U.S. Economic Outlook Mark Vitner, Managing Director & Senior Economist March 12, 2013

Economic Outlook 2 Economic Growth We are more than three years into the economic recovery and there is still a considerable amount of uncertainty regarding sovereign debt issues in Europe, the federal budget deficit and the willingness of businesses and households to commit to major capital purchases. Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economic Outlook 3 Financial Crises Are Becoming More Frequent Treasury yields are currently near record low levels. We believe QE and fiscal policy uncertainty are the primary drivers of ultra-low interest rates. Source: IHS Global Insight and Wells Fargo Securities, LLC

Economic Outlook 4 Unemployment Forecast Further reductions in the unemployment rate may lead to an earlier tightening in monetary policy. Source: Federal Reserve Board, U.S. Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 5 Unemployment Seasonal factors may be overstating some of the recent improvement in the unemployment rate. Broader unemployment measures suggest that there is still considerable slack in the labor market. Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 6 Homebuilding We believe housing starts have bottomed and will increase modestly over the next few years. Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economic Outlook 7 Home Prices Home prices have firmed recently as foreclosures have become a smaller portion of overall sales. Prices will likely fluctuate along a low trajectory until more foreclosures clear through the pipeline. Source: Federal Housing Finance Agency, National Association of Realtors, S&P Corp. and Wells Fargo Securities, LLC

Economic Outlook 8 Home Prices Although the recovery is underway, major metros still have a long way to go before making up the losses sustained in the recession. Source: S&P Corp. and Wells Fargo Securities, LLC

Economic Outlook 9 Apartment Sector Apartments have seen the greatest improvement in operating fundamentals but are also seeing intense new development. Source: Reis, Inc., U.S. Department of Commerce and Wells Fargo Securities, LLC Multifamily PermitsSupply & Demand

Economic Outlook 10 Warehouse & Industrial Sector The industrial market has improved quite significantly, with far less fanfare. Large inland markets are driving demand for warehouse space. Source: PPR, U.S. Department of Commerce and Wells Fargo Securities, LLC Net AbsorptionSupply & Demand

Economic Outlook 11 Office Sector Office vacancy rates have leveled off amid tepid office employment growth. Source: Reis, Inc., U.S. Department of Labor and Wells Fargo Securities, LLC Employment GrowthSupply & Demand

Economic Outlook 12 Retail Sector The retail sector has been slow to recover, and amongst relatively slow wage and salary growth. Source: Reis, Inc., U.S. Department of Commerce and Wells Fargo Securities, LLC Income GrowthSupply & Demand

North Carolina & Charlotte

Economic Outlook 14 North Carolina Employment Picture Nonfarm payrolls remain 4.3 percentage points below their prerecession peak. Source: U.S. Department of Labor and Wells Fargo Securities, LLC

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

Economic Outlook 16 North Carolina – Labor Market Employment growth has accelerated in recent months, and the unemployment rate continues to trend down. Source: U.S. Department of Labor and Wells Fargo Securities, LLC Unemployment Rate Employment

Economic Outlook 17 North Carolina – Housing Market The housing market recovery in North Carolina remains in low gear. Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC Housing PermitsHome Prices

Economic Outlook 18 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 19 Charlotte – Labor Market Charlotte is now firmly on the road to recovery. With job growth improving and several prominent relocation announcements, population growth is ramping back up. Source: U.S. Department of Labor and Wells Fargo Securities, LLC Population Employment

Economic Outlook 20 Private Employment – Southeast The recovery in the southeast remains mixed. The majority of metro areas have recovered more than half of the jobs lost during the Great Recession. Source: U.S. Department of Commerce and Wells Fargo Securities, LLC Percent ChangesLevels

Economic Outlook 21 Charlotte – Housing Market Homebuilding in Charlotte has regained some momentum in the past year. Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC Housing PermitsHome Prices

Economic Outlook 22 Charlotte CRE – Supply & Demand Charlotte continues to attract new residents, which has given a boost to apartments. The warehouse vacancy rate continues to fall due to acceleration in net absorption. Source: Reis, Inc., PPR and Wells Fargo Securities, LLC Warehouse Apartment

Economic Outlook 23 Charlotte CRE – Supply & Demand The office and retail markets remain at odds with the recovery. Both have seen improvement, but the gains have been modest at best. Source: Reis, Inc. and Wells Fargo Securities, LLC Retail Office

Economic Outlook 24 China Fiscal Policy Uncertainty Credit Availability & Financial Reform European Debt Crisis Deleveraging Monetary Policy Geopolitical Tensions Energy/Commodity Price Swings Issues to Watch

Economic Outlook 25 Our Forecast

Economic Outlook 26 Wells Fargo Forecast: Year-Ago vs. Actual

Appendix

Economic Outlook 28 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 29 John Silvia … … Global Head of Research and Economics Diane Schumaker-Krieg ………………… …… Global Head of Research & Economics Chief Economist Mark Vitner, Senior Economist……………....………... Jay Bryson, Global Economist …………………....………. Eugenio Aleman, Senior Economist ……………. Sam Bullard, Senior Economist…………………………. Anika Khan, Senior Economist.…. Senior Economists Kaylyn Swankoski, Economic Analyst Zachary Griffiths, Economic Analyst Sara Silverman, Economic Analyst Economists Azhar Iqbal, Tim Quinlan, Economist Michael A. Brown, Economist ………………… Sarah Watt, 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 © 2013 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 Services 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 FSA 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 Flowe, Administrative Assistant