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Economic Outlook

Economic Outlook. ROBERT FRY DuPONT ECONOMIST’S OFFICE. Flexographic Prepress Platemakers Association Sanibel Island, Florida February 22, 2010.

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Economic Outlook

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  1. Economic Outlook ROBERT FRY DuPONT ECONOMIST’S OFFICE Flexographic Prepress Platemakers Association Sanibel Island, Florida February 22, 2010

  2. This presentation contains forward-looking statements based on expectations, estimates and projections that are not guarantees of future performance and involve a number of uncertainties and assumptions. The content is provided “AS IS,” “AS AVAILABLE.” DuPont does not warrant the accuracy or completeness of the information, text, graphics, links, or other items contained in this communication, and DuPont expressly disclaims liability for errors or omissions in these materials. We reserve the right to make changes and corrections at any time, without notice. DuPont expressly disclaims all liability for the use or interpretation by others of information contained in this DuPont communication. Decisions based on information contained in this DuPont communication are the sole responsibility of the reader, and in exchange for using this DuPont communication the reader agrees to hold DuPont harmless against any claims for damages arising from any decisions that the reader makes based on such information. Nothing contained in this DuPont communication constitutes investment advice.

  3. Excuse me. Can you tell me where I am? You’re in a balloon.

  4. You mustbe a economist. Your answer is perfectly correct and totally useless. You must be a manager. You have a great view, but don’t know where you are.

  5. Recovery Chronology • Recovery is first apparent to economists when seasonally adjusted monthly data turn up. • Recovery becomes apparent to businesses when year-over-year growth turns positive, usually 5-6 months after the sequential upturn. • Skepticism about recovery persists among public and politicians until unemployment falls and economic activity returns to pre-recession levels. This can take years, depending on the speed of the rebound. • Markets (industries/geographies) are in various stages of “recovery.”

  6. Global economy recovering from worst recession since WW2 • Most of world is growing again. • Recovery started in developing countries of Asia and South America. • Production turned up in Japan in March 2009, in Western Europe in April 2009. • North America turned up in July 2009. • Central & Eastern Europe recovering slowly. • Question now turns to shape of recovery. • A V-shaped bottom is the historical norm, but few expected one. • Slow recovery (Nike “swoosh”) has been most common base case. • So far, recovery in industrial production is closer to a V, but going forward, V is likely to become more asymmetrical (lop-sided) than in past as growth slows. • W and √¯ are risks. • Speed of recovery will vary across industries and geographies. • “Recovery” means different things to different people.

  7. Real GDP(Annual % Change)

  8. Heads, we save Bear Stearns. Tails, we save Lehman. Hank Paulson, March 2008

  9. “I think we’ve averted” the risk of a new American depression. Ben Bernanke, March 12, 2009

  10. Gee, thanks for the housing bubble, Alan. I’m sure you can handle it, Ben. (Looks like Andrea and I sure picked the right time to sell our condo in DC.)

  11. Anything that can’t go on forever will stop. Herbert Stein, 1916 - 1999

  12. Worst US recession since WW2 has ended • US recession was been longest and deepest since Great Depression. • Real GDP declined 3.9% over four quarters. • 8.4 million jobs lost. • Recession lasted at least 18 months. • Recession probably ended in June 2009. • Unprecedented action by Fed steadied financial markets. • Stock prices bottomed in March 2009. • Unemployment claims have fallen sharply since early April 2009. • Home sales & housing starts have risen from troughs. • Vehicle sales surged in July/August 2009 and continue to trend up. • Leading indicators are up strongly.

  13. Forecasting exchange rates has a success rate no better than that of forecasting the outcome of a coin toss. -- Alan Greenspan November 19, 2004

  14. Conclusions • Leading indicators point to continued near-term growth. • No evidence of double-dip, but growth likely to slow in second half of 2010. • Rising commodity prices & surprising bottlenecks have halted decline in inflation despite slack in economy. • 2010 Central Bank challenge: Withdrawing stimulus at correct pace. • Many arguments for slow recovery are really explanations for why the recession was so severe or arguments for slow long-term growth. • √¯

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