US Economics Analyst

Issue No: 09/05

February 6, 2009
FOR THOSE PERMISSIONED:

Goldman Sachs Global ECS Research

at https://360.gs.com

What Does It Take to Think the Worst Is Over?

Many market participants are focused on
the question of when the economy will
stop deteriorating as rapidly as it is now—
that is, when will the second derivative
turn positive? We expect that to occur
Probability that Worst is Over Increases
as ISM Improves From Cycle Low
Percent Chance that Trough Is Past

over the next few months as fiscal stimulus 100

and the slow healing of credit markets help

Jan Hatzius break the economy’s slide.
jan.hatzius@gs.com 75

212 902 0394 For several major economic indicators, we

construct metrics of the probability that the
Ed McKelvey worst pace of decline in that indicator has 50

ed.mckelvey@gs.com passed. Our exercise provides a scorecard ISM Manufacturing Index

212 902 3393
to against which to measure future
25
improvements in the data.
Alec Phillips
alec.phillips@gs.com As an example of what this analysis
202 637 3746 produces, consider the manufacturing 0
0 3 6 9 12 15
index from the Institute for Supply Change from lowest reading this cycle (points)
Andrew Tilton Management (ISM). Our analysis finds Source: Our calculations.
andrew.tilton@gs.com
212 357 2619
that an increase of 2.7 points from the
cycle low, as we saw in January, implies a
Seamus Smyth 47% chance we have seen the bottom. The Labor Market Breaks Down
seamus.smyth@gs.com
The past week provided several tentative Thousands Percent change, 3-mo annualized
212 357 6224 700 10
hints that the pace of decline may be at its Initial Jobless Claims (left)

Kent Michels
worst: both of the ISM surveys rebounded 600
Hours Worked (right)
8

kent.michels@gs.com slightly in January and retail same-store 6

212 902 6726 sales were not quite as bad as expected. 500
4

But the labor market news was terrible, 2

with a decline of nearly 600,000 payroll 400 0
jobs and leading indicators suggesting that -2
our 9% forecast for end-of-year 300
-4
unemployment is all too realistic.
-6
200
Next week is shaping up to be an -8
extremely important one for US economic 100 -10
policy. Market participants are focused on 97 98 99 00 01 02 03 04 05 06 07 08 09
the administration’s rescue plan for the Source: Department of Labor.

financial sector, with an announcement

scheduled Monday. On the fiscal side, we
are cautiously optimistic that the Congress
will pass a stimulus bill in the vicinity of
$800-900 billion. And don’t rule out the
possibility of monetary policy news, with
Chairman Bernanke testifying before
Congress on Fed programs.
Important disclosures appear at the back of this document.
GS Global ECS US Research US Economics Analyst

I. Can Policy Make the Save?

The US economy continues to take a beating in early
2009, judging from the information released over the
past week. We forecast -4.5% real GDP growth
(annualized) in the first quarter after -3.8% in the
fourth quarter; the latter figure appears likely to be
revised down at least a little given that December
reports on construction outlays and factory orders
were weaker than government statisticians assumed.
Though the beating is severe, there are hints that it
may no longer be intensifying (see this week’s center
section for a quantitative analysis on this issue). Both
the manufacturing and nonmanufacturing surveys
from the Institute for Supply Management rebounded
slightly from December lows (Exhibit 1). Same-store
retail sales were dismal, but at -2.3% year-over-year
slightly better than expectations. Auto sales were a
bigger disappointment; they sank to a pathetic 9.6-
million annual rate in January. However, much of the
incremental damage here was due to fleet sales rather
than end consumer demand.
1. Jobless claims continue to push higher. The
Labor Department reported 626,000 new claimants
last week, easily the high for this cycle and the highest
weekly total since 1982. This foots with a slew of
recent layoff announcements (about 500,000 over the
past two months, according to the outplacement firm
Challenger, Gray, and Christmas).
2. Hiring has plummeted. Job advertising provides a
useful gauge of hiring intentions. January surveys of
online job postings from the Conference Board and
Monster.com show declines of 25%-30% year-over-
year, much steeper than a few months ago.
3. Leading sectors are contracting fastest. As we
have noted in prior work, certain sectors—including
housing construction, banking, and temporary
employment—tend to be the first to decline and the
first to recover in a labor market cycle. Collectively,
the rate of decline in these sectors is still increasing, to
nearly -15% annualized over the past three months.

The labor market is a disaster, which should not be The labor market is the most obvious—but not the
much of a surprise given that employment trends only—evidence that the gap between actual and
typically lag economic activity by one to three potential output is opening quickly. Industrial
months. Payrolls dropped by nearly 600,000 in capacity utilization has also fallen sharply, and this
January, and the unemployment rate moved up to week’s vacancy data for the housing sector revealed
7.6%. Hours worked are contracting at an 8.8% that much lower levels of home construction have not
annual rate (Exhibit 2). yet begun to whittle away the massive excess supply
there. The implication of high levels of excess
With the economy continuing to shrink at a rapid clip capacity is continued easing in inflation pressure
early in 2009, job losses unfortunately have some way (Exhibit 3).
to go. Key leading indicators universally point
towards pain ahead, and suggest that the risks are Hoping for Policy Help
skewed to the high side of our 9% forecast for the Next week is shaping up to be an extremely important
end-of-year unemployment rate: one for US economic policy. Market participants are
Exhibit 1: ISM Surveys Suggest
Stabilization—At Least in the Rate of Decline Exhibit 2: The Labor Market Breaks Down
Index Index Thousands Percent change, 3-mo annualized
70 70 700 10
ISM Manufacturing Initial Jobless Claims (left)
8
ISM Nonmanufacturing Hours Worked (right)
600
6
60 60
4
500
2

50 50 400 0

-2
300
-4
40 40
-6
200
-8

30 30 100 -10
97 98 99 00 01 02 03 04 05 06 07 08 09 97 98 99 00 01 02 03 04 05 06 07 08 09
Source: Institute for Supply Management. Source: Department of Labor.

Issue No: 09/05 2 February 6, 2009

GS Global ECS US Research
Exhibit 3: Inflation Pressures to Fade Further
Percent change, year ago Percent change, year ago
3.0
Core PCE Price Index
2.5
2.0
1.5
1.0
0.5
0.0
98 99 00 01 02 03 04 05 06 07 08
Note: Dotted line denotes GS forecast.
Source: Department of Commerce.
focused on the administration’s rescue plan for the
financial sector, with an announcement scheduled
Monday. On the fiscal side, we are cautiously
optimistic that the Congress will pass a stimulus bill in
the vicinity of $800-900 billion. And don’t rule out
the possibility of monetary policy news, with
Chairman Bernanke testifying on Fed programs
Tuesday.
In our view, the most critical item on the agenda next
week is the financial sector rescue plan. As we parse
Monday’s announcement from the Treasury, we will
be focused on three basic parameters:
1. Size. How big is the pool of assets that will be
guaranteed or purchased? Rough numbers suggest at
least $2 trillion in residential mortgage whole loans
and probably an equivalent amount of non-residential
loans could be defined as “troubled” or hard-to-value
assets. So on the surface, this would suggest a
program in the $4 trillion-plus range would be needed
to have confidence that a meaningful part of banks’
potential losses have been capped. But the
government will not (hopefully) pay face value for
these assets, and might be able to narrow the scope of
the program to recent vintages, using credit-scoring
techniques to identify the worst loans within each
group. This could potentially bring down the value of
whole loans purchased or guaranteed into the $1-$2
trillion range. Any plan that addresses securities as
well would have to be correspondingly bigger. Media
reports suggest that guarantees are likely to feature
prominently in the rescue plan—these are probably
more attractive to policymakers than a large “bad
bank,” as they do not require upfront government
borrowing, and use banks’ net interest earnings in
coming quarters as a shield against taxpayer losses.
Issue No: 09/05
US Economics Analyst
2. Pricing. How will troubled assets be priced and
marked? From the banks’ perspective, the most
generous program would involve guarantees or
3.0
purchases at current book value; the most punitive, at
market prices. A more likely outcome would involve
2.5
the government (or its representatives) estimating a
hold-to-maturity value for the assets and either
2.0
guaranteeing or purchasing them at that price.
Policymakers may hesitate to force markdowns, as
1.5 they would create an immediate need for additional
capital injections.
1.0
3. Capital. Will additional government capital be
0.5 provided to the banks, and on what terms? Media
reports have suggested that government preferred
0.0 shares might be converted to common equity. This
09 10 could give banks facing insolvency a new lease on
life, though an important issue is whether any such
conversion would occur immediately for all banks
(which would be dilutive even for well-capitalized
banks) or would occur after current common equity
holders were wiped out (which would leave the bank
in the hands of government). Even if the government
does convert preferred shares to common equity, there
is a risk that more capital will be required for the most
troubled institutions.
In conjunction with the financial sector plan,
policymakers may choose to roll out related economic
policy measures—in particular, subsidies for
residential loan modifications and/or a “buy-down” to
lower conforming mortgage rates to 4%. When all is
said and done, it should certainly be a major
announcement.
Meanwhile, the not-so-pretty legislative process
continues with Senate deliberations over the fiscal
stimulus package. The bill under discussion totals
$940 billion (which includes a $70 billion cost to
index the Alternative Minimum Tax to inflation for
another year). If all goes well, the House and Senate
will conference later in the week to reconcile their
respective bills and pass a measure shortly thereafter.
We think passage is likely, but it is certainly not a
done deal at this point—at present, a group of Senate
Democrats and Republicans is working on a proposal
to cut as much as $100 billion in out-year spending
from the bill, and this would represent a significant
difference with the House version. That said, these
changes would have very little impact on 2009
outlays, and since the original Senate bill was more
front-loaded to begin with, the final compromise may
still include more stimulus for 2009 than the $250
billion or so in the House package.
Andrew Tilton
3 February 6, 2009
GS Global ECS US Research
II. What Does It Take to Think that the Worst Is Over?
Many market participants are focused on the question
of when the economy will stop getting bad as rapidly
as it is now—that is, when will the second derivative
turn positive? We expect that to occur over the next
few months as fiscal stimulus and the slow healing of
credit markets help break the economy’s slide, though
we do not expect growth until the second half of the
year.
We construct quantitative metrics for a variety of
indicators of the probability that the worst pace of
decline is over for that indicator to help answer this
question. Our exercise provides a scorecard against
which to measure future improvements. As an
example of what this analysis produces, consider the
manufacturing index from the Institute for Supply
Management (ISM). Our analysis finds that an
increase of 2.7 points from the cycle low, as we saw in
January, implies a 47% chance we have seen the
bottom. Though there are some tentative signs of
improvement, the probabilities for most indicators
suggest a great deal of uncertainty about whether the
worst is indeed over.
Current Contraction Likely Most Rapid Rate
Economic activity contracted at a 3.8% annual pace in
the fourth quarter and the first quarter looks likely to
be even worse—our current forecast looks for a 4.5%
annualized decline in GDP. But we think it likely that
the current pace of contraction will turn out to be the
deepest of this recession. Our forecast envisages
moderation to a decline of only 1% in the second
quarter, followed by anemic growth during the second
half. In our view the boost from the fiscal stimulus,
combined with the easing in financial conditions
relative to the almost total seizure of credit markets in
October, will be enough to slow the rapid decline—
but not to restore normal growth.
Evidence of the expected abatement in the downward
trend of economic activity is still scant, though some
tentative signs do exist. However, most monthly
economic data series are noisy, so these signs could
well reverse themselves. Given that, what sort of
improvement would be needed to persuade a skeptic
that the worst really is over?
Is the Turn in the ISM Real?
To answer the question, we construct a quantitative
measure of how likely it is that a faster pace of decline
in an economic indicator is still to come, given
whatever improvement may have been seen so far.
For instance, is the improvement in the January ISM
manufacturing index reported earlier in the week, to
35.6 from 32.9, large enough to signal that we have
Issue No: 09/05
US Economics Analyst
seen the trough for this cycle? (Recall that the ISM
index measures the fraction of businesses seeing an
increase in manufacturing activity over the month;
thus, a reading that is better but still under 50 indicates
that manufacturing is still deteriorating, but at a
slower rate.) In other words, are the worst declines in
manufacturing over?
The problem can be illustrated by considering the
behavior of the ISM manufacturing index during the
1981-1982 recession, as shown in Exhibit 1. In
November 1981 the index dipped to 36.1. By
February 1982, however, it had increased to 38.3, an
improvement of 2.2 points. But manufacturing
deteriorated again, reaching its eventual cyclical low
of 35.5 in May 1982. So the 2.2-point improvement
from November 1981 to February 1982 proved to be a
false signal as the ultimate fastest pace of decline had
not yet been reached. We repeat this procedure
across all months in recessions dating back to 1970 to
get a distribution that we then use statistical
techniques to smooth. This procedure gives us an
estimated probability that a still faster pace of decline
is yet to come for any given improvement relative to
the worst reading to date.1
Exhibit 1: Increase in ISM during 1982 Gave a
False Signal That Trough Had Passed
Index Probability
100
ISM Manufacturing Index
46
Percent Chance that ISM Has
80
Already Troughed
60
42
40
38
20
34 0
Sep-81 Dec-81 Mar-82 Jun-82 Sep-82 Dec-82
Source: Institute of Supply Management.
1
Specifically we run a probit regression. The
dependent variable is whether or not the worst pace of
decline has already occurred while the explanatory
variable is the difference between the current month’s
reading and the worst reading to date. The results of
that regression then allow us to calculate a probability
that the worst decline is yet to come.
4 February 6, 2009
GS Global ECS US Research US Economics Analyst

Exhibit 2: Probability that Worst is Over
Increases as ISM Improves From Cycle Low
Percent Chance that Trough Is Past
100
75
50
ISM Manufacturing Index
25
0
0 3 6 9 12
Change from lowest reading this cycle (points)
Source: Our calculations.
Exhibit 2 summarizes the results for the ISM. When
the current month is the worst decline seen so far, the
chance that the worst is over for that recession is only
about 20%. Improvements off that recent bottom
reduce the chance that a worse reading happens in the
future. For example, a 3.1-point improvement
increases the chance that the worst is over for
manufacturing to about 50%. To get to 75% requires
an increase from the recent low reading of 5.6 points,
and to 90% an increase of 8.1 points.
We can now answer the original question posed
above: how confident does the current improvement in
deterioration, some of the series have to be
transformed. The results, including notes on the
transformations, are summarized in Exhibit 3.
Looking across the results, it is apparent that there is
wide variation in how large a swing needs to occur
before one can have confidence that the worst is over.
In general terms, the results depend on two factors.
First, how noisy is a series from month to month?
Those that tend to be volatile month-to-month
naturally require a bigger move to confirm that the
lows have passed. Second, how persistent is a change
in direction? Some series are more likely to follow up
moves in one direction with more moves in the same
direction. For those series, any turn is more
meaningful.
15 The Current State of Data Has Hints—But Only
Hints—That the Worst Could Be Over
On the basis of the current data there is some—very
limited—cause for optimism. Several series have
rebounded from their worst pace of decline, though a
number still show the fastest pace of deterioration for
the cycle in the most recent month, as shown in
Exhibit 4. Generally, the labor market indicators still
look fairly poor, while the consumer ones have seen
some letup in the pace of decline. As noted above,
manufacturing occupies the middle ground.
Exhibit 3: How Much Improvement Needed?
Improvement Needed for an X% Chance
That Trough is Past:

the ISM make us that a faster pace of decline is not Indicator Transformation 50% Chance 75% Chance 90% Chance

lurking ahead. The answer: only a moderate amount. ISM

Manufacturing None 3.0 5.7 7.7
The probability that we have passed the trough Index
improves from 23% to 47%. In essence, the ISM falls Unemployment* Difference 0.18 0.40 0.56
in the middle ground; whether or not a worse reading Initial Jobless
Monthly 19 30 39
is yet to come is a tossup. Claims*
Auto Sales % Change 0 26 45
Confidence None 1.9 6.6 10.1
Thresholds Differ Across Indicators *Lower reading is better.
The same procedure can be applied to other indicators. Source: Our calculations.

For each, the procedure quantifies how likely it is that

the worst is over for that indicator, given the current Exhibit 4: Signal Differs Across Indicators
reading relative to the worst so far in the recession. Reading Needed to Conclude:
50% 75 % 90 %
We focus on five indicators that cover three essential Trough So
Current chance chance chance
Far in 2008
segments of the economy: the labor market, Recession
Reading worst worst worst
manufacturing and the consumer. In choosing the over over over
ISM
indicators, we focus on those that are generally not Manufacturing 32.9 35.6 35.9 38.6 40.6
revised, or where revisions are relatively small. Since Index
many economic data series can be revised Unemployment* 0.53 0.36 0.35 0.13 -0.03
substantially, looking at some series as they are Initial Jobless
reported now could give misleading comparisons Claims* 572 572 553 542 533
Auto Sales -16 -7 -16 10 29
about whether a reading was the worst yet of that
recession. Hence, we exclude some high profile Confidence 55.3 61.2 57.2 61.9 65.4
*Lower reading is better.
indicators such as the change in payroll employment, Source: Our calculations.
durable goods orders and the various housing-related
metrics. As we are interested in the pace of

Issue No: 09/05 5 February 6, 2009

GS Global ECS US Research
1. Increase in Unemployment (49% probability
worst is past) – Despite the large 0.36 percentage
point increase in the unemployment rate reported
today, the model assigns a one in two chance to
the worst—defined as the largest increase—being
over. Why? Because what we have seen so far
was very bad; the unemployment rate surged 0.54
percentage points back in May 2008. That is the
benchmark against which this increase is
measured, and it is about 0.2 percentage points
better. Additionally, the increase was somewhat
smaller than the 0.42-point increase in December.
2. Monthly Initial Jobless Claims (14%) – Claims
for January sit at their worst point of the cycle, an
extremely high 572,000. Using our metric that
means the chances are only about 35% that the
worst is actually over. The data flow through the
month is consistent with further deterioration.
Claims for the last week of January were
626,000—well above the monthly average. To
increase the probability to 50% that that January
was the worst month of this cycle, we would need
to see claims drop to an average of 553,000.
However the further moderation to get to a 75%
chance is relatively small, only an additional
11,000 to 542,000.
3. Percent Change in Auto Sales (58%) – Even
with a disappointing January—auto sales growth
slipped from +1% to -7% (month-to-month, not
annualized)—this indicator remains in the middle
ground. This is because the benchmark is so low:
sales plummeted 16% in November, so the 7%
decline in January is still 9 percentage points
better. However, the relative improvement is still
not enough to get to a 75% probability that the
worst is over—that needs a monthly rebound of
10% (about one million units at the current sales
pace). The required improvement is large because
auto sales are volatile month-to-month.
4. Michigan Confidence (71%) – Confidence
provides the most optimistic read, with over a
50% probability that the worst is over. The latest
reading of 61.2 is nearly 6 points above the low of
55.3, a large enough improvement to make a new
low appear somewhat unlikely. In fact, this is the
only series that currently is near the 75%
threshold, with a further improvement of just 0.7
points necessary to meet it.
A Combined Index
Of course, the question that really matters is not
whether some indicator has turned, but whether the
economy as a whole has. As a first pass at an answer,
we combine all five indicators into an index by taking
the average of the probabilities, as shown in Exhibit 5.
Issue No: 09/05
US Economics Analyst
Exhibit 5: Tentative Signs That Worst Is Past
Index Index
55 55
45 45
35 35
Aggregate Index Combining
Probabilities that Troughs
Have Passed
25 25
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09
Source: Our Calculations.
There has been a notable improvement from October,
when the pace of economic deterioration was
extremely rapid, and clearly the fastest so far during
the recession. The ISM manufacturing improvement
accounts for about 5 points of the increase. However,
substantial further improvement is still needed to have
any sort of confidence that the worst is over. Across
indicators the average sits at just under a 50% chance.
Also, the index currently assigns a lower chance that
the pace of fastest deterioration has passed than in the
late summer of 2008. This shows the importance of
combining this sort of quantitative index with
economic judgment. At that time the economy was
boosted by the first round of fiscal stimulus, and our
forecast expected renewed deterioration in part due to
the temporary nature of that stimulus. This index
would not have been helpful then since the underlying
economics pointed to more severe weakness ahead.
A Scorecard for our Forecast
The fact that using this method would have led to total
misreading of the situation last summer is why we
view these thresholds as a scorecard for our forecast
rather than an input into the forecast. A forecast tries
to say what is to come, using the knowledge of the
broader economic situation. In this regard, we are in a
very different situation now than last summer since
the underlying economic dynamics should be
positive—at least in a relative sense—as the more
sustained fiscal stimulus and a continued easing of
credit conditions come into play. So we will be using
this exercise as a metric to see if the data are
confirming our forecast of the pace of decline
slowing: to discern whether improvements over the
next several months rise to the level of being
meaningful, or if they are just noise.
Seamus Smyth
6 February 6, 2009
GS Global ECS US Research US Economics Analyst

THE US ECONOMIC AND FINANCIAL OUTLOOK

(% change on previous period, annualized, except where noted)
2007 2008 2009 2008 2009
(f) (f) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
OUTPUT AND SPENDING
Real GDP 0.9 2.8 -0.5 -3.8 -4.5 -1.0 1.0 1.0
Year-to-year change 2.0 1.3 -1.8 2.5 2.1 0.7 -0.2 -1.5 -2.5 -2.1 -0.9
Consumer Expenditure 2.8 0.3 -1.5 0.9 1.2 -3.8 -3.5 -2.5 0.0 1.0 1.0
Residential Fixed Investment -17.9 -20.8 -15.2 -25.1 -13.3 -16.0 -23.6 -20.0 -10.0 -5.0 0.0
Business Fixed Investment 4.9 1.8 -13.9 2.4 2.5 -1.7 -19.1 -20.0 -15.0 -12.5 -10.0
Industrial Production, Mfg 1.7 -2.5 -14.2 -1.1 -4.1 -8.7 -16.2 -25.0 -12.5 -5.0 -3.0
INFLATION
Consumer Price Index 4.3 5.0 6.7 -9.2 -2.2 2.1 1.6 0.9
Year-to-year change 2.9 3.8 -0.6 4.2 4.3 5.3 1.5 -0.1 -0.8 -2.0 0.6
Core Indexes (% chg, yr/yr)
CPI 2.3 2.3 1.3 2.4 2.3 2.5 2.0 1.6 1.5 1.0 1.1
PCE* 2.2 2.2 1.1 2.2 2.3 2.3 1.8 1.5 1.2 0.8 0.9
Unit Labor Costs (% chg, yr/yr) 2.7 0.5 0.3 0.0 0.1 1.4 0.7 0.4 1.0 0.1 -0.5
LABOR MARKET
Unemployment Rate (%) 4.6 5.8 8.5 4.9 5.4 6.0 6.9 7.8 8.5 8.8 9.0
FINANCIAL SECTOR
Federal Funds** (%) 4.24 0.16 0.13 2.61 2.00 1.81 0.16 0.13 0.13 0.13 0.13
3-Month LIBOR (%) 4.98 1.83 1.00 2.78 2.77 3.12 1.83 1.25 1.00 1.00 1.00
Treasury Yield Curve** (%)
2-Year Note 3.12 0.82 0.75 1.62 2.77 2.08 0.82 0.75 0.75 0.75 0.75
5-Year Note 3.49 1.52 2.00 2.48 3.49 2.88 1.52 1.60 1.80 1.90 2.00
10-Year Note 4.10 2.42 2.90 3.51 4.10 3.69 2.42 2.50 2.70 2.80 2.90
Profits*** (% chg, yr/yr) -0.6 -6.2 -25.0 1.8 -6.4 -7.9 -12.0 -25.0 -30.0 -30.0 -14.0
_ _ _ _ _ _ _ _
Federal Budget (FY, $ bn) -162 -455 -1,425
FOREIGN SECTOR
Current Account (% of GDP) -5.3 -4.6 -2.8 -5.0 -5.1 -4.8 -3.7 -3.1 -2.8 -2.8 -2.7
Exchange Rates
Euro ($/€)** 1.46 1.35 1.45 1.55 1.56 1.44 1.35 1.30 1.40 1.43 1.45
Yen (¥/$)** 112 91 90 101 107 107 91 90 90 90 90
* PCE = Personal consumption expenditures. ** Denotes end of period. *** Profits are after taxes as reported in the national income
and product accounts (NIPA), adjusted to remove inventory profits and depreciation distortions.
NOTE: Published figures are in bold

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Issue No: 09/05 7 February 6, 2009

US Calendar

Focus for the Week Ahead

As noted on page 3, policy issues will take center stage this week. Treasury Secretary Timothy Geithner kicks
off with a major announcement on financial rescue on Monday; Federal Reserve Chairman Ben Bernanke follows
with testimony on the Fed’s liquidity and credit programs on Tuesday; and by the weekend Congress is scheduled
to have completed work on a fiscal stimulus bill (February 9, 10, and 13).
On the data front, the December trade balance should show further improvement as petroleum prices slid in
December and volumes do not appear to have increased materially. Outside petroleum, declines in non-
petroleum imports and exports should roughly offset one another (February 11).
Although auto sales fell further and chain stores reported dismal results, the implications for the retail sales report
for January do not suggest a replay of the horrific December results (February 12).

Economic Releases and Other Events

Time Estimate
Date (EST) Indicator GS Consensus Last Report
Mon Feb 9 12:00 Treasury’s Geithner speaks on financial rescue program
20:45 Dallas Fed Pres Fisher spks on global finl crisis; Houston
Tue Feb 10 9:00 NY Fed Pres Dudley speaks on inflation; NYC
10:00 Wholesale Trade (Dec) n.a. -0.7% -0.6%
10:00 Geithner testifies on TARP at Senate Banking Committee
13:00 Bernanke Testifies at House Finl Services Committee
Wed Feb 11 8:30 Trade Balance (Dec) -$35.0bn -$35.9bn -$40.4bn
9:50 NY Fed Gov Duke spks on stabilizing the housing market
10:00 Geithner testifies on TARP at Senate Budget Committee
13:00 Chicago Fed Pres Evans spks on US economic outlook
14:00 Federal Budget Balance (Jan) -$80.0bn -$75.0bn -$98.2bn
Thu Feb 12 8:30 Retail Sales (Jan) -0.4% -0.7% -2.7%
Ex Autos Flat -0.3% -3.1%
8:30 Initial Jobless Claims n.a. 610,000 626,000
10:00 Business Inventories (Dec) n.a. -0.6% -0.7%
Fri Feb 13 10:00 U. Mich Consumer Sentiment—Preliminary (Feb) n.a. 61.3 61.2

Issue No: 09/05 8 February 6, 2009