2011 AGMA/AGBA Annual MeetingApril 15 2011April 15, 2011

James P. MeilVice President and Chief Economist

2011 Eaton Corporation. All rights reserved.

Key Points on Global EconomyKey Points on Global Economy• Tailwinds and headwinds gaining strength• Tailwinds

• U.S. results solid or surprises in employment, PMIs, auto sales, retail sales• Europe manufacturing (IP & PMI), orders, cap goods, auto, confidence all strong • China Feb mfg up 14.1%, Brazil second wind, Russia gaining

• Headwinds• Headwinds• Japan & Mideast geopolitics & oil fallout pose a rising risk to growth• Other commodity prices rising due to demand, links to oil, inflation/risk hedge (gold)• Rumblings of dissent, break with status quo from Tunisia to Wisconsin to D.C.• Cenbanks seeing inflation and tightening on it – except in U.S.

• Construction, industrial, transport & capital goods markets• U.S. resi prices soft; U.S. & Europe non-resi should bottom in 2011 midyear • Most global capital equipment categories showing solid gains• Most global capital equipment categories showing solid gains• Transportation markets rebounding, but Japan supply chain a shock on 2011q2

Recovery has more risk fatter tails on the bell curve

2Updated: April 11, 2011

Recovery has more risk – fatter tails on the bell curve

Drivers for recent pickup in global momentummomentum

• U.S.N b 2 El ti ( idl k i d)• November 2 Elections (gridlock is good)

• November 3 FRB Quantitative Easing• Dec 16 Congress passes tax compromise

With b d i ti i i bi l• With bonus depreciation provision, a big plus

• EuropeD J F b lt t f d h i• Dec, Jan, Feb results strong for orders, purchasing managers indexes and business confidence, especially Germany

• Ireland, Portugal, Spain damage confined (so far)

• BRICs• Jan, Feb data releases generally on or above expectation

3Updated: April 7, 2011

Much happy news – but not allppy

U S E iti

Not-so-happyHappy• U.S. Equities • Global PMIs – Mfg and

Services

• Japan quake & impacts• Mideast unrest

U S S i & UK h iServices• U.S. Retail Sales• Global Equipment

• U.S., Spain & UK housing• Global gov’t finance

• EuropeInvestment• Global Corporate Cash

Flow & Profitability

• Europe• U.S. Federal• U.S. State & LocalFlow & Profitability

• U.S. Inflation • Cenbank tightening• Commodity prices

4

• ROW InflationUpdated: April 7, 2011

U.S. Stock Market – S & P 500U.S. Stock Market S & P 5001,600

1,500

1,600

1,500

1,400

1,300

1,200

1,400

1,300

1,200

1,100

1,000

1,100

1,000

, Log

Sca

le

900

800

900

800

Inde

x

700

600

700

600

5

Source: Standard and Poor’sData through week of April 8, 2011

600 60096 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

U.S. 10-Year Treasury Rates and90-Day T-bills14.0 14.0

90 Day T bills

10.0

12.0

10.0

12.0

10-Year Treasury Rate

6.0

8.0

Perc

ent

6.0

8.010 Year Treasury Rate

2.0

4.0P

2.0

4.0

90-Day T-Bill Rate

-2.0

0.0

-2.0

0.090 Day T Bill Rate

6

85 87 89 91 93 95 97 99 01 03 05 07 09 11

Source: U.S. Federal Reserve Board; 10-Year Treasury Rate throughApril 2011; 90-Day T-Bill Rate through March 2011

U.S. Federal Reserve Senior Loan Officers’ Survey

30 30

Officers SurveyNet % easing less tightening standards – C & I loans

01020

01020Large and

mid-market

ge

-30-20-10

0

-30-20-100

Small

Per

cent

ag

-60-50-4030

-60-50-4030

Net

P

Average response to surveyover 22 years = -9.3

-90-80-7060

-90-80-7060

7

-9090 92 94 96 98 00 02 04 06 08 10 12

-90

Source: U.S. Federal ReserveData updated through January 2011 quarterly survey

Eurozone Yield SpreadEurozone Yield Spread

5.5

6.0

5.5

6.0

4 0

4.5

5.0

5.5

4 0

4.5

5.0

5.5

10 year rate

3.0

3.5

4.0

rcen

t (%

)

3.0

3.5

4.0

Percent (

1.5

2.0

2.5Per

1.5

2.0

2.5

%)

Refi (ECB policy) rate 3 month rate

0.0

0.5

1.0

0.0

0.5

1.0rate

8

Source: Eurostat via Haver AnalyticsData through April 2011

99 00 01 02 03 04 05 06 07 08 09 10 11

ECB Lending SurveyNet % easing less tightening standards

10

20

Net % easing less tightening standards

-10

0

10

S ll/Midge

40

-30

-20Small/Mid

Per

cent

ag

-60

-50

-40

Net

P

-80

-70Large

9

-9003 04 05 06 07 08 09 10 11

Source: European Central BankData updated through January 2011 quarterly survey

Global Oil and U.S. Gasoline Prices

4.70 140150

B t C d ( i ht)

Global Oil and U.S. Gasoline Prices

3.70

4.20

asol

ine

Pric

e

100110120130

Br

Brent Crude (right)

2 70

3.20

Self-

serv

Ga

allo

n)

708090100 rent C

rude S($ / bar r

1 70

2.20

2.70

etai

l Reg

ular

($

/g

40506070 pot Price

rel)

1.20

1.70

Wee

kly

Re

102030Retail Regular

Gasoline Price (left)

10

0.7096 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

0

Source: U.S. DOE, Energy Information AgencyWeekly data through April 11, 2011

Mideast status quo challengedq gClockwise top left:

Libya – Muammar GaddafiGaddafi

Syria - Bashar al-Assad

Bahrain - Sheikh Hamad bin Isa Al-Khalifah

Yemen - Ali Abdullah Saleh

11

Global Commodity Price Trends –Copper and Nickel25.0 5.0

Copper and Nickel

C ( i ht)20.0

4.0

4.5

C

Copper (right)

10 0

15.0

kel (

$/lb

.)

3.0

3.5

Copper ($/

5.0

10.0

Nic

k

2.0

2.5

/lb.)

0.0

05 05 05 -05 05 05 06 -06

-06

-06

-06 07 07 07 -07

-07 07 08 -08

-08 08 -08 09 09 -09

-09

-09 09 10 10 -10 10 10 11 -11

1.0

1.5Nickel (left)

12

Jan-

Mar

-M

ay-

Jul -

Sep-

Dec-

Feb-

Apr -

Jun-

Aug-

Nov-

Jan-

Mar

-M

ay-

Aug -

Oct

-De

c-Fe

b-Ap

r -Ju

l-Se

p-No

v-Ja

n-M

ar-

Jun-

Aug-

Oct

-De

c-M

ar-

May

-Ju

l -Se

p-De

c-Fe

b-Ap

r -

Source: London Metal ExchangeDaily data through April 11, 2011

Metric for Japan economic riskNikkei 225 Index over last 3 monthsNikkei 225 Index over last 3 months

13

Source: U.S. Department of AgricultureData through April 6, 2011

Value of the Dollar: U.S. $/Euro, FRB Inflation-Adjusted Broad Index

1.15

1.25 0.80

0 90

Inflation Adjusted Broad IndexFRB Broad IndexReal US$ Value

0 95

1.05

1.15

dex

0.90

1.00

1 10 U

(left axis)

0 75

0.85

0.95

Dol

lar I

nd 1.10

1.20

1 30

US$ / Euro

1990-2010Averages

0.65

0.75

Fed 1.30

1.40

o

Euro(right axisInverted)

0.45

0.55

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

1.50

1.60

Inverted)

14

9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 1 1

Sources: U.S. Federal Reserve Board data through March 2011; International Monetary Fund data through April 2011(pre-1999 ‘synthetic Euro’ estimated from 12 currency basket)

NFIB Small Business Optimism IndexNFIB Small Business Optimism Index110 110

100

105

00)

100

105

95

100

(198

6 =

10

95

100

90Inde

x

90

80

85

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 1280

85

15

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: NFIBMonthly data through March 2011

ISM Purchasing Managers’ Index(manufacturing)(manufacturing)

65 65

55

60

ral 55

60

45

50

50 =

Neu

tr

45

50

40

45

Inde

x 5

40

45

30

35

30

35

16

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: ISM Manufacturing Report on BusinessMonthly data through March 2011

Manufacturing Industrial Production IndexesNon-durables and Durables Industries

125130

125Durables

Non durables and Durables Industries

sion

sion

110115120

100

115

Durables

Rec

ess

Rec

es

95100105

2002

= 1

95

105

Nondurables

808590

Inde

x

85Recent Growth Trend (Annualized % )

657075

65

75Non-dur Durables12 Mos (Feb11/Feb10) 2.9 10.16 Mos (Feb11/Aug10) 2.7 12.0

Recent Growth Trend (Annualized % )

17

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: Federal Reserve BoardData through February 2011

U.S. Housing StartsU.S. Housing Starts

2.0 2.0essi

on

essi

on

essi

on

1.6 1.6

Rec

e

Rec

e

Rec

e

3 m

ma)

1.2 1.2

its (S

AAR

,

0.8 0.8

Total

ions

of U

ni

0.4 0.4Single FamilyM

illi

18

Source: U.S. Census BureauData through February 2011

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

U.S. Light Vehicle Retail Sales

1921

3 m

ma)

1921

U.S. Light Vehicle Retail Sales

131517

s (S

AA

R, 3

131517

Auto Sales SAAR in last 4 mos:

Dec 12 5 / Jan 12 5 / Feb 13 4 / Mar

91113

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Mill

ions

91113Dec 12.5 / Jan 12.5 / Feb 13.4 / Mar

13.1

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

300040005000

) 300040005000Detroit-3 average incentive per vehicle

$3193/vehicle in January 2011$3185/vehicle in February 2011$3039/ hi l i M h 2011

0100020003000

($)

0100020003000$3039/vehicle in March 2011

19

095 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

Sources: Ward’s Automotive and Motor IntelligenceData through March 2011

ATA Truck Tonnage Index and U.S. Manufacturing Industrial Production

165

175

165

175

Manufacturing Industrial Production

Mfg IP ATA Tonnage12 Mos (Jan11/Jan10) 6 0 3 4

Recent Activity Trends (Annualized %)

155

165

A, 3

mm

a)

155

165

ATA Truck Tonnage Index

12 Mos (Jan11/Jan10) 6.0 3.46 Mos (Jan11/Jul10) 4.7 6.8

135

145

93 =

100

(SA

135

145IndexManufacturing

IndustrialProduction

115

125

Inde

x 19

9

115

125

95

105

95

105

20

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Sources: American Trucking Association and U.S. Federal Reserve BoardTonnage data through January 2011; IP data through February 2011

NAFTA Class 8 Trucks

40

45

40

45Orders

30

35

40

mm

a)

30

35

40

20

25

30

nds

(SA

, 3

20

25

30

10

15

Thou

san

10

15

0

5

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 120

5Build Actual &Build Plan

21

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: ACT; Orders and Build data through February 2011Plan forecast through August 2011

NAFTA Class 6-7 Buses & Trucks(excluding RVs)

2224

2224

Orders

(excluding RVs)

161820

3 m

ma)

161820

121416

ands

(SA

, 3

121416

68

10

Thou

s

6810

246

246

Build Actual &Build Plan

22

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12Source: ACT; Orders and Build data through February 2011Plan forecast through August 2011

U.S. Construction & Agricultural Machinery

4 0

4.5

4 0

4.5Construction Equipment

U.S. Construction & Agricultural Machinery

3 0

3.5

4.0

ma)

3 0

3.5

4.0q pOrders

Construction Ag12 Mos (Feb11/Feb10) 60.3 17.06 M (F b11/A 10) 53 1 11 9

Shipments Trend (Annualized %)

2.5

3.0

ions

(3 m

2.5

3.06 Mos (Feb11/Aug10) 53.1 -11.9

1.5

2.0

$ B

illi

1.5

2.0

A i l l ECE

0.5

1.0

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 120.5

1.0Agricultural Eq. Shipments

Shipments

23

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: U.S. Census BureauData through February 2011

U.S. Mining, Oil Field & Gas Field Machinery

2 7

3.0

2 7

3.0

Field Machinery

12 Mos (Feb11/Feb10) -13.9Shipments Trend (Annualized %)

2 1

2.4

2.7

ma)

2 1

2.4

2.7Shipments

6 Mos (Feb11/Aug10) -1.5

1.5

1.8

2.1

s of

$ (3

mm

1.5

1.8

2.1

0.9

1.2

1.5

Bill

ion

0.9

1.2

1.5Orders

0.3

0.6

0.3

0.6

24

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: U.S. Census BureauData through February 2011

U.S. Industrial Machinery4.5 4.5

y

3.5

4.0

ma) 3.5

4.0Orders

2 5

3.0

s of

$ (3

m

2 5

3.0

2.0

2.5

Bill

ions

2.0

2.5Shipments

1.0

1.5

1.0

1.512 Mos (Feb11/Feb10) 12.56 Mos (Feb11/Aug10) 35.4

Shipments Growth Trend (Annualized %)

25

092 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

Source: U.S. Census BureauData through February 2011

U.S. Metalworking MachineryU S eta o g ac e y2.8 2.8

Orders

2.4

2.6

ma) 2.4

2.6

2 0

2.2

s of

$ (3

m

2 0

2.2

1.8

2.0

Bill

ion

1.8

2.0

1.4

1.6

1.4

1.6Shipments12 Mos (Feb11/Feb10) 7.0

6 Mos (Feb11/Aug10) -15.5

Shipments Trend (Annualized %)

26

92 94 96 98 00 02 04 06 08 10 12Source: U.S. Census BureauData through February 2011

EU-27 Manufacturing IPEU 27 Manufacturing IP120 120

110

MA

110

ind

Consumer Nondurables

100

05=1

00, 3

-MM

100

dex 2005=100

Consumer Durables

90

inde

x 20

0

90

0, 3-MM

ACapital Equipment

Durables

Intermediate Goods

70

80

70

80Type

Capital Equipment Durables Nondurables

Intermed. Goods

12 Mos (Jan11/Jan10) 14.0 2.0 2.3 9.06 Mos (Jan11/Jul10) 13.3 -3.0 0.2 5.3

IP Growth Trends, (Annualized %)

27

Source: Eurostat via Haver AnalyticsData through January 2011

7095 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

70

Brazil Manufacturing Industrial Productiong

12 Mos (Feb11/Feb10) -0.3Mfg IP Growth Trend (Annualized %)

6 Mos (Feb11/Aug10) 3.3

28

Source: IGBEData through February 2011

China Industrial Production

220

240

220

240

Oct-10 Nov-10 Dec-10 Jan-11 Feb-11Y/Y Ind Prod Growth

180

200

220

A

180

200

22013.1% 13.3% 13.5% 13.5% 14.9%

140

160

(200

5 =

100)

, SA

140

160

80

100

120

Inde

x (

80

100

12015% CAGR Trend Line

40

60

80

40

60

80

29

00 01 02 03 04 05 06 07 08 09 10 11

Source: Chinese National Bureau of Statistics; Eaton Economics Data through February 2011

Japan Manufacturing IP

110

115

110

115

p g

12 Mos (Feb11/Feb10) -0.46 Mos (Feb11/Aug10) 7 7

Japan IP Growth Trend (Annualized %)

100

105

(SA

)

100

105

6 Mos (Feb11/Aug10) 7.7

90

95

2005

= 1

00 (

90

95

75

80

85

Inde

x, 2

75

80

85

65

70

75

65

70

75

30

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Source: MITI (Ministry of Trade and Industry)Data through February 2011

Global Macroeconomic OutlookGDP and Mfg Industrial ProductionGDP and Mfg Industrial Production

2010 2011 2012Real GDP Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Actual Forecast Forecast

act act f f f f f f

20112010 2012

World 3.9 2.5 3.7 2.6 3.8 3.1 4.0 3.1 4.0 3.3 3.6United States 2.6 3.1 2.6 2.7 2.6 3.3 3.4 2.7 2.9 2.7 3.1Brazil 6.2 5.4 6.7 2.5 8.9 1.2 6.7 2.2 7.5 4.5 4.7Europe EU-27 1.9 0.7 2.4 1.9 1.8 1.9 2.0 2.1 1.7 1.9 2.0 Eurozone 1.4 1.1 2.2 1.9 1.8 1.9 1.9 2.1 1.7 1.9 2.0China* 9.6 9.8 9.2 9.0 9.4 9.8 9.2 9.0 10.3 9.5 9.0Japan 3.3 -1.3 1.8 0.0 1.5 2.2 2.4 2.0 4.0 1.1 2.0India* 8.9 8.2 8.1 8.0 8.4 8.6 8.9 8.5 8.7 8.3 8.5

2010 2011 201220112010 2012 2010 2011 2012Manufacturing IP Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Actual Forecast Forecast

act act f f f f f fWorld 3.0 2.5 8.3 1.5 7.0 6.5 4.9 4.0 8.4 4.9 4.2United States 5.6 4.4 8.9 0.8 3.5 2.9 3.8 2.3 5.9 5.0 3.2B il 3 9 0 5 4 3 10 0 6 2 8 6 4 4 1 7 10 4 3 8 4 7

20112010 2012

Brazil -3.9 -0.5 4.3 10.0 6.2 8.6 4.4 1.7 10.4 3.8 4.7Europe EU-27 5.7 5.3 7.7 4.0 3.0 3.1 3.5 3.8 7.2 5.8 3.6 Eurozone 5.0 5.8 7.2 3.8 2.9 2.9 3.4 3.7 7.3 5.7 3.5China* 13.5 13.3 12.5 12.4 13.5 13.8 12.5 12.0 15.7 13.1 11.5Japan -7 1 -6 1 14 2 -8 6 21 8 17 2 8 2 6 0 16 0 3 5 5 0

31

Japan -7.1 -6.1 14.2 -8.6 21.8 17.2 8.2 6.0 16.0 3.5 5.0India* 9.4 5.1 6.4 7.0 6.9 9.3 8.5 7.9 10.5 7.4 8.0

Percent changes at seasonally adjusted annual rates Updated April 08, 2011* China, India data are y/y growth rates

U S Macroeconomic OutlookU.S. Macroeconomic Outlook 2010 2011 2012

Qtr 3* Qtr 4* Qtr 1* Qtr 2* Qtr 3* Qtr 4* Actual Forecast Forecastt t f f f f

2010 Forecast 2011 Forecast

act act f f f fReal GDP 2.6 3.1 2.6 2.7 2.6 3.3 2.9 2.7 3.1Consumer Spending 2.4 4.0 1.6 1.1 2.7 3.1 1.7 2.3 2.7Capital Spending 10.0 7.7 5.2 5.5 6.4 9.7 5.7 7.4 7.2 Equipment 15.4 7.7 9.3 6.3 7.4 11.1 15.3 9.9 7.9q p Structures -3.6 7.7 -8.2 2.6 3.8 5.6 -13.7 0.1 4.9Government Spending 3.9 -1.7 1.4 0.6 0.5 0.5 1.0 1.0 0.9Net Exports (Y2K$B) -505 -398 -378 -350 -347 -338 -423 -353 -311Mfg Industrial Production 5.6 4.4 8.9 0.8 3.5 2.9 5.9 5.0 3.2Housing Starts (M) 0 59 0 53 0 57 0 59 0 63 0 67 0 59 0 61 0 77Housing Starts (M) 0.59 0.53 0.57 0.59 0.63 0.67 0.59 0.61 0.77US Light Vehicle Sls (M) 11.6 12.3 13.0 12.7 13.1 13.6 11.5 13.1 13.6NA Lt Veh Production (M) 12.0 11.4 13.8 13.1 13.0 12.6 11.9 13.1 14.0Unemployment Rate (%) 9.6 9.6 8.9 9.0 8.9 8.9 9.6 8.9 8.8

90 Day Treasury Yield 0 2 0 3 0 2 0 1 0 2 0 3 0 2 0 2 1 190 Day Treasury Yield 0.2 0.3 0.2 0.1 0.2 0.3 0.2 0.2 1.110 Year Treasury Yield 2.8 2.9 3.4 3.4 3.7 3.7 3.2 3.5 3.9GDP Deflator 2.0 0.3 3.2 2.5 2.6 2.6 1.0 2.2 2.5

Percent Changes except where indicated*2010 2011 changes expressed as q/q seasonally adjusted annualized rates

32

2010-2011 changes expressed as q/q seasonally adjusted annualized ratesUpdated April 11, 2011

EU-27 Industrial Markets/Production Outlook

2007 2008 2009 2010 2011

EU 27 Industrial Markets/Production Outlook

2007 2008 2009 2010 2011Actual Actual Actual Actual Fcst

Light Vehicle Production (M) 22.3 21.2 16.8 19.5 20.1g ( )Medium Comm'l Veh Prod (K) 157 142 63 86 119Heavy Comm'l Veh Prod (K) 555 579 198 315 403Industrial Production 4.1 -1.9 -14.8 7.1 4.8Industrial Production 4.1 1.9 14.8 7.1 4.8Agricultural Equipment 8.8 15.1 -32.2 8.6 13.6Mining,Quarry & Constr Eq 13.2 -0.9 -37.2 17.2 13.0Lifting and Handling Eq 9 1 0 1 -30 6 -0 1 11 1Lifting and Handling Eq 9.1 0.1 30.6 0.1 11.1Fluid Power Equipment 10.6 3.6 -36.9 32.5 12.4

Percent Change (except where indicated)

33

Sources: Eurostat, Eaton Economics Updated April 1, 2011

NAFTA/U.S. Industrial Markets /Production Outlook

2007 2008 2009 2010 2011Actual Actual Actual Actual Fcst

Production Outlook

NAFTA Lt Veh Production (M) 15.0 12.6 8.5 11.9 13.1NAFTA Cl 6-7 Truck Prod (K) 127 99 66 74 91NAFTA Class 8 Truck Prod (K) 212 205 118 154 250NAFTA Class 8 Truck Prod (K) 212 205 118 154 250US Ag Equipment Shp 6.1 11.5 -14.4 9.0 6US Construction Eq Shp -5.4 -42.0 32.0 17.4 17US Mining & Oilfield Eq Shp 31.4 7.1 -21.1 -11.9 8US Material Handling Eq Shp 8.4 -8.9 -35.8 4.7 8US Industrial Eq Purchases 4.0 -4.2 -23.3 5.7 12Housing Starts (M) 1.34 0.90 0.56 0.59 0.61Mfg. Capacity Utilization % 79.6 74.9 67.0 71.9 76Oil Prices (WTI $/bbl) 72.34 99.67 61.95 78.99 105

Percent Change (except where indicated)

34

g ( p )

Summary Pointsy• Markets experienced a faster-than-expected snap back• Keys for 2011: y

• Global capital spending and profitability• Replacement (“pent-up”) demand• Favorite indicators: purchasing managers index, stock prices, anFavorite indicators: purchasing managers index, stock prices, an• Commodity prices – risk and reward• Bonus depreciation will be visible at year-end, pull forward impact

• Commodities prices always bear watching• Commodities prices always bear watching• High levels help ag, mining & oil equip; some industrial machinery;

hurt motor vehicles; volatility a headwind for all• May be an early signal for China (the player on the margin)May be an early signal for China (the player on the margin)

• Pace of recovery likely slower from here onward• Return to 2006/2008 peaks will still take to 2012-2013 for most markets• Construction “normal” levels may take to mid-decade

35

• Construction normal levels may take to mid-decade

Updated: April 8, 2011

36 36