Upstate New York Regional Advisory Council Meeting

Federal Reserve Bank of New York 33 Liberty Street

10F, Paul Volcker Boardroom Tuesday, March 22, 2016

AGENDA

10:30am Introductory Remarks Jack Gutt, Executive Vice President

10:40am-11:10am The National Economy Richard Peach, Senior Vice President

11:10am-11:30am Regional Update

Jason Bram, Research Officer 11:30am-12:00pm International Update

Matthew Higgins, Vice President 12:00pm 12:15pm 12:15pm-1:55pm

Adjourn to NWCR-10F Lunch Round Table Discussion with William Dudley, President Questions for discussion with President Dudley:

Your experience and that of your customers and suppliers can give us insight into current economic conditions. 1. Has your firm experienced an increase in demand in recent

months? 2. Has demand for your product or service increased sufficiently that you increased or plan to increase employment in 2016? 3. Has demand for your product or service increased sufficiently

that you plan to increase investment in plant and equipment in 2016?

4. Can you please give us a brief overview of the process you typically go through and the major factor you take into account when setting average wage increase and starting wages for

your workforce? In particular, how do you factor in recent and expected inflation — specifically, changes in the cost of living for your workers? 5. Has your access to credit changed in 2016? 6. How is the labor market in meeting your needs?

2:00 pm Adjourn

Upstate New York Regional Advisory Board

Federal Reserve Bank of New York 33 Liberty Street New York, NY

Tuesday, March 22, 2016

ATTENDEE LIST

Board Members Scott Bieler President & CEO West Herr Automotive Group Kenneth M. Franasiak Chairman Calamar William Gisel President & CEO Rich Products Corporation Dr. Anne Kress President Monroe Community College Jordan Levy NY Partner Softbank Capital

Melanie LittleJohn Regional Director National Grid Linda MacFarlane President & CEO Community Loan Fund of the Capital Region Martin Mucci President & CEO PayChex, Inc. Robert L. Stevenson President Eastman Machine Company Carlos Unanue President Goya de Puerto Rico, Inc.

Federal Reserve Bank of New York

William Dudley Jack Gutt Richard Peach Matthew Higgins Anika Pratt

President EVP, Head of Communications & Outreach Group SVP, Research & Statistics VP, Integrated Policy Analysis AVP, Outreach & Education

Jason Bram Luis Uranga Tony Davis Angela Sun

Research Officer, Research & Statistics Officer and Chief of Staff, Chief of Staff’s Office Director, Community Engagement, Outreach & Education Associate, Legal

US Macro Overview March 22, 2016

Overview

• US economic growth slowed over the course of 2015 due primarily to slower growth among our trading partners and substantial dollar appreciation.

– Consumer spending and housing continued to be the engines of growth. – Growth of business fixed investment slowed substantially, due in part to the sharp contraction

in oil and gas drilling activity. – Net exports exerted a substantial drag.

• The labor market is showing all the classic signs of being at or near full

employment.

• Core inflation has moved up of late. – Rent inflation continues to edge higher. – Health care price inflation has turned the corner. – Rate of decline of core goods prices has slowed substantially.

• What is in store for 2016? Is the worst of the dollar shock behind us?

– There are some “green shoots”.

2

80

100

120

140

80

100

120

140

2012 2013 2014 2015 2016

Nominal Trade-Weighted Value of US$ Index Index

Source: Federal Reserve Board

Jan-97=100

-25

-20

-15

-10

-5

0

5

10

15

20

25

-25

-20

-15

-10

-5

0

5

10

15

20

25

2005 2007 2009 2011 2013 2015

Imports and Exports of Real Goods 4 Quarter % Change 4 Quarter % Change

Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.

Exports

Imports

0

200

400

600

800

1000

1200

1400

1600

1800

0

200

400

600

800

1000

1200

1400

1600

1800

2000 2002 2004 2006 2008 2010 2012 2014 2016

Baker Hughes US Oil Rig Count Active Oil Rigs Active Oil Rigs

Source: Baker Hughes Note: Shading shows NBER recessions.

0

100

200

300

400

500

600

0

100

200

300

400

500

600

2012 2013 2014 2015 2016

Non-Investment Grade Corporate Bond Spread Basis Points Basis Points

Source: Standard & Poor, Federal Reserve Board

-1

0

1

2

3

4

5

6

-1

0

1

2

3

4

5

6

2012 2013 2014 2015 2016

Aggregate Weekly Hours Worked Y/Y % Change Y/Y % Change

Source: Bureau of Labor Statistics

Note: Shading shows NBER recessions.

Goods-Producing Industries (Left Axis)

Private Service-Providing

Industries (Right Axis)

-4

-3

-2

-1

0

1

2

3

4

5

-4

-3

-2

-1

0

1

2

3

4

5

2006 2008 2010 2012 2014 2016

Real Wage & Salary Income versus Real PCE Y/Y % Change Y/Y % Change

Source: Bureau of Economic Analysis

Note: Shading shows NBER recessions.

Real W&S Income

(Left Axis)

Real PCE (Right Axis)

-30

-20

-10

0

10

20

30

40

50

60

-30

-20

-10

0

10

20

30

40

50

60

287-603 604-679 680-749 750-801 802-839

Change in Debt 2014Q4-2015Q4 By Credit Score Quintile Percent Percent

Equifax Risk Score Quintiles*

Mortgage/ HELOC Auto Credit Card Inquiries

Note: * 2014Q4 Quintiles

Student Loan

9

0

200

400

600

800

1000

1200

1400

1600

1800

0

50

100

150

200

250

300

350

400

450

500

2000 2002 2004 2006 2008 2010 2012 2014 2016

Housing Starts Thousands, 3 MMA Thousands, 3 MMA

Source: Census Bureau Note: Shading shows NBER recessions.

Total Multifamily (Left Axis)

Total Single Family

(Right Axis)

Single Family Housing Market

3

4

5

6

7

8

9

10

11

12

13

-20

-15

-10

-5

0

5

10

15

20

25

2000 2002 2004 2006 2008 2010 2012 2014 2016

12 Month % Change Months

Source: CoreLogic, National Association of Realtors, via Haver Analytics Note: Shading shows NBER recessions.

Single Family House Price Index

(Left Axis)

Months’ Supply

(Right Axis)

“Normal” Range for Months’ Supply

0

0.005

0.01

0.015

0.02

0.025

0.03

0

0.005

0.01

0.015

0.02

0.025

0.03

1968 1978 1988 1998 2008

Housing Starts and Existing Homes Sales Per Capita Units Units

Source: BLS, Census Bureau, NAR

Note: Shading shows NBER recessions.

Housing Starts

Existing Home Sales

.0178 (average over 1968-2003)

.009 (average over 1968-2003)

-800-600-400-200020040060080010001200140016001800

-1000

-500

0

500

1000

1500

2000

1999 2001 2003 2005 2007 2009 2011 2013 2015

Household Formations 2 Year Avg. Change 2 Year Avg. Change

Source: Bureau of the Census Note: Shading shows NBER recessions.

Total (Left Axis)

Renter (Left Axis)

Owner (Right Axis)

500

550

600

650

700

750

800

500

550

600

650

700

750

800

1999 2001 2003 2005 2007 2009 2011 2013 2015

About 35 to 40 Million People

Credit Score at Mortgage Origination: All First Mortgages Credit Score Credit Score

Source: FRBNY Consumer Credit Panel

Median

10th Percentile

25th Percentile

14

-25

-20

-15

-10

-5

0

5

10

15

20

25

-25

-20

-15

-10

-5

0

5

10

15

20

25

2005 2007 2009 2011 2013 2015

Bank Assets: Domestically and Foreign Chartered Banks % Change Year-to-Year % Change Year-to-Year

Source: Federal Reserve Board Note: Shading shows NBER recessions.

Commercial and Industrial Loans

(Left Axis)

Residential Real Estate Loans (Right Axis)

Commercial Real Estate Loans

(Left Axis)

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

60 65 70 75 80 85 90

Quarterly data1980Q1 – 2007Q4

Equipment Investment Spending and Capacity Utilization Real Business Investment in New Equipment (% Change – Year to Year)

Real Business Investment in New Equipment (% Change – Year to Year)

Source: Federal Reserve Board, Bureau of Economic Analysis

Manufacturing Capacity Utilization (Percent of Capacity)

2015Q4:

(76.0, 1.0)

16

-5

-4

-3

-2

-1

0

1

2

3

4

5

-8

-6

-4

-2

0

2

4

6

8

10

2000 2002 2004 2006 2008 2010 2012 2014 2016

Real Government Consumption and Gross Investment 4 Quarter % Change 4 Quarter % Change

Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.

Federal (Left Axis)

State & Local (Right Axis)

0

2

4

6

8

10

12

56

58

60

62

64

66

68

2000 2002 2004 2006 2008 2010 2012 2014 2016

Percent Percent

Source: Bureau of Labor Statistics, via Haver Analytics Note: Shading shows NBER recessions.

Labor Force Participation Rate

(Left Axis)

Unemployment Rate

(Right Axis)

Employment-Population Ratio

(Left Axis)

Labor Market Indicators

0

2

4

6

8

10

12

60

65

70

1955

1959

1963

1967

1971

1975

1979

1983

1987

1991

1995

1999

2003

2007

2011

2015

Labor Share of National Income and Unemployment Percent Rate

Source: Bureau of Economic Analysis, BLS Note: Shading shows NBER recessions.

Labor Share of National Income

(Left Axis)

Unemployment Rate

(Right Axis)

-2

-1

0

1

2

3

4

5

-2

-1

0

1

2

3

4

5

2000 2002 2004 2006 2008 2010 2012 2014 2016

12 Month % Change 12 Month % Change

Source: Bureau of Economic Analysis, via Haver Analytics Note: Shading shows NBER recessions.

Total PCE

Core PCE

FOMC Objective

PCE Deflator

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

-3

-2

-1

0

1

2

3

4

2000 2002 2004 2006 2008 2010 2012 2014 2016

CPI Inflation: Core Goods and Core Services 12 Month % Change 12 Month % Change

Source: Bureau of Labor Statistics Note: Shading shows NBER recessions.

Core Goods (Left Axis)

Core Services (Right Axis)

-1

0

1

2

3

4

5

6

7

8

9

10

11

12

2000 2002 2004 2006 2008 2010 2012 2014 2016

Rental Vacancy Rate and Rent of Primary Residence Percent 12 Month % Change

Source: Census Bureau, BLS Note: Shading shows NBER recessions.

Rental Vacancy Rate

(Left Axis)

Rent of Primary Residence (Right Axis)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Personal Consumption Expenditures: Health Care Price Index 12 Month % Change 12 Month % Change

Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.

17% of total PCE deflator 19% of core PCE deflator

0

1

2

3

4

0

1

2

3

4

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

TIPS-based Inflation Expectations Percent Percent

Source: Federal Reserve Board

Note: Dashed lines represent 2 standard

deviations from the mean.

5-10 Years

2011 – Present Average

2.44

3.22 (+2 SD)

1.65 (-2 SD)

(As of 3-1-16)

0

50

100

150

200

250

300

350

400

450

0

50

100

150

200

250

300

350

400

450

2012 2013 2014 2015 2016

Energy, Industrial Metals and Livestock Level Level

Source: Standard & Poor’s

Note: Shading shows NBER recessions.

Index Dec-31-1969=100

Energy (Left Axis)

Industrial Metals (Right Axis)

Livestock (Left Axis)

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2012 2013 2014 2015 2016

Industrial Production: Manufacturing Y/Y % Change Y/Y % Change

Source: Federal Reserve Board

Note: Shading shows NBER recessions.

Overview of the Regional Economy Presentation to the Upstate New York Regional Advisory Board Jason Bram, Research Officer March 22, 2016

The views expressed here are those of the presenter and do not necessarily represent the views of the Federal Reserve Bank of New York or the Federal Reserve System.

Overview of Regional Conditions

• Recent benchmark revisions show slower job growth in upstate New York, while home prices remain buoyant.

• New York City’s economy continues to grow briskly.

• New Jersey’s economy is looking a bit stronger after benchmark revisions.

• Puerto Rico’s economy continues to languish at depressed levels.

FEDERAL RESERVE BANK OF NEW YORK 2 2

80

90

100

110

120

130

2007 2008 2009

Shading indicates NBER recession

2010 2011 2012 2013 2014 2015 2016 2017

New York State

New Jersey

New York City

Puerto Rico

Regional Economic Activity Index of Coincident Economic Indicators (CEI)

Index (Dec2007=100)

Dec

Source: Federal Reserve Bank of New York 3

88

92

96

100

104

2007 2008 2009

Shading indicates NBER recession

2010 2011 2012 2013 2014 2015 2016 2017

New York State

New York City

United States

New Jersey

Puerto Rico

108

Feb

112

116

Private-Sector Employment Seasonally Adjusted Index

Index (Dec2007=100)

Source: Bureau of Labor Statistics and Moody's Economy.com 4

Employment Growth in Upstate NY Before and After Benchmark Revisions

5 Source: New York State Department of Labor, Bureau of Labor Statistics, and Moody's Economy.com

2,175

2,200

2,225

2,250

2,275

2,300

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Thousands

Upstate NY Pre Revision

Upstate NY Post Revision

Jan

Dec

Shading indicates NBER recession

Employment Growth in Upstate NY Before and After Benchmark Revisions

6 Source: New York State Department of Labor, Bureau of Labor Statistics, and Moody's Economy.com. Note: Employment growth calculated as percent change between 2014 and 2015 annual total employment.

1.6

1.3 1.2

0.9

0.7

-0.4

0.5

1.1

0.4

0.2 0.1

-1.1

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Buffalo Albany Rochester Utica Syracuse

Pre Revision Change Post Revision Change

Percent

Binghamton

Employment Growth in New York City Before and After Benchmark Revisions

7 Source: New York State Department of Labor, Bureau of Labor Statistics, and Moody's Economy.com

3,600

3,800

4,000

4,200

4,400

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Thousands

New York City Pre Revision

New York City Post Revision

Shading indicates NBER recession

Jan

Dec

Employment Trends in Puerto Rico Before and After Benchmark Revisions

8 Source: Bureau of Labor Statistics and Moody's Economy.com

850

900

950

1,000

1,050

1,100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Thousands

Puerto Rico Pre Revision

Puerto Rico Post Revision

Jan

Dec

Shading indicates NBER recession

-60

-40

-20

0

20

40

60

2007 2008 2009

Shading indicates NBER recession

2010 2011 2012 2013 2014 2015 2016 2017

Empire State Manufacturing Survey

Business Leaders Survey

(Service Sector)

Current Economic Conditions FRBNY Business Surveys, Current Conditions

Diffusion Index

Mar

Source: Federal Reserve Bank of New York 9

For more detail on these two surveys, please see https://www.newyorkfed.org/survey/business_leaders/bls_overview and https://www.newyorkfed.org/survey/empire/empiresurvey_overview.html

Superstorm Sandy

March 2016 Supplementary Questions FRBNY Business Surveys

Source: Federal Reserve Bank of New York 10

Empire State Manufacturing Survey

Business Leaders (Service Sector) Survey

Mean Median Mean Median

Compensation your firm will pay per employee (for wages and benefits) 2.79 3.00 3.44 3.00

Prices your employees will pay (for goods and services where they live) 2.27 2.00 2.69 2.00

Prices U.S. consumers will pay (for goods and services ) 2.03 2.00 2.64 2.00

By what percentage do you expect each of the following to change over the next 12 months?

For full report, please see https://www.newyorkfed.org/medialibrary/media/survey/business_leaders/2016/2016_03supplemental.pdf

60

70

80

90

100

110

2006 2007 2008 2009

Shading indicates NBER recession

2010 2011 2012 2013 2014 2015 2016 2017

United States

Downstate NY

Upstate NY

Home Prices CoreLogic Home Price Index, Seasonally Adjusted

Index (Mar2006=100)

Jan

Source: CoreLogic Home Price Index (including distressed sales) 11

60

70

80

90

100

110

120

130

2006 2007 2008 2009

Shading indicates NBER recession

2010 2011 2012 2013 2014 2015 2016 2017

United States

Albany

Rochester

Buffalo

Home Prices CoreLogic Home Price Index, Seasonally Adjusted

Index (Mar2006=100)

Jan

Source: CoreLogic Home Price Index (including distressed sales)

Syracuse

12

Global Economic Outlook

Upstate New York Regional Advisory Board Matthew Higgins, March 2016

Roadmap Foreign advanced economies’ struggle to escape

“lowflation”

Political economy risks in Europe

Market and economic stresses facing EMEs

China’s ongoing economic slowdown and recent policy surprises

High EME corporate debt and the risk of disorderly deleveraging

0

2

4

6

8

10

12

10 11 12 13 14 15 16

Global GDP Growth Percent Q/Q-4

Emerging ex. China

China

Advanced

90

95

100

105

110

115

08 09 10 12 12 13 14 15 16

Indexes, 2008:Q1 = 100

Advanced Economy Real GDP

Japan

United States

Euro area

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

98 00 02 04 06 08 10 12 14 16 18

Euro Area: Real GDP vs. Potential Trillions of 2010 euros

Real GDP

EC Potential Estimate

Linear Trend, 1998-2005

EC forecasts

Sources: Eurostat, EC CIRCA database.

2016 2017

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

12 13 14 15 16

Percent change from year ago

G-3: Core Consumer Price Inflation

Japan

United States

Euro Area

Sources: BEA, Eurostat, BoJ. U.S. inflation measured using the PCE index.

1.7

0.8 0.7

0

20

40

60

80

100

08 09 10 11 12 13 14 15 16 17

Percent

Central Bank Credit as a Share of GDP

Japan

United States

Euro Area

Sources: BoJ, ECB, Federal Reserve. Projections assume that announced BoJ and ECB asset purchase programs proceed as planned, and that Federal Reserve credit remains constant at its current level. Nominal GDP is assumed to grow in line with current market forecasts.

AE Core Inflation Performance with Negative Policy Rates

Country Date AdoptedInitial Core

InflationCurrent Core

Inflation

Japan January 2016 0.8 0.7

Sweden Feruary 2015 0.9 1.4

Switzerland December 2014 0.2 -1.0

Denmark September 2014 1.0 1.3

Euro Area June 2014 0.7 0.8

Sources: National sources, OECD. Policy rates are as follows: Japan, marginal current account balances; Sweden, repo rate; Switzerland, 3-mo. LIBOR target; Denmark, CD rate; Euro Area, deposit rate.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2000 2002 2004 2006 2008 2010 2012 2014

Eurozone UK Canada Japan US

Bank Net Interest Margins Percent Percent

Source: Bloomberg, Federal Reserve Board

0%

10%

20%

30%

40%

50%

60%

0%

10%

20%

30%

40%

50%

60%

Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16

UK Poll: Should the UK Remain in the EU? 5-poll moving average 5-poll moving average

Source: Whatukthings.org.

Remain

Leave

Undecided

3

4

5

6

7

11 12 13 14 15 16

Percent, CY/CY

Evolution of EME Market Growth Forecasts

2014 2013

2015

2012

Sources: Blue Chip Economics, Consensus Economics. Figures are GDP-weighted averages for 24 EMEs outside China.

2016

70

80

90

100

110

120

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16

Indexes, January 2014 = 100 U.S. and EME equity performance

S&P500 FTSE EME equity index

Note: Index values are in dollar terms

-6

-4

-2

0

2

4

6

8

10

12

10 11 12 13 14 15 16

Emerging Economy GDP Growth Percent Q/Q-4

EMEs ex. China, Brazil, Russia

China

Brazil & Russia

-20

-10

0

10

20

30

40

04 05 06 07 08 09 10 11 12 13 14 15 16

Percent from year-ago month, based on 12-month sum China: Export and Import Volume Growth

Sources: China National Bureau of Statistics, BEA.

Exports Imports

0.75

0.85

0.95

1.05

1.15

1.25

4

6

8

10

12

14

16

07 08 09 10 11 12 13 14 15 16

Percent, Q/Q-4

China: GDP growth and labor market tightness

GDP growth

Job openings to seekers ratio

Ratio

Sources: National Bureau of Statistics, Ministry of Human Resources and Social Security.

-350

-300

-250

-200

-150

-100

-50

0

14 15 16

Basic points

China: Cumulative Rate and RR Cuts

Required reserve ratio

Policy Rate

80

100

120

140

160

180

200

50

60

70

80

90

100

110

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Credit to Private Nonfinancial Sector ( % GDP ) Percent Percent

Advanced

China

Other EMEs

Source: BIS.

-250

-200

-150

-100

-50

0

50

100

150

200

250

-250

-200

-150

-100

-50

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Basic Balance

Net private non-FDI capital flows

Reserves

China: Basic Balance and Net Capital Flows $U.S. billions

"Basic balance" includes current account and net FDI. Net private fon-FDI financial flows includes errors and omissions. Last data point for reserves is estimated from partial data.

6.1

6.2

6.3

6.4

6.5

6.6

6.7

Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16

China: Hypothetical Basket-Implied Exchange RateRMB per USD

Sources: Bloomberg, FRBNY calculations

Spot rate required to fix CFETS basket at level of 8/13/2015

Spot Rate (actual)

Step devaluation

Change in Private Credit to GDP Ratio End-2007 to June 2015 or 7½ years preceding crisis

0

20

40

60

80

100

120

140

160Percentage points

Sources: BIS, staff estimates.

Nonfinancial Corporate Credit by Source of Financing

0

4

8

12

16

Sources: BIS, staff estimates. Other EMEs includes India, Indonesia, Hong Kong, Korea, Malaysia, Singapore, Thailand, Brazil, Mexico, Czech Rep., Hungary, Poland, Russia, Turkey and South Africa.

$U.S. trillions, 2015:Q1

China

Domestic Banks

Domestic Debt Securities

Foreign Securities and Bank Loans

Other EMEs

$4.3

$0.9

$2.3

0 10 20 30 40 50 60 70

MexicoSouth Africa

RussiaMalaysia

South KoreaThailand

IndonesiaTurkey

IndiaBrazil

Total

Note: Represents the 1,800 most indebted companies listed on the national stock exchanges in 10 EMEs. Firms at risk have ICRs less than 2. Source: Capital IQ, IPA estimates

Petrobras

EME Corporate Debt at Risk ICRs < 2x assuming a 200 bps rate hike and 25% EBITDA decline

REFERENCE CHARTS

35

40

45

50

55

60

65

-6

-4

-2

0

2

4

6

8

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Percent SAAR

Global GDP Growth and Global Composite PMI

GDP Growth

Composite PMI

Correlation = 0.85

Sources: Markit Economics, national surveys

Jan/Feb

40.0

42.5

45.0

47.5

50.0

52.5

55.0

57.5

05 06 07 08 09 10 11 12 13 14 15 16

Diffusion Index

Emerging Market Manufacturing PMI

Source: Markit.

Average 2005 – 2008:Q1 = 53.3

Average 2012 – 2015:Q1 = 50.5

Global GDP Growth and Market Forecasts ( % CY/CY ) 2015 2016F 2017F

World 2.6 2.7 3.1

Advanced 1.8 1.8 2.0o/w: United States 2.4 2.1 2.4

Euro Zone 1.5 1.6 1.7United Kingdom 2.2 2.0 2.2Japan 0.4 0.8 0.7

Emerging Markets 3.6 4.0 4.7o/w: China 6.9 6.4 6.2

India 7.4 7.5 7.5NIE+ 1/ 2.7 2.9 3.2Russia -3.7 -1.2 1.3Brazil -3.8 -2.9 1.0Mexico 2.5 2.5 2.9

Sources: Blue Chip Economics as of March w here available, Consensus Economics as of March or February elsew here. Aggregates are dollar-GDP w eighted averages. 1/ Hong Kong, Korea, Malaysia, the Philippines, Singapore, Taiw an and Thailand.

-8-6-4-202468

1012

10 11 12 13 14 15 16

Percent SAAR and Q/Q-4

Japanese GDP Growth

SAAR Q/Q-4 Market forecast

Tōhoku earthquake VAT hike

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2010 2011 2012 2013 2014 2015 2016 2017

Oil: Supply and Demand GrowthMillions of barrels per day, 4 quarter moving average, y/y

Source: IEA. Forecast assumes OPEC ex-Iran supply continues at current rates, and Iran rejoins the market in Q3 at 0.6 mbpd . Forecast as of Feb-2015.

Current Forecast

Demand Supply

Supply forecastsas of March 2015

Demand forecastas of March 2015

Credit to the Nonfinancial Sector

0

4

8

12

16

20

24

Sources: BIS, staff estimates. Other EMEs includes India, Indonesia, Hong Kong, Korea, Malaysia, Singapore, Thailand, Brazil, Mexico, Czech Rep., Hungary, Poland, Russia, Turkey and South Africa.

$U.S. trillions

China

Corporate

Household

Government

Other EMEs

Other EMEs

China

2007:Q4 2015:Q1