Defiance Capital Management

Economic and Investment Research & Analysis

The Week That Just Passed

March 12, 2010 – 4 pages

Leonardo Cardoso – Managing Director

leocardoso@defiancecap.com
www.defiancecap.com

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Defiance Capital Management Investment Research and Analysis
 Weekly Economic and Market Review: 03/12/10
Economic Review

Health of the Consumer

Retail Sales
Despite unwelcoming weather conditions last 3% Retail Sales 8%
6%
month, Retail & Food Services Sales (Retail 2%
4%
Sales) – an important indicator of consumer 1% 2%

Yearly %∆
Monthly %∆
0% 0%
spending that represents more than 70% of -2%
-1%
domestic GDP, surprisingly increased 0.3% or -4%
-2% M/M %∆ -6%
$1,207M to $355,546M in Feb 10 as economists -8%
-3% Y/Y %∆
expected a 0.3% decline. Nevertheless, Jan 10 -10%
-4% -12%
Retail Sales were revised much lower to a gain

Jan-07

Jul-07
Oct-07
Jan-08

Jul-08
Oct-08
Jan-09

Jul-09
Oct-09
Jan-10
Apr-07

Apr-08

Apr-09
of 0.1% from a previously reported 0.5% gain.
Y-on-Y Retail Sales increased 3.9%, albeit from
a lower base of comparison as the recession was in full force during the beginning of 2009; a
better comparison would be to Feb 08 Retail Sales of $373,140.

Retail Sales-Ex Auto increased a strong 0.8% in Feb after a gain of 0.5% in Jan. Auto and parts
sales dropped 2.0% last month. Trouble at automaker Toyota Motor Corp. most likely skewed
this number; its ales fell 8.7% to 100,027 vehicles. Besides auto and parts sales, the only other
category to report declining sales in February was Health and personal care stores. The bright
start of the month was Electronics and appliance stores, which most likely fueled by the Super
Bowl, gained 3.7% in Feb.

Consumer Sentiment
Policy makers give more weight to actual
Consumer Confidence, Sentiment and Retail Sales
economic activity than sentiment numbers.
10% 120.0
However, consumer sentiment and confidence
100.0
Y/Y Retalil Sales %∆

indices are a barometer of what consumers 5%

might do with their money. With that being said, 80.0 Indices Value
0%
Jan-07

Jul-07
Oct-07
Jan-08

Jul-08
Oct-08
Jan-09

Jul-09
Oct-09
Jan-10

lately consumer have been reflecting some

Apr-07

Apr-08

Apr-09

60.0
-5%
unease about the state of the economic as the 40.0

mid-March U. Michigan Consumer Sentiment -10% 20.0

index fell for the second period in a row to 72.5 -15% YonY %∆ Tot. Retail Sales 0.0
CCI
from 73.6 at month-end Feb. While the index of (Umich) Cons. Sent. Index

consumer expectations, a leading component of

the overall sentiment index, is pointing to extended weakness ahead, inflation expectations
continue subdued at 2.8% one-year out.

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Defiance Capital Management Investment Research and Analysis
Employment Situation
Weekly Unemployment Claims
The 4-Week MA for Uempl Initial Claims 700,000 Initial Claims S.A.
failed for the second time to trend lower. For 650,000 I.C. 4-Week MA
600,000
the week ending on 03/06/10, the Weekly MA 550,000
increased by 5,000 to 475,500, the highest level 500,000
since Nov 09. Until claims fall below 450,000 450,000
400,000
there will not be much gains in payrolls. 350,000

1/3/09
1/31/09
2/28/09
3/28/09
4/25/09
5/23/09
6/20/09
7/18/09
8/15/09
9/12/09
10/10/09
11/7/09
12/5/09
1/2/10
1/30/10
2/27/10
Week
Ending 12/19/2009 12/26/2009 1/2/2010 1/9/2010 1/16/2010 1/23/2010 1/30/2010 2/6/2010 2/13/2010 2/20/2010 2/27/2010 3/6/2010
I.C. 4-
Week MA 465,750 460,250 449,750 440,750 447,000 457,000 469,500 469,000 467,750 474,250 470,500 475,500

National Output and Inventories Conditions

No indicators in our proprietary economic model this week

Housing and Construction Conditions

No indicators in our proprietary economic model this week

Prices, Productivity and Wages Indicators

No indicators in our proprietary economic model this week

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