Presented by: MACROECONOMIC SCORECARD: THE WORLD’S LARGEST ECONOMIES March 2013 Economist Doug Hermanson.

Presented by:

MACROECONOMIC SCORECARD: THE WORLD’S LARGEST ECONOMIES

March 2013

Economist

Doug Hermanson

© Copyright 2013 Kantar Retail

█ = IMPROVING █ = MIXED █ = WORSENING21

Current Retail Conditions

2

Clear deterioration in Europe; China and U.S. a bit mixed

Summary of Macro Factors Affecting Retail*Q4 2012 or Latest Available Month*

Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Commerce, Conference Board, and Kantar Retail

* GDP, Investment and Consumer Spending are quarterly through fourth quarter of 2012; Remaining indicators are monthly through January, February or March 2013

• Euro zone and EU declining sharply; inflation may loom with easy money, weak currency

• China balancing strong growth vs. inflation pressures

• U.S. positive in some measures, but gov’t issues have tripped up confidence

Economic Bloc

GDP, Annualized Growth Rate*Residential & Business Investment*Consumer Spending*Retail Sales Consumer ConfidenceCPI Headline IndexCPI Food IndexCPI Core Index

World's Largest Economies

China EUEuro Zone

JapanUnited StatesIndicators


The Global Macro Outlook for Retail

3

Threatened by recession and weak growth into 2013

Source: Kantar Retail

Short Term (6–12 months)

Long Term (2–5 years)

China

Healthy growth likely to persist, but at risk of re-igniting inflation pressures

Long-term growth unlikely to be as robust as past amid price/cost pressures

EuropePersisting recession conditions with uncertain path toward growth

Growth likely kept stagnant by austerity and lack of confidence

Japan

Uneven growth amid weak export demand, & despite aggressive monetary policy to spur growth

Growth kept modest by various factors, including aging population

United States

Weakness/threats offset by persisting gains in housing, investment, hiring

Growth kept modest by constraints on income growth, price pressures

Net Outlook

Modest global growth likely; downside risks most apparent in Europe

Moderate growth tempered by persisting inflation, austerity effects

• Europe will remain in recession in 2013

• China and emerging markets follow mixed path, shifting positive

• The United States will sustain slow to modest growth

• As global demand revives beyond 2013, global commodity price pressure will re-emerge


Summary Conclusions and Implications

4

• Short vs. Long Term. Expect retail demand to remain on a modest and uneven path in the short term. When global growth shifts into a higher gear will be determined by the euro debt crisis and emerging markets, likely in 2014 or beyond.

• Europe. Expect flat or negative growth in most countries through at least 2013 due to the escalating euro debt crisis.

• China/Emerging Markets. A quick return to robust growth in China and other emerging markets is unlikely.

• United States. Expect U.S. retail sales growth to keep a respectable pace, but a notch below last year.

• Prices/Costs. Plan on global cost pressures that remain relatively modest for most markets in 2013 as a result of moderate global demand growth in the short term.


Largest Markets: GDP Trends Span Big Range

5

• Euro zone and EU pressured by fall off in investment

• Underlying U.S. growth trends stronger than indicated

• Growth in Japan is elusive

• China is sustaining healthy growth despite threats

Source: EuroStat, China National Bureau of Statistics and Kantar Retail

Largest Economies: Inflation-Adjusted GDPQtr-to-Qtr Growth, Seasonally-Adjusted Annualized Rate

*European Union includes 27 countries**Euro zone includes 17 countries*** Calculated by annualizing quarterly growth rate reported by National Bureau of Statistics of China

Growth is holding up in China; declining in Europe

-0.7% -0.7%

1.3%

-0.2%

8.2%

0.4%

-0.3%

3.1%

-0.9%

8.7%

-1.9% -2.3%

0.4% 0.0%

8.2%

European Union*

Euro Zone** United States

Japan China***

2012.2 2012.3 2012.4


Largest Markets: Little Momentum in Retail Sales

6

• Euro zone and EU have fallen flat

• U.S. growth holds at modest pace

• Japan trending with flat price growth

• Renewed letup in China is concern; unlikely to persist given consumer confidence

Largest Economies: Nominal Retail SalesYear-to-Year Percent Change; Not Adjusted for Inflation*

Euro zone***

United States

China

Japan

Trends in U.S and China still portend sustained global growth

Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Labor

European Union**

* United States , Japan and China are through February Others are through January ** European Union includes 27 countries *** Euro zone includes 17 countries

-4%

-1%

2%

5%

8%

11%

14%

17%

20%

Mar-11 Mar-12


Largest Markets: Price Pressures Mostly Easing

7

• Weather-affected commodities have pushed Chinese food prices higher

• U.S. inflation mostly dormant; elevated gasoline prices an issue

• Inflation pressures easing in Europe and Japan; Easy money policies may change this

Largest Economies: Consumer Price InflationYear-to-Year Percent Change, Through February*

Euro zone***United States

China

Japan

Pockets of stronger inflation in China and United States


European Union**

* Through February except the Japan is through January** European Union includes 27 countries *** Euro zone includes 17 countries

-3%

0%

3%

6%

9%

12%

15%

18%

21%

Mar-11 Mar-12


-3%

0%

3%

6%

9%

12%

15%

18%

21%

Jan-11 Jan-12

Largest Markets: Core Inflation Dormant

8

• All the major markets have core inflation rates at or below 2.0%

• China’s core rate is surprisingly more modest than in United States

• Japan’s rate once again declining, triggering easy money policies to spur inflation

Largest Economies: Core Consumer Price InflationYear-to-Year Percent Change, Through February*

Euro zone***

United StatesChina

Japan

Excluding food and fuel, little inflation in other categories


European Union**

* Through November, except the Japan is through October** European Union includes 27 countries *** Euro zone includes 17 countries


Largest Markets: Confidence Metrics Mixed

9

• China most positive

• Expectations for aggressive growth policies may be boosting Japan’s confidence

• Confidence in Europe is holding at very weak levels

• U.S. plagued by uncertainty around government budget

Largest Economies: Consumer ConfidenceYear-to-Year Percent Change, through February*

Euro zone*** (right scale)

United States

China

Japan

Weak in Europe; picking up in China, Japan; volatile in U.S.


European Union** (right scale)

* Through February, except the United States through March** European Union includes 27 countries *** Euro zone includes 17 countries

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

0

20

40

60

80

100

Apr-11 Apr-12



Scorecard: European Union and Euro Zone

10Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Commerce, Conference Board, and Kantar Retail

• The euro area hurt most by Spain and Italy, but France and Germany increasingly a negative factor

• EU indicators are similar due to a renewed decline in the United Kingdom

• Easing inflation may soften declines in unit-demand—but weak currency raises inflation threat

The Largest Economies: Selected Indicators

1 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales2 Consumer spending (inflation-adjusted) is estimated by Kantar RetailY-to-Y = Year-over-Year change; Q-to-Q = change from prior quarter; M-to-M = change from prior month. Chg Y-to-Y = rate of Year-over-Year change in percentage points; Same for quarterly and monthly growth. All data is seasonally adjusted unless indicated by "NSA" or Not Seasonally Adjusted

Growth

Period Y-to-YQ-to-Q or

M-to-MChg

Y-to-YChg Q-to-Q or M-to-M

GDP (Inflation-Adjusted), Annualized Growth Rate Q4 '12 -0.6% -1.9% -0.2% -2.4%Residential & Business Investment (Inflation-Adjusted) Q4 '12 -3.5% -3.4% -0.3% -0.6%Consumer Spending (Inflation-Adjusted) Q4 '12 -0.7% -1.0% 0.2% -0.8%Retail Sales Excluding Auto & Fuel Channels 1 Jan-13 -0.1% 0.2% 0.2% 0.6%Consumer Confidence (Points) 1 Feb-13 -2.8 0.8 0.9 0.8CPI Headline Index, Not Seasonally Adjusted (NSA) Feb-13 2.0% 0.4% -0.1% 1.2%CPI Food Index, Not Seasonally Adjusted (NSA) Feb-13 3.2% 0.2% -0.6% -0.6%CPI Core Index, excluding food and fuel (NSA) Feb-13 1.4% 0.3% -0.1% 1.8%

Growth


M-to-MChg


GDP (Inflation-Adjusted), Annualized Growth Rate Q4 '12 -0.9% -2.3% -0.3% -2.1%Residential & Business Investment (Inflation-Adjusted) Q4 '12 -4.9% -4.4% -0.6% -1.4%Consumer Spending (Inflation-Adjusted) Q4 '12 -1.2% -1.6% 0.3% -1.2%Retail Sales Excluding Auto & Fuel Channels 1 Jan-13 -0.7% 0.2% 0.3% 0.7%Consumer Confidence (Points) 1 Feb-13 -2.8 0.5 0.9 0.7CPI Headline Index, Not Seasonally Adjusted (NSA) Feb-13 1.8% 0.4% -0.1% 1.4%CPI Food Index, Not Seasonally Adjusted (NSA) Feb-13 2.7% 0.1% -0.5% -0.4%CPI Core Index, excluding food and fuel (NSA) Feb-13 1.3% 0.3% -0.1% 2.1%

European Union

Euro Area



Scorecard: China, Japan, and United States

11Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Commerce, Conference Board, and Kantar Retail

• Japan is struggling to maintain growth amid weak global demand

• China still faces tough task to sustain strong growth without causing more inflation

• U.S. positive in some key measures, but tax/spend issues have tripped up confidence

The Largest Economies: Selected Indicators

1 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales2 China’s consumer spending is estimated by Kantar Retail

Growth


M-to-MChg


GDP (Inflation-Adjusted), Annualized Growth Rate Q4 '12 1.7% 0.4% -0.9% -2.7%Residential & Business Investment (Inflation-Adjusted) Q4 '12 7.2% 14.0% 1.0% 13.1%Consumer Spending (Inflation-Adjusted) Q4 '12 1.8% 1.8% 0.0% 0.3%Retail Sales Excluding Auto & Fuel Channels 1 Feb-13 4.1% 0.4% 0.1% -0.1%Consumer Confidence (Points) 1 Mar-13 -5.5 -2.3 -3.9 -1.2CPI (Headline Index) Feb-13 2.0% 0.7% 0.4% 0.7%CPI Food Index Feb-13 1.2% 0.1% 0.1% 0.1%CPI (Core Index, excluding food and fuel) Feb-13 2.0% 0.2% 0.1% -0.1%

Growth


M-to-MChg


GDP (Inflation-Adjusted), Annualized Growth Rate Q4 '12 0.4% 0.0% -0.1% 1.0%Residential & Business Investment (Inflation-Adjusted) Q4 '12 0.1% 0.0% -4.4% 1.3%Consumer Spending (Inflation-Adjusted) Q4 '12 1.1% 0.5% 0.0% 1.0%Retail Sales at Supermarkets and Department Stores 1 Feb-13 -0.6% -0.1% -0.4% 0.3%Consumer Confidence (Points) 1 Feb-13 2.7 1.6 1.1 0.4CPI (Headline Index) Jan-13 -0.3% 0.0% -0.2% -0.1%CPI Food Index Jan-13 -0.7% 1.4% -0.4% 1.0%CPI (Core Index, excluding food and fuel) Jan-13 -0.7% 0.0% -0.1% 0.1%

Growth


M-to-MChg


GDP (Inflation-Adjusted), Annualized Growth Rate Q4 '12 7.8% 8.2% 0.1% -0.4%Residential & Business Investment (Inflation-Adjusted), NSA 1 Feb-13 21.2% 0.0% 0.0% 67.2%Consumer Spending (Inflation-Adjusted), NSA 1,2 Feb-13 11.3% -2.2% -1.2% -2.8%Retail Sales of all Consumer Goods, NSA 1 Feb-13 13.3% -1.4% -0.8% -2.8%Consumer Confidence (Points) 1 Feb-13 2.3 1.0 -1.6 1.6CPI (Headline Index), NSA Feb-13 3.2% 2.6% 1.2% 4.1%CPI Food Index, NSA Feb-13 6.0% 3.0% 3.1% -1.6%CPI excluding food and fuel prices, NSA Feb-13 1.8% -0.2% 0.3% -0.9%

United States

Japan

China


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Frank Badillo

Doug Hermanson

T: +614.355.4019

T: +614.355.4044

Senior Economist

Economist

KRIQ website: Macroeconomics Insights Topics & Trends > Macroeconomics

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www.KantarRetailiq.com

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Presented by: MACROECONOMIC SCORECARD: THE WORLD’S LARGEST ECONOMIES March 2013 Economist Doug Hermanson.

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