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

© Copyright 2013 Kantar Retail Current Retail Conditions 2 Clear deterioration in Europe; China and U.S. a bit mixed Summary of Macro Factors Affecting Retail* Q 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

© Copyright 2013 Kantar Retail 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 Europe Persisting 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

© Copyright 2013 Kantar Retail 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.

© Copyright 2013 Kantar Retail 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 GDP Qtr-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

© Copyright 2013 Kantar Retail 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 Sales Year-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

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

© Copyright 2013 Kantar Retail 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 Inflation Year-to-Year Percent Change, Through February* Euro zone*** United States China Japan Excluding food and fuel, little inflation in other categories Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Labor European Union** * Through November, except the Japan is through October ** European Union includes 27 countries *** Euro zone includes 17 countries

© Copyright 2013 Kantar Retail 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 Confidence Year-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. Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Labor 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 Scorecard: European Union and Euro Zone 10 Source: 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 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

© Copyright 2013 Kantar Retail Scorecard: China, Japan, and United States 11 Source: 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 sales 2 China’s consumer spending is estimated by Kantar Retail

© Copyright 2013 Kantar Retail 245 First Street Floor 10 Cambridge, MA F Frank Badillo Doug Hermanson T: T: Senior Economist Economist KRIQ website: Macroeconomics Insights Topics & Trends > Macroeconomics F: F: