1. NABE OUTLOOK 2004Q1 SURVEY Presented to Silicon Valley Round Table MARCH 9, 2004 Duncan H. Meldrum NABE President & Chief Economist, Air Products

2. OUTLOOK SUMMARY 2004: Strongest Real GDP growth since 1984 –2005: Growth recedes to trend Investment accelerates Employment recovers, but slowly –Held back by productivity gains & high benefit costs –Unemployment rate falls to 5.6% No inflation threat –No rise in short rates until 2004Q3 –Long rates rise with recovery Profits continue to recover –Demand expansion raises top line growth –Strong productivity gains and moderate wage gains lead to lower unit labor costs in 2004

3. REAL GDP GROWTH FEB ‘04 FORECAST: STRONGER 2004

4. MAIN SOURCES OF GDP STRENGTH LESS RELIANCE ON POLICY IN 2004 20032004 Residential InvestmentBusiness Fixed Investment Government SpendingPersonal Consumption Inventory Investment

5. REAL GDP GROWTH RATES 200320042005 REAL GDP3.14.63.8 Consumption3.13.83.5 Business Fixed Invest.2.89.89.0 Residential Investment7.63.5-2.3 Inventory Change (B00$)-$1.5$41.5$48.9 Government3.42.61.8 Exports1.910.09.9 Imports3.77.35.4

6. 2004 OUTLOOK FEB ’04 VS PREVIOUS FORECASTS

7. 2005 OUTLOOK FEB ’04 FORECAST

8. INVENTORY INVESTMENT LARGE SWING FROM 2003 TO 2004

14. INDUSTRY SURVEY SUPPORTS CAPITAL SPENDING OUTLOOK

18. EMPLOYMENT FORECAST Slow Improvement

20. SIGNIFICANT FACTORS HOLDING BACK PAYROLL HIRING (RANKED)

21. MOST IMPORTANT FACTOR DRIVING PRODUCTIVITY IN U. S.

22. PRODUCTIVITY GROWTH SLOWS But Outlook Stronger in 2004 Than in November

23. COMPENSATION PER HOUR More Modest Gain Now Expected In 2004, Stronger Gain in 2005

24. Unit Labor Costs Larger Decline Now Expected in 2004

25. AFTER TAX CORPORATE PROFITS Faster Growth Than Previous Forecasts

27. INFLATION IS NOT AN ISSUE

28. INTEREST RATE OUTLOOK First Short Term Increase In 2004Q3

29. Federal Deficit Forecast A Little Deeper in FY2004 (With Some Recovery In FY2005)

31. REAL NET EXPORTS Better Performance Expected Net Exports of Goods & Services, NIA Basis

32. FACTORS BEHIND DOLLAR’S DECLINE VS EURO (&, TO LESSER EXTENT, OTHER CURRENCIES)

37. OUTLOOK SUMMARY 2004: Strongest Real GDP growth since 1984 –2005: Growth recedes to trend Investment accelerates Employment recovers, but slowly –Held back by productivity gains & high benefit costs –Unemployment rate falls to 5.6% No inflation threat –No rise in short rates until 2004Q3 –Long rates rise with recovery Profits continue to recover –Demand expansion raises top line growth –Strong productivity gains and moderate wage gains lead to lower unit labor costs in 2004

38. JANUARY ’04 INDUSTRY SURVEY

39. JULY ‘03 INDUSTRY SURVEY