1. U.S. Economic Outlook – Hard Landing, Soft Landing, or No Landing?
National Marine Bankers Association
Key Largo, Florida
November 14, 2006
Gina Martin
Wachovia Economics

2. Economic Growth Slowing

3. Leadership Change
Out with the Old
In with the New

4. Spending Boom – Now a Bust?
Real Personal Consumption and Real Disposable Income

5. Will Consumers Crack? Housing/Home Equity Energy and Health Care Costs
Debt Payments
Net Worth/Balance Sheets
Tight Labor Market
Income Growth

6. Affordability Turning the Corner

7. Mortgage Equity Withdrawals and Income

8. Housing Wealth Effect in the U.K.

9. Debt Levels and Ability to Pay
Mortgage Delinquencies
Financial Obligations Ratios

11. Net Worth and Household Assets
Billions of Dollars

12. Wage Pressures Building
“Sustainability of Labor Arbitrage” by Everest Research Institute – outsourcing IT can last for more years in Asian mkts (India, China, Philippines), 3-6 years in Central Europe (Poland, Czech Republic), 30+ years in Mexico
Global outsourcing contract values up 173% Yr/Yr in 1Q

13. Retail Sales and Wages
3 Month Moving Averages

14. Wages Not the Only Story

15. Past Moderations
Percent Change in Spending Growth (1987, 1995)

16. Boat Sales Off of 2005 High

17. Cash is Still King
Sum of Checkable Deposits and Currency, Time and Savings Deposits,
and Money Market Funds held by the Household sector

18. Demographics
U.S. Population Distribution
2005 Marine Loan Customers

19. Where is “Neutral”?
Two Fed Presidents (Moscow, Poole), A Governor (Kohn), and Chairman Bernanke all out talking the inflation game – rates are going higher
Global inflation at a 10yr high at 2.4% from 2% last year (using global gdp deflator)
Neutral is 5%?
Watching – wage pressures as productivity slows
Global game of interest rate increases – ECB to 2.75%, South Korea to 4.25%, India to 5.75%, South Africa, Denmark, Thailand, Turkey (15%)

20. “Unwelcome Developments”

21. Inflation and Long Term Interest Rates