MACROECONOMIC SCORECARD THE WORLDS LARGEST ECONOMIES Presented by

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

Current Retail Conditions Clear deterioration in Europe; China and U. S. a bit mixed Summary of Macro Factors Affecting Retail* Q 4 2012 or Latest Available Month* • Euro zone and EU declining sharply; inflation may loom with easy money, weak currency • China balancing strong growth vs. inflation pressures * GDP, Investment and Consumer Spending are quarterly through fourth quarter of 2012; Remaining indicators are monthly through January, February or March 2013 • U. S. positive in some measures, but gov’t issues have tripped up confidence 2 © Copyright 2013 Kantar Retail Source: Euro. Stat, Japan National Statistics Center, National Bureau of Statistics of China, U. S. Department of Commerce, Conference Board, and Kantar Retail

The Global Macro Outlook for Retail Threatened by recession and weak growth into 2013 Short Term (6– 12 months) • 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 Source: Kantar Retail China Europe Japan United States Net Long Term (2– 5 years) Healthy growth likely Long-term growth to persist, but at risk unlikely to be as of re-igniting inflation robust as past amid pressures price/cost pressures Persisting recession Growth likely kept conditions with stagnant by uncertain path austerity and lack of toward growth confidence Uneven growth amid Growth kept modest weak export by various factors, demand, & despite including aggressive monetary population policy to spur growth Weakness/threats Growth kept modest offset by persisting by constraints on gains in housing, income growth, investment, hiring price pressures Modest global Moderate growth ©tempered Copyright 2013 Kantar growth likely; by Retail 3

Summary Conclusions and Implications • 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. © Copyright 2013 Kantar Retail 4

Largest Markets: GDP Trends Span Big Range Growth is holding up in China; declining in Europe • Euro zone and EU pressured by fall off in investment Largest Economies: Inflation-Adjusted GDP Qtr-to-Qtr Growth, Seasonally-Adjusted Annualized Rate • Underlying U. S. growth trends stronger than indicated • Growth in Japan is elusive • China is sustaining healthy growth despite threats *European Union includes 27 countries **Euro zone includes 17 countries *** Calculated by annualizing quarterly growth rate reported by National Bureau of Statistics of China Source: Euro. Stat, China National Bureau of Statistics and Kantar Retail © Copyright 2013 Kantar Retail 5

Largest Markets: Little Momentum in Retail Sales Trends in U. S and China still portend sustained global growth • Euro zone and EU have fallen flat Largest Economies: Nominal Retail Sales Year-to-Year Percent Change; Not Adjusted for Inflation* • U. S. growth holds at modest pace China • Japan trending with flat price growth • Renewed letup in China is concern; unlikely to persist given consumer confidence United States European Union** Euro zone*** Japan * United States , Japan and China are through February Others are through January ** European Union includes 27 countries *** Euro zone includes 17 countries © Copyright 2013 Kantar Retail Source: Euro. Stat, Japan National Statistics Center, National Bureau of Statistics of China, U. S. Department of Labor 6

Largest Markets: Price Pressures Mostly Easing Pockets of stronger inflation in China and United States • 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 Inflation Year-to-Year Percent Change, Through February* China European Union** Euro zone*** United States Japan * Through February except the Japan is through January ** European Union includes 27 countries *** Euro zone includes 17 countries © Copyright 2013 Kantar Retail Source: Euro. Stat, Japan National Statistics Center, National Bureau of Statistics of China, U. S. Department of Labor 7

Largest Markets: Core Inflation Dormant Excluding food and fuel, little inflation in other categories • All the major markets have core inflation rates at or below 2. 0% Largest Economies: Core Consumer Price Inflation Year-to-Year Percent Change, Through February* • 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 China European Union** United States Euro zone*** Japan * Through November, except the Japan is through October ** European Union includes 27 countries *** Euro zone includes 17 countries © Copyright 2013 Kantar Retail Source: Euro. Stat, Japan National Statistics Center, National Bureau of Statistics of China, U. S. Department of Labor 8

Largest Markets: Confidence Metrics Mixed Weak in Europe; picking up in China, Japan; volatile in U. S. • 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 Confidence Year-to-Year Percent Change, through February* China United States Japan Euro zone*** (right scale) European Union** (right scale) * Through February, except the United States through March ** European Union includes 27 countries *** Euro zone includes 17 countries © Copyright 2013 Kantar Retail Source: Euro. Stat, Japan National Statistics Center, National Bureau of Statistics of China, U. S. Department of Labor 9

Scorecard: European Union and Euro Zone • The euro area hurt most by Spain and Italy, but France and Germany increasingly a negative factor The Largest Economies: Selected Indicators • 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 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales 2 Consumer spending (inflation-adjusted) is estimated by Kantar Retail Y-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 1 10 © Copyright 2013 Kantar Retail Source: Euro. Stat, Japan National Statistics Center, National Bureau of Statistics of China, U. S. Department of Commerce, Conference Board, and Kantar Retail

Scorecard: China, Japan, and United States • Japan is struggling to maintain growth amid weak global demand The Largest Economies: Selected Indicators • 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 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales 2 China’s consumer spending is estimated by Kantar Retail 1 11 © Copyright 2013 Kantar Retail Source: Euro. Stat, Japan National Statistics Center, National Bureau of Statistics of China, U. S. Department of Commerce, Conference Board, and Kantar Retail

Frank Badillo Senior Economist Doug Hermanson Economist KRIQ T: +614. 355. 4019 F: +614. 355. 4059 T: +614. 355. 4044 F: +614. 355. 4059 245 First Street www. Kantar. Retailiq. com Floor 10 F +1 617 Insights 499 2723 website: Macroeconomics Cambridge, MA www. Kantar. Retailiq. com 02142 Topics & Trends > Macroeconomics © Copyright 2013 Kantar Retail