enterpriseSeattle Forecast 2012 - Ken Goldstein

enterpriseSeattle’s40th Economic Forecast Conference Thursday, January 12, 2012 Washington State Convention Centerinfo@enterpriseSeattle.org (206) 389-8650 www.enterpriseSeattle.org

2012 FORECAST: A LOOK AHEADModerator:Jeff Marcell, enterpriseSeattlePanelists:- Dick Conway, Puget Sound Economic Forecaster- Mike Dueker, Russell Investments- Ken Goldstein, The Conference Board

Overview:  No Momentum – No Help on the Way  Ditto Global Economy - Even In Euro-Zone (3.9% in 2011, 3.2% in 2012)  Food + Energy + Commodity + CONFIDENCE  Housing Still A Drag  Currency Speculation  Recession Risk 50-504 © 2011 The Conference Board, Inc. | www.conferenceboard.org

Global Economy Is Coming Back 2012 2013-2016 2017-2025 US 1.8 3.0 2.3 Euro Area 0.5 1.7 1.7 Japan 2.1 1.2 1.5 Other Advanced Economies 2.5 2.6 1.7 Developing Asia (ex. China and India) 2.8 4.4 3.8 China 8.7 6.5 3.5 India 7.4 6.0 4.6 Latin America 2.9 3.4 3.2 Middle East 2.3 3.8 3.5 Africa 2.4 4.2 3.9 World Total 3.2 3.5 2.7 Source: IMF, The Conference Board5 © 2011 The Conference Board, Inc. | www.conferenceboard.org

Industrial Production in Choppy Water The Conference Board’s Leading Economic Indexes Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 2010 2011 U.S.A 1.2 0.8 0.2 0.9 0.7 -0.3 0.7 0.3 0.5 0.3 0.1 0.9 0.5 MEXICO 1.3 0.2 0.7 -0.2 0.8 0.5 -0.4 0.3 0.0 -1.1 -0.3 -0.5 UK -0.1 0.5 0.2 0.4 0.4 0.4 0.6 0.0 0.2 -0.5 -0.4 -0.4 GERMANY 0.9 0.7 0.7 0.7 0.2 0.5 0.5 0.3 0.0 -2.1 -1.3 0.3 FRANCE -0.3 0.7 0.9 0.6 0.8 0.2 -0.4 0.4 -0.3 -0.4 -0.6 0.5 SPAIN -1.1 0.1 1.0 0.1 -0.5 -0.2 0.0 -0.2 -0.8 -0.2 -0.4 -0.2 JAPAN 0.0 0.2 1.2 0.8 -1.2 -2.3 -0.9 0.5 1.1 0.1 -0.4 1.1 KOREA 0.9 1.2 1.2 0.0 0.7 -0.4 0.5 -0.5 -0.2 0.4 -0.7 0.0 AUSTRALIA 0.2 0.1 -0.6 -0.2 0.5 0.8 0.4 0.3 1.0 0.7 0.6 0.6 CHINA -0.1 -1.1 0.5 0.3 1.0 0.1 0.4 1.0 0.6 0.6 0.4 -0.1 Source: The Conference Board6 © 2011 The Conference Board, Inc. | www.conferenceboard.org

In All Regions – Even The Euro-Zone 6-month annualized percent change 25 20 15 US LEI 10 5 0 -5 -10 -15 Asia LEI Euro Area LEI -20 -25 Nov.11 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Note: Shaded areas represent recessions Source: The Conference Board7 © 2011 The Conference Board, Inc. | www.conferenceboard.org

Especially Service-Sector Job Growth Index, 1985=100 200 Present Situation 160 120 80 Expectation 40 Dec.11 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Note: Shaded areas represent recessions. Data as of November 2010 are based on surveys conducted by The Nielsen Company; data prior to that are based on surveys conducted by TNS. Source: The Nielsen Company, TNS, NBER, The Conference Board8 © 2011 The Conference Board, Inc. | www.conferenceboard.org

Stuck in the Slow Lane 2011 2012 2011 2012 2013 III Q* IV Q I Q II Q ANNUAL ANNUAL ANNUAL --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- Real GDP 1.8 2.8 1.3 1.6 1.8 1.8 2.2 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- --------------------- --------------------- CPI Inflation 3.1 1.0 1.1 1.6 3.1 1.7 1.9 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- --------------------- --------------------- Real Consumer Spending 1.7 2.7 2.4 2.2 2.2 2.2 2.0 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- --------------------- --------------------- Real Capital Spending 15.7 3.4 4.1 3.1 8.7 5.0 3.6 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- --------------------- --------------------- Net Exports Bil. 00$ -402.8 -398.7 -410.0 -409.5 -410.6 -402.5 -364.3 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- --------------------- --------------------- Industrial Production 6.2 3.5 3.1 2.5 4.1 3.2 2.6 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- --------------------- --------------------- Unemployment Rate (%) 9.1 8.7 8.8 9.0 9.0 8.9 8.6 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- --------------------- --------------------- 90 Day T-Bills (%) 0.02 0.05 0.05 0.17 0.06 0.14 0.30 10 Yr Treas Bonds (%) 2.43 2.07 1.97 1.97 2.79 2.00 2.55 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- --------------------- --------------------- Exchange Rates $/EURO 1.40 1.36 1.30 1.30 1.39 1.30 1.27 Yen/$ 79 77 79 80 80 81 89 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- --------------------- --------------------- *Actual Data9 © 2011 The Conference Board, Inc. | www.conferenceboard.org

Price Split 14 $ per thousand cubic feet $ per gallon Gasoline (right scale) 3Q 11 4 12 10 3 8 6 2 4 1 2 Natural Gas (left scale) 0 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Department of Energy, The Conference Board10 © 2011 The Conference Board, Inc. | www.conferenceboard.org

Wealth destruction phase Cresting The Conference Boards Experimental Monthly Financial Instability Index 16 Credit 14 Crunch 12 Lehman 10 Brothers Junk Collapse Bond 8 Crash Bear Sterns and Bursting October Collapse 6 Friday of Equity 1987 the 13th Bubble Crash Corporate Sovereign 4 mini crash Long Term Asian Accounting Debt U.S. Debt Capital Crisis Scandals Crisis Downgrade 2 in Europe 0 -2 Oct 11 -4 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Note: Shaded areas represent recessions Source: The Conference Board11 © 2011 The Conference Board, Inc. | www.conferenceboard.org

Euro Premium Erosion U Forecast USD/EUR 1.0 1.1 -Stdev 1.2 1.3 +Stdev 1.4 Trend Jan. 03 - Dec. 11 1.5 1.6 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Note: Shaded areas represent recessions Source: FRB, The Conference Board12 © 2011 The Conference Board, Inc. | www.conferenceboard.org

In A Panicky World – Flight To Safety Y Forecast JPY/USD 130 125 +Stdev 120 115 110 105 100 95 -Stdev 90 85 Trend Jan.03 - Dec. 11 80 75 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Note: Shaded areas represent recessions Source: FRB, The Conference Board13 © 2011 The Conference Board, Inc. | www.conferenceboard.org

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enterpriseSeattle Forecast 2012 - Ken Goldstein

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