Global Economic Research August 5, 2010 @ 16:15 EST

CAPITAL MARKETS RESEARCH

Derek Holt (416) 863-7707
derek_holt@scotiacapital.com
Closing Points
Gorica Djeric (416) 862-3080 — A Daily Recap and Look Ahead
gorica_djeric@scotiacapital.com

Economic Releases — Today, Overnight and Tomorrow

North America - TODAY

Country Date Time Event Period BNS Survey Actual Prior Revised
CA 8/5/2010 08:30 Building Permits MoM JUN 2.00% 1.80% 6.50% -10.80% -8.20%
US 8/5/2010 08:30 Initial Jobless Claims 31-Jul 453K 455K 479K 457K 460K
US 8/5/2010 08:30 Continuing Claims 24-Jul 4520K 4515K 4537K 4565K 4571K
US 8/5/2010 09:00 Deputy Treasury Secretary Neal Wolin Speaks in Boston
US 8/5/2010 10:00 ICSC Chain Store Sales YoY JUL -- -- 2.80% 3.00% --
US 8/5/2010 12:00 Geithner at Social Security, Medicare Trustees Briefing
US 8/5/2010 12:30 San Francisco Fed Hosts Mortgage Hearing
US 8/5/2010 12:30 Fed's Yellen Gives Remarks at Foreclosure Hearing
US 8/5/2010 15:30 Treasury's Wolin Speaks in Philadelphia

North America - TOMORROW

Country Date Time Event Period BNS Survey Actual Prior Revised
CA 8/6/2010 07:00 Net Change in Employment JUL 20.0K 12.5K -- 93.2K --
CA 8/6/2010 07:00 Unemployment Rate JUL 7.90% 7.90% -- 7.90% --
CA 8/6/2010 07:00 Full Time Employment Change JUL -- -- -- 48.9 --
CA 8/6/2010 07:00 Part Time Employment Change JUL -- -- -- 44.2 --
CA 8/6/2010 07:00 Participation Rate JUL -- 67.4 -- 67.4 --
US 8/6/2010 08:30 Change in Nonfarm Payrolls JUL -40K -65K -- -125K --
US 8/6/2010 08:30 Change in Private Payrolls JUL -- 90K -- 83K --
US 8/6/2010 08:30 Change in Manufact. Payrolls JUL -- 10K -- 9K --
US 8/6/2010 08:30 Unemployment Rate JUL 9.60% 9.60% -- 9.50% --
US 8/6/2010 08:30 Avg Hourly Earning MOM All Emp JUL 0.10% 0.10% -- -0.10% --
US 8/6/2010 08:30 Avg Hourly Earning YOY All Emp JUL -- 1.60% -- 1.70% --
US 8/6/2010 08:30 Avg Weekly Hours All Employees JUL 34.1 34.1 -- 34.1 --
CA 8/6/2010 10:00 Ivey Purchasing Managers Index JUL -- 55.5 -- 58.9 --
US 8/6/2010 15:00 Consumer Credit JUN -- -$5.3B -- -$9.1B --

Europe - OVERNIGHT
Country Date Time Event Period BNS Survey Actual Prior Revised
FR 8/6/2010 02:45 Trade Balance (Euros) JUN -- -4.4B -- -5.5B --
FR 8/6/2010 02:45 Central Govt. Balance (Euros) JUN -- -- -- -67.9B --
IT 8/6/2010 04:00 Industrial Production sa (MoM) JUN -- 0.70% -- 1.00% --
IT 8/6/2010 04:00 Industrial Production wda(YoY) JUN -- 8.50% -- 7.30% --
IT 8/6/2010 04:00 Industrial Production nsa(YoY) JUN -- 9.70% -- 10.50% --
UK 8/6/2010 04:30 PPI Input NSA (MoM) JUL -- -0.50% -- -0.20% --
UK 8/6/2010 04:30 PPI Input NSA (YoY) JUL -- 11.40% -- 10.70% --
UK 8/6/2010 04:30 PPI Output Core NSA (MoM) JUL -- 0.10% -- -0.30% --
UK 8/6/2010 04:30 PPI Output Core NSA (YoY) JUL -- 4.50% -- 4.80% --
UK 8/6/2010 04:30 Industrial Production (MoM) JUN -- 0.10% -- 0.70% --
UK 8/6/2010 04:30 Industrial Production (YoY) JUN -- 1.90% -- 2.60% --
IT 8/6/2010 05:00 GDP sa and wda (QoQ) 2Q P -- 0.40% -- 0.40% --
IT 8/6/2010 05:00 GDP sa and wda (YoY) 2Q P -- 1.20% -- 0.50% --
GE 8/6/2010 06:00 Industrial Production MoM (sa) JUN -- 0.50% -- 2.60% --
GE 8/6/2010 06:00 Industrial Prod. YoY (nsa wda) JUN -- 11.60% -- 12.40% --

Asia Pacific - OVERNIGHT

Country Date Time Event Period BNS Survey Actual Prior Revised
AU 8/5/2010 21:30 Reserve Bank Quarterly Monetary Policy Statement
JN 8/6/2010 01:00 Leading Index CI JUN P -- 98.7 -- 98.6 --
JN 8/6/2010 01:00 Coincident Index CI JUN P -- 101.2 -- 101.2 --

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Global Economic Research August 5, 2010

Closing Points

KEY POINTS
North American Wrap-Up
 Canadian homebuilders add more supply on multis and C&Is
 US jobless claims up, seasonal adjustment bias

Expected Overnight Developments

 French trade deficit to narrow in June
 Italian preliminary Q2 GDP estimate to remain unchanged, at 0.4% q/q
 German, Italian and UK industrial production to advance at a slower clip in June
 UK producer prices to continue to contract in June
 RBA to release Quarterly Monetary Policy Statement
 Japan’s leading index to move a touch higher

Look-Ahead to North America Tomorrow

 More moderate employment pick-up expected in Canada
 Markets cautious ahead of July non-farm payrolls data

CANADIAN RECAP

CANADIAN HOMEBUILDERS ADD MORE SUPPLY TO MULTIS and C&Is

m/m % change in the value of total building permits, June:

Actual: 6.5%
Consensus: 1.8%
Prior: -8.2% (revised from -10.8%)

 June building permits surprised on the upside, rising 6.5% m/m, more than three times the forecast, as they reversed
some of the steep 8.2% plunge posted in May. If there is hope for house prices in Canada, it lies in curtailing supply.
That’s where any room for optimism lies in a report that shows a positive headline print, but widespread losses in value
and volume terms within the residential sector.

 Housing permit volumes increased by 2.0% m/m, supported by a 12.1% gain in the multiples segment. The singles
category experienced a 9.2% m/m retreat. This is the third straight month of contraction for singles, and their steepest
decline since March 2009.

 Trend-wise, the volume of housing permits granted is up 70% since bottoming in February 2009. Over that same
period, singles are up 56.2%, while multis have jumped by 102.1%. The return of supply in the new and resale listings
segments is one reason for cooling house price gains compared to dynamics through much of last year in which the
release of pent-up demand occurred in the context of a paucity of supply.

 The value of housing permits increased by 6.5% on the month, and the greater value advance than the volume growth
may suggest a price effect and/or a mix shift toward higher-priced new homes, ahead of the HST implementation,
which became effective on July 1st. Higher-priced new homes are more heavily hit by the HST. In Ontario, the
government rebates the effect of the HST up to the first $400,000 in home value. A $1 million new home, for example,
would incur a net incremental tax burden of $57,000 after July 1st.

 By segment, nominal gains were led by the commercial (+39% m/m) and institutional (+41.7%) categories. The
residential sector posted a 4.5% decline - led by an 8.3% drop in singles - as did the industrial sector, where the number
of issued permits contracted by 18%.

 The value of building permits was up in six provinces. Alberta, Newfoundland & Labrador and British Columbia
posted the largest advances. Saskatchewan, PEI and Ontario posted losses. Saskatchewan had the largest drop with
decreases in every component.

 At the metropolitan level, the total value of permits rose in 15 of the 34 census metropolitan areas.

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Global Economic Research August 5, 2010

Closing Points

UNITED STATES RECAP

US JOBLESS CLAIMS UP, SEASONAL ADJUSTMENT BIAS

Initial jobless (thousands) / continuing claims (thousands):

Actual: 479 / 4537
Consensus: 455 / 4515
Prior: 460 / 4571

Extended/Emergency benefits (two week lag, thousands):

Actual: 603,853 / 406,842
Prior: 3,314,629 / 3,253,636

 Jobless claims remain volatile and range bound. The number of out-of-work Americans filing new claims for
unemployment benefits increased by 19,000 to 479,000 last week, their highest since the second week of April.
Consensus was looking for a more modest increase to 455,000.

 Some of the increase may have been caused by difficulties in adjusting for seasonal factors, as car manufacturers
traditionally close their plants for two weeks in early July. However, this year, General Motors and a number of other
manufacturers did not shut down all of their plants.

 The four-week moving average for initial claims currently sits at 458,500, an increase of 5,250 from the previous
week's level. A push back down toward the 400k mark would be consistent with more encouraging nonfarm payrolls
numbers in the months ahead.

 Initial claims have remained trendless in the 427k-490k range since the beginning of this year – this is still considered
to be a historically elevated level, symbolic of a fragile labour market. Unemployment level remains sticky.

 The largest increases in initial claims for the week ending July 24 were in Minnesota (+288), Vermont (+39), North
Dakota (+38), Wyoming (+32), and Colorado (+19), while the largest decreases were in California (-19,107), New
York (-7,801), North Carolina (-6,399), Michigan (-5,984), and Georgia (-5,863).

 The number of individuals who continued to receive jobless benefits declined by 34,000 to 4,537,000 for the week
ending July 24. The four-week moving average rose by 25,750 to 4,575,500. The forecast was calling for a more
modest increase to 4,515,000 million.

 The U.S. House of Representatives approved an extension of unemployment benefits for some 2.5 million Americans
in late July, ending a deadlock over renewing the assistance. Unemployment benefits are now extended through
November 30, but the extension also applies retroactively, restoring the program was allowed to expire in at the end of
June. Previous attempts to pass the bill failed, as opponents argued that US$33 billion would unnecessarily add to the
already massive U.S. budget deficit.

TOMORROW’S CANADA-U.S. SESSION

 July employment reports for Canada and the United States are both scheduled for release on Friday, at 7:00amET
and 8:30amET, respectively. The median consensus is for a gain of 15,000 in Canada and for the unemployment rate to
stay at 7.9%. Conversely, in the US the call is for a decline of 65,000, and for the jobless rate to edge up to 9.6% from
9.5% in the previous month. For Canada, the tail risk lies in the exceptionally high base effect of the past few months.

 Should the forecast come true, July would mark the seventh successive monthly gain for the Canadian job market, but
at the most subdued pace since December 2009. This should not imply that the Canadian labour market is experiencing
renewed weakening, but that recent month’s gains beat expectations by a wide margin. Canada has added on 403,000
jobs since last July — 227,000 positions in the second quarter alone — exceeding our optimistic forecast for
employment growth published at the beginning of the year. A strong recovery in the labour market is a source of
support to consumer spending, such that April and May’s retail sales reports were an aberration on trend.

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 Global Economic Research August 5, 2010

Closing Points

 Canadian unemployment rate is well below the U.S. jobless rate, highlighting once again Canada’s outperformance
during the cycle. If the Canadian scenario were applied to the United States, then using the usual 10:1 scaling factor
would yield a gain of 4-4.5 million jobs since last July; instead private payrolls in the U.S. are still down by over
300,000.

 In the United States, the headline employment print is likely to be distorted, as temporary Census hiring started to
unwind in June, and will continue to do so until September. We estimate for the top print to post a contraction of
40,000 in July.

 Private-sector payrolls are forecast to ink a gain of about 100,000, in line with the average monthly gain so far this
year. The risk here is on the upside — by about 10,000 to 15,000 — as GM did not close some of its plants for the
two-week summer shutdown in July. Furthermore, we expect that state and local government hiring was reduced by
another 10,000 to 12,000, on the poor state of finances. Tax receipts remain low, while government spending has yet to
be reduced significantly. So far this year, local & state government reduced its payrolls by 95,000 workers, and further
downsizing is likely. Finally, the weekly Census report on temporary census payrolls showed that related payrolls
increased by 33,000 in the first half of the month, after posting a sharp reduction of 225,000 in June. That said, the
Census weekly numbers have not lined up well with the Census non-farm payrolls report for many reasons, including
the ones we flagged in a prior non-farm Flash Points preview.

 Private sector has been consistently adding jobs since the beginning of the year, averaging a monthly gain of 100,000.
Nevertheless, the unemployment rate has come down by only half a percentage point. To maintain the unemployment
rate at this level, at the headline level 100,000-150,000 jobs would need to be added on a monthly basis. To start
bringing the jobless rate lower, that number would need to be in the 200,000+ range. The expectation that the U.S.
economy will advance at a slower clip in the second half of the year — averaging 2.5% growth — would make this
more challenging.

Equities % change:
Fixed Income Government Yield Curves (%): Last Change 1 Day 1-wk 1-mo 1-yr
S&P/TSX 11784.74 -60.31 -0.5 0.8 6.2 6.7
2-YEAR 5-YEAR 10-YEAR 30-YEAR Dow 30 10674.98 -5.45 -0.1 2.0 10.2 15.0
S&P 500 1125.81 -1.43 -0.1 2.2 10.1 12.3
Last 1-day 1-w k Last 1-day 1-w k Last 1-day 1-w k Last 1-day 1-w k Nasdaq 2293.06 -10.51 -0.5 1.8 9.6 15.1
DAX 5365.78 -20.38 -0.4 1.0 11.2 15.5
U.S. 0.52 0.57 0.58 1.57 1.61 1.66 2.90 2.95 2.98 4.06 4.08 4.08
FTSE 6333.58 2.25 0.0 3.2 8.9 18.3
CANADA 1.52 1.53 1.54 2.31 2.33 2.38 3.11 3.16 3.18 3.66 3.72 3.76 Nikkei 9653.92 164.58 1.7 -0.4 3.4 -7.1
Hang Seng 21551.72 1.84 0.0 2.2 7.3 3.1
GERMANY 0.75 0.74 0.83 1.55 1.58 1.71 2.56 2.60 2.72 3.24 3.30 3.43 CAC 3764.19 3.47 0.1 3.1 13.0 8.8
Commodities % change:
JAPAN 0.15 0.15 0.16 0.35 0.35 0.36 1.04 1.01 1.09 1.71 1.67 1.80 WTI Crude 82.03 -0.44 -0.5 4.7 13.7 14.0
Natural Gas 4.61 -0.12 -2.6 -4.4 -1.6 14.2
U.K. 0.79 0.80 0.84 2.01 2.05 2.14 3.24 3.29 3.41 4.16 4.22 4.38 Gold 1192.50 -7.00 -0.6 2.6 -1.3 24.2
Silver 18.35 -0.15 -0.8 4.3 2.8 25.1
Foreign - U.S. Spreads (bps): CRB Index 277.67 -1.31 -0.5 2.8 9.1 3.4
Currencies % change:
CANADA 100 96 96 75 73 71 20 21 20 -40 -36 -32 USDCAD 1.0168 -0.0014 -0.1 -1.9 -4.4 -5.0
EURUSD 1.3186 0.0025 0.2 0.8 5.2 -8.5
GERMANY 22 17 25 -2 -3 5 -34 -35 -26 -82 -78 -65 USDJPY 85.7900 -0.4800 -0.6 -1.2 -2.2 -9.7
AUDUSD 0.9156 -0.0010 -0.1 1.7 9.1 8.9
JAPAN -37 -42 -43 -122 -126 -130 -186 -195 -190 -235 -241 -228
GBPUSD 1.5890 0.0007 0.0 1.8 5.0 -6.5
USDCHF 1.0467 -0.0064 -0.6 0.6 -1.7 -1.4
U.K. 27 23 26 44 45 48 33 34 43 10 14 30

Source: Bloomberg. All quotes reflect Bloomberg data as at the time of publishing.
While this source is believed to be reliable, Scotia Capital cannot guarantee its accuracy.