Mr. Gene CollinsJohn B. and Lillian E. Neff Department of

FinanceCollege of Business and Innovation

The University of Toledo

The Immediate Global Banking Liquidity Crisis has been resolved – Slow Liquidity removal remains.

Coordinated Global Credit management efforts are working unevenly - Europe

Slow growth will likely continue through the first quarter of 2013

The increase in taxes to pay for the prior excesses has already begun

Dollar stability some strength until 2011

More consistent but relatively slow growth continues through 2012.

Bank Liquidity withdraw may need to wait until 2013 as Bank Lending improves.

Manufacturing continues to grow - small inventory rebuild – Euro jeopardizes dollar competitiveness

Housing continues to be a drag on the economy into 2012.

Government Deficits will continue to be a drag through 2012 as State and Local Governments reduce spending and Federal reduction perception improves

Relatively slow growth (1.5-3.1) continues through Q2 2013 with real unemployment slightly higher.

Bank Liquidity withdraw may need to wait until 2013 as improved Bank Lending continues.

Manufacturing continues to expand – dollar competitiveness-some setbacks from Euro

Housing continues to be a drag on the economy into 2013.

Government Deficits will continue to be a drag through 2012 stabilizing in 2013 as State and Local Governments reduce spending and Federal reduction perception improves. Draconian measures of deficit reduction will be softened by both parties (after the November elections).

The Euro Zone will hold together as the decline in the Euro improves their exports at the expense of the US. Germany fights a rear guard action but funds the Euro.

2011 2012 2011 2012Y/Y % Q1 Q2 Q3 (E)Q4 (E)Q1 (E)Q2 (E)Q3 (E)Q4 Annual Average

Real GDP 0.4 1.3 2.0 2.6 1.9 2.1 2.9 2.8 1.6 2.4Consumer Spending 2.1 0.7 2.3 2.4 2.2 2.3 2.5 2.6 1.9 2.4

Business Investment 2.1 10.3 14.8 5.1 4.4 5.3 6.8 6.1 8.1 5.7

Government Spending -5.9 -0.9 -0.1 0.0 -2.1 -1.8 -1.0 -0.6 -1.7 -1.4

Net ExportsGDP Addition -0.3 0.2 0.5 -0.2 0.1 0.2 0.6 0.0 0.0 0.2

2012 2013 2012 2013Y/Y % (E)Q1 (E)Q2 (E)Q3 (E)Q4 (E)Q1 (E)Q2 (E)Q3 (E)Q4 Annual Average

Real GDP 1.9 2.1 2.9 2.8 2.4 2.7 3.0 3.3 2.4 2.8Consumer Spending

2.2 2.3 2.5 2.6 2.3 2.6 2.9 3.2 2.4 2.7

Business Investment

4.4 5.3 6.8 6.1 5.1 5.8 6.5 6.9 5.7 6.0

Government Spending

-2.1 -1.8 -1.0 -0.6 -2.0 -1.8 -1.6 -0.8 -1.4 -1.6

Net ExportsGDP Addition

0.1 0.2 0.6 0.0 0.1 0.2 0.2 0.1 0.2 0.1

2011 Actual 2012 2011 2012Q1 Q2 Q3 (E)Q4 (E)Q1 (E)Q2 (E)Q3 (E)Q4 Annual Average

Headline CPI (Y/Y) 5.2 4.1 3.1 2.1 2.8 2.7 2.5 2.0 3.6 2.5

Core CPI (Y/Y) 1.7 2.5 2.7 1.8 2.1 2.5 2.3 1.3 2.2 2.0

2013(E)Q1 (E)Q2 (E)Q3 (E)Q4

Headline CPI (Y/Y) 2.3 2.6 2.9 3.1Core CPI (Y/Y) 1.6 2.2 2.1 2.3

2013Average

2.7

2.1

Domestic CPI will rise gradually reaching an actionable target range for the FED by Q4 2013.

Core CPI will remain under control and show a stable to upward bias.

Unemployment Rate will not be a reliable economic indicator because of participation rate variation. The percent of the population employed will continue to decline in 2012– While employment increases.

Housing price increases remain flat to weak in most areas as knock-on foreclosures from continued unemployment and underemployment increase with no further tax subsidies and established tighter underwriting.

The over built and weak economic areas will continue to see some further housing price depreciation into 2012 from foreclosure pressure.

Fed Funds rate will remain well below the Fed

0.5% target into 2013. Fed bond purchases will continue through 2012 at decreasing levels after Q3 2012 Year end Fed Funds still below ¼ %.

Direct Fed stress sector lending has ended. No major liquefying of the Fed balance sheet until Q4 2012 or 2013

The term structure of interest rates indicates low inflationary economic growth continues.

Stimulating Federal Payroll Tax Holiday oExtension of Tax reductions for another year oModest Spending Federal IncreasesoSome further Public Works InfrastructureoDeficit “Reduction” cuts will be moderated by

economic performance after November 2012 State fiscal problems a major economic

negativeoReductions in employment continues more slowlyoMore Municipal BankruptciesoCapital projects reduction slows to maintenanceoContinued tax and user fee increases continues

Annual Average Expected GDP Growth

2010 (A) 2.7 %

2011 1.6 %

2012 2.4 %

2013 2.8%

Carpe Diem

BMO Capital Markets Economics, November 25,2011 Barclays Capital Markets Research Bloomberg News, Bloomberg LLC St. Louis Federal Reserve Bank of Canada Monetary Policy Report October 2011Quarterly Report Cleveland Federal Reserve