Jay H.

Bryson, Global Economist

jay.bryson@wachovia.com
1-704-383-3518
Tim Quinlan, Economic Analyst
tim.quinlan@wachovia.com
1-704-374-4407

SPECIAL COMMENTARY May 14, 2009

Global Chartbook: May 2009

This report is available on www.wachovia.com/economics and on Bloomberg at WBEC

Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Contents
World............................................................................................................................................... 6
Dollar Exchange Rates................................................................................................................... 7
United States................................................................................................................................... 8
Euro-zone........................................................................................................................................ 9
Germany........................................................................................................................................ 10
France ............................................................................................................................................ 11
Italy ................................................................................................................................................ 12
Japan .............................................................................................................................................. 13
United Kingdom .......................................................................................................................... 14
Canada........................................................................................................................................... 15
Australia........................................................................................................................................ 16
Norway.......................................................................................................................................... 17
Sweden .......................................................................................................................................... 18
Switzerland ................................................................................................................................... 19
Brazil.............................................................................................................................................. 20
China.............................................................................................................................................. 21
India............................................................................................................................................... 22
Mexico ........................................................................................................................................... 23
Poland............................................................................................................................................ 24
Russia............................................................................................................................................. 25
Singapore ...................................................................................................................................... 26
South Africa .................................................................................................................................. 27
South Korea .................................................................................................................................. 28
Taiwan ........................................................................................................................................... 29
Turkey ........................................................................................................................................... 30
Energy Markets ............................................................................................................................ 31

2
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Executive Summary
Global Economy is in Deepest Recession in Decades
The heady days of 2004-2007, when global GDP growth averaged about five percent The sharp downturn in
per annum, seem like a distant memory now. Growth in most countries slowed in global economic
the first half of 2008 due in part to monetary tightening, the unprecedented rise in activity that began in
energy prices and dislocations in credit markets. However, global economic activity the fourth quarter of
went into freefall in the fourth quarter of 2008 as credit markets froze up in the wake 2008 has extended into
of Lehman Brothers failure, and the sharp downturn in major economies has this year.
extended into this year. Industrial production in the OECD countries (i.e., the thirty
most developed economies in the world) plunged 17 percent in February, by far the
sharpest year-over-year rate of contraction since records began in 1975.
We forecast global GDP will decline one percent this year. Although our projection Global GDP will
may not sound “bad,” global GDP has never contracted, at least not since the probably contract in
International Monetary Fund (IMF) began calculating the series in 1970. The G-7 2009, the first year of
countries are in the midst of their worst recessions in decades. Developing economies negative growth since
are hardly immune to the sharp reduction in global trade that has transpired, and a records began in 1970.
sharp slowdown has occurred in the emerging world. Developing economies that
had over-leveraged financial sectors have been especially hard hit, and countries
such as Belarus, Hungary, Iceland, Latvia, Pakistan and Ukraine have already gone
to the IMF with hat in hand.
Not only has the IMF been very busy since last autumn, but national governments
have also been hard at work in responding to the crisis. First, governments have
taken steps to shore up their respective financial systems via recapitalization, loan
guarantees, and increased deposit insurance. Although the global financial system is
hardly back to normal, some segments of the credit markets are starting to function
again. In addition, most central banks have cut policy interest rates to unprecedented
levels, and national governments have enacted fiscal stimulus programs of varying
sizes.
There are tentative signs that the efforts of policymakers are starting to bear some There are tentative
fruit. Data from the second quarter is rather limited at this point but it appears that signs that the efforts of
most major economies continue to contract, albeit at rates that are much slower than policymakers are
over the past two quarters. In addition, there have been some bona fide “green starting to bear some
shoots” of recovery spotted in some major developing economies. The fruit.
manufacturing PMI in China has moved above the demarcation line that separates
expansion from contraction, and industrial production in Brazil, Korea and Taiwan
are well off the lows that were set early this year. Although it would be premature to
state that the overall global economy has stabilized, we probably are at or near an
inflection point where the rate of decline starts to slow. By the end of the year, global
economic activity should be growing again on a sequential basis.
Global growth should be stronger in 2010 than in 2009, but it will probably fall short The global upturn that
of its long-run average of 3.7 percent per annum. Thus, the global upturn that we are we are expecting will
expecting will probably be sluggish, at least initially. The eventual U.S. recovery probably be sluggish, at
probably will be held back by slow growth in consumer spending as individuals least initially.
attempt to de-lever and repair battered balance sheets. Policy response in Europe and
Japan have generally been less aggressive than in the United States, so both the Euro-
zone and Japan are probably looking at a slow recoveries as well.

3
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Underlying all of our projections is our assumption that policymakers will take the
necessary steps to prevent the global financial system from locking up again à la last
autumn. If credit markets completely shut down again, however, global economic
activity would go into a renewed freefall. In other words, the global economy is
clearly not out of the woods yet. The vulnerability of the global economy at present
to shocks was driven home earlier this month by the swine flu paranoia.
We do not believe the Inflation rates in most countries shot higher in the first half of 2008 and commodity
world will experience prices went through the roof. However, the global downturn has caused commodity
generalized deflation. prices to collapse. After rising to six percent in 2008, which is the highest rate in
about ten years, global inflation should recede to around one percent this year.
Although we do not believe the world will experience generalized deflation, some
individual countries could experience a period of mild price declines this year. A
slow global upturn also means that commodity prices will probably grind higher, but
another moonshot a la’ 2007-08 does not seem likely.

Dollar Appreciation Should Continue in Near Term

After following a downward trend between 2002 and mid-2008, the trade-weighted
value of the U.S. dollar is up about fifteen percent on balance since last July. Not only
did the greenback benefit from the marked decline in the U.S. current account
deficit—the trade deficit has been cut in half since the third quarter of 2008—but
massive safe-haven purchases of U.S. Treasury securities by both foreign investors
and foreign central banks also boosted the dollar at the expense of most foreign
currencies.
The dollar should In our view, the dollar should continue to grind higher, at least in the near term. U.S.
appreciate further in the authorities are generally taking more aggressive steps to stimulate the economy via
near term. aggressive monetary and fiscal easing than their counterparts in most other
countries. Consequently, signs (or at least expectations) of stabilization and
subsequent recovery should show up in the United States before they do in most
other economies. Expectations of recovery should be conducive for further dollar
strength.
Foreign currencies However, the problems facing the U.S. economy are generally more serious than the
should stabilize versus problems that confront many other economies. Although growth in the United States
the greenback later this should turn positive again later this year, the recovery we project will probably be
year as most foreign very sluggish. As foreign economies begin to find bottom later this year, most foreign
economies find bottom. currencies should stabilize versus the U.S. dollar. The greenback could even begin to
give up some of its gains next year as the reality of a very slow U.S. economic
recovery becomes painfully clear to investors.

4
 Global Chartbook: March 2009
May 14, 2009 SPECIAL COMMENTARY

Forecasts as of May 13, 2009

Wachovia Currency Forecast

(End of Quarter Rates)
2009 2010
Q2 Q3 Q4 Q1 Q2 Q3 Q4
Major Currencies
Euro ($/€) 1.33 1.28 1.24 1.22 1.24 1.26 1.28
U.K. ($/£) 1.48 1.44 1.40 1.38 1.42 1.44 1.46
Wachovia International Economic Forecast U.K. (£/€) 0.90 0.89 0.89 0.88 0.87 0.88 0.88
(Year-over-Year Percentage Change) Japan (¥/$) 100 105 110 112 114 112 111
GDP CPI Other Industrialized
2008 2009 2010 2008 2009 2010 Canada (C$/US$) 1.19 1.23 1.25 1.24 1.22 1.18 1.15
Global 3.2% -1.0% 3.0% 6.0% 1.1% 1.7% Switzerland (CHF/$) 1.12 1.16 1.20 1.24 1.22 1.18 1.14
Major Economies Norway (NOK/$) 6.70 7.00 7.25 7.25 7.00 6.80 6.60
United States 1.1% -3.0% 1.6% 3.8% -1.2% 1.0% Sweden (SEK/$) 8.00 8.40 8.70 8.70 8.40 8.10 7.90
Eurozone 0.7% -3.9% 1.1% 3.3% 0.0% 0.4% Australia (US$/A$) 0.73 0.71 0.70 0.70 0.72 0.75 0.78
Germany 1.0% -4.6% 0.9% 2.8% -0.2% 0.1% Developing Economies
France 0.8% -3.0% 1.2% 3.2% -0.1% 0.4% Mexico (MXN/$) 13.25 13.75 14.00 14.00 13.50 13.00 12.50
Italy -1.0% -4.6% 0.4% 3.5% 0.2% 0.0% Brazil (BRL/$) 2.15 2.25 2.30 2.25 2.15 2.10 2.00
UK 0.7% -3.8% 1.2% 3.6% 1.1% 0.2% Poland (PLN/$) 3.30 3.50 3.60 3.60 3.45 3.30 3.20
Russia (RUB/$) 32.50 33.00 33.25 33.00 32.00 31.00 30.00
Japan -0.7% -7.2% -0.2% 1.4% -1.0% -0.7%
Turkey (TRY/$) 1.57 1.60 1.62 1.60 1.57 1.54 1.50
Canada 0.5% -2.3% 2.4% 2.4% 0.3% 1.0%
South Africa (ZAR/$) 8.70 9.00 9.15 9.00 8.80 8.60 8.40
Developing Economies
China (CNY/$) 6.82 6.80 6.78 6.75 6.70 6.65 6.60
China 9.1% 7.7% 8.5% 5.9% -1.0% 0.3% India (INR/$) 49.50 49.75 50.00 50.00 49.60 49.20 48.75
India 6.0% 5.1% 7.0% 7.8% 7.4% 5.0% Korea (KRW/$) 1300 1325 1350 1325 1300 1275 1250
Mexico 1.3% -3.4% 1.7% 5.1% 5.2% 3.1% Singapore (S$/US$) 1.48 1.50 1.52 1.52 1.51 1.50 1.48
Brazil 5.1% -2.1% 3.1% 5.7% 4.7% 3.9% Taiwan (TWD/$) 33.25 33.50 33.75 33.75 33.50 33.00 32.50
Data as of: May 13, 2009
1 1
Data as of: May 13, 2009

Wachovia International Interest Rate Forecast

(End of Quarter Rates)
3-Month LIBOR 10-Yr Government Security
2009 2010 2009 2010
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q2 Q3 Q4 Q1 Q2 Q3 Q4
United States 0.80% 0.70% 0.60% 0.60% 0.60% 0.70% 0.80% 3.20% 3.40% 3.40% 3.40% 3.60% 3.70% 3.70%
Japan 0.50% 0.40% 0.25% 0.25% 0.25% 0.25% 0.25% 1.40% 1.50% 1.60% 1.70% 1.80% 1.90% 1.95%
Euroland 1.20% 1.15% 1.15% 1.15% 1.20% 1.75% 2.25% 3.40% 3.50% 3.70% 4.00% 4.30% 4.40% 4.50%
U.K. 1.30% 1.00% 0.75% 0.75% 0.75% 1.00% 1.50% 3.60% 3.75% 4.00% 4.25% 4.50% 4.60% 4.70%
Canada 0.75% 0.60% 0.50% 0.50% 0.50% 1.00% 2.00% 3.20% 3.50% 3.80% 4.00% 4.25% 4.40% 4.45%
1
Data as of: May 13, 2009

5
Global Chartbook: March 2009
May 14, 2009 SPECIAL COMMENTARY

World OECD Industrial Production

Year-over-Year Percent Change
10% 10%

ƒ Global economic activity weakened significantly last

5% 5%
autumn as credit markets froze in the wake of the Lehman
Brothers’ default. The global economy has fallen into its
0% 0%
deepest recession in decades with industrial production
plunging at double digit rates in most countries.
-5% -5%

ƒ However, the major governments of the world averted a

-10% -10%
catastrophe by taking bold steps to support the global
financial system. Many major economies have also
-15% -15%
announced fiscal stimulus measures that will eventually
help to backstop economic activity. Indeed, there are some OECD Industrial Production: Feb @ -17.0%
-20% -20%
signs that the global economy is nearing an inflection
76 80 84 88 92 96 00 04 08
point if it has not reached it already. That is, most
economies continue to contract, but less rapidly than just a
few months ago. Central Bank Policy Rates
8.0% 8.0%
ƒ Developing countries where economic fundamentals are ECB: May @ 1.00%
Bank of Canada: May @ 0.25%
not sound (e.g., many economies in Eastern Europe) have 7.0%
US Federal Reserve: May @ 0.25%
7.0%
plunged into very deep recessions. However, the recent Bank of England: May @ 0.50%
6.0% 6.0%
commitment by the G-20 countries to pony up more funds
for the IMF is good news for these economies. 5.0% 5.0%

4.0% 4.0%
ƒ The remarkable run-up in commodity prices between 2003
and the first half of 2008 led to generalized inflation fears. 3.0% 3.0%
However, commodity prices have essentially collapsed as
global recession has taken hold. Economic weakness and 2.0% 2.0%
the collapse of commodity prices should cause inflation
1.0% 1.0%
rates in most countries to decline significantly in 2009.
Some countries may even experience mild deflation this 0.0% 0.0%
year. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

CRB Index
Monthly Average Level
450 450
Global CPI
Year-over-Year Percent Change
16% 16% 400 400

14% 14%
350 350
12% 12%

300 300
10% 10%

8% 8% 250 250
Forecast
6% 6%
200 200
4% 4%
CRB Index: Mar @ 206.4
150 150
2% 2%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0% 0%
Source: Bloomberg LP, Federal Reserve Board, IHS Global Insight,
1995 1998 2001 2004 2007 2010
International Monetary Fund and Wachovia

6
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Dollar Exchange Rates U.S. Trade Weighted Dollar Major Index

March 1973=100
115 115

110 110
ƒ Since bottoming last summer, the dollar has risen more
than 15% on a trade-weighted basis against other major 105 105

currencies. The greenback has also registered impressive 100 100

gains versus the currencies of most developing countries 95 95
as well.
90 90

ƒ The dollar’s appreciation reflects a number of factors. 85 85

First, the U.S. current account deficit has declined 80 80

significantly over the past two quarters. Although the 75 75
improvement largely reflects the collapse in oil prices—
70 70
the United States is the largest importer of oil in the Major Currency Index: May @ 81.2
world—the decline in the current account deficit placed 65 65
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
less downward pressure on the dollar.

ƒ The greenback also benefited from net capital inflows. U.S. US Trade Weighted Emerging Currency Index
investors repatriated more than $100 billion of assets in 150
March 1973=100
150
the second half of 2008 as risk aversion spiked. Although
foreign investors dumped riskier U.S. assets like equities
145 145
and corporate bonds, foreign purchases of U.S. Treasury
securities surged as investors sought the safety of the
140 140
world’s most liquid asset.

135 135
ƒ We project that the trade weighted dollar will continue to
trend higher in the near term. Signs of stabilization and
eventual recovery will likely show up first in the United 130 130

States, which should benefit the greenback. However, the

eventual recovery in the United States will probably prove 125 125
to be frustratingly slow. Returns on U.S. assets likely will Fed's "Other Important Trading Partners" Index: May @ 138.53
remain relatively low, which would not be conducive to 120 120
strong inflows of capital over time. We project that the 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
dollar will stabilize later this year or early next year before
depreciating somewhat. Current Account Deficit
Quarterly in Billions of Dollars, Seasonally Adjusted
$40 $40
Net Assets
Billions of Dollars $0 $0
$900 $900
Foreign-Owned Assets in the U.S.: Q4 @ $-7.6 B
U.S.-Owned Assets Abroad: Q4 @ $84.4 B -$40 -$40
$600 $600
Inflows
-$80 -$80

$300 $300 -$120 -$120

-$160 -$160
$0 $0

-$200 -$200

-$300 -$300 Balance on Current Account: Q4 @ $-132.8 B

-$240 -$240
Outflows 92 94 96 98 00 02 04 06 08

-$600 -$600
Source: Bloomberg LP, Federal Reserve Board, IHS Global Insight,
99 00 01 02 03 04 05 06 07 08
International Monetary Fund and Wachovia

7
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

United States Real GDP

Bars = Compound Annual Growth Rate Line = Yr/Yr Percent Change
8.0% 8.0%

ƒ We are in the 17th month of the recession, but we expect a 6.0% 6.0%

recovery to come later on this year. The severity of the

4.0% Forecast 4.0%
contraction reflects the effects of the credit crunch
compounded by the collapse in global growth. This 2.0% 2.0%
should mark the largest contraction in the U.S. economy in f
0.0% 0.0%
the post-World War II era.
-2.0% -2.0%
ƒ In both the fourth quarter of 2008 and the first quarter of
-4.0% -4.0%
2009, the U.S. economy contracted at more than a six
percent annualized rate. A massive drawdown in -6.0% -6.0%
GDPR - CAGR: Q1 @ -6.1%
inventories exacerbated the contraction in the first quarter GDPR - Yr/Yr Percent Change: Q1 @ -2.6%
but helps set the stage for a turnaround by the end of this -8.0% -8.0%
year. Capital spending continues to fall sharply and 2000 2002 2004 2006 2008 2010

economic weakness in the rest of the world has caused

U.S. exports to fall off a cliff. Real NonResidential Business Fixed Investment
Bars = Seasonally Adjusted Annual Rate Line = Yr/Yr % Change
25% 25%
ƒ The decline in energy prices since last summer has 20% 20%
brought down the overall rate of CPI inflation, bringing 15% 15%
the year-over-year rate into negative territory in March. 10% 10%
The core rate of inflation is receding as well, but not as 5% 5%
quickly as the overall CPI inflation rate. 0% 0%
-5% -5%
ƒ The Public Private Investment Program and other -10% -10%
measures that have been put in place by the U.S. Treasury -15% -15%
and the Fed have helped to stabilize the financial system, -20% -20%
and thereby have reduced a large downside risk to U.S. -25% -25%
economic prospects. However, the financial system is not -30% -30%
out of the woods yet, and lending likely will remain very Fixed Investment: Q1 @ -37.9%
-35% -35%
Fixed Investment: Q1 @ -16.3%
constrained until banks are able to rebuild their capital -40% -40%
bases. Therefore, the recovery that should begin in late 1996 1998 2000 2002 2004 2006 2008
2009 likely will be muted.
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%
CPI: Mar @ -0.4%
Core CPI: Mar @ 1.8%
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% -600 -600

Nonfarm Employment Change: Apr @ -539,000

0.0% 0.0% -800 -800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-1.0% -1.0%
Source: U.S. Department of Commerce, U.S. Department of Labor and
92 94 96 98 00 02 04 06 08
Wachovia

8
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Euro-zone Euro-zone Real GDP

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

ƒ Economic growth in the Euro-zone contracted in the fourth 4.0% 4.0%

quarter of 2008 and by many measures appears to have
gotten worse in the first quarter of 2009. The 16-country 2.0% 2.0%
economy contracted at a 5.8% annual rate in the fourth
quarter. 0.0% 0.0%

-2.0% -2.0%
ƒ Industrial production (IP) has fallen off a cliff in the first
quarter, raising concerns that first quarter GDP could show -4.0% -4.0%
substantial contraction in the Euro-zone. IP has been a
reliable indicator of economic growth over the past several -6.0% -6.0%
Compound Annual Growth: Q4 @ -6.3%
years. On a year-over-year basis, IP dropped 19% in Year-over-Year Percent Change: Q4 @ -1.5%
February. -8.0% -8.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008

ƒ There is some hope for relief as Euro-zone purchasing

mangers’ indices have recovered somewhat in recent Euro-zone Industrial Production Index
months. That said, these signs of life simply suggest a 12%
Year-over-Year Percent Change
12%
slowing pace of decline at this point, and not yet a recovery.
9% 9%
Consumer spending is likely to remain under pressure as
6% 6%
unemployment is now over eight percent and consumer
confidence is also at a record low. Business spending 3% 3%

remains weak, and the ongoing global recession will keep a 0% 0%

lid on export growth for much of this year. -3% -3%

-6% -6%
ƒ After dropping more than twenty percent from its highs
-9% -9%
last summer, the euro has stabilized recently, remaining in
a trading band between 1.25 and 1.40 against the dollar for -12% -12%

most of 2009. We project that the euro will trend lower -15% -15%
against the greenback over the next few months as investors IPI: Feb @ -19.0%
-18% -18%
3-Month Moving Average: Feb @ -16.3%
begin to get a sense that the U.S. economy is bouncing back -21% -21%
faster than economies in Europe. 1997 1999 2001 2003 2005 2007 2009

Euro-zone Purchasing Manager Indices

Index
65 65
Euro-zone Exchange Rate
USD per EUR 60 60
1.70 1.70

1.60 1.60 55 55

1.50 1.50
50 50
1.40 1.40
45 45
1.30 1.30

1.20 1.20 40 40

1.10 1.10
35 35
E.Z. Manufacturing: Apr @ 36.8
1.00 1.00 E.Z. Services: Apr @ 43.8
30 30
0.90 0.90
1998 2000 2002 2004 2006 2008
USD per EUR: May @ 1.363
0.80 0.80
1999 2001 2003 2005 2007 2009
Sources: IHS Global Insight, Bloomberg LP and Wachovia

9
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Germany German Real GDP

Bars = Compound Annual Rate Line = Yr/Yr % Change
9.0% 9.0%

ƒ Real GDP in Germany contracted at an annualized rate of

6.0% 6.0%
8.2% in the fourth quarter, the largest quarterly decline on
record. (The pan-German series goes back to 1991.) The
3.0% 3.0%
German economy is in the throes of what we expect will
be a peak-to-trough decline in real GDP of more than six
0.0% 0.0%
percent.

-3.0% -3.0%
ƒ By most measures, the economy continued to contract in
the first quarter. The Ifo index of German business
-6.0% -6.0%
sentiment, which is highly correlated with growth in Compound Annual Growth: Q4 @ -8.2%
industrial production, rose in April from an all time low. Year-over-Year Percent Change: Q4 @ -1.7%
Industrial production in March plunged 20.4% relative to -9.0% -9.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008
the same month in 2008, the fastest pace of contraction
since at least 1992.
German Production Indicators
ƒ The recent freefall in the economy caused significant 110
Index, Year-over-Year Percent Change
8.0%
contraction in the job market in recent months. In March,
the unemployment rate jumped to 8.3%. Although the 105 4.0%
weakness in the labor market may keep a lid on consumer
spending, government incentive programs may help 100 0.0%
bolster domestic demand.
95 -4.0%

ƒ There are some signs of hope. Exports for March posted a

90 -8.0%
surprise increase, fueling speculation of a turnaround.
Germany is an important supplier of capital goods to
85 -12.0%
Central and Eastern Europe. But with these areas in deep
recession, German exports have been falling off a cliff in 80 -16.0%
Ifo Index: Apr @ 83.7 (Left Axis)
recent months, making the hope of a turnaround so
IP Year-over-Year % Chg 3-M MA: Mar @ -19.8% (Right Axis)
enticing. 75 -20.0%
1996 1998 2000 2002 2004 2006 2008

German Unemployment Rate

Seasonally Adjusted
13.0% 13.0%
German Merchandise Exports
Year-over-Year Percent Change
30% 30% 12.0% 12.0%

20% 20% 11.0% 11.0%

10% 10% 10.0% 10.0%

0% 0% 9.0% 9.0%

-10% -10% 8.0% 8.0%

Unemployment Rate: Apr @ 8.3%

-20% -20% 7.0% 7.0%
Merchandise Exports: Mar @ -21.1% 1997 1999 2001 2003 2005 2007 2009
3-Month Moving Average: Mar @ -21.3%
-30% -30%
1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

10
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

France French Real GDP

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

ƒ After side-stepping consecutive quarters of contraction

4.0% 4.0%
earlier in the year, French GDP fell apart in the fourth
quarter, contracting at an annualized rate of 5.1%. It was
2.0% 2.0%
the worst quarterly contraction in more than 30 years.

0.0% 0.0%
ƒ By most measures, things are only getting worse in the
first quarter. Industrial production has fallen off a cliff so
-2.0% -2.0%
far in 2009. The trade deficit widened further in March as
exports fell to a four-year low as global trade dries up.
-4.0% -4.0%
Weak exports are weighing heavily on French industrial
Compound Annual Growth: Q4 @ -5.1%
production, and will likely be a major headwind for first Year-over-Year Percent Change: Q4 @ -1.0%
quarter real GDP as well. -6.0% -6.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008

ƒ An unexpected bright spot has emerged in domestic

demand as French consumers loosened the purse strings French Industrial Production Index
in March as consumer spending increased 1.1 percent for 8.0%
Year-over-Year Percent Change
8.0%
the month. Still, the pop in March may have had to do
with a decrease of an even larger magnitude in the
4.0% 4.0%
previous month that set March up for an increase by
comparison. Going forward, we do not expect sustained
0.0% 0.0%
strength from the consumer as the global recession and its
associated financial market turmoil have caused consumer
sentiment to weaken substantially. -4.0% -4.0%

ƒ On a peak-to-trough basis, we project that real GDP in -8.0% -8.0%

France will contract nearly four percent, which if realized,

would be France’s worst recession in decades. -12.0% -12.0%
IPI: Feb @ -15.5%
3-Month Moving Average: Feb @ -13.6%
-16.0% -16.0%
1997 1999 2001 2003 2005 2007 2009

French Merchandise Trade Balance

Billions of Euros, Seasonally Adjusted
2.0 € 2.0 €
Volume of French Retail Sales
Year-over-Year Percent Change of 3-Month Moving Average 1.0 € 1.0 €
6.0 % 6.0 %
0.0 € 0.0 €

-1.0 € -1.0 €
4.0 % 4.0 %
-2.0 € -2.0 €

-3.0 € -3.0 €

2.0 % 2.0 % -4.0 € -4.0 €

-5.0 € -5.0 €

0.0 % 0.0 % -6.0 € -6.0 €

Merchandise Trade Balance: Mar @ -4.9 €
-7.0 € -7.0 €
2000 2002 2004 2006 2008
3-Month Moving Average: Dec @ -1.0%
-2.0 % -2.0 %
1998 2000 2002 2004 2006 2008
Source: IHS Global Insight, Bloomberg LP and Wachovia

11
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Italy Italian Real GDP

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

ƒ Real GDP contracted at an annualized rate of 7.5% in the 4.0% 4.0%

fourth quarter – the worst contraction in growth in at least
2.0% 2.0%
27 years. While other European countries have plans for
big government spending to help underpin their 0.0% 0.0%
economies, Italy has no substantial stimulus plan in the
-2.0% -2.0%
works. With a debt-to-GDP ration north of 100 percent,
the Italian government has fewer options than some of its -4.0% -4.0%
less-leveraged European neighbors.
-6.0% -6.0%

ƒ A widely followed index of Italian business confidence -8.0% -8.0%

Compound Annual Growth: Q4 @ -7.5%
has slumped sharply over the past few months, but Year-over-Year Percent Change: Q4 @ -2.9%
hooked up slightly in April suggesting that economic -10.0% -10.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008
weakness could be showing signs of fading as we enter
the second quarter.
Italian and French Business Confidence
ƒ So far there are no indications of a slowing pace of decline 140
Index
140
when it comes to data for industrial production, which in Italian Business Confidence: Apr @ 64.2
February fell more than twenty percent, year over year. 130 French Business Confidence: Apr @ 71.0 130

In addition to struggles in manufacturing, weak domestic 120 120

demand has been a drag on growth for the last few years.
110 110
Retail sales have been falling on trend since late 2006, and
the pace of decline is picking up speed. 100 100

90 90
ƒ On a peak-to-trough basis, we project that the Italian
economy will contract more than six percent, which, if 80 80

realized, would be the worst downturn in Italy in decades. 70 70

Although the economy will not continue to contract
60 60
forever, the ensuing upturn probably will be muted.
50 50
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Italian Industrial Production Index

Year-over-Year Percent Change
7.5% 7.5%
Italian Consumer Price Index 5.0% 5.0%
Year-over-Year Percent Change
4.5% 4.5%
2.5% 2.5%
CPI: Mar @ 1.1%
4.0% 4.0% 0.0% 0.0%

-2.5% -2.5%
3.5% 3.5%
-5.0% -5.0%

3.0% 3.0% -7.5% -7.5%

-10.0% -10.0%
2.5% 2.5%
-12.5% -12.5%
2.0% 2.0%
-15.0% IPI: Feb @ -20.0% -15.0%
3-Month Moving Average: Feb @ -16.6%
1.5% 1.5% -17.5% -17.5%
1997 1999 2001 2003 2005 2007 2009

1.0% 1.0%
1997 1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

12
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Japan Japanese Real GDP

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

ƒ By the time this global recession has run its course, we

anticipate the economy will contract about nine percent on 5% 5%

a peak-to-trough basis. If so, Japan would clearly be in its

deepest recession since the end of the Second World War.
0% 0%
Real GDP in Japan plunged at an annualized rate of 12.1%
in the fourth quarter, the steepest rate of contraction in
35 years. -5% -5%

ƒ The Tankan index of Japanese business sentiment plunged -10% -10%

from a reading of -24 in the fourth quarter of last year to
Compound Annual Growth: Q4 @ -12.1%
-58 in the first quarter, edging out the all-time low set in Year-over-Year Percent Change: Q4 @ -4.3%
the deep recession of 1975. As the nearby chart shows, -15% -15%
the Tankan tracks closely with GDP. 2000 2001 2002 2003 2004 2005 2006 2007 2008

ƒ The sharp downturn in exports has caused the Japanese Japanese Tankan Survey & Real GDP
trade balance, which has been in chronic surplus over the 60.0
Index, Year-over-Year Percentage Change
6.0%
past few decades, to swing to a modest deficit. However Tankan Index: Q1 @ -58.0 (Left Axis)
exports fell at a slower pace in March, suggesting the Year-over-Year Percent Change: Q4 @ -4.3% (Right Axis)
40.0 4.0%
worst of the slowdown in exports may be behind us.

20.0 2.0%
ƒ After rising to a 14-year high against the dollar earlier this
year, the Japanese yen has given up some of its gains over
0.0 0.0%
the past few weeks as investors have become a bit less risk
averse. However, we look for the yen to depreciate further
over the course of the year and into next year as eventual -20.0 -2.0%

stabilization in global economic activity causes risk

aversion to subside. -40.0 -4.0%

-60.0 -6.0%
1996 1998 2000 2002 2004 2006 2008

Japanese Merchandise Trade Balance

Billions of Yen, Seasonally Adjusted
¥ 1,500 ¥ 1,500
Japanese Exchange Rate
JPY per USD ¥ 1,250 ¥ 1,250
150 150

¥ 1,000 ¥ 1,000
140 140
¥ 750 ¥ 750
130 130
¥ 500 ¥ 500
120 120
¥ 250 ¥ 250

110 110
¥0 ¥0

100 100 -¥ 250 -¥ 250

Merchandise Trade Balance: Mar @ -97.1 ¥
90 90 -¥ 500 -¥ 500

JPY per USD: May @ 98.5 2000 2002 2004 2006 2008
80 80
1995 1997 1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

13
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

United Kingdom U.K. Real GDP

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

ƒ Real GDP in the United Kingdom contracted at an 4.0% 4.0%

annualized rate of 7.4% in the first quarter, the sharpest
rate of contraction since the third quarter of 1979. 2.0% 2.0%
Purchasing managers’ indices have recovered somewhat
in recent months but still remain firmly in contraction 0.0% 0.0%

territory, indicating that the economy still faces

-2.0% -2.0%
headwinds going into the second quarter.
-4.0% -4.0%
ƒ We look for the peak-to-trough decline in U.K. real GDP to
total nearly five percent, which would make the current -6.0% -6.0%
Compound Annual Growth: Q1 @ -7.4%
downturn more severe than the recession in the early Year-over-Year Percent Change: Q1 @ -4.1%
1990s. The sharp rise in house prices over the past decade -8.0% -8.0%
has led to a significant build-up in consumer debt, and 2000 2002 2004 2006 2008

these imbalances will need to be worked off over the next

few years. Thus, the upturn, when it comes, will likely be U.K. Purchasing Managers' Indices
muted. Diffusion Indices
65 65

ƒ Despite the upturn in the various PMIs, the declines in 60 60

economic activity are not showing signs of slowing as we
55 55
head into the second quarter. Industrial production, for
example, fell 12.4% in March versus the same month last 50 50
year.
45 45

ƒ Sterling has stumbled versus the greenback over the past 40 40

few months as the British economic outlook has
deteriorated. Looking ahead to the next few quarters, we 35 35

project that sterling will weaken a bit further against the UK Services: Apr @ 48.7
30 30
dollar as the British economy remains in the doldrums. UK Construction: Apr @ 38.1
UK Manufacturing: Apr @ 42.9
Further out, however, sterling should stabilize and 25 25
eventually begin to strengthen against the dollar due to a 2000 2002 2004 2006 2008
very sluggish U.S. economic recovery.
U.K. Industrial Production Index
Year-over-Year Percent Change
5.0% 5.0%
U.K. Exchange Rates
USD per GBP
2.200 2.200

0.0% 0.0%

2.000 2.000

-5.0% -5.0%
1.800 1.800

1.600 1.600 -10.0% -10.0%

IPI: Mar @ -12.4%

1.400 1.400 3-Month Moving Average: Mar @ -12.1%
-15.0% -15.0%
1997 1999 2001 2003 2005 2007 2009
USD per GBP: May @ 1.476
1.200 1.200
1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

14
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Canada Canadian Real GDP

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

ƒ Canadian real GDP fell at an annualized rate of 3.4% in

the fourth quarter, and with most of the rest of the world 4.0% 4.0%

in recession, it appears likely that the economy shrank at a

faster rate in the first quarter. Growth in Canada’s export-
2.0% 2.0%
heavy economy is at least partly dependent on a
turnaround in global growth.
0.0% 0.0%

ƒ After months of layoffs, the Canadian economy added

35.9K jobs in April. From month to month, there can be -2.0% -2.0%
some statistical “noise” in employment numbers. In order
Compound Annual Growth: Q4 @ -3.4%
to filter out the noise, it is useful to look at a six month Year-over-Year Percent Change: Q4 @ -0.7%
moving average to get a better sense of the underlying -4.0% -4.0%
trend in the job market. By this measure, the labor 2000 2001 2002 2003 2004 2005 2006 2007 2008

situation in Canada is still in as challenging a condition as

we have seen in years. Canadian Employment
Month-over-Month Change in Employment, In Thousands
125 125
ƒ That said, there is plenty of evidence that the winds may
100 100
be changing for the better in the Canadian economy. The
75 75
Ivey Purchasing Managers’ Index posted a much
better-than-expected reading of 53.7 in April. A number 50 50

above 50 is associated with economic growth; the 25 25

consensus was only expecting a reading in the low 40s. 0 0

-25 -25
ƒ After depreciating more than twenty percent since last
-50 -50
summer, the Canadian dollar has turned around and
-75 -75
gained value versus the greenback. We do not expect the
recent rally to hold, and look for the loonie to trend lower -100 -100

through the rest of this year as global economic conditions -125 Change in Employment: Feb @ -82.6K -125
6-Month Moving Average: Feb @ -33.5K
remain very weak. Further out, however, the loonie -150 -150
should stabilize as global growth picks up in 2010. 2000 2002 2004 2006 2008

Canadian Retail Sales

Year-over-Year Percent Change, 3-Month Moving Average
8.0% 8.0%
Canadian Exchange Rate
CAD per USD 6.0% 6.0%
1.700 1.700

1.600 1.600 4.0% 4.0%

1.500 1.500 2.0% 2.0%

1.400 1.400
0.0% 0.0%

1.300 1.300
-2.0% -2.0%
1.200 1.200
-4.0% Total: Feb @ -5.7% -4.0%
1.100 1.100
Excluding Autos: Feb @ -2.0%
-6.0% -6.0%
1.000 1.000
2000 2002 2004 2006 2008
CAD per USD: May @ 1.151
0.900 0.900
1990 1993 1996 1999 2002 2005 2008
Source: IHS Global Insight, Bloomberg LP and Wachovia

15
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Australia Australian Real GDP

Bars = Compound Annual Rate Line = Yr/Yr % Change
10% 10%
Compound Annual Growth: Q4 @ -2.1%
ƒ Like every other major economy in the world, Australia 8%
Year-over-Year Percent Change: Q4 @ 0.3%
8%
experienced negative GDP growth at the end of last year.
Australian exports have been whacked by the global 6% 6%
recession, and Australian producers are liquidating
inventories very rapidly like their counterparts in most 4% 4%

other major economies.

2% 2%

ƒ Consumer spending has clearly decelerated over the past 0% 0%

year or so, but growth has generally held up fairly well.
Indeed, the 2.2% increase in retail spending in March -2% -2%
relative to the previous month was a pleasant surprise. In
sum, the Australian economy is clearly weak at present. -4% -4%
2000 2001 2002 2003 2004 2005 2006 2007 2008
However, it appears to be faring better than most other
major economies.
Australian Retail Sales
ƒ The Reserve Bank of Australia (RBA) has cut its policy rate 10%
Year-over-Year Percent Change
10%
from 7.25% last September to 3.00% in April. With the
global economy expected to stabilize later this year and
with fiscal stimulus in the pipeline down-under, the RBA 8% 8%
appears to be on hold, at least for now.
6% 6%
ƒ The Australian dollar depreciated sharply last year as
global growth prospects fell apart, but it has risen 20%
versus the greenback since early March as the global 4% 4%
economic outlook has turned less grim. The Aussie dollar
has appreciated a fair amount in a short period of time so
2% 2%
some pullback is inevitable, especially when investors
3-Month Moving Average: Mar @ 5.5%
begin to question the sustainability of the global economic
Retail Sales: Mar @ 6.3%
recovery. However, the Aussie dollar should trend higher 0% 0%
again next year as the global economic recovery gains 1999 2001 2003 2005 2007 2009
traction.
Central Bank Policy Rates
8.0% 8.0%
Australian Exchange Rate and CRB Index Reserve Bank of Australia: May @ 3.00%
USD per AUD, Index 7.0% US Federal Reserve: May @ 0.25% 7.0%
1.000 500.0
AUD Exchange Rate: May @ 0.73 (Left Axis) 6.0% 6.0%
CRB Index: May @ 240.8 (Right Axis) 450.0
0.900
5.0% 5.0%
400.0
0.800 4.0% 4.0%

350.0
3.0% 3.0%
0.700
300.0 2.0% 2.0%
0.600
250.0 1.0% 1.0%

0.500 0.0% 0.0%

200.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0.400 150.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Source: IHS Global Insight, Bloomberg LP and Wachovia

16
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Norway Norwegian Real GDP

Year-over-Year Percent Change
7.5% 7.5%

ƒ The year-over-year growth rate of Norwegian real GDP 6.0% 6.0%

slowed considerably over the course of 2008 as
“mainland” GDP growth, which excludes the oil sector, 4.5% 4.5%
rose only 1.2% in the fourth quarter, the slowest rate in
five years. Unfortunately, manufacturing production fell 3.0% 3.0%

at an annualized rate of 11% in the first quarter, faster

1.5% 1.5%
than the 7.5% contraction registered in the fourth quarter.
Thus, the economy appears to have weakened further in 0.0% 0.0%
the first quarter.
-1.5% -1.5%
Mainland GDP : Q4 @ 1.2%
ƒ Not only have Norwegian exports been hit, but domestic Overall GDP: Q4 @ 0.8%
demand has weakened as well. For example, the volume -3.0% -3.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008
of retail sales in the first quarter was down nearly 1% on a
year-over-year basis.
Volume of Norwegian Retail Sales
ƒ Norges Bank has cut its main policy rate from 5.75% in 10%
Year-over-Year Percent Change
10%
mid-October to only 1.50% at present. When it announced
its most recent 50 bps rate cut on May 6, Norges Bank
8% 8%
acknowledged that “the current global economic
downturn is the deepest in the post-war period.”
6% 6%
However, it also said that “there are also some signs of
improvement.” Therefore, Norges Bank will probably be
on hold for the foreseeable future. 4% 4%

ƒ The Norwegian krone depreciated last year as oil prices 2% 2%

collapsed. Although the currency has recouped some of its

losses over the past few weeks, we look for the krone to 0% 0%
weaken a bit over the next few months as investors begin 3-Month Moving Average: Mar @ -0.7%
to question the vigor of the global upturn. However, the -2% -2%
krone should strengthen anew later this year/early next 2001 2003 2005 2007 2009
year as the global recovery gains traction.
Norwegian Rates
3-Month Government Bill, 10-Yr Government Bonds
7.0% 7.0%
Norwegian Krone Exchange Rate 3-Month Government Bill: Apr @ 1.79%
NOK per USD 10-Yr Government: Apr @ 3.96%
10.000 10.000 6.0% 6.0%

9.000 9.000 5.0% 5.0%

8.000 8.000 4.0% 4.0%

7.000 7.000 3.0% 3.0%

6.000 6.000 2.0% 2.0%

5.000 5.000 1.0% 1.0%

2003 2004 2005 2006 2007 2008 2009
NOK per USD: May @ 6.547
4.000 4.000
1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

17
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Sweden Swedish Real GDP

Bars = Compound Annual Rate Line = Yr/Yr % Change
8% 8%

ƒ Real GDP in Sweden plunged at an annualized rate of 6% 6%

9.3% in the fourth quarter, the sharpest sequential rate of 4% 4%

contraction in at least 15 years. Although official GDP data
2% 2%
for the first quarter have not yet been published, it
appears that the economy has contracted further. For 0% 0%
example, industrial production declined 20 percent in the -2% -2%
first quarter on a year-over-year basis.
-4% -4%

ƒ Not only have Swedish exports taken it on the chin, but -6% -6%

domestic demand is very weak as well. Growth in real -8% Compound Annual Growth: Q4 @ -9.3% -8%
consumer spending has weakened significantly over the Year-over-Year Percent Change: Q4 @ -4.4%
-10% -10%
past year. Retail sales are clearly in steep decline and
2000 2001 2002 2003 2004 2005 2006 2007 2008
weakness in the labor market—the unemployment rate
has risen from about 5% last summer to more than 8.0% at
present—does not bode well for the near-term outlook for Swedish Industrial Production Index
consumer spending. Year-over-Year Percent Change
10% 10%

ƒ The Swedish Riksbank has slashed its policy rate from 5% 5%

4.75% last October to only 0.50% at present. The Riksbank
has not ruled out further rate cuts, although the scope to 0% 0%
cut further is rather limited, and it has said that the policy
rate is likely to remain at a low level until 2011. -5% -5%

-10% -10%
ƒ The Swedish krona depreciated significantly in the second
half of last year as the outlook for the Swedish economy -15% -15%
fell apart. The krona has recouped some of its losses over
the past two month, but we look for it to weaken -20% -20%
IPI: Mar @ -21.0%
somewhat versus the dollar through the end of the year as
3-Month Moving Average: Mar @ -19.7%
prospects for eventual recovery begin to appear stronger -25% -25%
in the United States than in most European countries. 2001 2003 2005 2007 2009

Swedish Retail Sales

Year-over-Year Percent Change
14% 14%
Swedish Exchange Rate Retail Sales: Dec @ -1.7%
SEK per USD 12% 3-Month Moving Average: Dec @ -1.3% 12%
12.00 12.00

10% 10%
11.00 11.00
8% 8%
10.00 10.00
6% 6%
9.00 9.00
4% 4%

8.00 8.00
2% 2%

7.00 7.00 0% 0%

6.00 6.00 -2% -2%

SEK per USD: May @ 8.034 1997 1999 2001 2003 2005 2007 2009
5.00 5.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

18
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Switzerland Swiss Real GDP

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

ƒ In the fourth quarter of 2008, a time when real GDP in the

Euro-zone contracted at an annualized rate of 5.7%, Swiss 4.0% 4.0%

GDP declined at an annualized rate of only 1.2%.

However, the build-up of inventories in the fourth quarter
2.0% 2.0%
sets the stage for unwinding and potentially deeper
declines in overall Swiss GDP in the quarters ahead as
unwanted stocks are worked down. 0.0% 0.0%

ƒ Indeed, there are signs that the Swiss economy ran into an -2.0% -2.0%
air pocket in the first quarter. The Swiss manufacturing Compound Annual Growth: Q4 @ -1.2%
PMI fell off a cliff in the first three months of the year, Year-over-Year Percent Change: Q4 @ -0.1%
-4.0% -4.0%
although it edged up a bit in April. “Hard” data on
2000 2001 2002 2003 2004 2005 2006 2007 2008
industrial production in the first quarter are not yet
available, but the depressed level of the PMI in
conjunction with weakness in exports and retail spending Swiss Manufacturing PMI
in the first quarter suggest that IP must have slumped Diffusion Index
70 70
significantly.
65 65
ƒ The overall rate of CPI inflation recently turned negative,
60 60
although the core rate of inflation is roughly 1% at
present. The Swiss National Bank has cut its target for the 55 55
3-month LIBOR rate to only 0.25%, and it has intervened
in the currency market to resist upward pressure on the 50 50

Swiss franc. Currency appreciation adds to deflationary

45 45
forces in the economy.
40 40

ƒ Although the Swiss franc has appreciated over the past

35 35
few weeks, we look for it to trend lower against the dollar Swiss Manufacturing PMI: Apr @ 34.7
in the months ahead. Signs of economic recovery should 30 30
show up sooner in the United States than they do in 1997 1999 2001 2003 2005 2007 2009
Switzerland, which should benefit the dollar.
Swiss Consumer Price Index
Year-over-Year Percent Change
3.5% 3.5%
Swiss Exchange Rate CPI: Apr @ -0.3%
CHF per USD 3.0% 3.0%
1.900 1.900

1.800 1.800 2.5% 2.5%

1.700 1.700 2.0% 2.0%

1.600 1.600
1.5% 1.5%
1.500 1.500
1.0% 1.0%
1.400 1.400

1.300 1.300 0.5% 0.5%

1.200 1.200
0.0% 0.0%
1.100 1.100
-0.5% -0.5%
1.000 1.000
1997 1999 2001 2003 2005 2007 2009
CHF per USD: May @ 1.136
0.900 0.900
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

19
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Brazil Brazilian Real GDP

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

9% 9%
ƒ Real GDP in Brazil fell at an annualized rate of roughly
14 percent in the fourth quarter, the sharpest contraction 6% 6%
on record. Not only did the global recession affect the
3% 3%
Brazilian economy—real exports dropped 11 percent—but
domestic demand weakened significantly as well. 0% 0%

-3% -3%
ƒ Recent indicators suggest that the economy remains weak,
-6% -6%
but the rate of contraction is probably not nearly as sharp
as in the fourth quarter. Industrial production in March -9% -9%
was up 4.8% relative to its December low, but it remains
-12% Compound Annual Growth: Q4 @ -13.6% -12%
13% below its level in March 2008. After hitting bottom in Year-over-Year Percent Change: Q4 @ 1.2%
February, exports rose in both March and April. Auto -15% -15%
sales fell off a cliff last autumn, but they have rebounded 2000 2001 2002 2003 2004 2005 2006 2007 2008

so far this year due in part to temporary reductions in auto

taxes. Brazilian Industrial Production Index
Year-over-Year Percent Change
15% 15%
ƒ Rising food and oil prices pushed up the rate of CPI
inflation in 2008. However, inflation is now slowly 10% 10%
starting to recede due to the collapse in energy prices since
last summer and slowing growth in Brazil. The central 5% 5%

bank has cut its policy rate by 350 bps since January, and
0% 0%
further easing in the months ahead seems likely.
-5% -5%
ƒ The Brazilian real was pummeled last autumn as risk
aversion spiked, but it has subsequently recouped some of -10% -10%
its losses as the global growth outlook has become less
dire. We project that the real will depreciate somewhat -15%
IPI: Mar @ -13.3%
-15%
versus the dollar in the quarters ahead as the global 3-Month Moving Average: Mar @ -14.0%
economy remains sluggish. However, the real should -20% -20%
1997 1999 2001 2003 2005 2007 2009
strengthen later this year or early next year as global
growth prospects begin to slowly improve.
Brazilian Policy Rate
30% 30%
Brazilian Exchange Rate
BRL per USD
4.00 4.00
25% 25%

3.50 3.50
20% 20%

3.00 3.00

15% 15%
2.50 2.50

2.00 2.00 10% 10%

Policy Rate: May @ 10.16%

1.50 1.50 5% 5%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
BRL per USD: May @ 2.182
1.00 1.00
99 00 01 02 03 04 05 06 07 08 09
Source: IHS Global Insight, Bloomberg LP and Wachovia

20
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

China Chinese Real GDP

Year-over-Year Percent Change
14.0% 14.0%

ƒ The Chinese economy has slowed noticeably over the past 12.0% 12.0%
six quarters. From a 13-year high of 12.8% in the second
quarter of 2007, the year-over-year growth rate slowed to 10.0% 10.0%
only 6.1% in the first quarter of 2009, the slowest rate in
nine years. Much of the recent slowdown in China can be 8.0% 8.0%

traced to the global downturn. Indeed, the value of

6.0% 6.0%
Chinese exports in the first quarter was down 14% relative
to the same period last year.
4.0% 4.0%

ƒ However, the government responded to the slowdown 2.0% 2.0%

with an aggressive fiscal response, and monetary policy Year-over-Year Percent Change: Q1 @ 6.1%
has also been eased significantly. There are some signs 0.0% 0.0%
that the government’s efforts are starting to bear fruit. 2000 2002 2004 2006 2008

Construction activity appears to have strengthened and

growth in consumer spending has remained resilient. The Chinese Trade
manufacturing PMI has been in expansion territory for Year-over-Year Percentage Change, 3-Month Moving Average
60.0% 60.0%
two consecutive months.

ƒ CPI inflation was the foremost issue in China last year, but 40.0% 40.0%
the collapse in energy prices and the slowdown in China
has caused inflation, both the overall rate and the core
20.0% 20.0%
rate, to turn slightly negative. If the government makes a
policy mistake in this environment, it will tend to over-
stimulate the economy rather than not stimulate enough. 0.0% 0.0%

ƒ The Chinese renminbi, which had gradually strengthened

-20.0% -20.0%
versus the dollar starting in mid-2005, has been essentially
Exports: Apr @ -21.8%
stable since last July. We believe that Chinese authorities
Imports: Apr @ -24.1%
will permit very little appreciation of the renminbi -40.0% -40.0%
between now and the end of the year. However, the 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Chinese currency likely will resume its appreciation next

year as the Chinese economy begins to strengthen. Chinese Manufacturing PMI
Seasonally Adjusted
60 60
Chinese Exchange Rate
CNY per USD
8.50 8.50
55 55
8.25 8.25

8.00 8.00 50 50

7.75 7.75
45 45
7.50 7.50

7.25 7.25 40 40

7.00 7.00
Chinese Manufacturing PMI: Apr @ 53.5
35 35
6.75 6.75
2005 2006 2007 2008 2009
CNY per USD: May @ 6.82
6.50 6.50
2005 2006 2007 2008 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

21
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

India Indian Real GDP

Year-over-Year Percent Change
12% 12%

ƒ Economic growth in India has slowed markedly over the

last few quarters. The 5.3% GDP growth rate registered in
9% 9%
the fourth quarter was the slowest pace of expansion in
more than five years. Unfortunately, it appears that
growth has slowed even further recently. Industrial
6% 6%
production was down about one percent in the first
quarter of the year relative to the same period in 2008.

3% 3%
ƒ The downturn in the rest of the world has weighed on the
Indian economy. Indeed, the value of Indian exports fell
more than 20 percent in the first quarter. If the drop in Year-over-Year Percent Change: Q4 @ 5.3%
0% 0%
auto sales in the first quarter is any indication then
2000 2002 2004 2006 2008
consumer spending has weakened as well.

ƒ Wholesale price inflation, which is the benchmark Indian Industrial Production Index
measure of inflation in India, has receded sharply over the 15.0%
Year-over-Year Percent Change
15.0%
past few months as commodity prices have collapsed and 3-Month Moving Average: Mar @ -0.9%
the Indian economy has slowed. In response to receding 12.5% 12.5%
inflationary pressures, the Reserve Bank of India has
slashed rates by 425 bps since mid-October. The main 10.0% 10.0%
policy rate now stands at 4.75%, the lowest rate in at least
nine years. 7.5% 7.5%

5.0% 5.0%
ƒ The Indian rupee plunged to an all-time low versus the
dollar in early March as risk aversion spiked, but it has 2.5% 2.5%
subsequently ground higher as tensions in financial
markets have eased up somewhat. We expect that the 0.0% 0.0%
rupee will remain weak over the months ahead as the
global economic outlook remains clouded. However, the -2.5% -2.5%
rupee could begin to claw its way back later this year as 1997 1999 2001 2003 2005 2007 2009
economic growth in India begins to strengthen.
Indian Wholesale Price Inflation
Year-over-Year Percent Change
14% 14%
Indian Exchange Rate Wholesale Price Inflation: Apr @ 0.7%
INR per USD 12% 12%
53.00 53.00

51.00 51.00 10% 10%

49.00 49.00 8% 8%

47.00 47.00
6% 6%
45.00 45.00
4% 4%
43.00 43.00

2% 2%
41.00 41.00

39.00 39.00 0% 0%
INR per USD: May @ 49.705 1999 2001 2003 2005 2007 2009
37.00 37.00
2000 2002 2004 2006 2008
Source: IHS Global Insight, Bloomberg LP and Wachovia

22
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Mexico Mexican Real GDP

Year-over-Year Percent Change
7.0% 7.0%

6.0% 6.0%
ƒ Mexican real GDP fell 1.6% in the fourth quarter, the first
negative reading for the year-over-year growth rate since 5.0% 5.0%
the recession in the early years of this decade. Recent
4.0% 4.0%
indicators suggest that the downturn intensified in the
first quarter as industrial production tumbled 13% in 3.0% 3.0%
February relative to the same month in 2008. Moreover,
2.0% 2.0%
the swine flu epidemic, which essentially shut down the
country in early May, will cause the economy to weaken 1.0% 1.0%

further in the second quarter. 0.0% 0.0%

-1.0% -1.0%
ƒ The Mexican economy is extensively tied to the U.S. Year-over-Year Percent Change: Q4 @ -1.6%
economy, and the deep recession in El Norte has imparted -2.0% -2.0%
a significant negative shock to Mexico. The value of 2004 2005 2006 2007 2008

Mexican exports was down about 30 percent in the first

quarter. However, the weakness in the Mexican economy Mexico & U.S. Industrial Production Indices
does not stop with exports. Car sales are down roughly Year-over-Year Percent Change
10% 10%
30 percent in the first four months of 2009 relative to the
same period last year.
5% 5%
ƒ The overall rate of CPI inflation has edged down over the
past few months, but is well above the Bank of Mexico’s
0% 0%
target of 3%. The Bank was reluctant to ease significantly
at first, but it has cut rates by 225 bps since late November
as the economy has gone into a tailspin. -5% -5%

ƒ The Mexican peso plunged to an all-time low in early

-10% -10%
March, but it has subsequently rallied as risk aversion has
Mexico, 3-Month Moving Average: Feb @ -10.0%
subsided a bit and as the government arranged a back- U.S.: Mar @ -12.8%
stopping loan through the IMF. Although the peso could -15% -15%
give up some of its gains in the months ahead, it probably 1999 2001 2003 2005 2007 2009
will strengthen in late 2008 or early 2009 as the Mexican
economic outlook improves. Mexican Consumer Price Index
Year-over-Year Percent Change
12% 12%
Mexican Exchange Rate CPI: Apr @ 6.2%
MXN per USD
16.00 16.00
10% 10%
MXN per USD: May @ 13.80
15.00 15.00

14.00 14.00 8% 8%

13.00 13.00
6% 6%
12.00 12.00

11.00 11.00
4% 4%

10.00 10.00

9.00 9.00 2% 2%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
8.00 8.00
1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

23
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Poland Polish Real GDP

Year-over-Year Percent Change
9.0% 9.0%
Year-over-Year Percent Change: Q4 @ 2.9%
ƒ Real GDP growth in Poland slipped to 2.9% in the fourth
quarter. Although positive, the outturn was the slowest
year-over-year growth rate in nearly four years.
6.0% 6.0%
Unfortunately, it appears that the deep global recession
caught up to Poland in the first quarter. The value of
Polish exports was down more than 25% in the first two
months of the year relative to the same period in 2008, and
industrial production tumbled about 10 percent in the first 3.0% 3.0%

quarter.

ƒ As in most countries, the overall rate of CPI inflation shot

higher in 2008, which led the National Bank of Poland 0.0% 0.0%
(NBP) to tighten monetary policy. However, CPI inflation 1995 1997 1999 2001 2003 2005 2007

has receded to only 3.6% currently, and further declines

seem likely due to global economic weakness. The NBP Polish Industrial Production Index
has cut its main policy rate by 225 bps since late Year-over-Year Percent Change
20% 20%
November.
15% 15%
ƒ The current account deficit swelled from less than 2% of
10% 10%
GDP in 2005 to roughly 4% currently. Foreign direct
investment has financed much of Poland’s current account 5% 5%
deficit over the past few years, but it seems likely that FDI
will weaken somewhat in the quarters ahead with the 0% 0%

global economy slipping into its worst recession in

-5% -5%
decades.
-10% -10%

ƒ The Polish zloty was hammered last autumn as risk

-15% -15%
aversion spiked, but it has subsequently recouped some of
IPI: Mar @ -2.0%
its losses. In our view, the zloty will weaken somewhat in -20% -20%
the months ahead. However, the zloty should begin to Jan 2008 Jul 2008 Jan 2009
turn around early next year as Polish economic prospects
begin to improve. Polish Merchandise Trade Balance
Millions of USD, Not Seasonally Adjusted
$0 $0
Polish Exchange Rate -$1,000 -$1,000
PLN per USD
5.000 5.000 -$2,000 -$2,000

-$3,000 -$3,000
4.500 4.500
-$4,000 -$4,000
4.000 4.000 -$5,000 -$5,000

-$6,000 -$6,000
3.500 3.500
-$7,000 -$7,000

3.000 3.000 -$8,000 -$8,000

-$9,000 -$9,000
2.500 2.500
-$10,000 -$10,000
Merchandise Trade Balance: Feb @ -$2,620 M
2.000 2.000 -$11,000 -$11,000
1997 1999 2001 2003 2005 2007 2009
PLN per USD: May @ 3.194
1.500 1.500
1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

24
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Russia Russian Real GDP

Year-over-Year Percent Change
10% 10%

ƒ Real GDP in Russia rose only 1.2% in the fourth quarter of

2008, the weakest year-over-year growth rate since the 8% 8%

Russian economy blew up in the late 1990s in the wake of

that country’s debt default. Unfortunately, the sharp drop 6% 6%
in industrial production in the first quarter—IP was down
13% relative to the same quarter in 2008—suggests that
overall GDP growth dipped into negative territory as well. 4% 4%

ƒ Not only is Russia suffering from the fallout of the global 2% 2%

downturn, but it is experiencing yet another financial
crisis. During the oil price run-up, the Russian economy Year-over-Year Percent Change: Q4 @ 1.2%
0% 0%
was booming. Russian banks became very leveraged and
2001 2002 2003 2004 2005 2006 2007 2008
funded themselves via capital inflows from abroad.
However, the global credit crunch led to significant strains
in the Russian banking system that has contributed to the Russian Industrial Production Index
sharp downturn in the country’s economy. Year-over-Year Percent Change
20% 20%

ƒ Despite the recession and the collapse of energy prices, 15% 15%

CPI inflation in Russia remains stubbornly high. The

10% 10%
depreciation of the ruble is contributing to inflation via its
effect on import prices. The Russian central bank raised its 5% 5%
policy rate by 200 bps last autumn in an attempt to
stabilize the exchange rate. The ruble has subsequently 0% 0%

recouped some of its losses, which has allowed the central -5% -5%
bank to cut rates by 100 bps since mid-April.
-10% -10%

ƒ We forecast that the ruble will weaken a bit over the next
-15% IPI: Mar @ -13.6% -15%
few months as economic prospects in Russia and in the 3-Month Moving Average: Feb @ -13.1%
world more broadly remain clouded. In our view, -20% -20%
however, a retest of the lows is not in the cards, and we 2003 2004 2005 2006 2007 2008 2009

look for the ruble to strengthen next year as growth

prospects improve. Russian Consumer Price Index
Year-over-Year Percent Change
20.0% 20.0%
Russian Exchange Rate
RUB per USD
38.000 38.000

36.000 36.000
15.0% 15.0%
34.000 34.000

32.000 32.000

30.000 30.000 10.0% 10.0%

28.000 28.000

26.000 26.000
CPI: Apr @ 13.3%
24.000 24.000 5.0% 5.0%
RUB per USD: May @ 33.051 2002 2003 2004 2005 2006 2007 2008 2009
22.000 22.000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

25
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Singapore Singapore Real GDP

Year-over-Year Percent Change
15.0% 15.0%

ƒ Real GDP in Singapore plunged nearly 12% in the first

10.0% 10.0%
quarter of the year relative to the same quarter in 2008, the
deepest downturn on record. Singapore is one of the most
5.0% 5.0%
open economies in the world, and the deep global
recession has imparted a major shock to the domestic
0.0% 0.0%
economy via a significant downturn in exports. That said,
domestic demand is also weak. Retail spending was off
about 9 percent in the first two months of the year on a -5.0% -5.0%

year-over-year basis.
-10.0% -10.0%

ƒ It appears that the rate of contraction may be slowing in Year-over-Year Percent Change: Q1 @ -11.5%
the second quarter. The manufacturing PMI rose in April, -15.0% -15.0%
although it is still in contraction territory. Exports were up 2000 2002 2004 2006 2008

about 10% in March relative to February on a seasonally

adjusted basis. Singapore Volume of Imports and Exports
3-Month Moving Average, Year-over-Year Percent Change
50% 50%
ƒ CPI inflation shot up last year, but it is not much of an Real Exports: Mar @ -20.4%
issue anymore. The overall rate of CPI inflation has Real Imports: Mar @ -17.2%

receded to less than two percent, and economic weakness

30% 30%
means that further declines in inflation lie in store.

ƒ Because the city-state is such an open economy, the

10% 10%
Monetary Authority of Singapore manages the exchange
value of the Singapore dollar versus a basket of currencies.
The generalized rise of the U.S. dollar since last summer
has translated into an appreciation of the greenback vis-à- -10% -10%

vis the Singapore dollar. We believe this strengthening

trend of the greenback versus the Sing dollar will remain
in place for the next few quarters. Next year the Sing -30% -30%
dollar likely will appreciate somewhat versus the 1996 1998 2000 2002 2004 2006 2008
greenback, in line with other currencies.
Singapore Manufacturing PMI
Index
70 70
Singapore Exchange Rate
SGD per USD
1.900 1.900 65 65

1.800 1.800 60 60

1.700 1.700 55 55

1.600 1.600 50 50

1.500 1.500 45 45

Singapore Manufacturing PMI: Apr @ 49.2

1.400 1.400 40 40
1999 2001 2003 2005 2007 2009
SGD per USD: May @ 1.481
1.300 1.300
1997 1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

26
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

South Africa South African Real GDP

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

ƒ Real GDP in South Africa fell at an annualized rate of 1.8%

in the fourth quarter of 2008 relative to the previous 6.0% 6.0%

quarter, the first sequential decline in ten years. The

marked decline in industrial production in the first three
4.0% 4.0%
months of the year suggests that real GDP contracted
again in the first quarter.
2.0% 2.0%

ƒ The downturn in exports is one reason why the South

African economy has gone into a slump. However, the rise 0.0% 0.0%
in inflation over the past few years has eroded real
Compound Annual Growth: Q4 @ -1.8%
income, thereby weighing on consumer spending. Real Year-over-Year Percent Change: Q4 @ 1.3%
retail spending in the first quarter was down about -2.0% -2.0%
three percent relative to the same period last year. 2000 2001 2002 2003 2004 2005 2006 2007 2008

ƒ After peaking last summer the overall CPI inflation rate South African Industrial Production Index
has receded somewhat, allowing the South African Manufacturing, Year-over-Year Percent Change
15.0% 15.0%
Reserve Bank (SARB) to cut rates by 350 bps since early
December. Although inflation is currently above the target 10.0% 10.0%
range of 3 percent to 6 percent, the SARB expects that
inflation will recede further due to the global economic 5.0% 5.0%
downturn. Therefore, the SARB probably will ease again
in the months ahead. 0.0% 0.0%

-5.0% -5.0%
ƒ The South African rand weakened sharply last autumn as
the global credit crunch intensified, but it has -10.0% -10.0%
subsequently recouped most of its losses as the outlook for
global growth has become less dire. In our view, the rand -15.0% -15.0%
IPI: Feb @ -15.0%
probably will weaken a bit in the quarters ahead as global 3-Month Moving Average: Feb @ -12.5%
economic conditions remain very weak. However, the -20.0% -20.0%
rand likely will strengthen later this year or early next 1999 2001 2003 2005 2007 2009

year as global growth prospects begin to brighten

somewhat. South African Consumer Price Index
Year-over-Year Percent Change
15% 15%
South African Exchange Rate CPI: Mar @ 8.5%
Rand per USD
13.000 13.000
12% 12%
RND per USD: May @ 8.420
12.000 12.000

11.000 11.000 9% 9%

10.000 10.000
6% 6%
9.000 9.000

8.000 8.000 3% 3%

7.000 7.000

0% 0%
6.000 6.000
2003 2005 2007 2009

5.000 5.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

27
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

South Korea South Korean Real GDP

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

ƒ After falling off a cliff in the fourth quarter of 2008, real 15% 15%

GDP in Korea was roughly flat in the first quarter. 10% 10%
Exports, which helped to pull down the Korean economy
5% 5%
in the fourth quarter, continued to contract early this year.
However, the major components of domestic demand 0% 0%
rebounded somewhat in the first quarter. -5% -5%

-10% -10%
ƒ The Korean government implemented a fiscal stimulus
package last year that has helped to stabilize real GDP. In -15% -15%

addition, stronger growth in some of Korea’s major -20% Compound Annual Growth: Q1 @ 0.2% -20%
trading partners over the past few months, especially in Year-over-Year Percent Change: Q1 @ -4.4%
-25% -25%
China, has also contributed to the increase in industrial
2001 2002 2003 2004 2005 2006 2007 2008 2009
production so far this year. The value of Korean exports in
April was up more than 40 percent relative to the low that
was reached in January. South Korean Industrial Production Index
Year-over-Year Percent Change
40% 40%
ƒ CPI inflation, which rose to a 10-year high of 5.9% in July, IPI: Mar @ -11.5%
has subsequently receded to 3.6% as energy prices have 30% 3-Month Moving Average: Mar @ -15.9% 30%
collapsed and as the economy has weakened. The Bank of
Korea slashed its policy rate rates by 325 bps between 20% 20%
October and February, but it has subsequently been on
hold as the economy has shown signs of stabilizing. 10% 10%

0% 0%
ƒ The Korean won tumbled to an 11-year low versus the
dollar in early March, but it has subsequently recouped -10% -10%
most of its losses as Korean growth prospects have
improved. The won likely will weaken a bit over the next -20% -20%
few months or so, but we look for it to stabilize and move
higher later this year as global growth prospects start to -30% -30%
improve. 1997 1999 2001 2003 2005 2007 2009

South Korean Export & Import Volumes

Year-over-Year Precent Change, 3-Month Moving Average
40% 40%
South Korean Exchange Rate
KRW per USD
1,600 1,600 30% 30%

1,500 1,500
20% 20%

1,400 1,400
10% 10%

1,300 1,300
0% 0%
1,200 1,200

-10% -10%
1,100 1,100 Volume of Exports: Mar @ -13.8%
Volume of Imports: Mar @ -12.5%
1,000 1,000 -20% -20%
2000 2002 2004 2006 2008
KRW per USD: May @ 1,285.0
900 900
1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

28
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Taiwan Taiwanese Real GDP

Year-over-Year Percent Change
10.0% 10.0%

ƒ Real GDP in Taiwan plunged 8.4% in the fourth quarter of 7.5% 7.5%

2008, the weakest year-over-year growth rate on record

5.0% 5.0%
(the series begins in 1962). However, more recent
indicators suggest that the economy may be stabilizing. 2.5% 2.5%
Although industrial production in the first quarter was
0.0% 0.0%
down about 30 percent relative to the same period last
year, it appears that IP is posting solid growth on a -2.5% -2.5%
sequential basis.
-5.0% -5.0%

ƒ Growth in Taiwan has been driven by exports over the -7.5% -7.5%
past few years, and the sharp downturn in the global Year-over-Year Percent Change: Q4 @ -8.4%
economy has imparted a nasty shock to the Taiwanese -10.0% -10.0%
economy. However, exports have strengthened a bit over 2000 2001 2002 2003 2004 2005 2006 2007 2008

the past few months as the Chinese economy has shown

signs of stronger growth. In addition, the government Taiwanese Industrial Production Index
enacted a fiscal stimulus program to counteract the effects Year-over-Year Percent Change
40.0% 40.0%
of the global downturn. However, consumer spending,
which was not very strong before the global credit crunch, 30.0% 30.0%
remains in the doldrums.
20.0% 20.0%

10.0% 10.0%
ƒ CPI inflation, which rose to nearly six percent last
summer, has turned slightly negative recently. The central 0.0% 0.0%
bank has cut its main policy rate to only 1.25% at present.
-10.0% -10.0%

ƒ The Taiwanese dollar declined to an all-time low versus -20.0% -20.0%

the U.S. dollar in early March. The currency has recouped -30.0% -30.0%
most of its losses recently, but we look for and it to
-40.0% IPI: Mar @ -26.0% -40.0%
weaken slightly vis-à-vis the greenback over the next few
6-Month Moving Average: Mar @ -32.2%
quarters as global growth prospects remain clouded. -50.0% -50.0%
Further out, however, the Taiwanese dollar should 1997 1999 2001 2003 2005 2007 2009
strengthen anew as the global recovery gets on firmer
footing. Taiwanese Export & Import Volumes
Year-over-Year Percent Change, 3-Month Moving Average
30% 30%
Taiwanese Exchange Rate
TWD per USD 20% 20%
36.00 36.00
TWD per USD: May @ 33.161
10% 10%
35.00 35.00

0% 0%
34.00 34.00
-10% -10%

33.00 33.00
-20% -20%

32.00 32.00
-30% -30%
Volume of Exports: Feb @ -31.9%
Volume of Imports: Feb @ -34.6%
31.00 31.00 -40% -40%
1997 1999 2001 2003 2005 2007 2009

30.00 30.00
1999 2001 2003 2005 2007 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

29
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Turkey Turkish Real GDP

Year-over-Year Percentage Change
12.5% 12.5%

10.0% 10.0%
• Real GDP tumbled 6.2% in the fourth quarter, the sharpest
year-over-year contraction since the deep recession in the 7.5% 7.5%
wake of the country’s balance-of-payments crisis in 2001. 5.0% 5.0%
Industrial production weakened even further in the first
2.5% 2.5%
three months of 2009, suggesting that the economy
contracted even more in the first quarter. The value of 0.0% 0.0%
Turkish exports is currently down nearly 30% relative to -2.5% -2.5%
last year.
-5.0% -5.0%

• Inflation was the big issue throughout most of 2008, but -7.5% -7.5%
overall CPI inflation has subsequently receded to the lowest -10.0% -10.0%
rate in decades (6.1% currently) due to economic weakness Year-over-Year Percent Change: Q4 @ -6.2%
-12.5% -12.5%
and the swoon in energy prices. The central bank, which
2000 2001 2002 2003 2004 2005 2006 2007 2008
had been tightening policy earlier in 2008, has slashed rates
by 700 bps since mid-November. More easing likely will
occur in the months ahead. Turkish Industrial Production Index
Year-over-Year Percent Change
25.0% 25.0%
• Turkey continues to post a current account deficit, but the
red ink in the country’s external account is much smaller 20.0% 20.0%

than it was just a few quarters ago. Although the 15.0% 15.0%
improvement in the current account makes the country less
10.0% 10.0%
reliant on foreign capital inflows, the value of Turkish
assets likely will remain vulnerable, at least in the near 5.0% 5.0%

term, to the whims of foreign investors. 0.0% 0.0%

-5.0% -5.0%
ƒ The Turkish lira dropped to an all-time low against the
-10.0% -10.0%
dollar in early March as risk aversion spiked. The lira has
strengthened in recent weeks, but we look for it to -15.0% -15.0%
depreciate over the next few quarters as global economic -20.0% IPI: Mar @ -20.9% -20.0%
conditions remain very weak. However, the lira should 3-Month Moving Average: Mar @ -22.0%
-25.0% -25.0%
begin to appreciate on a trend basis next year as the global 1997 1999 2001 2003 2005 2007 2009
economy begins a slow process of recovery.

Turkish Merchandise Trade Balance

Millions of USD, Not Seasonally Adjusted
$0 $0
Turkish Exchange Rate
TRY per USD -$1,000 -$1,000
1.800 1.800
-$2,000 -$2,000
1.600 1.600
-$3,000 -$3,000

1.400 1.400 -$4,000 -$4,000

-$5,000 -$5,000
1.200 1.200

-$6,000 -$6,000
1.000 1.000
-$7,000 -$7,000
0.800 0.800
-$8,000 -$8,000
Merchandise Trade Balance: Mar @ -2,325.9 USD
0.600 0.600 -$9,000 -$9,000
1997 1999 2001 2003 2005 2007 2009
TRY per USD: May @ 1.590
0.400 0.400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: IHS Global Insight, Bloomberg LP and Wachovia

30
Global Chartbook: May 2009
May 14, 2009 SPECIAL COMMENTARY

Energy Markets Crude Oil & Gasoline Prices

Dollars per Barrel, Dollars per Gallon
$150 $4.50
Crude Oil: May @ $58.63 (Left Axis)
ƒ Petroleum prices fell sharply last year as the global Retail Gasoline: May @ $2.22 (Right Axis)
$4.00
economy weakened significantly in the wake of the credit $125

crunch. Crude prices have risen somewhat over the past $3.50
few months on signs that the freefall in global economic
$100
activity may be starting to level out. Further price $3.00

increases may be constrained, however, by elevated

$2.50
inventories. U.S. stocks of crude oil are up about $75
15 percent above their levels at this time last year, and
$2.00
distillate stocks have shot up about 30 percent over the
$50
past year. $1.50

ƒ In contrast, gasoline inventories are leaner at present— $25 $1.00

they are flat on a year-over-year basis. Refiners are 2005 2006 2007 2008 2009

attempting to rebuild their margins, which became

squeezed last year when oil prices collapsed, by cutting Crude Oil Inventory
back production of gasoline. Gasoline prices have risen Year-over-Year Percent Change
20.0% 20.0%
relative to crude prices recently as inventories of the
former have declined. 15.0% 15.0%

10.0% 10.0%
ƒ Natural gas has not been immune to the same forces that
have driven oil prices over the past year. Indeed, the price 5.0% 5.0%
of natural gas in the United States is down roughly
70 percent from its peak last July as gas in storage is up 0.0% 0.0%

30%. The collapse in industrial production has eaten

-5.0% -5.0%
sharply into the industrial use of natural gas.
-10.0% -10.0%

ƒ It is hard to envision another moonshot in energy prices

-15.0% -15.0%
until global economic activity starts to strengthen
Oil Inventory: May @ 13.8%
significantly. Crude prices should drift higher this year -20.0% -20.0%
and into 2010 as modest growth returns to the global 2005 2006 2007 2008 2009

economy.
Gasoline Inventory
Year-over-Year Percent Change
15.0% 15.0%
Natural Gas
Henry Hub Spot, Dollars per MMBTU
$16 $16 10.0% 10.0%

$14 $14
5.0% 5.0%
$12 $12

0.0% 0.0%
$10 $10

$8 $8 -5.0% -5.0%

$6 $6
-10.0% -10.0%
$4 $4
Gasoline Inventories: May @ -0.9%
-15.0% -15.0%
$2 $2
2005 2006 2007 2008 2009
Natural Gas: May @ $4.31
$0 $0
2005 2006 2007 2008 2009
Source: Moody’s Economy.com and Wachovia

31
Wachovia Economics Group

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

& Economics (212) 214-5070
John E. Silvia, Ph.D. Chief Economist (704) 374-7034 john.silvia@wachovia.com
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Jay Bryson, Ph.D. Global Economist (704) 383-3518 jay.bryson@wachovia.com
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Sam Bullard Economist (704) 383-7372 sam.bullard@wachovia.com
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Yasmine Kamaruddin Economic Analyst (704) 374-2992 yasmine.kamaruddin@wachovia.com

Samantha King Economic Research Analyst (314) 955-2635 samantha.king1@wachovia.com

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