (median = 1.32, Mar = 1.66)

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

0%

2%

4%

6%

8%

10%

12%

0%

2%

4%

6%

8%

10%

12%Implied Equity Premium (median = 4.2%, May = 5.4%)Debt (BAA) Premium (median = 2.0%, May = 2.3%)

www.lairdresearch.com Jun 11, 2014 Page 6

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

−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

−60

−40

−20

020

4060

Flows to EquityFlows to BondsNet Market Flows

www.lairdresearch.com Jun 11, 2014 Page 7

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 (

%)

13 14 15 16 17 18 19 20 21 22 23 24

0.0

0.5

1.0

1.5

2.0

2.5

0.0

0.5

1.0

1.5

2.0

2.5Jun 10, 2014 (Today)May 12, 2014 (1 mo ago)Mar 10, 2014 (3 mo ago)10 Jun 2013 (1 yr ago)

3 Month & 10 Yr Treasury Yields

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

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

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

median: 91.00Jun 2014: 55.00

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

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

median: 37.00Jun 2014: 18.95

0100200300

0100200300

Spr

ead

(bps

)

www.lairdresearch.com Jun 11, 2014 Page 8

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

−1%

0%

1%

2%

3%

4%

5%

6%

−1%

0%

1%

2%

3%

4%

5%

6%

US Inflation Rate YoY% (Apr = 2.0%)US Inflation ex Food & Energy YoY% (Apr = 1.8%)

Personal Consumption Expenditures

Per

cent

(Ye

ar o

ver

Year

)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−1

01

23

45

6

PCE Inflation Rate YoY% (Apr = 1.6%)PCE Core Inflation YoY% (Apr = 1.4%)

5−Year, 5−Year Forward Inflation Expectation Rate

Per

cent

08 09 10 11 12 13 14 15 16 17 18 19

−1

01

23

45

6

5 year forward Inflation ExpectationActual 5yr Inflation (CPI measure)Actual 5yr Inflation (PCE Measure

www.lairdresearch.com Jun 11, 2014 Page 9

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%. These charts track that progress.

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 04: $7.5

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

Short Term Rates:Once at zero, Fed moved to QE

Long Term Rates:Moving up in anticipation of Taper?

www.lairdresearch.com Jun 11, 2014 Page 10

Exchange Rates

10 Week Moving Average CAD Exchange Rates

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

0.62

0.71

0.81

0.90

1.00

1.09

US

A /

CA

D

0.55

0.61

0.66

0.72

0.77

0.82

Eur

o / C

AD

59.

16 7

4.71

90.

2610

5.81

121.

3613

6.91

Japa

n / C

AD

0.38

0.44

0.49

0.55

0.61

0.67

U.K

. / C

AD

0.59

0.98

1.36

1.74

2.12

2.51

Bra

zil /

CA

D

CAD Appreciating

CAD Depreciating

1 Month Change in Rates versus Average

−3.0%

−1.5%

1.5%

3.0%

Euro 1.7%

UK 0.6%

Japan 0.4%

South Korea−1.2%

China−0.1%

India−1.7%

Brazil 0.3%

Mexico−1.3%

Canada−0.1%

USA−0.0%

% Change over 3 months vs. Canada

<−10.0% −8.0% −6.0% −4.0% −2.0% 0.0% 2.0% 4.0% 6.0% 8.0% >10.0%

CAD depreciatingCAD appreciating

ARG−5.2%

AUS 1.8%

BRA 2.9%

CHN−1.9%

IND 1.4%

RUS 4.1%

USA−1.8%

EUR−4.0%

JPY−1.0%

KRW2.2%

MXN−0.4%

ZAR−1.1%

www.lairdresearch.com Jun 11, 2014 Page 11

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

3.5

4.0

4.5

median: 3.952014 Q1: 3.10

Repos Outstanding with Fed. Reserve

Bill

ions

of D

olla

rs

5015

025

0

median: 46.14Jun 2014: 232.95

Bank ROE − Assets between $300M−$1B

Per

cent

05

1015

median: 12.852014 Q1: 8.89

Consumer Credit Outstanding

% Y

early

Cha

nge

−5

05

1015

20

median: 7.07Apr 2014: 5.94

Total Business Loans%

Yea

rly C

hang

e

−20

010

20median: 7.81Apr 2014: 10.00

US Nonperforming Loans

Per

cent

12

34

5

median: 2.392014 Q1: 2.50

St. Louis Financial Stress Index

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

02

46 median: −0.082

May 2014: −1.28

Commercial Paper Outstanding

Trill

ions

of D

olla

rs

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1.0

1.4

1.8

2.2

median: 1.36Jun 2014: 1.04

Residential Morgage Delinquency Rate

Per

cent

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

24

68

10

median: 2.302014 Q1: 7.79

www.lairdresearch.com Jun 11, 2014 Page 12

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 Beverage 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

median: 6.30May 2014: 6.304

56789

1011

4567891011

Per

cent

4 5 6 7 8 9 10

2.0

2.5

3.0

3.5

4.0

Beverage Curve (Unemployment vs. Job Openings)

Unemployment Rate (%)

Job

Ope

ning

s (%

tota

l Em

ploy

men

t)

Dec 2000 − Dec 2008Jan 2009 − Mar 2014Apr 2014

Participation Rate

Per

cent

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

6364

6566

67

median: 66.10May 2014: 62.80

Total Nonfarm Payroll Change

Mon

thly

Cha

nge

(000

s)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−50

00

500

median: 161.00May 2014: 217.00

www.lairdresearch.com Jun 11, 2014 Page 13

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: 8.60May 2014: 14.60

(U6) Unemployed + PT + Marginally Attached

Per

cent

810

1214

16

median: 9.60May 2014: 12.20

4−week moving average of Initial Claims

Jan

1995

= 1

00

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

5010

015

020

0

median: 108.46May 2014: 95.39

Unemployed over 27 weeks

Mill

ions

of P

erso

ns

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

01

23

45

67

median: 0.77May 2014: 3.37

Services: Temp Help

Mill

ions

of P

erso

ns

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1.5

2.0

2.5

median: 2.23May 2014: 2.86

0 200 400 600

15

20

25

30

35

Annual Change in Employment Levels (000s of Workers)

Ave

rage

wag

es (

$/ho

ur)

Private Industry Employment Change (1 year)

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 Jun 11, 2014 Page 14

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

−15

−5

515

median: 6.642014 Q1: 10.06

ISM Manufacturing − PMI

Inde

x

3040

5060

70

May 2014: 55.40

manufac. expanding

manufac. contracting

ISM Manufacturing: New Orders Index

Inde

x

3040

5060

7080 May 2014: 56.90

Increase in new orders

Decrease in new orders

Non−Manufac. New Orders: Capital Goods

Bill

ions

of D

olla

rs

4050

6070

median: 56.98Apr 2014: 70.13

Average Weekly Hours: Manufacturing

Hou

rs

3940

4142

43

median: 41.10May 2014: 42.10

Industrial Production: Manufacturing

YoY

Per

cent

Cha

nge

−15

−5

05

10

median: 3.23Apr 2014: 3.09

Total Business: Inventories to Sales Ratio

Rat

io

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1.1

1.2

1.3

1.4

1.5

1.6

median: 1.37Mar 2014: 1.30

Chicago Fed: Sales, Orders & Inventory

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−0.

50.

00.

5 Apr 2014: 0.00Above ave growth

Below ave growth

ISM Non−Manufacturing Bus. Activity Index

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

3545

5565

May 2014: 62.10

Growth

Contraction

www.lairdresearch.com Jun 11, 2014 Page 15

US Consumption Indicators

Variations in consumer activity are a leading indicator of thestrength of the economy. We track consumer sentiment (their expec-

tations about the future), consumer loan activity (indicator of newpurchase activity), and new orders and sales of consumer goods.

U. Michigan: Consumer Sentiment

Inde

x 19

66 Q

1 =

100

5060

7080

9011

0

median: 88.40May 2014: 81.90

Consumer Loans (All banks)

YoY

% C

hang

e

010

2030

median: 7.13Apr 2014: 2.18

AccountingChange

Deliquency Rate on Consumer Loans

Per

cent

2.5

3.0

3.5

4.0

4.5 median: 3.48

2014 Q1: 2.31

New Orders: Durable Consumer Goods

YoY

% C

hang

e

−30

−10

1030

median: 3.87Apr 2014: 0.76

New Orders: Non−durable Consumer Goods

YoY

% C

hang

e

−20

010

20

median: 3.94Apr 2014: 3.44

Personal Consumption & Housing Index

Inde

x

−0.

40.

00.

2

median: 0.02Apr 2014: −0.12above ave growth

below ave growth

Light Cars and Trucks Sales

Mill

ions

of U

nits

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

1012

1416

1820

22

median: 14.72Apr 2014: 15.96

Personal Saving Rate

Per

cent

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

24

68

10

median: 5.50Apr 2014: 4.00

Real Retail and Food Services Sales

YoY

% C

hang

e

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−10

−5

05

median: 2.38Apr 2014: 1.63

www.lairdresearch.com Jun 11, 2014 Page 16

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)

Mar 2014

r2 : 88.4%Range: Jan 1964 − Mar 2014

New Housing Units Permits Authorized

Mill

ions

of U

nits

0.5

1.0

1.5

2.0

2.5

median: 1.36Apr 2014: 1.06

New Home Median Sale Price

Sal

e P

rice

$000

's

100

150

200

250

Mar 2014: 290.00

Homeowner's Equity Level

Per

cent

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

4050

6070

80 median: 66.522014 Q1: 53.64

New Homes: Median Months on the Market

Mon

ths

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

46

810

1214 median: 5.00

Apr 2014: 3.40

US Monthly Supply of Homes

Mon

ths

Sup

ply

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

46

810

12 median: 5.90Apr 2014: 5.30

www.lairdresearch.com Jun 11, 2014 Page 17

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 2014

−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 2014

−10%

−8%

−6%

−4%

−2%

0%

2%

4%

6%

8%

10%

YoY Change in this quarter

YoY Percent Change

Fre

quen

cy

−15% −5% 5% 15%

www.lairdresearch.com Jun 11, 2014 Page 18

Global Business Indicators

Global 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 PMI − May 2014

<40.0 42.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0 >60.0

Steady ExpandingContracting

Eurozone52.2

Global PMI52.2

TWN52.4MEX

51.9

KOR49.5

JPN49.9

VNM52.5

IDN52.4

ZAF44.3

AUS49.2

BRA48.8

CAN52.2

CHN49.4

IND51.4

RUS48.9

SAU57.0

USA56.4

Global 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−1.2

Global PMI0.3

TWN0.1MEX

0.1

KOR−0.7

JPN0.5

VNM−0.6

IDN1.3

ZAF−3.1

AUS 4.4

BRA−0.5

CAN−0.7

CHN 1.3

IND 0.1

RUS 0.4

SAU−1.5

USA 1.0

Purchase Managers Index (Manufacturing) − China, Japan, USA, Canada, France, Germany, Italy, UK, Australia

04 05 06 07 08 09 10 11 12 13 14

3040

5060

70

3040

5060

70

Business Conditions Contracting

Business Conditions Expanding

www.lairdresearch.com Jun 11, 2014 Page 19

Global 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

12

Jun

12

Jul 1

2

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

Jun

13

Jul 1

3

Aug

13

Sep

13

Oct

13

Nov

13

Dec

13

Jan

14

Feb

14

Mar

14

Apr

14

May

14

Australia

India

Indonesia

Vietnam

Taiwan

China

Korea

Japan

South Africa

Saudi Arabia

Turkey

Russia

United Kingdom

Greece

Germany

France

Italy

Czech Republic

Spain

Poland

Ireland

Netherlands

Eurozone

Brazil

Mexico

Canada

United States

Global PMI 50.3 49.7 48.8 48.7 48.7 48.9 49.6 50.0 51.5 50.9 51.2 50.4 50.6 50.6 50.8 51.6 51.8 52.1 53.1 53.3 53.0 53.2 52.4 51.9 52.2

52.5 52.5 51.4 51.5 51.1 51.0 52.8 56.1 55.8 54.3 54.6 52.1 52.3 52.0 53.7 53.1 52.8 51.8 54.7 55.0 53.7 57.1 55.5 55.4 56.4

54.7 54.8 53.1 53.0 52.4 51.4 50.4 50.4 50.5 51.7 49.3 50.1 53.2 52.4 52.0 52.1 54.2 55.6 55.3 53.5 51.7 52.9 53.3 52.9 52.2

55.2 55.9 55.2 55.1 54.4 55.5 55.6 57.1 55.0 53.4 52.2 51.7 51.7 51.3 49.7 50.8 50.0 50.2 51.9 52.6 54.0 52.0 51.7 51.8 51.9

49.3 48.5 48.7 49.3 49.8 50.2 52.2 51.1 53.2 52.5 51.8 50.8 50.4 50.4 48.5 49.4 49.9 50.2 49.7 50.5 50.8 50.4 50.6 49.3 48.8

45.1 45.1 46.5 46.3 46.1 45.4 46.8 46.1 47.9 47.9 46.8 46.7 48.3 48.8 50.3 51.4 51.1 51.3 51.6 52.7 54.0 53.2 53.0 53.4 52.2

47.6 48.9 48.9 49.7 50.7 48.9 48.2 49.6 50.2 49.0 48.0 48.2 48.7 48.8 50.8 53.5 55.8 54.4 56.8 57.0 54.8 55.2 53.7 53.4 53.6

51.2 53.1 53.9 50.9 51.8 52.1 52.4 51.4 50.3 51.5 48.6 48.0 49.7 50.3 51.0 52.0 52.7 54.9 52.4 53.5 52.8 52.9 55.5 56.1 55.0

48.9 48.0 49.7 48.3 47.0 47.3 48.2 48.5 48.6 48.9 48.0 46.9 48.0 49.3 51.1 52.6 53.1 53.4 54.4 53.2 55.4 55.9 54.0 52.0 50.8

42.0 41.1 42.3 44.0 44.5 43.5 45.3 44.6 46.1 46.8 44.2 44.7 48.1 50.0 49.8 51.1 50.7 50.9 48.6 50.8 52.2 52.5 52.8 52.7 52.9

47.6 49.4 49.5 48.7 48.0 47.2 48.2 46.0 48.3 49.9 49.1 49.5 50.1 51.0 52.0 53.9 53.4 54.5 55.4 54.7 55.9 56.5 55.5 56.5 57.3

44.8 44.6 44.3 43.6 45.7 45.5 45.1 46.7 47.8 45.8 44.5 45.5 47.3 49.1 50.4 51.3 50.8 50.7 51.4 53.3 53.1 52.3 52.4 54.0 53.2

44.7 45.2 43.4 46.0 42.7 43.7 44.5 44.6 42.9 43.9 44.0 44.4 46.4 48.4 49.7 49.7 49.8 49.1 48.4 47.0 49.3 49.7 52.1 51.2 49.6

45.2 45.0 43.0 44.7 47.4 46.0 46.8 46.0 49.8 50.3 49.0 48.1 49.4 48.6 50.7 51.8 51.1 51.7 52.7 54.3 56.5 54.8 53.7 54.1 52.3

43.1 40.1 41.9 42.1 42.2 41.0 41.8 41.4 41.7 43.0 42.1 45.0 45.3 45.4 47.0 48.7 47.5 47.3 49.2 49.6 51.2 51.3 49.7 51.1 51.0

45.9 48.4 45.2 49.6 48.1 47.3 49.2 51.2 50.5 47.9 48.6 50.2 51.3 52.9 54.8 57.2 56.3 56.5 58.4 57.3 56.7 56.2 55.3 57.3 57.0

53.2 51.0 52.0 51.0 52.4 52.9 52.3 50.0 52.0 52.0 50.8 50.6 50.4 51.7 49.2 49.4 49.4 51.8 49.4 48.8 48.0 48.5 48.3 48.5 48.9

50.2 51.4 49.4 50.0 52.2 52.5 51.6 53.1 54.0 53.5 52.3 51.3 51.1 51.2 49.8 50.9 54.0 53.3 55.0 53.5 52.7 53.4 51.7 51.1 50.1

59.8 57.0 58.9 58.1 58.5 58.9 58.0 57.3 56.6 56.6 57.5 58.7 56.7 57.1 58.7 59.7 58.6 57.0 58.5 57.0

47.1 49.5 47.4 49.1 53.6 49.3 50.5 50.4 51.6 52.2 56.5 49.1 51.5 51.6 50.5 50.3 51.5 50.3 47.4 44.3

50.7 49.9 47.9 47.7 48.0 46.9 46.5 45.0 47.7 48.5 50.4 51.1 51.5 52.3 50.7 52.2 52.5 54.2 55.1 55.2 56.6 55.5 53.9 49.4 49.9

51.0 47.2 49.4 47.5 45.7 47.4 48.2 50.1 49.9 50.9 52.0 52.6 51.1 49.4 47.2 47.5 49.7 50.2 50.4 50.8 50.9 49.8 50.4 50.2 49.5

50.4 50.2 50.1 49.2 49.8 50.2 50.6 51.5 50.4 50.4 51.6 50.4 49.2 48.2 47.7 50.1 50.2 50.9 50.8 50.5 49.5 48.5 48.0 48.1 49.4

50.5 49.2 47.5 46.1 45.6 47.8 47.4 50.6 51.5 50.2 51.2 50.7 47.1 49.5 48.6 50.0 52.0 53.0 53.4 55.2 55.5 54.7 52.7 52.3 52.4

48.3 46.6 43.6 47.9 49.2 48.7 50.5 49.3 50.1 48.3 50.8 51.0 48.8 46.4 48.5 49.4 51.5 51.5 50.3 51.8 52.1 51.0 51.3 53.1 52.5

48.1 50.2 51.4 51.6 50.5 51.9 51.5 50.7 49.7 50.5 51.3 51.7 51.6 51.0 50.7 48.5 50.2 50.9 50.3 50.9 51.0 50.5 50.1 51.1 52.4

54.8 55.0 52.9 52.8 52.8 52.9 53.7 54.7 53.2 54.2 52.0 51.0 50.1 50.3 50.1 48.5 49.6 49.6 51.3 50.7 51.4 52.5 51.3 51.3 51.4

42.4 47.2 40.3 45.3 44.1 45.2 44.3 44.3 40.2 45.6 44.4 36.7 43.8 49.6 42.0 46.4 51.7 53.2 47.7 47.6 46.7 48.6 47.9 44.8 49.2

www.lairdresearch.com Jun 11, 2014 Page 20

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

YoY

Cha

nge

−40−20

02040

Bal

ance

08 09 10 11 12 13 14

−100

10203040

US

YoY

Cha

nge

−60−40−20

02040

Bal

ance

08 09 10 11 12 13 14

−80−60−40−20

0

Canada

YoY

Cha

nge

−15−10−5

05

10

Bal

ance

08 09 10 11 12 13 14

−20246

Germany

YoY

Cha

nge

−40

−20

0

20

Bal

ance

08 09 10 11 12 13 14

05

1015202530

JapanYo

Y C

hang

e

−30−20−10

01020

Bal

ance

08 09 10 11 12 13 14

−10−5

05

10

South Korea

YoY

Cha

nge

−15−10−5

05

1015

Bal

ance

08 09 10 11 12 13 14

−4−2

0246

India

YoY

Cha

nge

−10−5

05

1015

Bal

ance

08 09 10 11 12 13 14

−15−10−5

0

Australia

YoY

Cha

nge

−6−4−2

0246

Bal

ance

08 09 10 11 12 13 14

−2−1

01234

Eurozone

YoY

Cha

nge

−80−60−40−20

02040

Bal

ance

08 09 10 11 12 13 14

−100

1020

www.lairdresearch.com Jun 11, 2014 Page 21

Canadian Indicators

Unemployment rate

Per

cent

67

89

1011 median: 7.40

May 2014: 7.00

Permits issued for Dwelling

YoY

Per

cent

Cha

nge

−50

050

100

May 2014: NA

Retail Sales

YoY

Per

cent

Cha

nge

−5

05

10

median: 4.28Mar 2014: 3.65

Inflation rate

YoY

Per

cent

Cha

nge

in C

PI

−1

01

23

45

median: 1.68Apr 2014: 1.79

Consumer Confidence

6070

8090

100

median: 94.35Apr 2014: 87.30

Housing Prices

YoY

Per

cent

Cha

nge

−5

05

1015 median: 1.84

Mar 2014: 1.37

Money Supply (M2)

YoY

Per

cent

Cha

nge

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

05

1015 median: 5.88

Apr 2014: 4.89

PMI: Manufacturing

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

4050

6070

median: 56.50May 2014: 52.20

Retail Sales Performance

YoY

Per

cent

Cha

nge

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−5

05

10

median: 4.28Mar 2014: 3.65

www.lairdresearch.com Jun 11, 2014 Page 22

European Indicators

Unemployment Rates

Per

cent

age

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

05

1015

20

Business Employment Expectations

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−40

−20

010

Volume of Retail Sales (ex−cars)

Inde

x (J

an 2

010

= 1

00)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

6070

8090

110

130

Manufacturing Turnover

Inde

x (J

an 2

010

= 1

00)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

6070

8090

110

130

Building Permits

Inde

x (J

an 2

010

= 1

00)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

010

020

030

040

050

0

Industrial Orderbook Levels

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−60

−40

−20

020

Country EmploymentExpect.

Unempl.(%)

Bond Yields(%)

RetailTurnover

ManufacturingTurnover

BuildingPermits

IndustryOrderbook

PMI

Series Dates May 2014 Apr 2014 May 2014 Apr 2014 Apr 2014 Apr 2014 May 2014 May 2014� France -11.2 10.4 1.84 105.7 109.6 70.87 -21.7 49.6� Germany -1.7 5.2 1.33 101.9 113.3 133.46 -7.1 52.3� United Kingdom 5.6 6.6 2.27 105.55 105.76 NA 1.5 57� Italy -5.6 12.6 3.13 92.84 98.84 NA -20.5 53.2� Greece -12.2 26.6 6.39 74.37 98.45 16.25 -25.9 51� Spain -6.5 25.1 2.94 81.72 98.77 53.4 -14.3 52.9� Eurozone -3.6 10.4 2.93 99.77 109.24 NA -13.3 NA

www.lairdresearch.com Jun 11, 2014 Page 23

Government Bond YieldsLo

ng T

erm

Yie

lds

%

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

02

46

810

Economic Sentiment

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

6070

8090

110

130

Consumer Confidence

Inde

x

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

−10

0−

60−

200

20Production of Total Industry: Dec 2013

<−10.0%−7.5%−5.0%−2.5% 0.0% 2.5% 5.0% 7.5%>10.0%

YoY % Difference increasingdecreasing

AUT 0.44%

DEU 3.86%

ESP 2.39%

FIN−3.84%

FRA 0.71%

GBR 1.89%

GRC−1.77%

HUN 4.64%

IRL−6.86%

ITA−0.87%

NOR−2.71%

POL 4.68%

RUS 0.09%

SWE−2.91%

Inflation: Dec 2013

AUT 1.9%

DEU 1.4%

ESP 0.3%

FIN 1.6%

FRA 0.7%

GBR 2.0%

GRC−1.7%

HUN 0.4%

IRL 0.2%

ITA 0.7%

NOR 2.0%

POL 0.7%

SWE 0.1%

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

YoY % Change in Prices

PMI: May 2014

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

Steady ExpandingContracting

BRA48.8

CAN52.2

DEU52.3

ESP52.9

FRA49.6

GBR57.0

GRC51.0

IRL55.0

ITA53.2

MEX51.9

POL50.8

SAU57.0

TUR50.1

USA56.4

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−0.7

DEU−1.8

ESP 0.2

FRA−1.6

GBR−0.3

GRC−0.1

IRL−1.1

ITA−0.8

POL−1.2

TUR−1.0

USA 1.0

www.lairdresearch.com Jun 11, 2014 Page 24

Chinese Indicators

Tracking the Chinese economy is a tricky. As reported in the Finan-cial 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

4045

5055

60

May 2014: 49.40

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

1000

2000

3000

4000

5000

6000

May 2014: 2005.18

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

1000

2000

3000

5000

Apr 2014: 4250.00

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

9810

010

210

410

610

8

median: 102.95Apr 2014: 104.80

Exports

YoY

Per

cent

Cha

nge

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

−20

020

4060

80

median: 19.40May 2014: 6.95

Retail Sales Change

YoY

Per

cent

Cha

nge

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

1015

20

median: 13.20Apr 2014: 11.90

www.lairdresearch.com Jun 11, 2014 Page 25

Global Climate Change

Temperature and precipitation data are taken from the US NationalClimatic Data Center and presented as the average monthly anomalyfrom the previous 6 months. Anomalies are defined as the difference

from the average value over the period from 1961-1990 for precipitationand 1971-2000 for temperature.

Average Temperature Anomalies from Aug 2013 - Feb 2014

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

Anomalies in Celcius WarmerCooler Anomalies in Celcius

−4 −2 0 2 4

Average 6 month Precipitation Anomalies from Aug 2013 - Feb 2014

<−40.0 −30.0 −20.0 −10.0 0.0 10.0 20.0 30.0 >40.0

Anomalies in millimeters WetterDrier Anomalies in millimeters

−40 −20 0 20 40

www.lairdresearch.com Jun 11, 2014 Page 26