The Global Economic Outlook Jay H. Bryson, Managing Director and Global Economist November 17, 2015

Economics 2 Real GDP Forecast Our forecast looks for real GDP growth to remain generally solid in coming quarters Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economics 3 Real Final Sales Growth in domestic spending clearly has strengthened Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economics 4 Government Purchases Forecast The headwinds on growth from government spending have largely dissipated Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economics 5 Business Fixed Investment Forecast Business fixed investment spending should continue to grow at a solid pace, as it usually does at this point in the cycle Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economics 6 Real PCE Forecast Growth in consumer spending has ramped up in recent quarters Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economics 7 Real Net Exports Net exports likely will exert a modest drag on growth going forward Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economics 8 Eurozone GDP The economic recovery in the Eurozone should continue Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 9 Eurozone CPI The rate of CPI inflation in the euro area is well below the ECB’s target Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 10 ECB Balance Sheet The ECB likely will bolster its QE program in the near future Source: Bloomberg LP and Wells Fargo Securities, LLC

Economics 11 China Real GDP We forecast that growth in China will slow further, but that the economy will not completely implode Source: Bloomberg LP and Wells Fargo Securities, LLC

Economics 12 Contributions to Chinese Growth Chinese authorities hope to rebalance growth toward more consumer spending Source: CEIC and Wells Fargo Securities, LLC

Economics 13 China Household Assets Equities play a limited role in the allocation of Chinese financial wealth Source: CEIC and Wells Fargo Securities, LLC

Economics 14 Financial Markets The Chinese economy is largely bank financed Source: CEIC, IMF and Wells Fargo Securities, LLC

Economics 15 China Exchange Rate Chinese authorities are allowing the renminbi to depreciate slowly Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 16 China FX Reserves China has a huge warchest of foreign exchange reserves Source: Bloomberg LP and Wells Fargo Securities, LLC

Economics 17 Debt Outstanding If there is a leverage issue in the Chinese economy it resides in the non-financial corporate sector Source: CEIC, BIS and Wells Fargo Securities, LLC

Economics 18 Trade with China China has become a more important trading partner for many Asian economies over the past few decades Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 19 Value Added Some, but not all, Asian economies have limited economic exposure to China Source: Organisation for Economic Cooperation and Development and Wells Fargo Securities, LLC

Economics 20 Global Value-Added The United States has about twice as much “pull” on the global economy than China Source: Organisation for Economic Cooperation and Development and Wells Fargo Securities, LLC

Economics 21 Brazil GDP The Brazilian economy is in the middle of a deep recession Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 22 Brazil Exchange Rate The Brazilian currency has weakened sharply over the past year or two Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 23 Brazil CPI Exchange rate depreciation is helping to push up the inflation rate Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 24 Brazil Policy Rate The Brazilian central bank has tightened monetary policy to keep inflation expectations in check Source: Bloomberg LP and Wells Fargo Securities, LLC

Economics 25 Mexico GDP Solid real GDP growth in the United States is helping to support economic growth in Mexico Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 26 Global Industrial Production It would take a sharp downturn in the rest of the world to have a meaningful effect on U.S. economic growth Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 27 Value Added The United States derives only 10 percent of its value added from final spending in the rest of the world Source: Organisation for Economic Cooperation and Development and Wells Fargo Securities, LLC

Economics 28 U.S. Unemployment Rate There is less slack in the labor market today Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economics 29 PCE Inflation The drop in oil prices should cause the overall rate of inflation to recede, but “core” inflation likely will remain steady Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economics 30 Import Prices CPI inflation is not highly correlated with changes in prices of imports from China Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economics 31 U.S. Interest Rates The Fed likely will begin to raise the fed funds rate later this year Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics 32 World GDP Growth The IMF does not believe that the developing world will return to pre-crisis growth rates Source: IMF and Wells Fargo Securities, LLC

Economics 33 International Economic Forecast We project that global GDP growth will strengthen a bit during the next two years Source: IHS Global Insight and Wells Fargo Securities, LLC

Economics Wells Fargo Securities, LLC Economics Group 34 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 Erik Nelson, Economic Analyst Alex Moehring, Economic Analyst Misa Batcheller, Economic Analyst Michael Pugliese, Economic Analyst Economists Azhar Iqbal, Econometrician………………… Tim Quinlan, Economist …………………… Eric J. Viloria, Currency Strategist Sarah House, Economist …………… ………… Michael A. Brown, 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. Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC’s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm which includes, but is not limited to investment banking revenue. 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 © 2015 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. For purposes of the U.K. Financial Conduct Authority’s rules, this report constitutes impartial investment research. 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, nor 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. Donna LaFleur, Executive Assistant. Cyndi Burris, Senior Administrative Assistant