40th Annual Economic Forecast Conference, Thursday, January 12, 2012 (Seattle, WA) 2012 Forecast - Ken Goldstein, The Conference Board

1. enterpriseSeattle’s
40th Economic Forecast Conference
Thursday, January 12, 2012
Washington State Convention Center
info@enterpriseSeattle.org (206) 389-8650 www.enterpriseSeattle.org

2. 2012 FORECAST: A LOOK AHEAD
Moderator:
Jeff Marcell, enterpriseSeattle
Panelists:
- Dick Conway, Puget Sound Economic Forecaster
- Mike Dueker, Russell Investments
- Ken Goldstein, The Conference Board

3. Stuck in the Slow Lane
Ken Goldstein
3 © 2011 The Conference Board, Inc. | www.conferenceboard.org

4. 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 50-50
4 © 2011 The Conference Board, Inc. | www.conferenceboard.org

5. 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 Board
5 © 2011 The Conference Board, Inc. | www.conferenceboard.org

6. 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 Board
6 © 2011 The Conference Board, Inc. | www.conferenceboard.org

7. 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 Board
7 © 2011 The Conference Board, Inc. | www.conferenceboard.org

8. 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 Board
8 © 2011 The Conference Board, Inc. | www.conferenceboard.org

9. Stuck in the Slow Lane
2011 2012 2011 2012 2013
III Q* IV Q I Q II Q ANNUAL ANNUAL ANNUAL
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Real GDP 1.8 2.8 1.3 1.6 1.8 1.8 2.2
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CPI Inflation 3.1 1.0 1.1 1.6 3.1 1.7 1.9
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Real Consumer Spending 1.7 2.7 2.4 2.2 2.2 2.2 2.0
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Real Capital Spending 15.7 3.4 4.1 3.1 8.7 5.0 3.6
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Net Exports Bil. '00$ -402.8 -398.7 -410.0 -409.5 -410.6 -402.5 -364.3
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Industrial Production 6.2 3.5 3.1 2.5 4.1 3.2 2.6
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Unemployment Rate (%) 9.1 8.7 8.8 9.0 9.0 8.9 8.6
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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
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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
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*Actual Data
9 © 2011 The Conference Board, Inc. | www.conferenceboard.org

10. 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 Board
10 © 2011 The Conference Board, Inc. | www.conferenceboard.org

11. Wealth destruction phase Cresting
The Conference Board's 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 Board
11 © 2011 The Conference Board, Inc. | www.conferenceboard.org

12. 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 Board
12 © 2011 The Conference Board, Inc. | www.conferenceboard.org

13. 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 Board
13 © 2011 The Conference Board, Inc. | www.conferenceboard.org