1. The Florida Economic Environment: Outlook for Retail Sales Tony Villamil The Washington Economics Group, Inc. (WEG) Florida Retail Federation Annual Meeting The Shores Resort Daytona Beach, Florida November 12-14, 2007

2. Economic Growth Drivers of the Economy of Florida: A Framework Florida Economic Growth Driven by: State’s Business Climate US Economy & Financial Markets Developments Global Economy & Financial Markets Developments 2008 Florida Outlook Tendency Business Climate  US Econ/Fin Markets  Global Economy 

3. US Economic Driver of Florida Indicator2004200520062007 E 2008 F Risk F 1. Economic Growth (  % Real GDP) 3.63.12.92.82.0  2. Inflation (  % Core CPI/U) 2.2 2.62.31.5  3. Exports ($ Billion) 1,1571,2831,4451,5451,700  4. Imports ($ Billion) 1,7691,9972,2042,2502,300  5. Unemployment Rate (%) 5.55.14.64.55.0-5.5  Source : BEA, BLS, The Washington Economics Group, Estimates, Forecast. E= Estimate F= Forecast Risk

4. Global Economic Driver of Florida Region/Country (  GDP, %) 20052006 Projections 20072008 Developed Economies Euro Area Japan U.K. 1.5 1.9 1.8 2.8 2.2 2.8 2.6 2.7 3.0 2.5 2.0 2.5 Emerging Countries China India 10.4 9.0 11.1 10.0 11.0 9.0 10.0 8.0 Latin American Region Brazil Mexico 3.0 2.8 3.7 4.8 4.4 3.0 5.0 2.0 Source: IMF, July 2007 Outlook and The Washington Economics Group, Estimates for 2007-2008.

5. What Do US/Global/Business Climate Drivers Imply for Florida? Indicator200420052006 2007- 2008 Gross State Product (GSP) ($ Billions)607.2666.6713.5Slower Personal Income (PI) ($ Billions)565.0604.1647.6Slower Per Capita Personal Income ($)32,53434,00135,798Flat Non-Agricultural Employment7,510,1007,799,9008,007,100Slower Unemployment Rate (%)4.73.83.3Up Florida Exports ($ Billions)37.544.152.3 Double Digits (+) Florida Imports ($ Billions)43.851.157.4 Modest Slowing Total Visitors (Millions)808485* Moderate (+) Sources: Enterprise Florida, Inc., Labor Market Statistics and Visit Florida 2006 - *Preliminary.

6. From the Macro Florida Economy to Indicators of Retail Sales

7. Florida Consumer Confidence Index: Reflects Concerns on the Economic Outlook for 2008 Source: University of Florida BEBR. Data is based on December observations of each year. *2007 is based on November data.

8. $ Crude Oil/Barrel: Higher Gas Prices Likely to Follow Source: Energy Information Administration and 2007. Data is based on December observations of each year. *2007 is based on Future December Price as of 11/12/07 closing.

9. Florida Single-Family Median Home Prices: The “Net Wealth” Effect Source: Florida Association of Realtors and 2007 WEG Estimates.

10. Florida Unemployment Rate: Still Satisfactory, but Trend is Up Source: Bureau of Labor Statistics and Florida Labor Market Statistics. Data is based on December observation of each year. *2007 is based on October data.

11. Slowdown in Florida Taxable Sales in 2007 is from High-Activity Levels: Reflecting a More Subdued Economic Environment and “No Hurricanes”

12. Florida Taxable Sales* Source: Florida Economic & Demographic Research Database. *August of each year.

13. Florida Total Retail Sales % Change Total Retail Sales 20013.2 20023.3 20034.6 20049.7 20058.2 20067.0 20073.0 20084.0 Source: UCF, Sept 2007 Forecast and WEG Estimates for 2007-2008.

14. Outlook for Corporate Activities in Florida Strong Global Economic Driver Trade, goods and services (global merchandising) Financial – international private banking, Foreign Direct Investment International visitors, conferences and conventions Cluster Development (the New Florida) – the “poles” of growth Life Sciences Telecommunications Logistics Aviation Fashion and Entertainment Environmental Technologies Commercial real estate/public construction

15. Outlook for Corporate Activities in Florida (cont.) Soft Consumer-related spending Retail sales (auto dealers, furniture, appliances): “big ticket” Population-driven retail sales Residential-fixed investment (multifamily) Real estate-related manufacturing and services State and local government spending (watch clients with heavy dependence on public contracts)

16. Concluding Observations “The best of times (opportunities) and the worst of times (risks)” Fluid and uncertain outlook: a no-nonsense approach to business based on: 1. Core competencies 2. “Smart” expense management 3. Credit quality 4. Emphasis on marketing mix for “thinner consumer wallet” Property tax issues are far from resolved (business climate) Monitor/input Taxing and budget reform commission Income method for business property? Caps on local spending? Property insurance “No hurricanes” and market-based solutions Current approach relies too heavily on State (taxpayers) and …..luck!