Nielsen Economic Advisor: What You Need To Know Leading Economic Indicators - Sept 2008 update Todd Hale, SVP, Consumer Shopper Insights James Russo, VP, Marketing as seen on: nielsenwire.com

What Leading Indicators Are Telling Us As we head into the last qtr of 2008 and begin to concentrate on 2009, there is a preponderance of datapoints which point to a weakening economy. Front and center is the expanding credit crisis, along with indications or a weakening labor market and wage growth. On the plus side, energy prices have pulled back along with commodity prices which should provide some degree of relief for consumers. The 2Q GDP downward revision to 2.8% is misleading as it is a lagging indicator & reflects the impact of the fiscal stimulus. The significant question is this….as the economy teeters on a brink of a recession, will consumer spending, which hasn’t declined since the 4 th qtr of 1991, head south? Indicators tied to the labor market will continue to be the main driver of this recovery. To that end, the 4-week moving average for weekly unemployment claims is at an uncomfortably high 462,000. These high levels of initial and continuing claims foreshadowing further job losses and rising unemployment rates. Building permits, a sign of new housing activity, declined 40% vs. year ago in August vs down 5% vs. July 2008. One of several signs we are seeing that housing may be hitting a bottom. However, the rebound could be negated by tougher lending practices and a freeze on credit. Despite the negative news on the macro front, CPG companies can target opportunities based upon consumer behavior Nielsen has been analyzing over the past 12 months. Some of Those Are: Widespread Trading Down : From higher-end retailers & brands to value-retailers & brands; from fresh segments to canned & frozen varieties Necessity vs. Discretionary Decision Making Economic Need Driving At Home Trends Consumers Seeking & Responding to Value Solutions : Pricing, Promotion, Functional, Lifestyle Page

As we head into the last qtr of 2008 and begin to concentrate on 2009, there is a preponderance of datapoints which point to a weakening economy. Front and center is the expanding credit crisis, along with indications or a weakening labor market and wage growth. On the plus side, energy prices have pulled back along with commodity prices which should provide some degree of relief for consumers.

The 2Q GDP downward revision to 2.8% is misleading as it is a lagging indicator & reflects the impact of the fiscal stimulus. The significant question is this….as the economy teeters on a brink of a recession, will consumer spending, which hasn’t declined since the 4 th qtr of 1991, head south?

Indicators tied to the labor market will continue to be the main driver of this recovery. To that end, the 4-week moving average for weekly unemployment claims is at an uncomfortably high 462,000. These high levels of initial and continuing claims foreshadowing further job losses and rising unemployment rates.

Building permits, a sign of new housing activity, declined 40% vs. year ago in August vs down 5% vs. July 2008. One of several signs we are seeing that housing may be hitting a bottom. However, the rebound could be negated by tougher lending practices and a freeze on credit.

Despite the negative news on the macro front, CPG companies can target opportunities based upon consumer behavior Nielsen has been analyzing over the past 12 months.

Some of Those Are:

Widespread Trading Down : From higher-end retailers & brands to value-retailers & brands; from fresh segments to canned & frozen varieties

Necessity vs. Discretionary Decision Making

Economic Need Driving At Home Trends

Consumers Seeking & Responding to Value Solutions : Pricing, Promotion, Functional, Lifestyle

Outlook For The Next Six Months: Continued weakening, with potential for major slowdown given the expanding credit crisis Page Positive Neutral Negative Sentiment will dive again with news of bank failures. . Signs of an increasingly weak labor market Qtrly release Exports slowing, as Euro & Asia stalls Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Index of Leading Indicators: Composite of ten indicators Equity Markets (Dow, NASDAQ, S&P) Consumer Expectations Index Building Permits New Factory Orders Capacity Utilization Productivity: Output per man-hour worked Weekly Jobless Claims: 4 wk moving avg Avg weekly hours worked Help wanted Ad Indexes

Potentially Dismal Holiday Selling Season Nielsen projects sales over $98 billion, across 125 categories, resulting in a 4.7% gain in dollar sales, however flat to declining unit sales (-0.8%) The 2007 holiday season: actual dollar sales gain of 4.5%. Over a third of consumers spending less, value channels driving traffic. Expected big season for Online, Supercenters, Dollar,Club and Convenience Grocery should also benefit from consumers increasingly combining shopping trips Food, personal care & household basics – not nice-to-haves – will drive strong sales Companies need to be very focused on value & align with “at-home” behavior Page

Nielsen projects sales over $98 billion, across 125 categories, resulting in a 4.7% gain in dollar sales, however flat to declining unit sales (-0.8%)

The 2007 holiday season: actual dollar sales gain of 4.5%.

Over a third of consumers spending less, value channels driving traffic.

Expected big season for Online, Supercenters, Dollar,Club and Convenience

Grocery should also benefit from consumers increasingly combining shopping trips

Food, personal care & household basics – not nice-to-haves – will drive strong sales

Companies need to be very focused on value & align with “at-home” behavior

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