March 18, 2011

Economics Group
Weekly Economic & Financial Commentary

U.S. Review Manufacturing Production Growth

Output Growth by Volume, Not Revenue
Despite Headwinds, Expansion Continues 15%
Both Series are 3-Month Moving Averages
15%

x The U.S. economy continues to generate solid economic 10% 10%

growth. Manufacturing output increased for the eighth 5% 5%

consecutive month and regional manufacturing surveys
0% 0%
in New York and Philadelphia surged in February
suggesting continued strength in the coming month. -5% -5%

x Weekly first-time unemployment claims fell by 16,000 to -10% -10%

385,000 in the week ending March 12. The four-week
-15% -15%
moving average also nudged lower to 386,250 which
remains below the 400,000 threshold that has typically -20% 3-Month Annual Rate: Feb @ 8.6% -20%

denoted labor market stability. Yr/Yr Percent Change: Feb @ 6.8%

-25% -25%
87 89 91 93 95 97 99 01 03 05 07 09 11

Global Review Real Global GDP Growth

Year-over-Year Percent Change
Despite the Tragedy in Japan, Global Growth Continues 7.5% 7.5%

x The latest events in Japan have been devastating for that 6.0% Period Average 6.0%
country in terms of loss of life and human suffering and
our hearts and prayers are with the Japanese people. But 4.5% 4.5%

the implications for the rest of the world are probably

not as dire, as Japan had not been contributing that 3.0% 3.0%

much to global growth before the earthquake.

1.5% 1.5%
x Our biggest concern with what is happening in Japan
today is the reaction of the Japanese currency, which
0.0% 0.0%
shot up to an all time high versus the U.S. dollar before
the G7 decided to make a concerted effort to weaken the
-1.5% -1.5%
yen. 1970 1975 1980 1985 1990 1995 2000 2005 2010

Wells Fargo U.S. Economic Forecast Inside

Actual Forecast Actual Forecast
2010 2011 2008 2009 2010 2011 2012 U.S. Review 2
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
1
3.7 1.7 2.6 2.8 2.7 2.4 2.7 3.0 0.0 -2.6 2.8 2.6 3.0
U.S. Outlook 3
Real Gross Domestic Produc t
Personal Consumption 1.9 2.2 2.4 4.1 2.4 2.4 2.4 3.0 -0.3 -1.2 1.8 2.7 2.6 Global Review 4
Inflation Indic ators
2
Global Outlook 5
"Core" PCE Deflator
Consumer Price Index
1.8
2.4
1.5
1.8
1.2
1.2
0.8
1.2
0.8
2.2
0.9
3.3
1.0
3.5
1.3
3.4
2.3
3.8 -0.3
1.5 1.3
1.6
1.0
3.1
1.4
2.6
Point of View 6
Industrial Production
1
7.1 7.2 6.2 3.0 5.5 3.8 4.1 3.9 -3.3 -9.3 5.7 4.6 3.9
Topic of the Week 7
Corporate Profits Before Taxes
3
2
37.6 37.0 26.4 12.5 8.2 6.2 6.2 6.7 -16.4 -0.4 27.5 6.8 7.0 Market Data 8
Trade Weighted Dollar Index 76.1 78.8 73.6 73.2 72.5 73.0 74.0 75.0 74.3 77.7 75.6 73.6 78.0
Unemployment Rate 9.7 9.6 9.6 9.6 8.9 8.7 8.5 8.4 5.8 9.3 9.6 8.6 8.2
4
Housing Starts 0.62 0.60 0.59 0.53 0.55 0.58 0.64 0.70 0.90 0.55 0.59 0.62 0.83
5
Quarter-End Interest Rates
Federal Funds Target Rate 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 1.88 0.25 0.25 0.25 0.75
Conventional Mortgage Rate 4.97 4.74 4.35 4.71 4.90 5.15 5.15 5.20 6.04 5.04 4.69 5.10 5.63
10 Year Note 3.84 2.97 2.53 3.30 3.60 3.75 3.75 3.80 3.66 3.26 3.22 3.73 4.13
Forecast as of: March 18, 2011
1
C ompound Annual Growth Rate Quarter-over-Quarter
2
Year-over-Year Percentage C hange
3
Federal Reserve Major C urrency Index, 1973=100 - Quarter End
4
Millions of Units
5
Annual Numbers Represent Averages
Economics Group U.S. Review Wells Fargo Securities, LLC
U.S. Review
The Economic Expansion Is Still Underway Industrial Production - Motor Vehicles & Parts
Year-over-Year Output Growth by Volume, Not Revenue
Despite uncertainty overseas and market volatility, economic 80% 80%
indicators for the week continued to suggest economic expansion. Both Series are 3-Month Moving Averages

Manufacturing output increased for the eighth consecutive month 60% 60%
and regional manufacturing surveys in New York and
Philadelphia surged in February suggesting continued strength in 40% 40%
the coming month. Moreover, the initially reported decline in
industrial production in January was revised to a gain of 20% 20%
0.3 percent.
The strength in the factory sector is being led by robust growth in 0% 0%

the auto sector. The production of motor vehicle and parts

notched a third-straight monthly increase. When considered in -20% -20%

the context of strong sales from manufacturers to auto dealers

and the steady pace of retail auto sales, the auto sector as a whole -40% -40%
Motor Vehicles: Feb @ 10.8%
is as healthy as it has been since the “Cash for Clunkers” incentive Motor Vehicle Parts: Feb @ 4.6%
program. Although it is still too early to tell, some of the lost auto -60% -60%
production in Japan could also help to boost domestic auto 87 89 91 93 95 97 99 01 03 05 07 09 11

output. While headline industrial production slipped 0.1 percent

in February, much of the decline was due to a drop in utility Housing Starts
Seasonally Adjusted Annual Rate, In Millions
output. According to NOAA, for the Central and Southern United 2.4 2.4
States, the second half of the month saw temperatures 15 degrees
2.2 2.2
higher than normal, on average, while a warm spell brought
2.0 2.0
spring-like weather early in the Southeast.
1.8 1.8
Another data point that is supportive of continued economic
1.6 1.6
growth is initial jobless claims. Weekly first-time unemployment
1.4 1.4
claims fell by 16,000 to 385,000 in the week ending March 12.
The four-week moving average also nudged lower to 1.2 1.2

386,250 which remains below the 400,000 threshold that has 1.0 1.0
typically denoted labor market stability. 0.8 0.8

Housing market indicators reported this week, however, 0.6 0.6

continued to show weakness. Housing starts plunged 0.4 0.4
22.5 percent in February to a 479,000-unit pace, the second
0.2 0.2
lowest level on record. Single-family starts fell 11.8 percent, Housing Starts: Feb @ 479K
0.0 0.0
confirming that the demand for new single-family homes remains
01 02 03 04 05 06 07 08 09 10 11
exceptionally weak. While builder sentiment is finally improving
after remaining unchanged for the past four months, prospective
Single-family Housing Starts vs. Building Permits
buyer traffic has shown little to no improvement. The oversupply SAAR, In Millions, 3-Month Moving Average
of existing homes on the market and downward pressure on 2.0 2.0

home prices due to foreclosures continue to give builders little

1.8 1.8
incentive to significantly ramp up building activity.
1.6 1.6
Housing permits fell 8.2 percent to a 517,000-unit pace, which is
the lowest level on record, but single-family permits are running 1.4 1.4
above starts, which suggests we could see some modest
improvement in coming months. While this is encouraging news, 1.2 1.2

much of the gain will be because of the seasonal adjustment 1.0 1.0
process. With starts at such depressed levels, any upward
momentum could lead to exaggerated swings in the monthly data. 0.8 0.8

This means the Spring home buying season will likely not be the
0.6 0.6
beacon of hope that many are expecting. Consequently, we do not
expect a genuine recovery in housing starts to occur until the pace 0.4 Single-family Housing Starts: Feb @ 406K 0.4
of foreclosures slows significantly. Single-family Building Permits: Feb @ 415K
0.2 0.2
90 92 94 96 98 00 02 04 06 08 10

2
Economics Group U.S. Outlook Wells Fargo Securities, LLC
Existing Home Sales • Monday
Existing home sales rose 2.7 percent in January to 5.36 million, the
Existing Home Resales
highest level in eight months. Sales gains were driven by distressed Seasonally Adjusted Annual Rate - In Millions
transactions which accounted for 37 percent of total sales. Another 7.5 7.5

trend that has become apparent is the number of all cash

7.0 7.0
transactions which increased 32 percent while investors accounted
for 23 percent of sales. The high level of existing home inventories 6.5 6.5
continues to weigh on the housing market. Single-family
inventories fell 2.6 in January indicating a positive trend for the 6.0 6.0
housing market. As employment and income growth picks up
existing home sales should continue to increase. At the current pace 5.5 5.5

of sales, it would take 7.5 months to clear the inventory of existing

5.0 5.0
single-family homes. With the months supply numbers beginning
to edge downward, there will likely be some positive momentum for 4.5 4.5
existing housing starts in the later part of this year.
4.0 4.0
Existing Home Sales: Jan @ 5.36 Million
Previous: 5.36M Wells Fargo: 5.00M 3.5 3.5
1999 2001 2003 2005 2007 2009 2011
Consensus: 5.12M
Durable Goods Orders • Thursday
January durable goods orders remained positive, increasing
Durable Goods New Orders
Series are 3-Month Moving Averages 2.7 percent for the month and in line with the consensus forecast.
30% 30% However, the data was likely distorted from some seasonal
adjustment issues along with poor winter that led to the shutdown
20% 20%
of some facilities. Orders for electrical equipment were off
10% 10%
4.9 percent, computer orders declined 6.8 percent and machinery
orders fell 13.0 percent. Orders for non-defense capital goods also
0% 0% fell 6.9 percent in January, which is the first decline in two months.
Even in light of these somewhat disappointing numbers, the
-10% -10% underlying trend in orders is still positive. We expect
manufacturing output will continue to improve. Our expectation is
-20% -20%
that durable goods orders rose 1.3 percent in February due to
-30% -30%
stronger orders for the month. Our 2011 forecast for industrial
production remains strong as manufacturers continue to increase
-40% 3-Month Annual Rate: Jan @ -0.1% -40% production to meet increasing domestic and global demand.
Year-over-Year Percent Change: Jan @ 9.0%
-50% -50%
Previous: 3.2% Wells Fargo: 1.3%
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Consensus: 1.1%
Initial Jobless Claims • Thursday
Initial jobless claims fell again this week to 385K, a decrease of 16K
Initial Claims for Unemployment
from the previous week. The trend, as measured by the four-week Seasonally Adjusted, In Thousands
moving average continued to move downward, which is a positive 700 700
Year-over-Year Percent Change: Mar-12 @ -15.2%
sign for employment growth over the next few months. With the Initial Claims: Mar-12 @ 385.0 Thousand
650 650
release of this week’s claims data, initial jobless claims are now 4-Week Moving Average: Mar-12 @ 385.3 Thousand
52-Week Moving Average: Mar-12 @ 444.4 Thousand
15.2 percent lower than this time last year. Employment gains in 600 600

February increased by 192,000 and included an upward revision to

550 550
January’s employment number. We are beginning to see more
widespread job gains which would be a good sign for stability in 500 500
employment growth. Our forecast indicates that employment
450 450
growth should continue to pickup with gains averaging 162,500 per
month. In aggregate we believe an increase of around 2.0 million 400 400
jobs will be created this year and an additional 2.2 million jobs in
2012. 350 350

300 300

Previous: 385K 250 250

86 88 90 92 94 96 98 00 02 04 06 08 10
Consensus: 383K

3
Economics Group Global Review Wells Fargo Securities, LLC
Global Review
Despite the Tragedy in Japan, Global Growth Continues
Commodity Prices
Index
The latest events in Japan have been devastating for that country 500 500
in terms of loss of life and human suffering and our hearts and Foodstuffs: Mar @ 494.3
prayers are with the Japanese people at this crucial crossroads.
However, the implications for the rest of the world are probably
not as dire, as Japan had not been contributing that much to 400 400

global growth before the earthquake and tsunami hit. However,

while the short-run implications of the Japanese disaster will put
some downward pressure on growth, the Japanese recovery from 300 300
the disaster will have a larger impact on global economic
performance. Some analysts are even suggesting that this may be
the event that will finally take the Japanese economy off of a
depression that has already lasted more than two decades, as the 200 200

Japanese administration puts out a fiscal policy package to

reconstruct the affected parts of the country.
The global growth story is still intact even though parts of the 100 100
world, especially the Middle East and North Africa, are still 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09

immersed in a crisis with unknown potential consequences for

their regions and for the rest of the world. As we said before, the Crude Oil
NYMEX Front-Month Contract, Dollars per Barrel
global growth story remains intact even though growth has $160 $160
slowed down somewhat compared to last year’s rates. The so
called BRIC economies (Brazil, Russia, India, and China) are still $140 $140
growing and are still driving growth across the world,
$120 $120
contributing to the pressure on commodity prices.
So far this year in Latin America, high commodity prices are still $100 $100
supporting relatively strong growth. Furthermore, as the U.S.
economy continues to recover, the region will likely export more $80 $80

goods to the U.S. market while U.S. consumers will consume

$60 $60
more goods imported from this region, helped by a weak dollar.
From a trade perspective, the Pacific Rim countries are probably
$40 $40
going to be the hardest hit economies, as exports to Japan are a
very important component of their total exports. Meanwhile, $20 $20
petroleum prices are doing its share to slow down growth across Crude Oil: Mar @ $101.16
Europe even though the German economy is still showing no $0 $0
00 01 02 03 04 05 06 07 08 09 10 11
signs of slowing down that economy. However, the European
region has problems of its own and those problems could come to
haunt the region without any help from other countries. Euro & Yen Exchange Rates
USD per Euro, Yen per USD
Probably the biggest concern with what is happening in Japan 1.600 160
Euro: Mar @ 1.390 (Left Axis)
today is the reaction of the Japanese currency, which shot up to
Yen: Mar @ 82 (Right Axis)
an all-time high versus the U.S. dollar before the Group of 7 (G7)
decided to make a concerted effort to weaken the yen. The sudden 1.400 140
appreciation was a market reaction to expectations regarding a
large repatriation of capital flows to Japan. This poses a threat to
capital flows across the world as the Japanese reconstruction
efforts suck up monies that were invested in other countries. This 1.200 120

has the potential to increase interest rates across the world and
hurt those countries that were receiving these flows before the
disaster. Furthermore, the Japanese have been large buyers of
1.000 100
U.S. Treasuries and this could put some added pressure on U.S.
Treasury yields in the future. If the Japanese currency remains at
such an appreciated level it will be difficult for Japan to recover
through increases in exports. 0.800 80
2000 2002 2004 2006 2008 2010

4
Economics Group Global Outlook Wells Fargo Securities, LLC
United Kingdom CPI • Tuesday
Despite its mandate to maintain price stability, the Bank of England
U.K. Consumer Price Index
(BoE) has been content to let inflation remain north of the Year-over-Year Percent Change
maximum limit of 3 percent for the better part of the last year 6% 6%
CPI: Jan @ 4.0%
without tightening monetary policy. In his fifth consecutive letter to
the Chancellor of the Exchequer, BoE Governor Mervyn King 5% 5%
discussed a “great deal of uncertainty” about the inflation outlook.
(U.K. law requires a letter from the governor to the chancellor
4% 4%
whenever the inflation target is breached). January CPI inflation
revealed a 4.0 percent increase in prices on a year-over-year basis,
which may reflect the January increase in the VAT tax. Still, with 3% 3%

crude oil prices and gasoline costs on the rise, inflation pressures
could build in coming months. If they do, the growing dissent on 2% 2%
the BoE’s monetary policy committee could mean a tightening in
UK monetary policy.
1% 1%

Previous: 4.0% Wells Fargo: 3.8% 0% 0%

1997 1999 2001 2003 2005 2007 2009 2011
Consensus: 4.2% (Year-over-Year)
Canadian Retail Sales • Tuesday
December retail sales in Canada were broadly disappointing, down
Canadian Retail Sales
Year-over-Year Percent Change, 6-Month Moving Average 0.2 percent in the month, led lower by a 2.8 percent decline in sales
12% 12% at auto dealers. Still, fourth quarter consumer spending grew at a
4.9 percent annualized pace in Canada, and we suspect the
consumer will add to spending in the first quarter of 2011 as well.
8% 8%
An early indication of spending will be reported when January
retail sales data are released on Tuesday of next week. After
December’s disappointing turnout, we would not be surprised to
4% 4%
see sales increase in January. Canadian businesses added another
15.1K workers to their payrolls in February. While that was slightly
0% 0%
less than the consensus had been expecting, it is still strong enough
that labor market dynamics can be supportive of consumer
spending growth.
-4% -4%

Retail Sales: Dec @ 4.9%

6-Month Moving Average: Dec @ 4.2%
-8% -8%
Previous: -0.2%
2004 2005 2006 2007 2008 2009 2010
Consensus: 0.1% (Month-over-Month)
Eurozone PMIs • Thursday
Despite ongoing challenges from the sovereign debt situation, the
Eurozone Purchasing Managers' Indices
recovery in the Eurozone seems to be intact, even if it is somewhat Index
inconsistent across the various member countries. 65 65

Like the Bank of England, the European Central Bank (ECB)

60 60
appears to be getting closer to its first rate hike as inflation seems to
be on the rise. It will make the job a bit easier for the ECB if it
55 55
seems that growth will continue in the first quarter. Various
purchasing managers’ surveys released on Thursday will give the
50 50
Bank and market watchers in Europe a sense of the strength of the
recovery. Manufacturing and services PMIs for March are reported
45 45
on Thursday. Both measures are firmly in expansion territory,
suggesting that despite the Eurozone’s challenges, at least business
40 40
sentiment is positive.
35 35
E.Z. Manufacturing: Feb @ 59.0
E.Z. Services: Feb @ 56.8
Previous: 59.0 30 30
2001 2003 2005 2007 2009
Consensus: 58.2 (Manufacturing)

5
Economics Group
Interest Rate Watch
Japan and Fed Policy
Do the unfolding events in Japan have any
implications for U.S. monetary policy? The
FOMC held a regularly scheduled meeting
this week, but Japan was not mentioned in
the brief statement that was released at the
conclusion of the meeting. However, more
detailed minutes of the meeting will be
released in a few weeks, and we would be
surprised if the subject of Japan did not
arise at all during the discussion among
FOMC members.
Prior to the Japanese earthquake there was
very little chance that the Fed was planning
to hike rates in the near term. In our view,
recent events in Japan reduced that
probability even further. Although a
cottage industry that attempts to quantify
the effects of the Japanese disasters has
sprung up—and we make our own
assessments on page 4—nobody really
knows what impact Japan will ultimately
have on the global economy. In such an
Point of View Wells Fargo Securities, LLC
Credit Market Insights
Central Bank Policy Rates Home Prices and Charge-offs
7.5% 7.5%
US Federal Reserve: Mar - 18 @ 0.25%
ECB: Mar - 18 @ 1.00%
Now that home prices have started to drop
6.0%
Bank of Japan: Mar - 18 @ 0.10%
Bank of England: Mar - 18 @ 0.50%
6.0%
again after the tax-credit-induced run-up,
the question is how far will they fall? The
4.5% 4.5%
answer has far-reaching implications for
both homeowners and banks. The further
3.0% 3.0%
home prices fall, the more homeowners will
be underwater, which would likely lead to
1.5% 1.5%
more foreclosures and more charge-offs by
banks. Residential charge-offs had been
0.0% 0.0% trending lower since the Q409 peak but
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2010
turned higher again in Q410 as home prices
Yield Curve dipped. This is not good news, and it shows
5.00%
U.S. Treasuries, Active Issues
5.00% that banks still face tremendous challenges
in the housing market. More recent news
4.00% 4.00% only adds to the gloomy outlook. Despite a
decline in mortgage rates, applications to
3.00% 3.00% purchase a home fell 4.0 percent in the
latest week and have remained weak ever
2.00% 2.00% since mortgage rates rose above 4.5 percent
in December. Although home sales have
1.00%
March 18, 2011
1.00% risen recently, more homes are being
March 11, 2011 purchased by investors with cash, which
February 18, 2011

environment, it is probably prudent for

0.00% 0.00% generally results in a lower price due to
3M 2Y 5Y Y Y
10 30
policymakers to wait for more information greater financing reliability and less
before deciding what to do next.
Forward Rates paperwork. In another sign of weakness,
90-Day EuroDollar Futures
2.00%
March 18, 2011
2.00% housing starts plunged in February to the
Relative to last Thursday, the day before March 11, 2011
lowest since April 2009 and building
February 18, 2011
the earthquake struck, market expectations 1.70% 1.70%
permits fell to a record low. Although
about near-term Fed policy are little housing affordability is at a record high and
1.40% 1.40%
changed. However, whereas the market mortgage rates remain extremely low,
had looked for approximately 100 bps of 1.10% 1.10%
lackluster job growth and tight lending
Fed tightening by the end of 2012, it standards have restrained demand. With all
currently anticipates a bit less than that 0.80% 0.80%
these signs of weakness in the housing
now. 0.50% 0.50% market, it would be wise for banks to be
Unless the crisis suddenly spirals out of very conservative with their bad-debt
0.20% 0.20%
control, thereby dealing a long-term effect Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 provisions.
on the Japanese economy, we doubt that
the disasters will have any lasting effect on Mortgage Data
Fed policy. Natural disasters like
earthquakes tend to have only a temporary Week 4 Weeks Year
impact on the affected economy. Economic Current Ago Ago Ago
activity in Japan will be reduced in the near
Mortgage Rates
term, but rebuilding should lead to
30-Yr Fixed 4.76% 4.88% 5.00% 4.96%
stronger activity in subsequent quarters.
15-Yr Fixed 3.97% 4.15% 4.27% 4.33%
Likewise, U.S. exports to Japan, which
5/1 ARM 3.57% 3.73% 3.87% 4.09%
account for only 5 percent of total
1-Yr ARM 3.17% 3.21% 3.39% 4.12%
American exports, will be weakened in the
near term, but they should rebound in MBA Applications
subsequent quarters. As we note in the Composite 510.7 514.2 420.4 620.9
Topic of the Week, the effect on the United Purchase 186.6 194.4 175.1 221.5
States should be marginal and temporary. Refinance 2,406.3 2,383.7 1,848.6 2,955.9
Therefore, Fed policy should be little
Source: Freddie Mac, Mortgage Bankers Association and Wells Fargo Securities, LLC
changed.

6
Economics Group Topic of the Week Wells Fargo Securities, LLC
Topic of the Week
The Crisis in Japan and the United States
Tohoku Exports
The epicenter of the recent earthquake in Japan was 2010, Total = ¥500 Billion
130 km of the coast of northeast Japan, near the port Africa, 1%
city of Sendai in the Miyagi prefecture. The main areas Russia, 1%
damaged by both the earthquake and the resulting Middle East, 2%
tsunamis were located along the eastern coast of the Oceania, 2% Asia, 54%
Tohoku region. This area is far removed from the
principal manufacturing regions of Japan further south Central and
South America,
on the island of Honshu. Nevertheless, the city of 8%
Sendai, the largest, most important port along the
northeastern coast, was decimated by the tsunami.
Although Sendai is important in the Tohoku region of
Japan, the port is not one of Japan’s principal ports and
more than half of its exports are rubber-related goods. Western Europe,
In addition, the Tohoku region is a net importer of 13%

goods and relies heavily on imported fuels. The Tohoku

region’s principal trading partner is Asia, with the
United States accounting for less than 20 percent of
total trade. North America,
19%
Supply chain issues caused by direct damage will be
concentrated upstream from finished production and
are likely to have limited effects on the U.S. economy,
Tohoku Imports
2010, Total = ¥1,067 Billion
but rolling blackouts across the country will slow down Oceania, 19%
production in regions with stronger trading ties to U.S. Middle East,
consumers. In addition, the bulk of industrial capacity in 20%
the three most heavily damaged prefectures is located
far from the coastal areas hardest hit by the tsunami.
The diversion of resources from normal production to Middle and
South East, 8%
rebuilding efforts will constrain production for export,
which could potentially raise the price of Japanese Russia, 3%
Western Europe,
exports to the United States. As more energy, material 2%
Africa, 2%
and manpower are dedicated to the reconstruction of
devastated coastal areas, we could see a constriction in
the availability of some primary goods and upstream
manufactured goods produced in the affected areas. In North America,
terms of trade with the United States, the economic 14%

impact of the natural disasters should be limited and

transitory. For more information, please see our most
recent report entitled “Gauging the Impact of the Asia, 32%

Natural and Nuclear Disaster.”

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7
Economics Group Market Data Wells Fargo Securities, LLC
Market Data i Mid-Day Friday
U.S. Interest Rates Foreign Interest Rates
Friday 1 Week 1 Year Friday 1 Week 1 Year
3/18/2011 Ago Ago 3/18/2011 Ago Ago
3-Month T-Bill 0.06 0.07 0.15 3-Month Euro LIBOR 1.12 1.13 0.59
3-Month LIBOR 0.31 0.31 0.27 3-Month Sterling LIBOR 0.81 0.81 0.65
1-Year Treasury 0.25 0.23 0.37 3-Month Canadian LIBOR 1.20 1.22 0.40
2-Year Treasury 0.58 0.64 0.96 3-Month Yen LIBOR 0.20 0.19 0.24
5-Year Treasury 1.93 2.06 2.42 2-Year German 1.61 1.65 0.99
10-Year Treasury 3.27 3.40 3.68 2-Year U.K. 1.20 1.29 1.24
30-Year Treasury 4.44 4.55 4.59 2-Year Canadian 1.61 1.75 1.56
Bond Buyer Index 4.86 4.91 4.32 2-Year Japanese 0.22 0.22 0.15
10-Year German 3.18 3.21 3.13
Foreign Exchange Rates 10-Year U.K. 3.52 3.55 3.98
Friday 1 Week 1 Year 10-Year Canadian 3.17 3.28 3.45
3/18/2011 Ago Ago 10-Year Japanese 1.22 1.26 1.37
Euro ($/€€) 1.413 1.390 1.361
British Pound ($/ƕ) 1.617 1.608 1.524 Commodity Prices
British Pound (ƕ/€€) 0.874 0.865 0.893 Friday 1 Week 1 Year
Japanese Yen (¥/$) 81.080 81.840 90.390 3/18/2011 Ago Ago
Canadian Dollar (C$/$) 0.985 0.973 1.014 WTI Crude ($/Barrel) 101.27 101.16 82.20
Sw iss Franc (CHF/$) 0.905 0.930 1.058 Gold ($/Ounce) 1420.48 1417.45 1127.35
Australian Dollar (US$/A$) 0.994 1.014 0.921 Hot-Rolled Steel ($/S.Ton) 875.00 870.00 645.00
Mexican Peso (MXN/$) 12.051 11.908 12.523 Copper (¢/Pound) 432.90 419.50 338.75
Chinese Yuan (CNY/$) 6.570 6.575 6.826 Soybeans ($/Bushel) 13.12 13.30 9.44
Indian Rupee (INR/$) 45.126 45.243 45.454 Natural Gas ($/MMBTU) 4.12 3.89 4.09
Brazilian Real (BRL/$) 1.673 1.665 1.792 Nickel ($/Metric Ton) 25,924 26,020 22,210
U.S. Dollar Index 75.847 76.776 80.225 CRB Spot Inds. 606.08 619.06 500.08

Next Week’s Economic Calendar

Monday Tuesday Wednesday Thursday Friday
21 22 23 24 25
Exist i n g Hom e Sa l es New Hom e Sa l es Du r a bl e Goods Or der s GDP
Ja n u a r y 5 .3 6 M Ja n u a r y 2 8 4 K Ja n u a r y 3 .2 % 4 Q (2 n d) 2 .8 %
Febr u a r y 5 .0 0 M (W ) Febr u a r y 2 8 5 K (W ) Febr u a r y 1 .3 % (W ) 4 Q (3 r d) 2 .9 % (W )
U.S. Data

Du r a bl es Ex T r a n p.
Ja n u a r y -3 .0 %
Febr u a r y 1 .8 % (W )

U.K. Mexi co Eu r ozon e U.K.

Global Data

CPI (YoY) Ret a i l Sa l es (YoY) PMI (Ma n u fa ct u r i n g) Ret a i l Sa l es (MoM)

Pr ev iou s (Ja n ) 4 .0 % Pr ev iou s (Dec) 2 .6 % Pr ev iou s (Feb) 5 9 .0 Pr ev iou s (Ja n ) 1 .9 %
Ca n a da Ja pa n Ger m a n y
Rea t a i l Sa l es (MoM) CPI (YoY) Ifo Cu r r en t A ssessm en t
Pr ev iou s (Dec) -0 .2 % Pr ev iou s (Ja n ) 0 .0 % Pr ev iou s (Feb) 1 1 4 .7

Not e: (W ) = W ells Fa r g o Est im a t e (c) = Con sen su s Est im a t e

8
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

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