U.S. & Charlotte Economic Outlook: What’s Ahead for 2014 Mark Vitner, Managing Director & Senior Economist January 30, 2014

Economic Outlook 2 Key Macroeconomic Trends Uncertainty  The budget deal and start of the Fed taper have removed some of the uncertainty hanging over the economy. Simmering policy debates continue to weigh on investment and hiring decisions. Below Trend Growth  Below trend real GDP growth bolsters the case for the “new normal”. Expectations have been reset. Unconventional Monetary Policy  QE has boosted asset prices more than it has the economy’s underlying fundamentals. Global Economy  Recent data on the global economy are slightly more positive but remain mixed. Growth is Uneven  Energy and technology have been notable bright spots in this otherwise disappointing economic recovery.

Economic Outlook 3 U.S. GDP We see economic growth gradually regaining momentum as the housing recovery takes hold and the drag from fiscal belt tightening gradually wanes Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economic Outlook 44 Consumer Rising stock prices have helped bolster household finances at a time when real incomes are barely growing. Personal income growth remains sluggish and gains are heavily skewed toward lower and upper income households, reflecting transfer payments and capital gains. Source: U.S. Department of Commerce, Conference Board and Wells Fargo Securities, LLC Personal IncomeHousehold Wealth

Client/Prospect Name Percent change in Personal Income Q Q3 2013

Economic Outlook 66 Consumer Sluggish income growth has weighed on consumer confidence, which has held back consumer spending. Retail sales at the lower end have also been negatively impacted by tax increases. With gasoline prices falling, some of this headwind is now clearing. Source: Conference Board, U.S. Department of Commerce and Wells Fargo Securities, LLC Core Retail Sales vs. Disposable IncomeConsumer Confidence

Economic Outlook 77 Housing Market Metrics Despite some recent setbacks, we continue to look for a gradual recovery in homebuilding. Apartments are playing a larger role than in previous building cycles. Source: U.S. Department of Commerce, CoreLogic Case Shiller and Wells Fargo Securities, LLC Home PricesHousing Starts

Economic Outlook 88 Small Business Confidence With revenues growing slowly, small business owners have been reluctant to commit to significant investment in capital equipment or hire permanent workers. Source: Gallup, Wells Fargo Bank and Wells Fargo Securities, LLC Capital Spending GapSmall Business Confidence

North Carolina & Charlotte

Economic Outlook 10 North Carolina – Labor Market North Carolina’s labor market is gradually improving. The unemployment rate has declined significantly over the past year. Source: U.S. Department of Labor and Wells Fargo Securities, LLC UnemploymentEmployment

Economic Outlook 11 North Carolina Nonfarm Employment Growth Source: US Department of Labor and Wells Fargo Securities, LLC

Economic Outlook Unemployment Rate by County North Carolina – Unemployment Rate Composition North Carolina Unemployment Rate November 2013 Greater than 10.5% Less than 7.5% 7.5% to 8.5% 9.5% to 10.5% 8.5% to 9.5% Source: US Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 13 North Carolina – Home Prices & Construction With home prices improving, residential construction is slowly regaining strength. Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC Housing PermitsHome Prices

Economic Outlook 14 Charlotte – Labor Market Charlotte’s labor market continues to see improvement. Employment was likely slightly understated and may be revised upward. Source: U.S. Department of Labor and Wells Fargo Securities, LLC Unemployment Rate Employment

Economic Outlook 15 Employment by Industry Source: US Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 16 Charlotte – Home Prices & Construction Homebuilding in Charlotte has gained some momentum in the past year, and prices are rising. Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC Housing PermitsHome Prices

Economic Outlook 17 Charlotte – Market Fundamentals Charlotte has seen relatively strong population growth. Financial activities are a major driver of the metro’s economy. Source: U.S. Department of Commerce and Wells Fargo Securities, LLC GSPPopulation Growth

Economic Outlook 18 Charlotte – CRE Charlotte’s apartment market has been one of the robust markets in the nation. The office market, however, has yet to gain traction in this recovery. Source: Reis, Inc. and Wells Fargo Securities, LLC OfficeApartment

Economic Outlook 19 Charlotte – CRE Warehouse is seeing a decline in vacancy rates due to stronger absorption and little new construction activity. Retail remains relatively stagnant. Source: Reis, Inc., PPR and Wells Fargo Securities, LLC RetailWarehouse

Economic Outlook 20 China Slowdown Investor Home Buying Credit Availability & Financial Reform Manufacturing Competitiveness Deleveraging Monetary/Fiscal Policy Uncertainty Immigration Reform Energy/Commodity Price Swings Issues to Watch

Economic Outlook 21 Our Forecast

Appendix

Economic Outlook 23 Recent Special Commentary Wells Fargo Economics Group Publications To view any of our past research please visit: economics To join any of our research distribution lists please visit: economics A Sampling of Our Recent Special, Regional & Industry Commentary

Economic Outlook Wells Fargo Securities, LLC Economics Group 24 John E. Silvia … … Global Head of Research and Economics Diane Schumaker-Krieg ………………… …… Global Head of Research & Economics Chief Economist Mark Vitner, Senior Economist……………....………... Jay H. Bryson, Global Economist …………………....………. Sam Bullard, Senior Nick Bennenbroek, Currency Eugenio J. Alemán, Senior Economist………………. Anika R. Khan, Senior Economist …. Senior Economists Zachary Griffiths, Economic Analyst Sara Silverman, Economic Analyst Mackenzie Miller, Economic Analyst Blaire Zachary, Economic Analyst Economists Azhar Iqbal, Tim Quinlan, Economist Michael A. Brown, Economist ………………… Sarah Watt House, Economist……………………………. Michael T. Wolf, Economist ……………………. Economic Analysts Administrative Assistants Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through subsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A., Wells Fargo Advisors, LLC, Wells Fargo Securities International Limited, Wells Fargo Securities Asia Limited and Wells Fargo Securities (Japan) Co. Limited. Wells Fargo Securities, LLC. (“WFS”) is registered with the Commodities Futures Trading Commission as a futures commission merchant and is a member in good standing of the National Futures Association. Wells Fargo Bank, N.A. (“WFBNA”) is registered with the Commodities Futures Trading Commission as a swap dealer and is a member in good standing of the National Futures Association. WFS and WFBNA are generally engaged in the trading of futures and derivative products, any of which may be discussed within this publication. The information and opinions herein are for general information use only. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nor does Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated banks and is a wholly owned subsidiary of Wells Fargo & Company © 2014 Wells Fargo Securities, LLC. SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE Important Information for Non-U.S. Recipients For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited (“WFSIL”). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Conduct Authority. The content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive The FCA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, not will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients. This document and any other materials accompanying this document (collectively, the “Materials”) are provided for general informational purposes only. Peg Gavin, Executive Assistant. Cyndi Burris, Senior Administrative Assistant