The Economic Outlook · The Economic Outlook for the Nation 2 • The U.S. economy (real GDP) is forecasted to grow at a moderate pace of 2.3% in 2018, close to projected 2.2% growth

The Economic Outlook

Dr. George Mokrzan

Director of Economics

November 9, 2017

The Economic Outlook for the Nation

2

• The U.S. economy (real GDP) is forecasted to grow at a moderate pace of 2.3% in

2018, close to projected 2.2% growth in 2017, and up from 1.6% in 2016.

• Consumer spending is expected to continue a gradual moderating trend.

Consumers are benefitting from strengthened labor markets, solid overall finances

and relatively strong consumer confidence. However, consumer pent-up demand

has been easing, and personal income growth has been slowing.

• Business Equipment and Exports are expected to continue to recover from

weakness in 2015 and 2016. A strong international economy is supporting

commodity prices as well as export growth. Manufacturing is the strongest overall

sector in 2017. Agricultural prices should benefit from rising world economic growth.

• After 2 slow years, inflation is expected to return to 2.0% in 2017, and 2.2% next

year. Both short-term and long-term interest rates are probably headed upwards,

but the magnitude has a high degree of uncertainty. With respect to the Fed and

interest rates, our view is that the risks for the Fed Funds rate target and overall

market interest rates are to the upside, which will largely depend on the net

stimulatory impact of potential fiscal policy change by the new administration and

Congress.

Economic Activity Volatile, but Strongest Overall since August 2005

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Historical Data Source: Institute for Supply Management, Haver Analytics, Inc. Recessions shown in Grey

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Most Recent Data: October 2017

ISM Index -- Manufacturing and Non-Manufacturing Composite(Greater than 50 = Growth)

Combined Non-manufacturing & Manufacturing

New Orders for Manufacturing and Non-Manufacturing Rising

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Historical Data Source: Institute for Supply Management Haver Analytics, Inc. Recessions shown in Grey

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ISM New Orders Index (Growth Greater Than 50)

Manufacturing Non-Manufacturing

Unemployment Claims Trend Indicating Continued Economic Expansion

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Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey

Employment Growth Solid in Recovery

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Official Unemployment Rate at 4.1% and Falling

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Underemployment at 7.9% -- Lowest Since December 2006

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Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey.

Workforce Participation Has Begun to Rise in Non-retirement Ages. Potential for New Workers May be Large

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Historical Data Source: Haver, Inc., BLS, Recessions shown in Grey

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Latest month plotted: Q3 2017

Labor Force Participation Rates By Age Group (NSA)

20 - 24 Years Old 25 - 54 Years Old55 - 64 Years Old

Household Financial Obligations Ratio has Risen Somewhat, but Level Still Comparable to Early 1980s

Financial obligations

have fallen on

historically low

interest rates and

debt reductions from

historically high

levels.

10

*Financial Obligations Ratio (FOR) is an estimate of the ratio of

financial obligations payments to disposable personal income. It’s

a broader measure than the debt service ratio and includes

automobile lease payments, rental payments on tenant-occupied

property, homeowners' insurance and property tax payments.

Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey.

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18.0

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Latest data plotted: 2017-Q2

Household Debt Service Ratio (ratio of debt-service payments to disposable personal income),plus auto lease payments, rent on tenant-occupied property, homewoners' insurance and property tax

Household Financial Obligation Ratio

Debt High in All Sectors, but Households have brought down Mortgage Debt

11

Historical Data Source: Federal Reserve, Haver

Analytics, Inc., recessions shown in gray

Consumer inflation components have become increasingly disperse between goods, energy, food and services

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Historical Data Source: Haver Analytics, Inc.

Recessions Shown in Grey

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Latest data plotted: September 2017

Consumer Price Inflation12 Month Percent Change

CPI-U Services less energy services

Goods less foods and energy Owners' Equivalent Rent -- Primary Residence

Food at Home

Producer Prices Rising Broadly Again

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Producer Prices12 Month Percent Change

Final Demand Producer Prices

Final Demand Excluding Food, Energy and Services

FIBER pointing to gradually rising inflation from lowest levels since the Great Recession

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FIBER Industrial Materials Price Index Log Scale

World Commodity Prices Challenged by Slow Demand Growth and Strong Supply in recent years

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Recessions Shown in Grey; Most Recent Data: Oct. 31, 2017

Headline Inflation has Led Long-term Interest Rates

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Recessions Shown in Grey;

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Most Recent Data: September 2017

Inflation Leads Long-term Interest Rates

10-Year Treasury interest rate CPI-U 12-month Change

Real GDP Growth has been modest during the current Economic Recovery

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Real Personal Income before taxes and transfer receipts has been volatile

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Personal Income Trends Generally Upward, but real per capita disposable income growth has slowed

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Latest month plotted: September 2017

Personal Income Growth Since 2000 (Percent)

Disposable Personal Income Real (inflation adj) Disposable P. IncomePersonal Income Per Capita Real Disposable P. Income

Net Farm Income ($Billions) has struggled in Current Expansion

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Historical Data Source: FACTSET, Inc. Recessions shown in Grey; Most Recent Data: 2015

Prices Received by Farmers rising in 2017; Highly sensitive to the business cycle and world economic conditions

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Recessions in Grey

Business Sales Recovering After 2-Year Slump

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Most Recent Data: August 2017

Business Sales -- Seasonally Adjusted12-Month Percent Change

Total Business ManufacturingWholesale Trade Retail Trade

Capital Goods Orders showing nascent signs of Business Equipment Recovery in 2017

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Latest month plotted: September 2017

Non-Defense Capital Goods Excluding Aircraft12-Month Change (SA Billions$)

New Orders

Exports Growing Again as International Economy Improves

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Recessions in Grey

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U.S. Exports12 Month Percent Change

Exports, f.a.s.: Goods (SA, Millions $) Exports of Services (SA, Millions $)

The U.S. – Advanced Economy Export Growth Leader

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Recessions in Grey

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Latest month plotted: August 2017

Export Trade VolumeMonthly (January 2003 = 100)

Total Advanced Economies United States WorldEuro Area Japan

Global Growth Strongest since May 2006

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Recessions in Grey

Agricultural export prices show greater sensitivity to world economic conditions than non-agricultural export prices

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Recessions in Grey

Dollar has risen strongly and held much of its gains despite drop in 2017

On Positive Side: Strong dollar could help some emerging economies to recover, although it creates debt risks for others

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Historical Data Source: Federal Reserve, Haver

Analytics, Inc., recessions shown in gray

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Most Recent Data: November 2, 2017

Foreign Exchange Value of U.S. DollarNominal Trade-Weighted Indexes (3/73=100)

vs. Major Currencies vs. All Currencies

Most Regional States Have Grown Faster than the National Average During the Economic Recovery

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Source: Philadelphia FRB State Coincident

Indexes

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Most Recent Data: September 2017 -- Seasonally Adjusted Data

Philadelphia FRB Coincident Economic Activity Index Since End of Recession (June 2009)

Wisconsin

U.S.

Ohio Indiana Michigan Kentucky

Pennsylvania WV Illinois

Midwest Consumer Confidence in September at Highest Since 2000

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Source: Haver Analytics, Conference Board

Recessions shown in grey

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Latest month plotted: October 2017

Conference Board Consumer ConfidenceIndex 1985=100

Nation East North Central (OH,MI,IN,IL,WI)

Unemployment rates drop sharply; near their lowest points since the early 2000s in most states

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Historical Data Source: Haver Analytics, Inc.,

BLS, Recessions in Grey

September 2017

State Unemployment Decline*

Wisconsin 3.5% -5.4%

Indiana 3.8% -6.9%

Michigan 4.3% -10.6%

Pennsylvania 4.8% -3.6%

Illinois 5.0% -5.5%

West Virginia 5.1% -3.1%

Kentucky 5.2% -5.7%

Ohio 5.3% -5.4%

U.S. 4.2% -5.3%

* From end of recession June 2009

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Most Recent Data: September 2017 for States

Unemployment Rate (SA)

Michigan

Wisconsin Pennsylvania

WV

Ohio Kentucky Nation

Indiana Illinois

State Employment Has Been Growing, But at Varying Speeds

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Historical Data Source: Haver Analytics, Inc. Region: Ohio, Michigan, Indiana, Pennsylvania, West

Virginia, Kentucky, Illinois, Wisconsin

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Most Recent Data: August 2017 -- States Seasonally Adjusted Data

Percent Growth in Non-farm Payrolls since End of Recession (June 2009)

U.S.

Ohio Indiana Michigan

Kentucky Pennsylvania Illinois

Wisconsin WV

Columbus MSA Surpasses Ohio, Other Large Ohio MSAs and Nation in creating jobs in New Millennium

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Most Recent Data: August 2017 -- Seasonally Adjusted Data

Percent Growth in Non-farm Payrolls since January 2000

U.S.

Ohio Columbus MSA Cincinnati MSA Cleveland MSA

Private Sector Goods – the Strongest Growth Area of the Ohio Economy in the Recovery

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Most Recent Data: 2016

Ohio Real GSP (Chained 2009 $)Annual Rate of Change

Private Goods Private Services Ohio Total GSP

Ohio not yet experiencing the lift in exports of other states in 2017

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Most Recent Data: August 2017; Non-Seasonally Adjusted

Total Monthly Exports (Mil. $)3-Month Moving Average / Non-Seasonally Adjusted

Pennsylvania

Ohio Indiana

West Virginia Michigan

Illinois Wisconsin

Kentucky

The Philadelphia FRB Leading Indicator predicts strong regional growth in next 6 months except for Michigan and Indiana

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Source: Federal Reserve Bank of Philadelphia

Housing Markets have been generally more stable in the region than in the country

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Source: Haver Analytics, Inc.

Recessions in Grey

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Most Recent Data: Q2 2017

FHFA House Price Index - Four Quarter Percent Change

Ohio Indiana WV Illinois

Michigan Wisconsin U.S. Pennsylvania

Kentucky

Housing affordability highest in the Midwest

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Source: Haver Analytics, Inc.

National Association of Realtors (NAR)

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Most Recent Data: August 2017

NAR Composite Housing Affordability Index

Median family incomequalifies for 80% mortgage

on median priced home.

U.S. Midwest

South WestNortheast First Time Homebuyer U.S.

This publication contains general information. The views and strategies described may

not be suitable for all investors. Any forecasts presented are for illustrative purposes only

and are not to be relied upon as advice or interpreted as a recommendation. Individuals

should consult with their investment adviser regarding their particular circumstances. This

material has been prepared for informational purposes only, and is not intended to

provide, and should not be relied on for, accounting, legal, or tax advice. Contents herein

have been compiled or derived in part from sources believed reliable and contain

information and opinions that are accurate and complete. However, Huntington is not

responsible for those sources and makes no representation or warranty, express or

implied, in respect thereof, and takes no responsibility for any errors and omissions. The

opinions, estimates and projections contained herein are as of the date of this publication

and are subject to change without notice. This material is not intended as an offer or

solicitation for the purchase or sale of any financial instrument. Investing in securities

involves risk, including possible loss of principal amount invested. Past performance is no

guarantee of future results.

Data Sources: Haver Analytics, FACTSET and and other sources shown for applicable

slides

® and Huntington® are federally registered service marks of Huntington Bancshares

Incorporated. © 2017 Huntington Bancshares Incorporated.

Disclaimer

39

Documents

The Economic Outlook · The Economic Outlook for the Nation 2 • The U.S. economy (real GDP) is forecasted to grow at a moderate pace of 2.3% in 2018, close to projected 2.2% growth