TRMG It’s Getting Brighter, Really, It’s Getting Brighter Tales from the Recovery of 2009 Dr. Chris Kuehl Managing Director Armada Corporate Intelligence Chief Economist National Association of Credit Managers

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The Recession of has Ended (sort of) Investor confidence has returned – hit 10,000 again for the first time in a year CMI has been rising since February and is almost at 50 PMI data has started to trend upward and is finally over 50 Housing has started to climb back to respectability – new homes are up and so are existing home sales Durable goods orders climbed on the back of automotive and aviation (but it may be short lived) Consumer activity showing some signs of life (but there is a long way to go). Retail numbers look better than before

TRMG There is Still Much to Worry About Unemployment rates are at 9.8% - just shy of the double digit level that had been predicted Commercial property is the next big issue for banks – could be a multi-billion dollar problem Commodities demand has started to increase and that is starting to put pressure on inflation Government efforts are a mixed bag at best. The stimulus package has been limited, “cash for clunkers” was too little and perhaps too late, the health care reform effort could be very expensive.

TRMG Jobless Data Overall rate of unemployment up to 9.8% - is that really significant? Joblessness as lagging economic indicator Divergence between job sectors – college educated and skilled workers at 4.7% while high school grads are at 17% and growing Huge regional disparities – Michigan at 15% and North Dakota at 4.3%, Iowa at 6.8% Sector differences – job shortages in health care and energy while bottom drops out of construction and automotive

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How Bad Was This Last Recession? Comparable to recessions in the last three decades – not necessarily the worst but some unique issues Fundamentally a bank led crisis and one that will not end without a bank recovery Worst quarters were in 2008 Q4 and 2009 Q1 – more hope for Q3 and Q4 of 2009 Factors that play into global recovery – consumer attitude, banks, foreign trade, stimulus plans and the threat of inflation

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Six Things to Keep People Awake at Night Interest rate policy – when do they go back up? The return of the oil and commodities bubbles. The recession ending while providing something else to worry about – inflation. Struggles to pay major deficit may provoke new tax efforts. Consumer attitudes are improving but performance isn’t States are in real trouble

TRMG Forecasts Interest rates will remain very low until 2010 but when they jump – they will jump fast Oil prices will remain low through the early part of 2010 but will start to spike consistently by early spring – up to between $90 and $120 per barrel

TRMG Forecasts Inflation will start with commodity demand but will not be provoked by labor demand until 2011 Consumer demand will not manifest this year and will be weak until mid 2010 Trade will provide biggest boost to US economy in the next 12 to 18 months

TRMG Four Trends Coming Out of the Recession The rise of “giganomics”. More people functioning as collection of skills available to hire – multiple employers and multiple opportunities Expanded role of government – will cure be worse than the disease when it comes to financial community – deficits will loom as next big problem The “new frugality”. Will it last? What will people really be frugal with? US no longer the economic center of the universe – Asia rising but so is Europe and Latin America

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