April 29, 2011

Economics Group
Weekly Economic & Financial Commentary

U.S. Review Real GDP

Bars = Compound Annual Rate Line = Yr/Yr % Change
Economic Recovery Proceeds at a Moderate Pace 10% 10%

8% 8%
x After much anticipation, Fed Chairman Ben Bernanke at
last held his press conference with select print 6% 6%

journalists this week. As expected, the mostly prepared 4% 4%

remarks contained no new information, but did provide

2% 2%
more clarity on the Fed’s economic outlook, inflation and
0% 0%
inflation expectations and the expiration of the large-
scale asset program, commonly known as QE2. -2% -2%

x U.S. real GDP grew at only a 1.8 percent rate in the first -4% -4%

quarter, which was exactly in line with our conservative -6% Real GDP: Q1 @ 1.8% -6%
forecast, but well below the previous quarter’s solid gain. Real GDP: Q1 @ 2.3%
-8% -8%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Global Review U.K. Real GDP

Bars = Compound Annual Rate Line = Yr/Yr % Change
Royal Wedding Aside, Britons Are Gloomy 6% 6%

4% 4%
x British GDP grew at an annualized rate of 2.0 percent in
the first quarter, reversing the decline in the previous 2% 2%

quarter. In general, however, the pace of the recovery 0% 0%

remains sluggish. In our view, growth in consumer

-2% -2%
spending will likely remain lackluster over the next few
-4% -4%
quarters.
-6% -6%
x Although inflation at present is well above the Bank of
England’s target, we expect policy rates to remain -8% -8%

unchanged over the next few months. Most policymakers -10% Compound Annual Growth: Q1 @ 2.0% -10%
believe that the sluggish pace of recovery will cause Year-over-Year Percent Change: Q1 @ 1.8%
-12% -12%
inflation to recede in coming months. 2000 2002 2004 2006 2008 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 3.1 1.8 2.3 2.3 2.6 0.0 -2.6 2.9 2.3 2.7
U.S. Outlook 3
Real Gross Domestic Product
Personal Consumption 1.9 2.2 2.4 4.0 2.7 2.3 1.8 2.6 -0.3 -1.2 1.7 2.6 2.2 Global Review 4
Inflation Indic ators
2
Global Outlook 5
"Core" PCE Deflator
Consumer Pric e Index
1.8
2.4
1.5
1.8
1.2
1.2
0.8
1.2
0.9
2.2
1.0
3.4
1.3
3.7
1.7
3.9
2.3
3.8
1.5
-0.3
1.3
1.6
1.2
3.3
1.8
3.3
Point of View 6
Industrial Produc tion
1
8.1 7.1 6.7 3.2 6.0 4.4 4.1 3.9 -3.3 -11.1 5.3 5.0 4.0
Topic of the Week 7
Corporate Profits Before Taxes
3
2
37.6 37.0 26.4 18.3 8.2 6.2 6.2 6.7 -16.4 -0.4 29.2 6.8 7.0 Market Data 8
Trade Weighted Dollar Index 76.1 78.8 73.6 73.2 70.6 71.0 72.0 73.0 74.3 77.7 75.6 71.6 75.5
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 0.56 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 1.19
Conventional Mortgage Rate 4.97 4.74 4.35 4.71 4.84 5.20 5.25 5.30 6.04 5.04 4.69 5.15 5.70
10 Year Note 3.84 2.97 2.53 3.30 3.47 3.70 3.75 3.80 3.66 3.26 3.22 3.68 4.23
Forecast as of: April 29, 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
Fed Conference Reveals Nothing New Under the Sun
Federal Reserve Balance Sheet
After much anticipation, Fed Chairman Ben Bernanke at last held Trillions
$3.0 $2.5
his press conference with select journalists this week. As Other: Apr @ $206.8B
Foreign Swaps: Apr @ $0.0B
expected, the mostly prepared remarks contained no new Repos & Discount Window: Apr @ $0.0B
information. Some of the more telling aspects of the conference, $2.5 Agencies & MBS: Apr @ $1,058.4B
$2.0
Treasuries: Apr @ $1,406.6B
however, helped provide greater insight into the Fed’s economic
outlook, inflation and inflation expectations and the expiration of $2.0
the large-scale asset program, commonly known as QE2. $1.5

There were five key takeaways from the conference 1) the Fed $1.5
downgraded its economic growth projections for 2011 to a central
$1.0
tendency range of 3.1 to 3.3 percent from 3.4 to 3.9 percent 2) the
$1.0
slowdown in first quarter economic growth is likely due to
“transitory” factors such as lower defense spending, weaker $0.5
exports and weather 3) he defined the “extended period” $0.5

language as a “couple of meetings,” which is much shorter than

the assumed six months 4) he confirmed that QE2 would end in $0.0 $0.0
June and reinvestment of maturing securities would continue 2007 2008 2009 2010 2011

following the expiration. He also argued that ending QE2 is

unlikely to have a significant impact on financial markets because Real Domestic Final Sales
the “stock” of the Fed’s holdings is more important than the Bars = Compound Annual Rate Line = Yr/Yr % Change
8% 8%
“flow” of purchases 5) the Fed also raised its headline and core
inflation forecasts in 2011 and Chairman Bernanke acknowledged
6% 6%
that while near-term inflation expectations have picked up,
medium-term expectations have not moved very much.
4% 4%
We have consistently had one of the lower economic growth
forecasts for the year and continue to expect real GDP to grow 2% 2%
2.4 percent in 2011 and 2.8 percent in 2012. We agree that much
of the pullback in real GDP in the first half of the year will likely 0% 0%
be due to temporary factors, which should pick up in the second
half of the year. We also believe that inflation is expected to run -2% -2%
slightly higher, with overall CPI rising 3.3 percent this year and
core CPI rising 1.4 percent. Despite growing worries about -4% -4%
Final Sales: Q1 @ 0.8%
inflation, we expect the first rate hike to occur in early 2012.
Final Sales: Q1 @ 2.3%
That said, economic growth figures released this week were -6% -6%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
exactly in line with our conservative forecast. U.S. real GDP grew
at only a 1.8 percent rate in the first quarter, which was well
below the previous quarter’s solid gain. The gains in business Initial Claims for Unemployment
Seasonally Adjusted, In Thousands
investment and inventories were not enough to offset declines in 700 700
Year-over-Year Percent Change: Apr-23 @ -6.1%
government spending and construction outlays. Consumer Initial Claims: Apr-23 @ 429.0 Thousand
650 650
spending pulled back in the first quarter to a 2.7 percent pace as 4-Week Moving Average: Apr-23 @ 408.5 Thousand
52-Week Moving Average: Apr-23 @ 438.5 Thousand
households continue to grapple with rising food and energy 600 600
prices, which have taken a toll on purchasing power. Real final
550 550
sales, which exclude net trade and inventories, grew at only a
0.8 percent, which continues to suggest tepid economic growth. 500 500

Looking ahead, initial jobless claims figures were also released

450 450
this week and continue to be one the most important forward
looking indicators for the labor market. Initial claims rose to 400 400
429,000 in the week ending April 23, the highest level since
350 350
January and the third consecutive weekly increase. The closely
watched four-week moving average also inched higher and is now 300 300
at 406,500. While the Labor Department attributes the increase
to technical factors such as the Easter holiday, claims may be 250 250
86 88 90 92 94 96 98 00 02 04 06 08 10
signaling slower job growth in the coming months.

2
Economics Group U.S. Outlook Wells Fargo Securities, LLC
ISM Manufacturing • Monday
The ISM Manufacturing Index dipped slightly to 61.2 in March
ISM Manufacturing Composite Index
from 61.4 in February. The production index improved while the Diffusion Index
new orders index showed slightly slower expansion compared to 65 65

February. The employment index also declined slightly but

remained solidly in expansion territory. The supplier delivery index 60 60

jumped to 63.4, the second-highest level in nearly seven years,

indicating delivery times slowed as demand picked up. The prices 55 55

paid index rose to the highest since July 2008 as prices for oil and
other commodities continued to rise. A noticeable decline in the 50 50

order backlog index in March suggests we may see a bit of a

pullback in the headline index for April. The stark slowdown in the 45 45

Philadelphia Fed Index for April may also portend a lower ISM
reading for April. On the other hand, the rise in the Empire 40 40

Manufacturing Index for April gives us hope for a stronger ISM

print. 35
ISM Manufacturing Index: Mar @ 61.2
35

12-Month Moving Average: Mar @ 57.9

Previous: 61.2 Wells Fargo: 59.4 30 30
87 89 91 93 95 97 99 01 03 05 07 09 11
Consensus: 60.2
Factory Orders • Tuesday
Initial estimates showed factory orders declined 0.1 percent in
Non-Defense Capital Goods Orders, Ex-Aircraft
Series are 3 Month Moving Averages February. Excluding transportation equipment, orders rose just
40% 40% 0.1 percent, the weakest since October. Capital goods orders were
previously reported as having fallen 0.8 percent, dragged down by a
30% 30%
24.3 percent drop in defense orders. However, revisions in the
20% 20% March durable goods report released on April 27 showed capital
goods actually rose 1.0 percent in February. Similarly, non-defense
10% 10%
capital goods excluding aircraft were reported to have declined
0% 0% 0.7 percent in February, but this was revised to a 0.5 percent
increase. These upward revisions in February orders data, along
-10% -10%
with a strong 2.5 percent increase in durable goods orders in
-20% -20% March, suggest overall factory orders in March rose at a healthy
pace, and February’s decline will likely be revised to show an
-30% -30% increase. In addition, non-durable orders likely strengthened in
-40% 3 Month Annual Rate: Feb @ 3.2% -40%
March as well due to rising prices for food and commodities.
Year/Year Percent Change: Feb @ 14.9%
-50% -50%
Previous: -0.1% Wells Fargo: 2.0%
93 95 97 99 01 03 05 07 09 11
Consensus: 1.5% (Month-over-Month)
April Employment Report • Friday
The economy added 216,000 jobs in March, led by strength in
Nonfarm Employment Change
professional/business services, education/health and Change in Employment, In Thousands
leisure/hospitality. The unemployment rate dipped to 8.8 percent 600 600

as household employment rose by 291,000 while the labor force

400 400
expanded by 160,000. Although the number of unemployed has
declined by 1 million since November, hourly earnings growth 200 200
remains anemic, having been flat in four of the past five months.
High gas prices may have put a damper on consumer spending in 0 0
April. As such, employment growth in retail and leisure/hospitality
may have slowed. Government employment likely declined further -200 -200

in April as state and local governments continue to grapple with

-400 -400
budget deficits. In contrast, continued strength in manufacturing
suggests manufacturing job growth remained strong. Overall, we -600 -600
expect that job growth slowed in April and that the unemployment
rate was little changed. -800 -800
Nonfarm Employment Change: Mar @ 216,000
Previous: 216K Wells Fargo: 190K -1000 -1000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consensus: 190K

3
Economics Group Global Review Wells Fargo Securities, LLC
Global Review
Royal Wedding Aside, Britons Are Gloomy
U.K. Consumer Price Index
Year-over-Year Percent Change
Data released this week showed that real GDP in the United 6% 6%
Kingdom rose 0.5 percent (2.0 percent at an annualized rate) in CPI: Mar @ 4.1%
the first quarter relative to the preceding quarter. The increase
5% 5%
reversed a similar-sized decline in the fourth quarter that was
attributable, at least in part, to unseasonably harsh weather. That
said, the 1.8 percent year-over-year growth rate shows that the 4% 4%

pace of the recovery has been rather sluggish. Indeed, the level of
real GDP remains 4 percent below its pre-downturn peak. 3% 3%

A breakdown of the GDP data into its underlying components is

not yet available, but production-side data and various monthly 2% 2%
indicators offer some clues regarding the drivers of the British
economy at present. The service industries expanded 0.9 percent
1% 1%
in the first quarter, more than retracing the 0.6 percent
contraction registered during the previous quarter. However, real
retail spending was essentially flat in the first quarter. Therefore, 0% 0%
growth in overall personal consumption expenditures, which 1997 1999 2001 2003 2005 2007 2009 2011

accounts for two-thirds of GDP, probably expanded at a modest

pace in the first quarter. U.K. Consumer Confidence
Diffusion Index, Seasonally Adjusted
Moreover, there are reasons to expect that growth in consumer 10 10

spending will remain sluggish for the foreseeable future. Growth

in real personal disposable income is negative at present. In other
0 0
words, purchasing power is about one percent lower today than it
was last year at this time. Not only has employment growth been
weak—payrolls are up only 1 percent from their nadir in Q2
-10 -10
2009—but the 4 percent rise in consumer prices over the past
year has helped to erode purchasing power (top chart). In
addition, consumers are not feeling very confident at present. -20 -20
After rebounding in 2009, a widely followed index of consumer
confidence has trended lower over the past year (middle chart).
The percentage of individuals planning to make a “major -30 -30
purchase” over the next 12 months remains at depressed levels.
One factor that may be weighing on consumers’ expectations is Consumer Confidence: Mar @ -22.4
-40 -40
the well-publicized fiscal tightening that the government plans.
2001 2003 2005 2007 2009 2011
The budget will be pared by more than £30 billion (about
2 percent of GDP) in the fiscal year that just started, with further
Bank of England Policy Rate
cuts planned over the next few years. Even if fiscal tightening
does not have a knock-on effect on consumer spending, the 7.0% 7.0%

budget cuts will exert headwinds on economic growth.

6.0% 6.0%
The Bank of England has maintained its main policy rate at only
0.50 percent for more than two years (bottom chart). Although
5.0% 5.0%
the inflation rate at present is well above the 2 percent rate that
the government has mandated the Monetary Policy Committee
4.0% 4.0%
(MPC) to achieve over the “medium term,” we believe that the
MPC will keep rates unchanged over the coming months. At its
3.0% 3.0%
last policy meeting earlier this month, three MPC members voted
to hike rates. However, a majority still favors keeping rates on
2.0% 2.0%
hold because they expect inflation will come back to target over
the next two years due, at least in part, to the sluggish pace of
1.0% 1.0%
recovery. With the most hawkish member rolling off the MPC
Bank of England: Apr @ 0.50%
next month, we believe that the majority will continue to favor
0.0% 0.0%
unchanged policy for the foreseeable future.
2000 2002 2004 2006 2008 2010

4
Economics Group Global Outlook Wells Fargo Securities, LLC
Japanese Vehicle Sales • Monday
The Monday release of Japanese vehicle sales for April will be the
Japanese New Vehicle Sales
second installment on the state of the Japanese economy after the Year-over-Year Percent Change
devastating earthquake, tsunami and ensuing nuclear crisis. In 60% 60%

March, vehicle sales plunged by 37 percent compared to the same

month a year earlier and a comparable or even larger decrease in 40% 40%
April, which is highly possible, could throw cold water on a
potential recovery from the recent crisis.
20% 20%
Furthermore, vehicle sales could also give a good indication of the
mood of the Japanese consumer during the month following the
0% 0%
events that triggered the nuclear crisis and the effects that the crisis
has had on Japanese consumer confidence. It is clear that the
multiple crises will take a large toll on the Japanese economy -20% -20%

during the second and perhaps during the third quarters of the
year. And this is going to be reflected on durable goods such as -40% -40%
vehicle sales.
New Vehicle Sales: Mar @ -39.5%
Previous: 37.0% (Year-over-Year) -60% -60%
1998 2000 2002 2004 2006 2008 2010
Consensus: N/A
Brazil Industrial Production • Wednesday
The IBGE, the Brazilian statistical institute will release the
Brazilian Industrial Production Index
Year-over-Year Percent Change industrial production number for March on Wednesday and
20% 20% markets are expecting the number to come in at a low of 2.3 percent
compared to March of last year after growing by 6.9 percent during
15% 15%
the 12 months ending in February. This means that markets are
10% 10%
expecting a strong slowdown in economic growth in March and for
the rest of the year.
5% 5% However, there have been signs that the Brazilian economy has
continued to perform relatively well even as the central bank has
0% 0%
continued to increase interest rates to slowdown consumer
-5% -5%
demand. Thus, we believe that markets may be in for a surprise as
consumer demand, domestic and foreign, has remained strong even
-10% -10% as interest rates have continued to increase. Of course, this is not
good news for the future because the central bank will probably
-15% IPI: Feb @ 3.1% -15% have to continue to increase interest rates in the coming months.
3-Month Moving Average: Feb @ 2.8%
-20% -20%
Previous: 6.9%
1998 2000 2002 2004 2006 2008 2010
Consensus: 2.3% (Year-over-Year)
Germany Industrial Production • Friday
Germany’s industrial production f0r March will be released on
German Industrial Production Index
Friday and will probably show an economy that remains relatively Year-over-Year Percent Change
unperturbed by the many issues affecting the Eurozone region. 15% 15%

Emerging market growth has remained strong, especially Chinese

10% 10%
economic growth during the first quarter of the year and this will
probably be reflected on the performance of the country’s industrial 5% 5%
sector.
We already saw a relatively strong manufacturing PMI number for 0% 0%

March and this should be a good omen for March’s industrial

-5% -5%
production number. Furthermore, the manufacturing PMI for April
will be released on Tuesday and that is going to give us a good -10% -10%
indication of whether first quarter growth is spilling over to the
second quarter of the year. Of course, risks abound but Germany -15% -15%
has been able to remain, so far, relatively immune to these risk.
-20% IPI: Feb @ 14.7% -20%
3-Month Moving Average: Feb @ 12.7%
Previous: 14.8% -25% -25%
1997 1999 2001 2003 2005 2007 2009 2011
Consensus: 10.2% (Year-over-Year)

5
Economics Group Point of View Wells Fargo Securities, LLC
Interest Rate Watch Credit Market Insights
Subtleties: FOMC and Ben Bernanke Central Bank Policy Rates State Budget Outlook Mixed
7.5% 7.5%
Three fundamentals frame the debate on US Federal Reserve: Apr - 29 @ 0.25%
ECB: Apr - 29 @ 1.25%
For months, the municipal market has been
monetary policy and each of these draws 6.0%
Bank of Japan: Apr - 29 @ 0.10%
Bank of England: Apr - 29 @ 0.50%
6.0%
focused on state budget gaps and the
out some critical breakpoints. uncertainty associated with future pension
Growth expectations were lowered sharply 4.5% 4.5%
liabilities. Last week the National
for 2011 and then more modestly in 2012 Conference of State Legislatures (NCSL)
and 2013. For Chairman Bernanke the 3.0% 3.0%
released its March 2011 state budget
challenge to growth reflects the problems update. Its findings indicated that state
of the credit market—particularly the 1.5% 1.5%
revenues are beginning to stabilize, and in
mortgage and consumer credit markets. At some cases grow. Revenues are now
this point the base case is that credit in 0.0% 0.0% starting to more closely match state
00 01 02 03 04 05 06 07 08 09 10 11
these areas will be more expensive and less forecasts, thus helping to reduce the size of
available than in the past. As a result, we Yield Curve budget gaps. However, NCSL continues to
are likely to witness more modest growth 5.00%
U.S. Treasuries, Active Issues
5.00% characterize the current budget gap
and the contributions to growth will be less situation as weak with 24 states reporting
weighted toward the traditional strength in 4.00% 4.00% spending overruns for fiscal year 2011. In
consumer durables and housing. addition, budget gaps are projected to
3.00% 3.00% persist over the next two fiscal years. At
For inflation, the FOMC raised its central least 31 states are estimating a budget gap
tendency expectations for both overall and 2.00% 2.00% for fiscal year 2012 totaling $86.1 billion,
core PCE inflation for 2011 and for 2012. while 19 states are estimating a budget gap
For example, core PCE inflation 1.00% 1.00% for fiscal year 2013 totaling $30.9 billion.
April 29, 2011
expectations were moved from a range of April 21, 2011 While revenues are rebounding, spending
1.0-1.5 to 1.3-1.8 percent. Bernanke 0.00%
March 29, 2011
0.00% reductions have yet to reach the point of
emphasized that the FOMC expected the 3M 2Y 5Y 10
Y
30
Y
eliminating future state budget gaps.
recent acceleration of inflation would be Forward Rates
transitory but the projections indicate that 90-Day EuroDollar Futures State pension liabilities, also weighing on
2.25% 2.25%

some of these increases would persist at April 29, 2011 the minds of municipal investors, continue
April 21, 2011

least through next year. Moreover, he

2.00% March 29, 2011 2.00%
to be problematic for states. A recent report
asserted that the rise in inflation and
1.75% 1.75% by the Pew Center on the states found that
inflation expectations were not very much. 1.50% 1.50% 78 percent of states’ pension liabilities were
Yet, for investors, the five year-five year funded, but only 5 percent of retiree health
1.25% 1.25%

forward rate has moved from 2 percent at care coverage was funded. These statistics
1.00% 1.00%

the end of last year to 2.97 percent today. highlight the fact that while the budget gap
Five-year inflation expectations have
0.75% 0.75%
problem may be winding down, challenges
moved from 1.5 percent at the end of last 0.50% 0.50% related to states’ future liabilities remain.
year to 2.25 percent today. These types of 0.25% 0.25%
The mixed outlook will likely have a
movements suggest that investors are
Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12
negligible impact on the municipal market.
pricing more inflation than what might be Mortgage Data
interpreted as “not much.” The yield curve
has also become steeper over the past five
Week 4 Weeks Year
months as the Fed has held short rates flat,
Current Ago Ago Ago
but longer-term market rates have reflected
a rise in the inflation premium. Mortgage Rates

Chairman Bernanke made a subtle, but we 30-Yr Fixed 4.78% 4.80% 4.86% 5.08%
believe important, distinction between 15-Yr Fixed 3.97% 4.02% 4.09% 4.39%
short-term fiscal changes versus a long-run 5/1 ARM 3.51% 3.61% 3.70% 4.10%
credible commitment to reduce federal 1-Yr ARM 3.15% 3.16% 3.26% 4.05%
deficits. In the short-run, changes in tax
and spending provisions, along with MBA Applications
continued economic growth could give the Composite 441.2 467.5 485.3 534.6
appearance of reducing the federal deficit. Purchase 182.1 210.8 188.5 257.9
However, the real issue is the reduction of Refinance 1,964.0 1,975.2 2,222.5 2,161.8
long-term deficit forecasts that reflects the
Source: Freddie Mac, Mortgage Bankers Association and Wells Fargo Securities, LLC
influence of entitlements.

6
Economics Group Topic of the Week Wells Fargo Securities, LLC
Topic of the Week
Florida’s Economy Is Slowly Battling Back
Florida Employment Growth: March 2010
Florida’s economy is in a much better position today Year-over-Year Percent Change, 3-Month Moving Average
0.50%
than it was a year ago. In terms of job growth, most Punta Gorda

metropolitan areas were either contracting or recovering

3-Month Moving Average Percent Change

one year ago (top chart). Today, most metropolitan 0.25% Naples

areas across the state are expanding (bottom chart). Panama City Port St. Lucie Pensacola

Moreover, the metropolitan areas that have transitioned Recovering Gainesville Expanding
0.00%
into expansion mode include some of the most heavily West Palm Beach Jacksonville
Miami
populated areas in Florida, such as Orlando, Miami and
Fort Lauderdale. The only large metropolitan area that -0.25% Tampa
Tallahassee
Cape Coral
has struggled to gain traction in terms of adding jobs is Orlando Daytona

Jacksonville. Jacksonville is seeing a pickup in capital- Sebastian Palm Bay

intensive manufacturing and port activity, however, -0.50% Fort Lauderdale

driven by a weakening dollar, which is giving a boost to

Florida’s export base.
-0.75% Sarasota
Much of Florida’s recovery has been buoyed by a
rebound in tourism, led by international visitors. Job Contracting Decelerating
growth, however, is beginning to pick up across a broad -1.00%
-4.0% -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%
assortment of industries, including leisure & hospitality,
Year-over-Year Percent Change
professional & business services and education &
healthcare. We expect tourism to continue to lead
Florida’s recovery, but we also look for growth to start to
Florida Employment Growth: March 2011
Year-over-Year Percent Change, 3-Month Moving Average
accelerate in other key industries, such professional & 0.75%

technical services, staffing and healthcare & education. Sebastian

3-Month Moving Average Percent Change

Naples
Sarasota Orlando
Having said all of that, Florida’s economy is not likely to 0.50% Miami
regain its pre-recession vibrancy anytime soon. Housing Gainesville

still remains depressed in many areas, and the delay in Fort Lauderdale West Palm Beach

Tallahassee
foreclosures due to problems regarding paperwork is 0.25% Ocala
Daytona
Pensacola

prolonging a housing recovery. We believe home prices Tampa

have likely bottomed in Florida, but some price Recovering Punta Gorda Expanding
0.00%
measures will continue to trend lower, reflecting more Port St. Lucie
Cape Coral
distressed sales, not necessarily lower home prices.
-0.25%
Florida’s slow economic recovery is, to a large degree, Jacksonville

reflective of the broader U.S. macroeconomic story.

Historically, residential investment tends to lead -0.50%
Palm Bay Panama City

economic recoveries out of recessions, but with the

manifestation of a huge overhang of existing housing
Contracting Decelerating
units brought on by the housing bust, both Florida and -0.75%
-2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5%
the broader United States have been slow to recover.
Year-over-Year Percent Change

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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
4/29/2011 Ago Ago 4/29/2011 Ago Ago
3-Month T-Bill 0.04 0.05 0.15 3-Month Euro LIBOR 1.35 1.30 0.60
3-Month LIBOR 0.27 0.27 0.34 3-Month Sterling LIBOR 0.82 0.82 0.67
1-Year Treasury 0.13 0.20 0.34 3-Month Canadian LIBOR 1.20 1.20 0.51
2-Year Treasury 0.62 0.65 1.00 3-Month Yen LIBOR 0.20 0.20 0.24
5-Year Treasury 1.99 2.11 2.48 2-Year German 1.79 1.83 0.80
10-Year Treasury 3.31 3.39 3.72 2-Year U.K. 1.14 1.15 1.22
30-Year Treasury 4.42 4.46 4.59 2-Year Canadian 1.74 1.81 1.97
Bond Buyer Index 4.86 4.98 4.37 2-Year Japanese 0.20 0.21 0.17
10-Year German 3.26 3.31 3.06
Foreign Exchange Rates 10-Year U.K. 3.46 3.55 3.95
Friday 1 Week 1 Year 10-Year Canadian 3.22 3.29 3.66
4/29/2011 Ago Ago 10-Year Japanese 1.21 1.24 1.29
Euro ($/€€) 1.487 1.456 1.323
British Pound ($/ƕ) 1.666 1.651 1.532 Commodity Prices
British Pound (ƕ/€€) 0.893 0.882 0.864 Friday 1 Week 1 Year
Japanese Yen (¥/$) 81.350 81.880 94.030 4/29/2011 Ago Ago
Canadian Dollar (C$/$) 0.949 0.955 1.005 WTI Crude ($/Barrel) 112.87 112.29 85.17
Sw iss Franc (CHF/$) 0.867 0.886 1.084 Gold ($/Ounce) 1536.65 1506.85 1166.85
Australian Dollar (US$/A$) 1.094 1.074 0.928 Hot-Rolled Steel ($/S.Ton) 780.00 858.00 690.00
Mexican Peso (MXN/$) 11.530 11.605 12.206 Copper (¢/Pound) 421.30 439.80 333.35
Chinese Yuan (CNY/$) 6.492 6.508 6.826 Soybeans ($/Bushel) 13.45 13.44 9.70
Indian Rupee (INR/$) 44.219 44.368 44.520 Natural Gas ($/MMBTU) 4.61 4.41 3.98
Brazilian Real (BRL/$) 1.578 1.566 1.749 Nickel ($/Metric Ton) 26,836 25,293 25,590
U.S. Dollar Index 72.923 74.109 82.003 CRB Spot Inds. 619.53 627.69 511.67

Next Week’s Economic Calendar

Monday Tuesday Wednesday Thursday Friday
2 3 4 5 6
ISM Ma n u fa ct u r i n g Fa ct or y Or der s ISM Non -Mfg Pr odu ct i v i t y Non fa r m Pa y r ol l s
Ma r ch 6 1 .2 Febr u a r y -0 .1 % Ma r ch 5 7 .3 4 Q 2 .6 % Ma r ch 2 1 6 K
A pr il 5 9 .4 (W ) Ma r ch 2 .0 % (W ) A pr il 5 6 .9 (W ) 1 Q 0 .8 % (W ) A pr il 1 9 0 K (W )
U.S. Data

Con s. Spen di n g T ot a l V eh i cl e Sa l es Un it La bor Cost Un em pl oy m en t Ra t e

Febr u a r y -1 .4 % Ma r ch 1 3 .0 6 M 4 Q -0 .6 % Ma r ch 8 .8 %
Ma r ch 0 .4 % (W ) A pr il 1 2 .8 0 M (W ) 1 Q 0 .8 % (W ) A pr il 8 .7 % (W )

Ja pa n Eu r ozon e Br a zi l Ca n a da Ger m a n y
Global Data

V eh i cl e Sa l es (YoY) PPI (YoY) IP (YoY) Iv ey PMI SA IP (YoY)

Pr ev iou s (Ma r ) -3 7 .0 % Pr ev iou s (Feb) 6 .6 % Pr ev iou s (Feb) 6 .9 % Pr ev iou s (Ma r ) 7 3 .2 Pr ev iou s (Feb) 1 4 .8 %
U.K. Eu r ozon e Ca n a da
PMI Ma n u fa ct u r i n g Ret a i l Sa l es (YoY) Un em pl oy m en t Ra t e
Pr ev iou s (Ma r ) 5 7 .1 Pr ev iou s (Feb) 0 .3 % Pr ev iou s (Ma r ) 7 .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 Head of Research (704) 715-8437 diane.schumaker@wellsfargo.com

& Economics (212) 214-5070

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