Presented by: MACROECONOMIC SCORECARD: THE AMERICAS March 2013 Economist Doug Hermanson

© Copyright 2013 Kantar Retail Current Retail Conditions 2 Consumer spending challenged by flagging confidence Summary of Macro Factors Affecting Retail* Q or Latest Available Month* * GDP, Investment and Consumer Spending are quarterly through fourth quarter of 2012; Remaining indicators are monthly through January, February or March 2013 Brazil’s growth pickup threatened by inflation, weak investment Mexico’s strong retail growth is trending weaker Canada slowed by weak exports, confidence; helped by low inflation U.S. is holding up Source: Statistics Canada, Mexico (INEGI), Brazilian Institute of Geography and Statistics, U.S. Department of Commerce and Kantar Retail

© Copyright 2013 Kantar Retail The Macro Outlook for Retailing in the Americas 3 Slow growth trend shaped by inflation, U.S. uncertainty Source: Kantar Retail Short Term (6–12 months) Long Term (2–5 years) Brazil Economy constrained by price pressures, gov’t fiscal/monetary policies Long-term growth will hinge on ability to keep price pressures in check Canada Weakness amid retreating housing market, elevated debt levels, weak exports Extent of stronger growth depends on avoiding housing/debt bubble Mexico Growth slowed by U.S. impact, inflation concerns. But outpacing region’s other economies Growth prospects relatively strong as rising costs cause U.S. firms to shift trade closer to home United States Weakness/threats offset by persisting gains in housing, investment, hiring Growth kept modest by constraints on income growth, price pressures Net Outlook Extent of region’s slower growth depends on impact of inflation in Mexico/ Brazil, and U.S. prospects Steady-to-strong growth outlook led by commodity markets. Dampened by inflation & U.S. gov’t. cuts As the region’s major trade partner, the U.S. will shape the outlook Depends on gov’t tax/spend issues Canada adds to the risks with its own housing, debt issues Brazil, Mexico 2013 prospects challenged by trade outlook, price pressures; but potential still strong in long-term

© 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 most by the euro debt crisis and emerging markets, likely in 2014 or beyond. 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. The Americas. Plan for slower or modest growth in Mexico, Canada and Brazil in the short term. Canada and Mexico facing modest/weak export demand from U.S. Brazil’s price pressures will be drag and present big downside risks Canada also is grappling with frothy housing and debt markets United States. Expect U.S. retail sales growth to keep a respectable pace, but a notch below last year.

© Copyright 2013 Kantar Retail The Americas: GDP Trends Mixed in Q4 5 Brazil’s Q4 gain was mixed; weak investment still a challenge Mexico likely to let up some, but still outpace others Softness in Canada Underlying U.S. growth trends stronger than suggested in Q4 Source: Statistics Canada, Mexico (INEGI), Brazilian Institute of Geography and Statistics, U.S. Department of Commerce and Kantar Retail Growth picks up in Brazil, Mexico; weakens in U.S., Canada The Americas: Inflation-Adjusted GDP Qtr-to-Qtr Growth, Seasonally-Adjusted Annualized Rate

© Copyright 2013 Kantar Retail The Americas: Big Growth Range for Retail Sales 6 Brazil and Mexico’s retail sales letting up from very strong pace U.S. holding at a steady pace is encouraging given uncertainty Canada dragged weaker by homegoods channels The Americas: Nominal Retail Sales Year-to-Year Percent Change**; Not Adjusted for Inflation* Brazil, Mexico letting up; growth weak in Canada United States Brazil Canada Mexico Through January, except the United States is through February **Growth is a three-month moving average Source: Statistics Canada, Mexico (INEGI), Brazilian Institute of Geography and Statistics, U.S. Department of Commerce and Kantar Retail

© Copyright 2013 Kantar Retail The Americas: Price Inflation Trends Diverge 7 Brazilian inflation signals need to slow or change economic policy Mexico’s price pressures have tailed off, but may be picking back up This contrasts with modest inflation in Canada, United States—despite recent uptick The Americas: Consumer Price Inflation Year-to-Year Percent Change, Through February Inflation rising at a dangerous pace in Brazil United States Brazil Canada Mexico Source: Statistics Canada, Mexico (INEGI), Brazilian Institute of Geography and Statistics, U.S. Department of Commerce and Kantar Retail

© Copyright 2013 Kantar Retail The Americas: Core Price Trends 8 Brazil’s core inflation trend is less alarming, but still elevated Mexico’s inflation may be letting up in terms of core prices excluding food, fuel U.S. and Canada trends much more benign; boosts unit demand The Americas: Core Consumer Price Inflation Year-to-Year Percent Change, Through February U.S. and Canada are a contrast to Mexico, Brazil United States Brazil Canada Mexico Source: Statistics Canada, Mexico (INEGI), Brazilian Institute of Geography and Statistics, U.S. Department of Commerce and Kantar Retail

© Copyright 2013 Kantar Retail The Americas: Consumer Confidence 9 U.S. confidence volatile in face of tax/spend issues Canada holding up despite weak housing, U.S concerns Brazil confidence sagging amid weaker retail sales, elevated inflation Mexico holding up The Americas: Consumer Confidence Indices through February* Brazil trending weaker; Canada, U.S. volatile, if not weaker United States Brazil Canada Mexico Through February, except the United States is through March Source: Statistics Canada, Mexico (INEGI), Brazilian Institute of Geography and Statistics, U.S. Department of Commerce and Kantar Retail

© Copyright 2013 Kantar Retail Current Retail Conditions: Brazil, Mexico 10 Brazil and, to lesser degree, Mexico show troubling signs in terms of inflation indicators Brazil also is showing weak investment trends as rising wages dampen competitiveness These factors may increasingly hurt retail sales growth The Americas: Selected Indicators Q or Latest Available Month 1 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales 2 Estimated by Kantar Retail based on reported inflation-adjusted growth 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 Source: Statistics Canada, Mexico (INEGI), Brazilian Institute of Geography and Statistics, U.S. Department of Commerce and Kantar Retail

© Copyright 2013 Kantar Retail Current Retail Conditions: Canada, U.S. 11 Weak exports and homebuilding a drag on Canada U.S. positive in some key measures, but tax/spend issues have tripped up confidence Muted core and food price inflation is a positive for unit demand growth in both countries The Americas: Selected Indicators Q or Latest Available Month 1 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales 2 Estimated by Kantar Retail based on reported inflation-adjusted growth 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 Source: Statistics Canada, Mexico (INEGI), Brazilian Institute of Geography and Statistics, U.S. Department of Commerce and Kantar Retail

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