May 13, 2010

Economics Group

Special Commentary

Global Chartbook: May 2010

Executive Summary: Is Global Recovery Still in the Cards?
The seizing of financial markets that followed Lehman Brothers’ failure in September 2008 Contents Page
caused the global economy to fall into its deepest recession in decades. By the spring of 2009
industrial production (IP) in the 30 countries that comprise the Organisation for Economic World .........................3
Cooperation and Development (OECD) had plunged more than 15 percent from year-earlier levels United States .............4
(Figure 1). But the policy response—unprecedented monetary easing, expansionary fiscal policy, Eurozone....................5
and the shoring up of private sector balance sheets—led to stabilization in economic activity in Japan..........................6
mid-2009 that subsequently morphed into global recovery. By early this year, the year-over-year United Kingdom ........7
rate of IP growth in the OECD countries had turned positive again. However, another financial Australia.....................8
crisis, in the form of sovereign debt problems in the Euro-zone, could be a distinct possibility. Canada .......................9
Will the global recovery continue, or does another global recession loom?
Norway.....................10
Figure 1 Figure 2 Singapore ..................11
OECD Industrial Production U.S. Trade Weighted Dollar Major Index South Korea ............. 12
10%
Year-over-Year Percent Change
10% 115
March 1973=100
115 Sweden..................... 13
110 110
Switzerland .............. 14
5% 5%
105 105
Taiwan ..................... 15
100 100
Argentina ................. 16
0% 0%
Brazil ........................ 17
95 95
Chile ......................... 18
-5% -5% 90 90
China........................ 19
-10% -10%
85 85
India........................ 20
80 80 Mexico...................... 21
-15% -15%
75 75 Poland ......................22
OECD Industrial Production: Feb @ 7.7%
70 70 Russia.......................23
Major Currency Index: May @ 78.6
-20% -20% 65 65 South Africa .............24
81 85 89 93 97 01 05 09 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Turkey ......................25
Source: IHS Global Insight, Organisation for Economic Cooperation and Development, Bloomberg LP
and Wells Fargo Securities, LLC Dollar .......................26
Energy......................27
Let’s start with the good news. Among the major regions of the world, economic growth in Asia Metals ..................... 28
has been strongest to date. For example, real GDP in China increased nearly 12 percent on a year-
ago basis in the first quarter of 2010. However, the expansion is not confined to only China. Many
other countries in the region, including the large economies of Japan, Korea and Taiwan, are
posting positive growth rates again. What makes Asia so special? The financial systems of most
Asian economies were not nearly as leveraged as those of their western counterparts, so banks in
the region were able to ramp up lending again. In addition, most Asian governments responded to
the crisis with expansionary fiscal policy. Because self-sustaining economic recoveries have taken
hold, most Asian governments are beginning to remove emergency stimulus measures that were
put in place when the outlook was bleak. However, we believe it will be quite some time before
economic policies turn restrictive in most Asian countries.

This report is available on wellsfargo.com/research and on Bloomberg WFEC

Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

North American economies are growing again as well. The U.S. economy has expanded for three
consecutive quarters, and a self-sustaining recovery appears to be underway in Canada. The
temporary effects of fiscal stimulus certainly played a role in stabilizing the U.S. economy, but
recent increases in core measures of retail sales and capital spending indicate that there is more
to the story than simply fiscal stimulus. In our view, the U.S. economic recovery will remain intact
this year, but the pace of the upturn will likely remain frustratingly slow. Due to slow economic
growth and benign inflation, the Federal Reserve will likely refrain from hiking rates until late
this year.
Europe is the Achilles’ heel of the global economy. The economy has stabilized, but the pace of
recovery remains very slow. Moreover, the outlook for real GDP growth in the overall euro area
over the next few years appears to be bleak. Many countries in the Euro-zone (e.g., Greece,
Portugal and Spain) need to cut their budget deficits significantly, which will exert powerful
headwinds on economic growth for the next few years. In our view, the European Central Bank
(ECB) will be on hold for the foreseeable future.
When it recently became apparent that the Greek debt crisis was about to morph into a
generalized financial crisis, European leaders came up with a three-pronged strategy to deal with
the issue including a €500 billion lending facility. The IMF agreed to kick in an additional
€250 billion, the ECB began to purchase government bonds to re-liquefy those markets, and the
Federal Reserve re-authorized swap lines that foreign central banks could use to provide dollar
funding to their respective banking systems. So far, the market response to the plan has been
favorable. Indeed, the aim of the program is to entice investors to continue financing
governments who have encountered liquidity problems. In a best-case scenario, the funds that
have been committed by European governments will never be needed. Simply by committing to
provide a backstop, leaders hope to give investors confidence to continue to provide financing.
Assuming that markets settle down and that another full-blown financial crisis does not engulf
major economies again, the global economic recovery should continue. However, there are some
longer run issues to keep in mind in regards to the plan put forward by European leaders. First,
money may eventually need to flow, and parliaments could balk at approving the funds. If so,
financial markets probably would come under selling pressure again. Second, many European
countries face a bleak economic future even if the crisis is gone for good. Significant fiscal
retrenchment will exert powerful headwinds on growth over the next few years that could very
well lead to reform fatigue in some European Countries. Although the crisis may have subsided
for now, we fear that the issues that caused it in the first place have not gone away completely.
The Dollar Should Appreciate Modestly versus Major Currencies
The U.S. dollar trended lower throughout most of 2009, as the recovery in the global economy
caused the greenback to lose its safe-haven appeal. However, the dollar has gotten off to a strong
start in 2010, especially against the euro and other European currencies. U.S. economic data have
generally been stronger than expected, while the upturn on the other side of the Atlantic has been
disappointing thus far. Concerns about the European debt situation have clearly weighed on the
euro as well.
Looking ahead, our view, and that of the currency strategy team at Wells Fargo, is that the dollar
will continue to trend higher against most major currencies. As the U.S. recovery gathers steam,
foreign investment flows into long-term securities (e.g., corporate bonds and equities) and direct
investment inflows should continue to strengthen, helping to lift the greenback. In addition, the
diminished U.S. current account deficit will exert fewer headwinds on the greenback than it did
earlier this decade.
However, most “commodity” and emerging market currencies should strengthen further versus
the greenback in the quarters ahead. The global recovery will likely cause most commodity prices
to drift higher, which should help to support “commodity” currencies (e.g., the Aussie dollar). In
addition, rising levels of risk tolerance will clear the way for capital to flow to “risky” developing
countries, which should put upward pressure on many of those currencies.

2
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

OECD Industrial Production

World 120
Index, 2005=100
120

! The global economy is bouncing back from its

deepest recession in decades, though industrial 100 100
production in the OECD nations remains well
below the peak that was reached in early 2008.
Purchasing manager indices have generally
80 80
remained in expansion territory, suggesting
that the global recovery remains intact. Most
regions of the world are growing again, with
Asia clearly in the vanguard. 60 60

! The major governments of the world averted

catastrophe in the fall of 2008 by taking steps OECD Industrial Production: Feb @ 97.4
40 40
to prevent the global financial system from 1981 1985 1989 1993 1997 2001 2005 2009
collapsing. More recently, another financial
crisis has been averted by the timely lending
package assembled by the European Union. Global Purchasing Manager's Indices
Diffusion Index
! Not only have interest rates been reduced to 65 65

unprecedented lows, but major central banks

60 60
have enacted “quantitative easing” programs
via unconventional purchases of private sector 55 55
assets. Central banks in some countries (e.g.,
Australia and Norway) have started to hike 50 50
rates again, but the Fed, the ECB and the Bank
of Japan remain firmly on hold. 45 45

! Deep global recession and the collapse in

40 40
commodity prices caused inflationary
Courtesy of J.P. Morgan
pressures to recede significantly. Commodity 35 35
prices have risen off their lows, but elevated Global PMI Manufacturing: Apr @ 57.8
Global PMI Services: Apr @ 56.8
unemployment rates have kept a lid on wage 30 30
inflation. We forecast that CPI inflation rates 2004 2005 2006 2007 2008 2009 2010

will trend higher this year, but runaway global

inflation à la the 1970s does not seem likely. Central Bank Policy Rates
8.0% 8.0%
ECB: May @ 1.00%
Global CPI 7.0%
Bank of Canada: May @ 0.25%
7.0%
Year-over-Year Percent Change US Federal Reserve: May @ 0.25%
16% 16% Bank of England: May @ 0.50%
6.0% 6.0%
14% 14%
5.0% 5.0%
12% 12%
4.0% 4.0%
10% 10%
3.0% 3.0%

8% 8%
2.0% 2.0%

6% Forecast 6%
1.0% 1.0%

4% 4%
0.0% 0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2% 2%

0% 0% Source: U.S. Department of Commerce, U.S. Department of Labor

1995 1998 2001 2004 2007 2010 and Wells Fargo Securities, LLC

3
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Real GDP
United States 10.0%
Bars = CAGR Line = Yr/Yr Percent Change
10.0%
GDPR - CAGR: Q1 @ 3.2%

! After enduring its deepest recession in 8.0% GDPR - Yr/Yr Percent Change: Q1 @ 2.5% 8.0%

decades, the U.S. economy has posted positive 6.0% 6.0%

growth rates for the past three quarters and Forecast
4.0% 4.0%
monthly indicators point to continued growth
in the second quarter. Some of the growth 2.0% 2.0%

reflects the temporary effects of government 0.0% 0.0%

stimulus, and the transient inventory swing
that occurred in the fourth and first quarters -2.0% -2.0%

overstates the underlying strength of the -4.0% -4.0%

economy at present.
-6.0% -6.0%
! It would be incorrect, however, to claim that
-8.0% -8.0%
the rise in GDP over the past few quarters is 2000 2002 2004 2006 2008 2010
due entirely to stimulus. Core measures of
consumer spending and business spending
Retail Sales Ex. Motor Vehicles & Gasoline Stations
have posted solid gains over the past few 3-Month Moving Average
months. 12% 12%

! The labor market is finally starting to recover 9% 9%

as payrolls have risen in five out of the last six
6% 6%
months. That said, it will take years to fully
recover the 8.4 million jobs lost during the 3% 3%

downturn, and the unemployment rate, which 0% 0%

currently stands at 9.9 percent, will likely
remain elevated for the foreseeable future. -3% -3%

! Core measures of inflation are very benign at -6% -6%

present, which allows the Federal Reserve to -9% -9%

keep rates low “for an extended period.”
Although the Fed has started to remove some -12% Year-over-Year Percent: Mar @ 2.8% -12%
Retail Sales, ex. Autos & Gas, 3-Month Annual Rate: Mar @ 7.5%
emergency measures that were put in place -15% -15%
more than a year ago, we do not look for an 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

increase in the fed funds rate until late this

year. Nonfarm Employment Change
Change in Employment, In Thousands
600 600

CPI vs. Core CPI

Year-over-Year Percent Change 400 400
6.0% 6.0%

200 200
5.0% 5.0%

4.0% 4.0% 0 0

3.0% 3.0%
-200 -200
2.0% 2.0%
-400 -400
1.0% 1.0%

0.0% 0.0% -600 -600

Nonfarm Employment Change: Apr @ 290,000

-1.0% -1.0%
-800 -800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-2.0% CPI: Mar @ 2.3% -2.0%
Core CPI: Mar @ 1.1%
-3.0% -3.0% Source: U.S. Department of Commerce, U.S. Department of Labor
92 94 96 98 00 02 04 06 08 10 and Wells Fargo Securities, LLC

4
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Euro-zone Real GDP

Eurozone 6.0%
Bars = Compound Annual Rate Line = Yr/Yr % Change
6.0%

! Following its 5 percent contraction between 4.0% 4.0%

early 2008 and mid-2009, the Euro-zone 2.0% 2.0%

economy has started to recover. However, the
0.0% 0.0%
pace of the recovery remains painfully slow
with real GDP up only 0.6 percent since the -2.0% -2.0%

nadir in Q2 2009. Recently released data -4.0% -4.0%

showed that real GDP rose at an annualized
rate of 0.8 percent in the first quarter, and -6.0% -6.0%

available monthly indicators point to -8.0% -8.0%

continued growth in the second quarter.
-10.0% Compound Annual Growth: Q1 @ 0.8% -10.0%
! However, the recovery in the Euro-zone is Year-over-Year Percent Change: Q1 @ 0.5%
-12.0% -12.0%
hardly self-sustaining at present as growth in 2000 2002 2004 2006 2008 2010
private domestic demand (consumer spending
and business fixed investment spending) has
remained sluggish. The recovery is being Euro-zone Purchasing Manager Indices
Index
driven largely by net exports at present. 65 65

! Another global financial crisis, stemming this

60 60
time from the debt problems of some
European government, seems to have been 55 55
averted, at least for now (see page 2 for
details). However, some economies in the euro 50 50
area face a bleak economic future. Much-
needed austerity measures will exert powerful 45 45

headwinds on growth over the next few years.

! Weak growth and benign inflation imply that
40 40

the European Central Bank can keep monetary 35 35

policy accommodative for an extended period. E.Z. Manufacturing: Apr @ 57.6
E.Z. Services: Apr @ 55.5
Indeed, we believe that the ECB will keep its 30 30
main policy rate at 1 percent, where it has been 1998 2000 2002 2004 2006 2008 2010

maintained since May 2009, well into 2011.

Government Debt and Deficits
Percent of GDP
120% 120%
Debt
Euro-zone Consumer Price Inflation 110% 110%
Deficit
Year-over-Year Percent Change 100% 100%
5.0% 5.0%
Core CPI: Mar @ 1.0% 90% 90%
CPI: Mar @ 1.4%
80% 80%
4.0% 4.0%
70% 70%

60% 60%
3.0% 3.0%
50% 50%

40% 40%
2.0% 2.0%
30% 30%

20% 20%
1.0% 1.0%
10% 10%

0% 0%
0.0% 0.0%
Greece Ireland Portugal Spain

-1.0% -1.0% Source: Bank of England, EuroStat, IHS Global Insight, Statistics
1997 1999 2001 2003 2005 2007 2009 Canada and Wells Fargo Securities, LLC

5
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Japanese Real GDP

Japan 10%
Bars = Compound Annual Rate Line = Yr/Yr % Change
10%

! Japan’s fourth quarter GDP was revised lower

to 3.8 percent at a seasonally adjusted annual 5% 5%

rate, from the 4.6 percent rate initially

reported, keeping concerns about the 0% 0%
durability of the expansion on center stage.
The downward revision in GDP growth was
primarily due to less non-residential fixed -5% -5%

investment growth and a modest drawdown of

business inventories. Nevertheless, the
-10% -10%
economic recovery remains intact with
Compound Annual Growth: Q4 @ 3.8%
government, consumer spending and net Year-over-Year Percent Change: Q4 @ -1.4%
exports leading the expansion. -15% -15%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
! Deflation remains the primary economic
threat. National CPI is still declining at a
1.1 percent pace year-on-year through March, Japanese Exports
Billions USD, 3-Month Moving Average
though that is an improvement over the record $1.8 $1.8

low of -2.5 percent year-over-year decline Exports to United States: Mar @ 0.8B USD
$1.6 Exports to China: Mar @ 1.0B USD $1.6
recorded last October. Deflation will continue
to limit companies’ pricing power, and real $1.4 $1.4

wages are expected to fall further. $1.2 $1.2

! Heightened fears of a sovereign debt crisis in $1.0 $1.0

Greece and Europe is leading to a flight to
safety move into the Japanese yen and the $0.8 $0.8

safety of Japanese bonds. This is pushing $0.6 $0.6

Japanese long-term interest rates lower, and
could even intensify deflation pressures as $0.4 $0.4

import prices fall in relative terms. $0.2 $0.2

! Despite the fact that Japan has its own $0.0 $0.0
sovereign debt problem, with gross public debt 1996 1998 2000 2002 2004 2006 2008 2010

expected to rise above 213 percent of GDP by

the end of 2014, the country has yet to be Japanese Consumer Price Index
targeted by investors as a problem. 3.0%
Year-over-Year Percent Change
3.0%

Japanese Interest Rates

2.0% 2.0%
2.25% 2.25%
10-Yr Government Bond Yield: May @ 1.29%
2.00% LIBOR-JPY: May @ 0.24% 2.00%
1.0% 1.0%

1.75% 1.75%

0.0% 0.0%
1.50% 1.50%

1.25% 1.25%
-1.0% -1.0%

1.00% 1.00%

-2.0% -2.0%
0.75% 0.75%
"Core" CPI: Mar @ -1.1%
CPI: Mar @ -1.1%
0.50% 0.50%
-3.0% -3.0%
1997 1999 2001 2003 2005 2007 2009
0.25% 0.25%

0.00% 0.00% Source: Bloomberg LP, IHS Global Insight and

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Wells Fargo Securities, LLC

6
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

U.K. Real GDP

United Kingdom 6.0%
Bars = Compound Annual Rate Line = Yr/Yr % Change
6.0%

! After six consecutive quarters of contraction in 4.0% 4.0%

which real GDP fell more than 6 percent, 2.0% 2.0%

economic growth in the United Kingdom has
0.0% 0.0%
returned to positive territory again. However,
the recovery remains frustratingly slow, with -2.0% -2.0%

GDP up only 0.7 percent over the past two -4.0% -4.0%
quarters.
! Consumer spending has strengthened since the
-6.0% -6.0%

middle of last year, although the trajectory of -8.0% -8.0%

spending has been affected by the increase in -10.0% Compound Annual Growth: Q1 @ 0.8% -10.0%
the VAT on Jan. 1. However, capital spending Year-over-Year Percent Change: Q1 @ -0.3%
-12.0% -12.0%
remains weak. It appears that businesses may 2000 2002 2004 2006 2008 2010
be unwilling to commit to capex as long as
uncertainties regarding the economic outlook
remain high. U.K. Purchasing Manager Indices
Index
! In our view, the U.K. economy will expand 65 65

throughout 2010. However, continued

60 60
deleveraging by the household sector will likely
exert headwinds on consumer spending 55 55
growth. In addition, fiscal tightening will also
weigh on overall economic growth. 50 50

! The overall rate of CPI inflation is well above

the Bank of England’s target of 2 percent at 45 45

present. However, CPI inflation has been

40 40
pushed up in recent months by some
temporary factors including the hike in the 35 35
value-added tax. We forecast that inflation will UK Manufacturing: Apr @ 58.0
UK Services: Apr @ 55.3
retreat in the coming months, which will give 30 30
the Bank of England the wherewithal to remain 2000 2002 2004 2006 2008 2010

on hold until early next year.

United Kingdom Retail Sales
Year-over-Year Percent Change
9.0% 9.0%

U.K. Consumer Price Index

Year-over-Year Percent Change
6.0% 6.0%
6.0% 6.0%

5.0% 5.0%

3.0% 3.0%
4.0% 4.0%

3.0% 3.0%
0.0% 0.0%

2.0% 2.0%
Retail Sales: Mar @ 2.0%
3-Month Moving Average: Mar @ 1.1%
-3.0% -3.0%
1.0% 1.0%
1999 2001 2003 2005 2007 2009

CPI: Mar @ 3.4%

0.0% 0.0% Source: Bank of England, EuroStat, IHS Global Insight, Bloomberg,
1997 1999 2001 2003 2005 2007 2009 LP and Wells Fargo Securities, LLC

7
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Australian Real GDP

Australia 10%
Bars = Compound Annual Rate Line = Yr/Yr % Change
10%

! The Australian economy was among the few 8% 8%

developed economies to avoid getting drawn

6% 6%
into the financial crisis and the global
recession. GDP growth picked up speed at the 4% 4%
end of last year, and while first-quarter data
are not yet available, most measures of 2% 2%

economic activity point to continued recovery 0% 0%

into 2010.
! Indeed, the Reserve Bank of Australia (RBA) in
-2% -2%

its official policy statement in early May noted -4% Compound Annual Growth: Q4 @ 3.7% -4%
that “output growth over the year ahead is Year-over-Year Percent Change: Q4 @ 2.7%
-6% -6%
likely to exceed that seen last year.” The RBA 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
has been at the forefront of central banks
willing to dial back monetary stimulus as it has
raised its key lending rate 150 bps since this Central Bank Policy Rates
past October. With inflation currently in the 9.0% 9.0%
US Federal Reserve: May @ 0.25%
upper half of the bank’s target range, we think Bank of England: May @ 0.50%
8.0% 8.0%
the RBA will likely take a breather at its June Reserve Bank of Australia: May @ 4.50%

meeting before considering another rate hike. 7.0% 7.0%

! The Australian economy added roughly 75,000 6.0% 6.0%

jobs in the first quarter of 2010, which helped 5.0% 5.0%

stabilize the unemployment rate at 5.3 percent.
Despite the relative strength in the job market, 4.0% 4.0%

consumers are still reticent to spend too much. 3.0% 3.0%

Retail sales have been roughly flat so far in
2010, with the 0.3 percent growth in March 2.0% 2.0%

falling short of the larger gain that the 1.0% 1.0%

consensus expected. This may mean that
0.0% 0.0%
consumption did not add much to GDP growth 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
in Q1. But the housing sector has shown signs
of strength recently including a 15.3 percent
Australian Consumer Price Index
jump in building approvals in March. Year-over-Year Percent Change
8.0% 8.0%

Australian Retail Sales and Housing

Year-over-Year Percent Change, 3-Month Moving Average
12.0% 90.0% 6.0% 6.0%
Retail Sales: Mar @ 2.5% (Left Axis)
Housing Approvals: Mar @ 47.5% (Right Axis)

8.0% 60.0% 4.0% 4.0%

4.0% 30.0% 2.0% 2.0%

0.0% 0.0% 0.0% 0.0%

Overall CPI : Q1 @ 2.9%

-4.0% -30.0% -2.0% -2.0%
1995 1998 2001 2004 2007 2010

-8.0% -60.0% Source: Bloomberg LP, IHS Global Insight and

1998 2000 2002 2004 2006 2008 2010 Wells Fargo Securities, LLC

8
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Canadian Real GDP

Canada 6.0%
Bars = Compound Annual Rate Line = Yr/Yr % Change
6.0%

! After weathering the biggest contraction since 4.0% 4.0%

1982, the Canadian economy has snapped back
to life. The economy expanded at a 5.0 percent 2.0% 2.0%

annual pace in the fourth quarter—the fastest

sequential growth rate since the third quarter 0.0% 0.0%

of 2000. Yet it appears the economy is just

-2.0% -2.0%
getting warmed up. With GDP data for January
and February already reported, the Canadian -4.0% -4.0%
economy likely grew at an even faster pace in
the first quarter of 2010. -6.0% -6.0%
Compound Annual Growth: Q4 @ 5.0%
! Nearly half of the growth in the fourth quarter Year-over-Year Percent Change: Q4 @ -1.2%
-8.0% -8.0%
came from the quickening pace of consumer 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
spending. But growth was broad-based in the
quarter, with positive contributions coming
from business and government spending. Canadian Employment
Month-over-Month Change in Employment, In Thousands
! While the Canadian job market has been 125 125

gradually recovering since midsummer 2009, 100 100

payrolls jumped more than anyone was 75 75

expecting in April, adding more than 108,000 50 50

jobs. It was the largest monthly gain on 25 25
record. Monthly jobs data are famously choppy
0 0
in Canada but even the six-month moving
average is at a multi-year high. -25 -25

! The Bank of Canada (BoC) recently backed

-50 -50

away from its conditional intention to leave the -75 -75

target rate unchanged through the second -100 -100

quarter of 2010. Though the core rate of -125

Change in Employment: Apr @ 108.7K
-125
6-Month Moving Average: Apr @ 39.1K
inflation remains near the bottom of BoC’s -150 -150
target range of 1 to 3 percent, the vigorous pace 2002 2004 2006 2008 2010

of economic recovery and the stellar April jobs

number likely mean a 25 bps hike when the Canadian Consumer Price Index
BoC meets in June. 5.0%
Year-over-Year Percent Change
5.0%

Central Bank Policy Rates

4.0% 4.0%
8.0% 8.0%
US Federal Reserve: May @ 0.25%
3.0% 3.0%
7.0% Bank of Canada: May @ 0.25% 7.0%

6.0% 6.0% 2.0% 2.0%

5.0% 5.0% 1.0% 1.0%

4.0% 4.0% 0.0% 0.0%

3.0% 3.0%
-1.0% -1.0%
"Headline": Mar @ 1.6%
2.0% 2.0% "Core": Mar @ 1.0%
-2.0% -2.0%
2000 2002 2004 2006 2008 2010
1.0% 1.0%

0.0% 0.0% Source: Bloomberg LP, IHS Global Insight and

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Wells Fargo Securities, LLC

9
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Norwegian Real GDP

Norway 16.0%
Bars = Compound Annual Rate Line = Yr/Yr % Change
16.0%
Compound Annual Growth Rate: Q4 @ 0.4%

! Norway experienced a mild recession in

12.0%
Year-over-Year Percent Change: Q4 @ -1.2%
12.0%
2008/2009. Although growth has returned to
positive territory, the pace of the expansion to
8.0% 8.0%
date remains tepid. Real GDP data for the first
quarter are not yet available but the weak
growth rate in industrial production—less than 4.0% 4.0%

3 percent at an annualized rate—suggests that

the overall rate of GDP growth remained slow. 0.0% 0.0%

Only in April did the manufacturing PMI edge

above “50.” -4.0% -4.0%

! Growth in consumer spending has generally

-8.0% -8.0%
been solid with the year-over-year growth rate 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
in real retail sales running around 3 percent at
present. However, investment spending is very
weak and export growth returned to positive Norwegian Manufacturing PMI
territory only recently. 70 70

! The overall rate of CPI inflation is above 65 65

3 percent at present, although the core rate of
inflation is lower at 1.7 percent. However, the 60 60

unemployment rate is only 3 percent at

55 55
present, and inflation could rise further going
forward if growth strengthens. 50 50

! Norges Bank, the country’s central bank, has 45 45

slowly raised its main policy rate to
2.00 percent at present from 1.25 percent last 40 40

October, the last rate hike occurring on May 5.

35 35
Although the Bank will probably hike rates
Norwegian Manufacturing PMI: Apr @ 51.9
further in the months ahead, the pace of 30 30
monetary tightening will likely remain quite 2004 2005 2006 2007 2008 2009 2010

slow if economic growth does not strengthen

and inflation remains benign. Volume of Norwegian Retail Sales
Year-over-Year Percent Change
10% 10%

Norwegian Consumer Price Index

Year-over-Year Percent Change 8% 8%
6% 6%

6% 6%

4% 4%
4% 4%

2% 2%
2% 2%

0% 0%

0% 0% 3-Month Moving Average: Mar @ 3.0%

-2% -2%
2001 2003 2005 2007 2009

CPI: Apr @ 3.3%

-2% -2% Source: Bloomberg LP, IHS Global Insight and
1997 1999 2001 2003 2005 2007 2009 Wells Fargo Securities, LLC

10
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Singapore Real GDP

Singapore 15.0%
Year-over-Year Percent Change
15.0%

! Singapore’s economy is in the middle of a

10.0% 10.0%
turbo-charged V-shaped recovery. First-
quarter GDP spiked 32.1 percent at a
5.0% 5.0%
seasonally adjusted annual rate, far exceeding
consensus expectations. GDP is now
13.1 percent above a year ago. 0.0% 0.0%

! Singapore’s manufacturing expansion was on

-5.0% -5.0%
fire in the first quarter, surging 139 percent
from the fourth quarter at a seasonally
-10.0% -10.0%
adjusted annual rate. Manufacturing
production is now 43 percent above a year ago. Year-over-Year Percent Change: Q1 @ 13.1%

Singapore’s March industrial production -15.0%

2000 2002 2004 2006 2008 2010
-15.0%

slipped 1.5 percent, following February’s

robust 5.2 percent monthly gain. Electronics
and biomedical manufacturing are leading Singaporean Industrial Production Index
Manufacturing Production, Year-over-Year Percent Change
Singapore’s manufacturing recovery. 20.0% 20.0%

! The Monetary Authority of Singapore (MAS) 15.0% 15.0%

chose in April to re-center the policy band
10.0% 10.0%
within which the Singapore dollar is permitted
to trade, adopting a new policy stance that 5.0% 5.0%

allows gradual appreciation of the local 0.0% 0.0%

currency. This is how the MAS conducts
monetary policy. An appreciation of the -5.0% -5.0%

Singapore dollar is an effective tightening of -10.0% -10.0%

monetary policy, making Singapore’s exports
relatively more expensive, slowing export -15.0% -15.0%

growth and tamping down import inflation. -20.0% -20.0%

!
6-Month Moving Average: Mar @ 18.3%
With economic growth roaring back and with -25.0% -25.0%
higher electricity tariffs and food and 1997 1999 2001 2003 2005 2007 2009

commodity prices, overall CPI inflation is

expected to increase in 2010. Singapore Exchange Rate
SGD per USD
1.900 1.900

Singapore Consumer Price Index

Year-over-Year Percent Change 1.800 1.800
8.0% 8.0%
CPI: Mar @ 1.6%
7.0% 7.0%
1.700 1.700
6.0% 6.0%

5.0% 5.0% 1.600 1.600

4.0% 4.0%
1.500 1.500
3.0% 3.0%

2.0% 2.0%
1.400 1.400
1.0% 1.0%
SGD per USD: May @ 1.397
0.0% 0.0% 1.300 1.300
1997 1999 2001 2003 2005 2007 2009
-1.0% -1.0%

-2.0% -2.0% Source: Bloomberg LP, IHS Global Insight and

1997 1999 2001 2003 2005 2007 2009 Wells Fargo Securities, LLC

11
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

South Korean Real GDP

South Korea 20%
Bars = Compound Annual Rate Line = Yr/Yr % Change
20%

! South Korea’s first-quarter GDP grew at a 15% 15%

robust annualized rate of 7.5 percent 10% 10%

(7.8 percent in year-over-year terms). The
5% 5%
economic recovery remains broad-based with
little sign of a near-term slowdown, yet 0% 0%

political and economic risks remain high, as -5% -5%

South Korea mulls a response to the alleged
North Korean sinking of one of its naval ships. -10% -10%

! South Korea’s industrial production jumped -15% -15%

another 1.6 percent in March to a new record -20%

Compound Annual Growth: Q1 @ 7.5%
-20%
high. Industrial production is now 22.6 percent Year-over-Year Percent Change: Q1 @ 7.8%
-25% -25%
higher than a year ago, largely due to a 2001 2002 2003 2004 2005 2006 2007 2008 2009
resurgence of exports.
! Exports have spiked 31.5 percent from a year
South Korean Industrial Production Index
ago in April, though that was a slight Year-over-Year Percent Change
moderation from March’s 34.3 percent 40% 40%

advance. Korean growth remains highly

30% 30%
dependent on strong growth continuing among
its Asian neighbors. So far Asian demand for 20% 20%
electronics, vehicles, and shipbuilding remains
robust. An unexpected slowdown in Chinese 10% 10%
demand due to Chinese monetary tightening or
a property bubble collapse is another real 0% 0%

downside risk. Mainland Chinese stock prices

have been falling so far this year, and the -10% -10%

Chinese PMI weakened a bit in April.

-20%
!
-20%
IPI: Mar @ 22.6%
South Korea does not face any of the sovereign
3-Month Moving Average: Mar @ 26.7%
debt issues plaguing much of the developed -30% -30%
world. South Korea’s budget deficit is expected 1997 1999 2001 2003 2005 2007 2009

to widen, but the level of public debt to GDP is

low at only 25.6 percent. South Korean Merchandise Trade Balance
Billions of USD, Not Seasonally Adjusted
$8.0 $8.0

South Korean Exchange Rate $7.0 $7.0

KRW per USD $6.0 $6.0

1,600 1,600
$5.0 $5.0
KRW per USD: May @ 1,155.5
$4.0 $4.0
1,500 1,500
$3.0 $3.0

$2.0 $2.0
1,400 1,400
$1.0 $1.0

1,300 1,300 $0.0 $0.0

-$1.0 -$1.0

1,200 1,200 -$2.0 -$2.0

-$3.0 -$3.0
1,100 1,100 -$4.0 -$4.0
Merchandise Trade Balance: Apr @ $4.4
-$5.0 -$5.0
1,000 1,000 1997 1999 2001 2003 2005 2007 2009

900 900 Source: Bloomberg LP, IHS Global Insight and

1999 2001 2003 2005 2007 2009 Wells Fargo Securities, LLC

12
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Swedish Real GDP

Sweden 10%
Bars = Compound Annual Rate Line = Yr/Yr % Change
10%

! Although growth has returned to most other

5% 5%
areas of the world, the Swedish economy
continues to contract. Relative to its peak in
0% 0%
early 2008, real GDP has declined about
7 percent. However, the modest increase in
industrial production in the first quarter and -5% -5%

the recent surge in the manufacturing PMI

suggests that real GDP growth may finally have -10% -10%

turned positive again.

! About 60 percent of the country’s exports are
-15%
Compound Annual Growth: Q4 @ -1.6%
-15%

destined for the European Union and another Year-over-Year Percent Change: Q4 @ -1.9%
-20% -20%
10 percent to go to emerging Europe. Both 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
regions have lagged the global upturn, which
has weighed on Swedish exports. In addition,
weakness in the labor market—unemployment Swedish Industrial Production Index
Year-over-Year Percent Change
has risen to the highest rate in more than 10 10% 10%

years—is weighing on consumer spending.

! Due to the rise in energy prices over the past
5% 5%

year the overall inflation rate returned to 0% 0%

positive territory in December, and it will likely
trend a bit higher in the months ahead. That -5% -5%
said, a major inflationary outbreak in Sweden
does not seem likely due to the weakness in the -10% -10%

economy.
! The Riksbank (the country’s central bank) cut
-15% -15%

its main policy rate to only 0.25 percent last -20% -20%
summer, where it has subsequently been IPI: Mar @ 6.5%
3-Month Moving Average: Mar @ 2.4%
maintained. Although the Riksbank may begin -25% -25%
to raise rates later this year, the pace of 2001 2003 2005 2007 2009

tightening will likely remain gradual until the

Swedish economy shows more obvious signs of Swedish Merchandise Trade Balance
strength. 25
Billions of Swedish Krona, Seasonally Adjusted
25
Merchandise Trade Balance: Mar @ 7.2B SEK
Swedish Consumer Price Index 12-Month Moving Average: Mar @ 6.8B SEK
Year-over-Year Percent Change
5.0% 5.0% 20 20
CPI: Apr @ 1.0%

4.0% 4.0%
15 15

3.0% 3.0%

10 10
2.0% 2.0%

1.0% 1.0%
5 5

0.0% 0.0%

0 0
-1.0% -1.0% 1997 1999 2001 2003 2005 2007 2009

-2.0% -2.0% Source: Bloomberg LP, IHS Global Insight and

1997 1999 2001 2003 2005 2007 2009 Wells Fargo Securities, LLC

13
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Swiss Real GDP

Switzerland 6.0%
Bars = Compound Annual Rate Line = Yr/Yr % Change
6.0%

! Switzerland experienced a mild recession in

4.0% 4.0%
late 2008/early 2009, but the economy is
growing again. Real GDP rose at a solid rate in
2.0% 2.0%
the second half of last year, and monthly
indicators, including the manufacturing PMI
and retail sales, suggest that growth has 0.0% 0.0%

strengthened further this year.

! House prices in most parts of Switzerland did
-2.0% -2.0%

not get overly inflated during the past decade,

-4.0% -4.0%
so the economy is not suffering from the Compound Annual Growth: Q4 @ 3.0%
hangover of a burst housing bubble. Real Year-over-Year Percent Change: Q4 @ 0.0%
-6.0% -6.0%
consumer spending has turned up over the 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
past few quarters, and investment spending
has also strengthened. Unless global economic
activity lurches lower again, which is not our Swiss Manufacturing PMI
Diffusion Index
base-case forecast, a self-sustaining expansion 70 70

appears to be taking hold in Switzerland.

65 65
! CPI inflation is in positive territory again as
energy prices have rebounded. As measured by 60 60

the core rate of CPI inflation, however, there

55 55
are few inflationary pressures in the economy
at present. The core rate of inflation is 50 50
currently 0.3 percent, which is more than a full
percentage point lower than in late 2008. 45 45

! The Swiss National Bank (SNB) has 40 40

maintained its target for the Swiss franc

35 35
LIBOR at the very low rate of only 0.25 percent Swiss Manufacturing PMI: Apr @ 65.9
since March 2009. Given the uncertainties 30 30
surrounding the economic outlook in the Euro- 1997 1999 2001 2003 2005 2007 2009

zone, to which most of Swiss exports are

destined, the SNB will likely remain on hold Swiss Retail Sales
for the foreseeable future. 8.0%
Year-over-Year Percent Change
8.0%
Retail Sales: Mar @ 112.0%
Swiss Consumer Price Index 3-Month Moving Average: Mar @ 2.1%
Year-over-Year Percent Change
3.5% 3.5% 6.0% 6.0%
CPI: Apr @ 1.4%
3.0% 3.0%

2.5% 2.5% 4.0% 4.0%

2.0% 2.0%

1.5% 1.5% 2.0% 2.0%

1.0% 1.0%

0.5% 0.5% 0.0% 0.0%

0.0% 0.0%

-0.5% -0.5% -2.0% -2.0%

2003 2004 2005 2006 2007 2008 2009 2010
-1.0% -1.0%

-1.5% -1.5% Source: Bloomberg LP, IHS Global Insight and

1997 1999 2001 2003 2005 2007 2009 Wells Fargo Securities, LLC

14
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Taiwanese Real GDP

Taiwan 10.0%
Year-over-Year Percent Change
10.0%

! Taiwan’s economic expansion continues to 7.5% 7.5%

strengthen. March industrial production

5.0% 5.0%
bounced back from a year ago. Exports
continue to lead the charge, rising 43.7 percent 2.5% 2.5%
from a year ago.
! Moreover, there is little sign of a near-term 0.0% 0.0%

pause in economic activity. Taiwan’s leading -2.5% -2.5%

economic index increased 0.3 percent in March
to a new high, the 14th consecutive monthly -5.0% -5.0%

increase.
-7.5% -7.5%
! President Ma of the ruling Kuomintang (KMT) Year-over-Year Percent Change: Q4 @ 9.2%

has a strong mandate to govern, which is helped -10.0% -10.0%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
by the fact that the KMT also controls the
Legislative Yuan. The government is looking to
improve relations and strengthen economic ties Taiwanese Industrial Production Index
with mainland China. The president of Taiwan 80.0%
Year-over-Year Percent Change
80.0%
is seeking an Economic Cooperation Framework
Agreement with the mainland that is a de facto 60.0% 60.0%
free-trade agreement. The opposition is playing
on fears that greater rapprochement with China 40.0% 40.0%
could lead to a loss of sovereignty for Taiwan.
! Taiwan’s strengthening economic outlook, and 20.0% 20.0%

moves by other countries in the region to allow

0.0% 0.0%
their currencies to appreciate, is making the
New Taiwan dollar more attractive. -20.0% -20.0%
! Taiwan’s central bank announced in March that
it would leave its main policy rate unchanged at -40.0%
IPI: Mar @ 28.8%
-40.0%

1.25 percent, although it acknowledged there 6-Month Moving Average: Mar @ 44.7%
were signs of improvement in the domestic -60.0% -60.0%
1997 1999 2001 2003 2005 2007 2009
economy. Official interest rates could start to
rise as early as the next policy meeting in June if
the recovery remains at its current pace. Taiwanese Merchandise Trade Balance
Billions of New Taiwan Dollars, Not Seasonally Adjusted
140.0 140.0
Merchandise Trade Balance: Apr @ 78.8 TWD
Taiwanese Exchange Rate 120.0 12-Month Moving Average: Apr @ 68.3 TWD 120.0
TWD per USD
36.00 36.00 100.0 100.0
TWD per USD: May @ 31.715
80.0 80.0
35.00 35.00
60.0 60.0

40.0 40.0
34.00 34.00
20.0 20.0

33.00 33.00 0.0 0.0

-20.0 -20.0
32.00 32.00
-40.0 -40.0

-60.0 -60.0
31.00 31.00
1997 1999 2001 2003 2005 2007 2009

30.00 30.00 Source: Bloomberg LP, IHS Global Insight and

1999 2001 2003 2005 2007 2009 Wells Fargo Securities, LLC

15
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Argentine Economic Activity Index

Argentina 15%
Year-over-Year Percent Change
15%

! The Argentine minister of economics has 10% 10%

started a “road show” to introduce the recently

5% 5%
launched offer to holdout bondholders from
the 2005 restructuring of the country’s debt. 0% 0%
The government is expecting at least an 80
percent acceptance of the new offer, which -5% -5%

includes a “haircut” for institutional investors -10% -10%

of 66.3 percent, which is larger than that
offered on for the original 2005 restructuring. -15% -15%

! After the slowdown in economic activity in -20% -20%

2009 due to the international financial Economic Activity: Feb @ 6.1%
-25% -25%
meltdown, the Argentine economy has 1997 1999 2001 2003 2005 2007 2009
resumed its strong growth. According to the
index of economic activity, the Argentine
economy grew by 6.1 percent in February Argentine Consumer Price Index
Year-over-Year Percent Change
compared to the same month a year earlier. 14% 14%

! It seems that even the intervened statistical

12% 12%
institute is not able to “keep” inflation under
tabs. Argentina’s inflation rate has been 10% 10%
accelerating during the first months of this
year. Cumulative inflation for the first quarter 8% 8%
of the year was 3.3 percent compared to a rate
of 1.6 percent during the same period a year 6% 6%

earlier.
! Industrial production remained very strong in
4% 4%

March, growing by 10.6 percent on a year- 2% 2%

earlier basis after posting 11.0 percent growth
Consumer Price Index: Mar @ 9.7%
during the previous month. It is clear that 0% 0%
industrial production as well as higher prices 2004 2005 2006 2007 2008 2009 2010

for the country’s commodities is doing the

trick. On the downside, the rift with China may Argentine Exchange Rate
affect the country’s exports. 4.00
BRL per USD
4.00
ARS per USD: May @ 3.894
Argentine Merchandise Trade Balance
Millions of USD, Not Seasonally Adjusted 3.75 3.75
$3,000 $3,000

3.50 3.50
$2,000 $2,000

3.25 3.25

$1,000 $1,000
3.00 3.00

$0 $0
2.75 2.75

-$1,000 -$1,000 2.50 2.50

03 04 04 05 06 07 08 09

Merchandise Trade Balance: Mar @ USD $311M

-$2,000 -$2,000 Source: Bloomberg LP, IHS Global Insight and
1997 1999 2001 2003 2005 2007 2009 Wells Fargo Securities, LLC

16
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Brazilian Real GDP

Brazil 12%
Bars = Compound Annual Rate Line = Yr/Yr % Change
12%

! The Brazilian economic recovery is in full 9% 9%

swing and the markets, as well as central 6% 6%

bankers, are taking note. The Brazilian
3% 3%
economy, after suffering the impact of the
worldwide financial crisis and the collapse in 0% 0%

world demand, is once again booming. -3% -3%

! The economic recovery is broad-based and

-6% -6%
very strong. Industrial production surged by
19.7 percent in March compared to the same -9% -9%

month a year earlier, with automobile -12% Compound Annual Growth: Q4 @ 8.4% -12%
production surging by 36.6 percent after a Year-over-Year Percent Change: Q4 @ 4.3%
-15% -15%
36.3 percent rate in February. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

! This growth is translating into a very strong

recovery in the country’s trade sector. Exports
Brazilian Retail Sales
increased by 23.0 percent (year-over-year) in Year-over-Year Percent Change
April after surging by 33.2 percent during 12% 12%

March. But Brazilians are also importing a lot

of goods from other countries, reflected in the 8% 8%
strong rebound in imports since late last year.
Thus, imports grew at an even higher rate, by
60.9 percent in April and by 49.8 percent in 4% 4%

March.
! Surging domestic consumption is pushing up 0% 0%
inflation, which has prompted the central bank
to increase the Selic overnight interest rate to
-4% -4%
9.50 percent from 8.75 percent. However, the
market fears that the central bank is already Retail Sales: Feb @ 12.3%
6-Month Moving Average: Feb @ 9.0%
behind the curve and will have to play catch-up -8% -8%
in the coming monetary policy meetings. The 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

talk of the town is that the next increase in

rates will be 100 basis points. Brazilian Merchandise Trade Balance
Millions of USD, Not Seasonally Adjusted
$6,000 $6,000

Brazilian Exchange Rate $5,000 $5,000

BRL per USD
4.00 4.00
BRL per USD: May @ 1.850 $4,000 $4,000

3.50 3.50 $3,000 $3,000

$2,000 $2,000
3.00 3.00

$1,000 $1,000

2.50 2.50
$0 $0

2.00 2.00 -$1,000 -$1,000

Merchandise Trade Balance: Mar @ $668
-$2,000 -$2,000
1.50 1.50
1997 1999 2001 2003 2005 2007 2009

1.00 1.00 Source: Bloomberg LP, IHS Global Insight and

99 00 01 02 03 04 05 06 07 08 09 10 Wells Fargo Securities, LLC

17
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Chilean Real GDP

Chile 12%
Bars = Compound Annual Rate Line = Yr/Yr % Change
12%

! The effects of the Chilean earthquake have 9% 9%

started to appear on the country’s economic 6% 6%

releases. Industrial production plunged by
3% 3%
17.4 percent during March compared to the
same month a year ago, according to the INE, 0% 0%

the country’s statistical institute. The severity -3% -3%

of the drop is augmented if we recall that
industrial production dropped by 7.0 percent -6% -6%

in March of last year, as the country was -9% -9%

affected by the worldwide financial crisis.
-12% Compound Annual Growth: Q4 @ 5.9% -12%
! Chilean exporters have had a wild ride over the Year-over-Year Percent Change: Q4 @ 2.2%
-15% -15%
last few years. Between the peak in March of 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
2008 and the trough hit in February 2009
after the financial crisis, Chilean exports fell by
roughly half. But as foreign economies began Chilean Consumer Price Index
Year-over-Year Percent Change
to recover, global trade began to pick up as 12% 12%

well. Chilean exports have retraced more than CPI: Apr @ 0.9%

half of the losses from the last cycle, leaving

exports roughly 20 percent off their 2008 8% 8%
highs. For now, the good news is it appears
that the earthquake of February 27 is not
having much of an impact on trade activity.
4% 4%
! Chilean consumer prices were up by
0.9 percent in April compared to the same
month a year earlier. Wholesale prices 0% 0%
remained in deflationary territory during the
first quarter of this year, even though the index
did not change during March from the
-4% -4%
previous month. On a year-over-year basis 1997 1999 2001 2003 2005 2007 2009
wholesale prices are down 6.3 percent. Thus,
monetary policy will remain expansive this
Chilean Economic Activity Index
year. Year-over-Year Percent Change
10% 10%

Chilean Exchange Rate 8% 8%

BRL per USD
800 800
CLP per USD: May @ 534.600 6% 6%

4% 4%
700 700
2% 2%

0% 0%

600 600
-2% -2%

-4% -4%
Economic Activity: Mar @ -2.8%
500 500
-6% -6%
2004 2005 2006 2007 2008 2009

400 400 Source: Bloomberg LP, IHS Global Insight and

99 00 01 02 03 04 05 06 07 08 09 10 Wells Fargo Securities, LLC

18
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Chinese Real GDP

China 14.0%
Year-over-Year Percent Change
14.0%

! Real GDP growth in China has rebounded 12.0% 12.0%

sharply in recent quarters. Because Chinese
banks were not overly leveraged, the 10.0% 10.0%

government directed them to increase lending

aggressively. In addition, the government 8.0% 8.0%

stimulated the economy via acceleration of

6.0% 6.0%
planned infrastructure spending.
! Growth in domestic demand has been solid. 4.0% 4.0%

For example, the value of retail sales is

currently growing nearly 18 percent on a year- 2.0% 2.0%

over-year basis. In contrast, the decline in the Year-over-Year Percent Change: Q1 @ 11.9%
0.0% 0.0%
Chinese trade balance in recent quarters 2000 2002 2004 2006 2008 2010
suggests that net exports have been a slight
drag on growth.
Chinese Merchandise Trade Balance
! Now that the economy is firmly back on track, USD Billions, Not Seasonally Adjusted
the government is directing banks to slow $45 $45
Merchandise Trade Balance: Apr @ 1.7 USD Billions
down the pace of credit creation before $40 $40

inflation becomes an issue. Most indicators $35 $35

point in the direction of continued strong $30 $30

growth in the second quarter but, as the recent $25 $25
decline in the manufacturing PMI suggests, the
$20 $20
pace of growth may slow somewhat going
forward. $15 $15

! Will Chinese authorities tighten too much?

$10 $10

Probably not, because inflation largely remains $5 $5

benign. That said, both the overall rate and the $0 $0

core rate of CPI inflation have trended up -$5 -$5

recently. Although economic policies will -$10 -$10

become less accommodative in the months 2000 2002 2004 2006 2008 2010

ahead, we do not expect Chinese authorities to

slam on the brakes. Chinese Loan Growth
Year-over-Year Percent Change
35% 35%

Chinese CPI Inflation

Year-over-Year Percent Change 30% 30%
10% 10%
Overall CPI: Apr @ 2.8%
Non-food CPI: Apr @ 1.3% 25% 25%
8% 8%

20% 20%
6% 6%

15% 15%
4% 4%

10% 10%
2% 2%

5% 5%
0% 0%
Chinese Loan Growth: Mar @ 21.8%
0% 0%
-2% -2% 99 01 03 05 07 09

-4% -4% Source: Bloomberg LP, IHS Global Insight and

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Wells Fargo Securities, LLC

19
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Indian Real GDP

India 12%
Year-over-Year Percent Change
12%

! Real GDP growth in the Indian economy has

fluctuated over the past year or so. After
9% 9%
slowing in the wake of the global recession,
growth bounced back up in mid-2009.
However, overall GDP growth weakened again
in the fourth quarter as agricultural output, 6% 6%

which accounts for nearly 20 percent of Indian

GDP, fell because of the effects of last year’s
drier-than-normal monsoon. 3% 3%

! Despite the fluctuations in the overall rate of

GDP growth, the underlying state of the Indian Year-over-Year Percent Change: Q4 @ 6.0%
0% 0%
economy remains relatively strong at present. 2004 2005 2006 2007 2008 2009
Growth in industrial production was very
strong in the first quarter, and the
manufacturing PMI remained well above “50” Indian Industrial Production Index
Year-over-Year Percent Change
in April, suggesting that growth has remained 18.0% 18.0%

solid in the current quarter. 3-Month Moving Average: Mar @ 15.1%

! Strong growth in automobile sales shows that 15.0% 15.0%

consumer spending generally remains solid. In

addition, exports have accelerated with the 12.0% 12.0%

year-over-year growth rate in the value of

Indian exports surging to 54 percent 9.0% 9.0%
(admittedly off a low base) in March.
! Wholesale price inflation, which is the 6.0% 6.0%

benchmark inflation gauge in India, has shot

up over the past few months. In response to 3.0% 3.0%
strong growth and the potential for inflation to
move higher, the Reserve Bank of India has 0.0% 0.0%
started to take back some of its previous rate 1997 1999 2001 2003 2005 2007 2009

cuts by hiking its main policy rate by 50 bps

over the past two months. Indian Wholesale Price Inflation
Year-over-Year Percent Change
14% 14%
Wholesale Price Inflation: Mar @ 9.9%
Indian Real GDP 12% 12%
Year-over-Year Percent Change
12% 20%
10% 10%
9% 15%
8% 8%
6% 10%
6% 6%
3% 5%
4% 4%

0% 0%
2% 2%

-3% -5%
0% 0%

-6% -10%
-2% -2%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-9% Overall GDP: Q4 @ 6.0% (Left Axis) -15%
Agricultural Output: Q4 @ -2.8% (Right Axis)
-12% -20% Source: Bloomberg LP, IHS Global Insight and
2000 2002 2004 2006 2008 Wells Fargo Securities, LLC

20
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Mexican Real GDP

Mexico 8.0%
Year-over-Year Percent Change
8.0%

! The recovery of the Mexican economy is taking 6.0% 6.0%

a very different path than the recovery of other 4.0% 4.0%

Latin American economies, because the 2.0% 2.0%

reasons for the Mexican recession were 0.0% 0.0%
different from the others. The strong economic
linkages between the Mexican and U.S. -2.0% -2.0%

economy weighed heavily on the Mexican -4.0% -4.0%

economy during the crisis. Although the -6.0% -6.0%

Mexican economy is recovering, the rate of this
-8.0% -8.0%
recovery is very mild compared to, say, Brazil.
!
-10.0% -10.0%
According to the Global Index of Economic Year-over-Year Percent Change: Q4 @ -2.3%
-12.0% -12.0%
Activity (IGAE), the Mexican economy grew by 2004 2005 2006 2007 2008 2009
3.4 percent during the second month of the
year compared to the same month a year
earlier, and up from a growth of 2.4 percent in Industrial Production Indices
Year-over-Year Percent Change
January. On a seasonally adjusted basis, the 10% 10%

index increased by 0.5 percent after falling by

1.0 percent during January, which tends to
5% 5%
show the still relative weakness of this
recovery.
! Mexican trade is also turning the corner but 0% 0%

the pace is also very slow. Exports increased by

39.0 percent in March on a year-earlier basis, -5% -5%
while imports posted a 38.6 percent increase.
However, since exports and imports were
down by 25 and 22 percent, respectively, in -10% -10%

March of last year, the recovery is not as strong Mexico, 3-Month Moving Average: Feb @ 3.2%
as in previous recovery processes. U.S.: Mar @ 4.0%
-15% -15%
! Mexican interest rates remain at all-time lows, 1999 2001 2003 2005 2007 2009

and we should expect these levels to remain

there for some time, as inflation has to be in Mexican Consumer Price Index
the rear mirror of central bankers. 12%
Year-over-Year Percent Change
12%

Mexican Exchange Rate

MXN per USD
16.00 16.00 10% 10%
MXN per USD: May @ 12.95
15.00 15.00

8% 8%
14.00 14.00

13.00 13.00
6% 6%

12.00 12.00

4% 4%
11.00 11.00

CPI: Apr @ 4.3%

10.00 10.00
2% 2%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
9.00 9.00

8.00 8.00 Source: Bloomberg LP, IHS Global Insight and

1999 2001 2003 2005 2007 2009 Wells Fargo Securities, LLC

21
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Polish Real GDP

Poland 9.0%
Year-over-Year Percent Change
9.0%
Year-over-Year Percent Change: Q4 @ 3.1%
! April 10, 2010, was among the saddest days in
Poland’s history as the country lost its
president and many political and military
6.0% 6.0%
leaders in the plane crash near Smolensk,
Russia. Since the president’s role in Poland is
mainly ceremonial, the crash will not cause
much political instability in the near term.
However, it will necessitate an early election to 3.0% 3.0%

elect a new president, which will be held on

June 20. Prime Minister Donald Tusk’s Civic
Platform Party, which is pro-business and pro-
European Union, has the inside edge, with 0.0% 0.0%

acting President Bronislaw Komorowski the 1995 1997 1999 2001 2003 2005 2007 2009

party’s nominee.
! Poland’s economy grew 1.2 percent in Q4 2009 Polish Industrial Production Index
Year-over-Year Percent Change
from the previous quarter, and 3.1 percent 20% 20%

from the same quarter a year ago. Trade led the IPI: Mar @ 12.3%
15% 15%
way, while inventory replenishment also
supported growth. Private consumption 10% 10%
growth slowed during the quarter. For all of
2009, real GDP rose 1.7 percent. First-quarter 5% 5%

data were not available as of this writing.

0% 0%
! On a year-ago basis, industrial production is
rebounding. However, the trade deficit has -5% -5%

widened since September as exports have -10% -10%

slowed more than imports. Weak European
growth and the weak euro pose risks for -15% -15%

Poland’s exports and manufacturing.

-20% -20%
! Rising unemployment, weak wage growth, the Jan 2008 Jul 2008 Jan 2009 Jul 2009 Jan 2010

zloty’s appreciation against the euro and

favorable base effects have all recently Polish Merchandise Trade Balance
contributed to a moderation in inflation. $0
Millions of Polish Zloty, Not Seasonally Adjusted
$0

Polish Consumer Price Index -$1,000 -$1,000

Year-over-Year Percent Change
12.0% 12.0% -$2,000 -$2,000
CPI: Mar @ 2.6%
-$3,000 -$3,000

10.0% 10.0% -$4,000 -$4,000

-$5,000 -$5,000

8.0% 8.0% -$6,000 -$6,000

-$7,000 -$7,000
6.0% 6.0%
-$8,000 -$8,000

-$9,000 -$9,000
4.0% 4.0%
-$10,000 -$10,000
Merchandise Trade Balance: Feb @ -$2,637 M
-$11,000 -$11,000
2.0% 2.0%
2000 2002 2004 2006 2008 2010

0.0% 0.0% Source: Bloomberg LP, IHS Global Insight and

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Wells Fargo Securities, LLC

22
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Russian Real GDP

Russia 10%
Year-over-Year Percent Change
10%

! Russian real GDP was down 3.8 percent year

8% 8%

6% 6%
0ver year in Q4 2009, an improvement over
the 7.7 percent drop in Q3. A rise in the trade 4% 4%

surplus, bolstered by rising oil prices, was a 2% 2%

primary driver. Continued improvement in 0% 0%

consumer spending added further support. -2% -2%

! The continuing global economic recovery has -4% -4%

led to further increases in demand for oil, -6% -6%

natural gas and metals, the vast majority of -8% -8%
Russian exports. Exports were up a whopping
-10% -10%
64.7 percent from a year ago in February, while Year-over-Year Percent Change: Q4 @ -3.8%
-12% -12%
imports were up a respectable but smaller 2001 2002 2003 2004 2005 2006 2007 2008 2009
14.8 percent. This has led to a further widening
of the trade surplus since the fourth quarter,
contributing to the 0.6 percent quarter-over- Russian Merchandise Trade Balance
Billions of USD, Seasonally Adjusted
quarter growth estimate for first-quarter GDP $20 $20

that the government released on April 28. $18

Merchandise Trade Balance: Apr @ $15.0B
$18

! Retail sales have improved further since our $16 $16

last report, rising 9.6 percent in March from a
$14 $14
year ago, as real wage growth continues to
accelerate, while the unemployment rate is $12 $12

down slightly from year-ago levels. However, $10 $10

credit remains tight, preventing consumers $8 $8
from contributing more to economic growth.
$6 $6
! Although the domestic economy is rebounding,
$4 $4
spending growth remains well below average.
This, along with the ruble’s sharp rebound over $2 $2

the past year, has led to a further slowing in $0 $0

annual inflation to 6.1 percent in April, the 1999 2001 2003 2005 2007 2009

lowest in over a decade. With inflation low, the

central bank cut the refinancing rate again in Russian Retail Sales
April to a record-low 8.0 percent. 120%
Year-over-Year Percent Change
120%
Retail Sales: Mar @ 9.6%
Russian Consumer Price Index
Year-over-Year Percent Change 100% 100%
20% 20%

80% 80%
18% 18%

16% 16% 60% 60%

14% 14% 40% 40%

12% 12% 20% 20%

10% 10%
0% 0%

8% 8%
-20% -20%
1997 1999 2001 2003 2005 2007 2009
6% 6%
CPI: Apr @ 6.1%
4% 4% Source: Bloomberg LP, IHS Global Insight and
2002 2003 2004 2005 2006 2007 2008 2009 2010 Wells Fargo Securities, LLC

23
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

South African Real GDP

South Africa 8.0%
Bars = Compound Annual Rate Line = Yr/Yr % Change
8.0%

! For the full-year 2009, the South African 6.0% 6.0%

economy contracted 1.8 percent. But like

4.0% 4.0%
many foreign economies it ended the year on
an up-note rising at a 3.2 percent annualized 2.0% 2.0%
pace in the fourth quarter. In recent public
comments South African Finance Minster 0.0% 0.0%

Gordhan noted the economy may indeed -2.0% -2.0%

recover faster than budget estimates.
! Despite the finance minister’s optimism, the
-4.0% -4.0%

unemployment rate in South Africa is among -6.0% Compound Annual Growth: Q4 @ 3.2% -6.0%
the highest in the world. Recently released Year-over-Year Percent Change: Q4 @ -1.6%
-8.0% -8.0%
employment data suggest the situation is 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
continuing to deteriorate, as the economy shed
another 171,000 jobs in the first quarter of
2010, leaving one in four people in the South South African Unemployment
Rate
African workforce looking for work. There are 26.0% 26.0%

1.8 million South Africans who have given up Unemployment Rate: Q1 @ 25.2%

looking for work. Including these discouraged

workers, the unemployment rate is a
staggering 35.4 percent. 24.0% 24.0%

! With one in three consumers either out of work

or having thrown in the towel on their job
search, consumer activity continues to wither.
Retail sales fell for the 13th straight month in 22.0% 22.0%
February.
! A dip in CPI inflation gave the South African
Reserve Bank (SARB) cover to cut its
benchmark interest rate 50 bps in March to 20.0% 20.0%
6.5 percent. But in recent public comments, Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Mar 10

Reserve Bank Governor Gill Marcus signaled

the target rate would likely remain unchanged Real South African Retail Sales
“for some time to come.” 15%
Year-over-Year Percent Change
15%

South African Consumer Price Index 12% 12%

Year-over-Year Percent Change
15% 15%
CPI: Mar @ 5.1% 9% 9%

6% 6%
12% 12%

3% 3%

9% 9%
0% 0%

-3% -3%
6% 6%

-6% -6%
Wholesale & Retail Sales: Feb @ -1.5%
3% 3% -9% -9%
2003 2004 2005 2006 2007 2008 2009

0% 0% Source: Bloomberg LP, IHS Global Insight and

2003 2005 2007 2009 Wells Fargo Securities, LLC

24
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Turkish Real GDP

Turkey 12.5%
Year-over-Year Percentage Change
12.5%

! Turkey’s economy has turned the corner,

10.0% 10.0%

7.5% 7.5%
growing 6.0 percent in the fourth quarter from
the previous year, the first positive reading in 5.0% 5.0%

five quarters, and second only to China’s 2.5% 2.5%

10.7 percent growth. Strong rebounds in 0.0% 0.0%

private consumption and business investment, -2.5% -2.5%
along with a surge in government spending, -5.0% -5.0%
drove growth. Trade had little effect on growth
-7.5% -7.5%
as the trade deficit was little changed from a
year prior. The government is expecting -10.0% -10.0%

double-digit GDP growth in the first quarter. -12.5%

Year-over-Year Percent Change: Q4 @ 6.0%
-12.5%

! Industrial production has rebounded strongly. -15.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-15.0%

Production was up 21.1 percent in March from

a year ago as auto production soared 57
percent and textile production rose 26 percent. Turkish Industrial Production Index
Year-over-Year Percent Change
Along with improved demand, the extremely 25.0% 25.0%

low base of comparison is also contributing to 20.0% 20.0%

the strong numbers.
15.0% 15.0%
! Inflation has been inching higher in recent
10.0% 10.0%
months, coming in at 10.2 percent year over
year in April. A rebound in demand and a low 5.0% 5.0%

base of comparison are contributing to the 0.0% 0.0%

increase. Despite rising inflation, the central -5.0% -5.0%
bank plans to keep rates low as it believes the
price spike is temporary. However, rising -10.0% -10.0%

producer prices suggest further price pressures -15.0% -15.0%

are building. This, along with continued -20.0% IPI: Mar @ 21.1% -20.0%
growth, will keep the central bank vigilant. 3-Month Moving Average: Mar @ 17.1%
-25.0% -25.0%
! Political instability persists in Turkey, as the 1997 1999 2001 2003 2005 2007 2009

ruling AKP party has proposed amendments

that would restructure the judicial system and Turkish Merchandise Trade Balance
increase civilian control of the military. $0
Millions of USD, Not Seasonally Adjusted
$0

Turkish Consumer Price Index -$1,000 -$1,000

Year-over-Year Percent Change
120.0% 120.0%
-$2,000 -$2,000

-$3,000 -$3,000
100.0% 100.0%

-$4,000 -$4,000

80.0% 80.0%
-$5,000 -$5,000

-$6,000 -$6,000
60.0% 60.0%

-$7,000 -$7,000

40.0% 40.0%
-$8,000 -$8,000
Merchandise Trade Balance: Mar @ -5,031.5 USD
-$9,000 -$9,000
20.0% 20.0%
2000 2002 2004 2006 2008 2010

CPI: Apr @ 10.2%

0.0% 0.0% Source: Bloomberg LP, IHS Global Insight and
1997 1999 2001 2003 2005 2007 2009 Wells Fargo Securities, LLC

25
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

U.S. Trade Weighted Dollar Major Index

Dollar Exchange Rates 115
March 1973=100
115

! The weighted-average value of the dollar has 110 110

been trended higher this year. Some of the 105 105

greenback’s biggest gains have come at the 100 100

expense of the euro and other European 95 95
currencies. In contrast, the dollar has lost value
on balance versus many emerging market 90 90

currencies so far this year. 85 85

! The appreciation of the dollar versus European 80 80

currencies this year reflects the stronger 75 75

economic upturn to date in the United States 70 70
than on the other side of the Atlantic Ocean. In Major Currency Index: May @ 78.6
65 65
addition, the Euro-zone’s widely publicized 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
fiscal problems have reduced the attractiveness
of euro assets in the eyes of many investors.
Euro-zone Exchange Rate
! The United State’s current account deficit has USD per EUR
narrowed considerably over the past few years, 1.70 1.70

which exerts fewer headwinds on the dollar. At 1.60 1.60

the same time, net capital inflows into the
1.50 1.50
United States have trended higher over the
past year or so, which have also helped boost 1.40 1.40

the greenback. 1.30 1.30

! Wells Fargo projects the dollar will appreciate

1.20 1.20
modestly over the next few quarters versus
most major currencies, as the U.S. economic 1.10 1.10

recovery continues to prompt foreign buying of 1.00 1.00

higher yielding U.S. assets. However, USD per EUR: May @ 1.265
“commodity” and emerging market currencies 0.90 0.90

will likely appreciate further on a trend basis, 0.80 0.80

as commodity prices continue to grind higher 1999 2001 2003 2005 2007 2009

and as increasing levels of risk tolerance causes

capital to flow to those countries. Monthly Net Securities Purchases
Billions of Dollars
$160 $160

Current Account Deficit

Quarterly in Billions of Dollars, Seasonally Adjusted $120 $120
$40 $40

$80 $80
$0 $0

$40 $40
-$40 -$40

$0 $0
-$80 -$80

-$40 -$40
-$120 -$120

-$80 -$80
Net Securities Purchases: Feb @ $47 Billion
-$160 -$160
3-Month Moving Average: Feb @ $42 Billion
-$120 -$120
-$200 -$200 2004 2005 2006 2007 2008 2009 2010

Balance on Current Account: Q4 @ $-115.6 B

-$240 -$240 Source: Bloomberg LP, Federal Reserve Board, IHS Global Insight,
92 94 96 98 00 02 04 06 08 Intl. Monetary Fund and Wells Fargo Securities, LLC

26
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

Crude Oil
Energy $160
NYMEX Front-Month Contract, Dollars per Barrel
$160

! After a very strong recovery in oil prices during $140 $140

April, the international environment changed

$120 $120
considerably during the first week of May, as
the Greek financial situation and the prospects $100 $100
for a quick and positive resolution seemed to
evaporate, at least temporarily. The price for $80 $80

the West Texas Intermediate hit $86.17 dollars $60 $60

per barrel on May 3 and was down $10 dollars
per barrel by May 6, when the U.S. stock $40 $40

market collapsed and then partially recovered.

$20 $20
! We still believe that current world growth is Crude Oil: May @ $75.11
$0 $0
supportive of higher oil prices, and although 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
the current crisis is putting downward pressure
on prices, the international scenario will calm
down in the near future and oil prices will start Crude Oil Inventory
Year-over-Year Percent Change
increasing again. We are still keeping our 25% 25%

forecast of a slow-but-steady recovery in oil

20% 20%
prices during the rest of this year.
! Oil inventories have come down considerably
15% 15%

from the peaks achieved during the previous 10% 10%

cycle. We should expect crude oil inventories to 5% 5%

remain low in the coming quarters, as
worldwide economic growth continues to 0% 0%

accelerate. -5% -5%

! Natural gas prices continue to defy the -10% -10%

economic recovery, and while they increased
somewhat during the last part of 2009, they -15% -15%
Oil Inventory: Apr @ -3.9%
have come down once again. On a positive side, -20% -20%
natural gas inventories have continued to go 2005 2006 2007 2008 2009 2010

down and that should help natural gas prices

going forward. Natural Gas
Henry Hub Spot, Dollars per MMBTU
$16 $16

Natural Gas Storage $14 $14

Year-over-Year Percent Change
45% 45%
$12 $12

$10 $10
30% 30%

$8 $8

15% 15%
$6 $6

$4 $4
0% 0%

$2 $2
Natural Gas: May @ $3.96
-15% -15% $0 $0
2005 2006 2007 2008 2009 2010

Natural Gas Storage: Apr @ 4.0%

-30% -30% Source: Bloomberg LP, IHS Global Insight and
2005 2006 2007 2008 2009 2010 Wells Fargo Securities, LLC

27
Global Chartbook: May 2010 WELLS FARGO SECURITIES, LLC
May 13, 2010 ECONOMICS GROUP

CRB Metals Index

Metals 1,200
Index
1,200

! The recovery in overall metals prices has been

1,000 1,000
swift and steady after the collapse produced by
the worldwide financial crisis, as shown by the
800 800
CRB Metals Index graph. The biggest threat
today for metal prices, other than the current
Greek debt crisis, has to be related to the level 600 600

of inventories, which have recovered

handsomely as the world economy left the 400 400

recession at the end of 2009.

! Still, inventory replenishment is something
200 200

that we should see during a recovery, which is CRB Metals Index: May-7 @ 790.28
0 0
what the world metals market is experiencing 2002 2004 2006 2008 2010
right now. The problem, however, is that if
there is a new shock to the economy in the
coming quarters due to foreseen or unforeseen Copper Price
Dollars per Pound
events, then prices could collapse again as they $5.00 $5.00

did after the financial crisis.

! Even copper inventories, which have remained $4.00 $4.00
very low since the mid-2000, have increased
considerably since early 2009. Meanwhile,
aluminum inventories have skyrocketed since $3.00 $3.00

late 2008, from approximately 400,000 metric

tons to 1.6 million metric tons, which could $2.00 $2.00
become a problem for aluminum prices going
forward.
! Thus, the equilibrium between supply and $1.00 $1.00

demand of metals will remain the best Copper: May-7 @ $3.17

indicator of the future path of metals prices. So $0.00 $0.00
far, demand is outstripping supply in many of 2002 2004 2006 2008 2010

these markets, and we should expect prices to

remain strong as long as economic growth Aluminum Price
remains sustainable across the world. $1.75
Dollars per Pound
$1.75
Aluminum: May-7 @ $0.94
Aluminum Inventories
Thousands of Metric Tons, London Metal Exchange
2,000 2,000 $1.50 $1.50

$1.25 $1.25
1,500 1,500

$1.00 $1.00

1,000 1,000

$0.75 $0.75

500 500
$0.50 $0.50
2002 2004 2006 2008 2010

Aluminum: May-7 @ 1568175

0 0 Source: Bloomberg LP, IHS Global Insight and
2002 2004 2006 2008 2010 Wells Fargo Securities, LLC

28
 May 13, 2010

Wells Fargo Internationa l Economic Forecast Wells Fa rgo Bank Currency Strategy Group Forecast
(Y ear -ove r-Y ear Pe rcent C hange) (End of Quart er Rat es )
GDP CPI 201 0 2011
Global Chartbook: May 2010

2009 2010 2011 2009 2010 201 1 Q2 Q3 Q4 Q1 Q2 Q3

Global (PPP weig hts ) - 0.8% 4.6% 4 .1% 2.8 % 4.3% 4.1% Ma jor Currenc ie s
Global (Market Exc hange Rates ) - 2.0% 3.4% 2 .9% n/a n/a n/a Euro ($/€) 1.27 1.27 1.24 1.22 1.19 1.17
U.K. ($/£) 1.49 1.50 1.49 1.47 1.44 1.42
Advanc ed Ec onomies1 - 3.3% 2.5% 2 .3% -0.3 % 1.5% 1.3% U.K. (£/€) 0.85 0.84 0.83 0.83 0.83 0.82
Unit ed St ates - 2.4% 3.0% 2 .5% -0.3 % 2.3% 2.4% Japan (¥/$) 93 94 96 99 101 103
Eurozone - 4.0% 1.1% 1 .5% 0.3 % 1.4% 1.0% Canada (C$ /US$) 1.00 0.99 1.01 1.03 1.06 1.08
Unit ed Kingdom - 4.9% 1.1% 2 .5% 2.2 % 3.0% 1.6% Swit zerland (CHF/$) 1.11 1.11 1.13 1.16 1.19 1.22
Japan - 5.2% 2.6% 1 .7% -1.3 % -0.7% 0.1%
Korea 0.2% 5.7% 3 .6% 2.8 % 2.7% 3.0% Ot her Currenc ies
Canada - 2.6% 3.7% 3 .1% 0.3 % 2.2% 2.3% Aust ralia (US$ /A$) 0.91 0.94 0.93 0.90 0.88 0.87
China (CNY /$) 6.79 6.69 6.59 6.49 6.39 6.29
1
Developing Ec onomies 2.4% 7.1% 6 .1% 6.5 % 7.6% 7.5% Sout h Korea ($/KRW) 1133 1117 1092 1067 1042 1033
China 8.5% 10.9% 9 .0% -0.7 % 2.7% 3.6% Singapo re ($/SGD) 1.38 1.35 1.35 1.34 1.33 1.33
India 6.8% 8.0% 7 .8% 11.4 % 12.6% 8.0% T aiwan ($ /T W D) 3 1.63 3 1.42 3 1.17 3 0.92 3 0.67 3 0.50
Me xic o - 6.5% 3.6% 3 .5% 5.3 % 5.4% 5.9% Mexic o ($/MXN) 1 2.43 1 2.33 1 2.13 1 1.93 1 1.73 1 1.60
Brazil - 0.2% 5.4% 5 .3% 4.9 % 5.5% 5.9% Norway (NOK/$) 6.10 6.05 6.09 6.14 6.22 6.40
Russia - 7.9% 4.0% 4 .2% 11.8 % 6.7% 8.7% Sweden (SE K/$) 7.52 7.47 7.54 7.62 7.72 7.92
Fore cast as o f: May 12, 2010 Fo reca st as of: Ma y 12, 2010
1
Aggregated Using PP P We ights

Wells Fargo Int ernat ional Int erest Rat e Forecast

(End of Quarter Rates)
3-Mont h LIBOR 10-Ye ar Bond
2010 2011 2010 2011
Q2 Q3 Q4 Q1 Q2 Q3 Q2 Q3 Q4 Q1 Q2 Q3
U.S. 0.40% 0.40% 0.65% 1.40% 2.15% 2.65% 3.80% 3.80% 3.90% 4.00% 4.20% 4.30%
Japan 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 1.35% 1.35% 1.35% 1.45% 1.50% 1.60%
Euroland 0.60% 0.60% 0.80% 1.10% 1.50% 2.25% 3.10% 3.15% 3.40% 3.70% 3.80% 4.00%
U.K. 0.65% 0.65% 0.65% 1.25% 2.00% 3.00% 4.00% 4.10% 4.50% 4.70% 4.80% 4.85%
C anada 0.40% 0.50% 1.00% 2.00% 3.00% 3.50% 3.60% 3.90% 4.10% 4.30% 4.40% 4.45%
Forecast as of: May 12, 2010

29
ECONOMICS GROUP
WELLS FARGO SECURITIES, LLC
Wells Fargo Securities, LLC Economics Group

Diane Schumaker-Krieg Global Head of Research (704) 715-8437 diane.schumaker@wellsfargo.com

& Economics (212) 214-5070

John E. Silvia, Ph.D. Chief Economist (704) 374-7034 john.silvia@wellsfargo.com

Mark Vitner Senior Economist (704) 383-5635 mark.vitner@wellsfargo.com
Jay Bryson, Ph.D. Global Economist (704) 383-3518 jay.bryson@wellsfargo.com
Scott Anderson, Ph.D. Senior Economist (612) 667-9281 scott.a.anderson@wellsfargo.com
Eugenio Aleman, Ph.D. Senior Economist (612) 667-0168 eugenio.j.aleman@wellsfargo.com
Sam Bullard Senior Economist (704) 383-7372 sam.bullard@wellsfargo.com
Anika Khan Economist (704) 715-0575 anika.khan@wellsfargo.com
Azhar Iqbal Econometrician (704) 383-6805 azhar.iqbal@wellsfargo.com
Ed Kashmarek Economist (612) 667-0479 ed.kashmarek@wellsfargo.com
Tim Quinlan Economist (704) 374-4407 tim.quinlan@wellsfargo.com
Kim Whelan Economic Analyst (704) 715-8457 kim.whelan@wellsfargo.com
Yasmine Kamaruddin Economic Analyst (704) 374-2992 yasmine.kamaruddin@wellsfargo.com

Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer
registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the
Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through
subsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A, Wells Fargo Advisors, LLC,
and Wells Fargo Securities International Limited. The information and opinions herein are for general information use
only. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nor does Wells Fargo Securities,
LLC assume any liability for any loss that may result from the reliance by any person upon any such information or
opinions. Such information and opinions are subject to change without notice, are for general information only and are
not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized
investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated banks and is a
wholly owned subsidiary of Wells Fargo & Company © 2010 Wells Fargo Securities, LLC.

SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE