monthly macro manual · 2019-05-08 · may 2019 key takeaways 2 developments since our april...

Wells Fargo EconomicsMonthly Macro Manual

Your guide to the data and events that will shape the economic outlook and drive financial markets in the month ahead

May 08, 2019

May 2019

Key Takeaways

2

Developments since our April Monthly Economic Outlook

Our forecast for 2019 U.S. real GDP growth has increased to 2.8%. Real GDP growth topped 3% in Q1, andalthough we expect growth to slow to 2.5% in Q2, the composition of growth should be tilted more towarddomestic demand. On balance, the first half of the year is shaping up to see solid economic growth andcontinued labor market strength despite the recession fears that arose late last year.

We still expect the fed funds rate to remain unchanged for the foreseeable future, and our target year-end10-year yield is still 2.70%. Although we expect core inflation to bottom out and rise from here, we do notexpect core PCE inflation to return to 2% in this year. To us, this is a recipe for neither rate hikes nor cutsfrom the FOMC in 2019.

Economic data out of China have been encouraging, but in the aggregate the global growth environmentremains sluggish. Trade uncertainty continues to wax and wane, as do the prospects for a Brexit deal.We expect most major central banks to follow the Fed and remain on hold for remainder of the year.

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U.S. Real GDP Bars = CAGR Line = Yr/Yr Percent Change

GDP - CAGR: Q1 @ 3.2%

GDP - Yr/Yr Percent Change: Q1 @ 3.2%

Forecast

Source: U.S. Department of Commerce, Federal Reserve Board and Wells Fargo Securities

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Federal Funds Target RateUpper Bound, Percent

Federal Funds: Q1 @ 2.50%

Forecast

May 2019

Monthly Macro Calendar: May 6-June 7

3

Source: Bloomberg LP and Wells Fargo Securities

Monday Tuesday Wednesday Thursday Friday

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Ha rker (Ph ila delph ia ) JOLT S Job Open ings Bra ina rd* (Fed Boa rd of Gov ernors) PPI Fina l Dem a nd (YoY) CPI (YoY)

Spea ks on th e Econ om ic Ou tlook Ma r ch 7 ,4 8 8 Open in g Rem a r ks a t 'Fed Listen s' Ev en t Ma r ch 2 .2 %; A pr il 2 .4 % (W) Ma r ch 1 .9 %; A pr il 2 .1 %

Ka pla n (Da lla s Fed) Ch ina CPI (YoY) T ra de Ba la nce Bra ina rd* (Fed Boa rd of Gov ernors)

Spea ks in Beijin g on Moder a ted Pa n el Ma r ch 2 .3 % Febr u a r y -$4 9 .4 B; Ma r ch -$5 1 .3 B (W) Spea ks a t Fed Com m u n ity Dev elopm en t Con f.

Qu a rles* (Fed Boa rd of Gov ernors) Cent ra l Ba nk of Bra zil Meet ing Powell* (Fed Boa rd of Gov ernors) Willia m s* (New York Fed)

Discu sses Fin a n cia l Reg u la t ion Pr ev iou s 6 .5 0% Spea ks a t Fed Com m u n ity Dev elopm en t Con f. Spea ks to Br on x Ba n ker s Br ea kfa st

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Rosengren* (Bost on Fed) Im port Price Index (YoY) Ret a il Sa les (MoM) Hou sing St a rt s Willia m s* (New York Fed)

Rem a r ks a t Fed Listen s Ev en t Ma r ch 0.0% Ma r ch 1 .6 % Ma r ch 1 ,1 3 9 K Meets w ith Com m u n ity Lea der s

Cla rida * (Fed Boa rd of Gov ernors) Willia m s* (New York Fed) Indu st ria l Produ ct ion (MoM) Ba nk of Mexico Meet ing

Rem a r ks a t 'Fed Listen s' Ev en t Spea ks a t SNB/IMF Ev en t in Zu r ich Ma r ch -0.1 % Pr ev iou s 8 .2 5 %

George* (Ka nsa s Cit y Fed) Eu rozon e Q1 GDP (SA , QoQ)

Spea ks to Econ om ic Clu b of Min n esota Q4 0.4 %

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Powell* (Fed Boa rd of Gov ernors) Exist ing Hom e Sa les Bu lla rd* (St . Lou is Fed) New Hom e Sa les Du a ble Goods Orders (MoM)

Spea ks a t A t la n ta Fed Fin . Ma r kets Con f. Ma r ch 5 .2 1 M Spea ks in Hon g Kon g on U.S. Econ . Ou tlook Ma r ch 6 9 2 K Ma r ch 2 .6 %

Ja pa n Q1 GDP (SA , QoQ) Ev a ns* (Ch ica go Fed) Bost ic (A t la nt a Fed) Ka pla n, Da ly , Bost ic & Ba rkin

Q4 0.5 % Discu ssed Econ om y a n d Mon eta r y Policy Open in g Rem a r ks a t Da lla s Fed Con fer en ce Spea k on Pa n el

Rosengren * (Bost on Fed) FOMC A pril/Ma y Meet ings Minu t es Ja pa n CPI (YoY)

Spea ks to Econ om ic Clu b of New Yor k Ma r ch 0.5 %

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Con su m er Con fiden ce Index Ba nk of Ca na da Meet ing Cla rida * (Fed Boa rd of Gov ern ors) Person a l Incom e (MoM)

A pr il 1 2 9 .2 Pr ev iou s 1 .7 5 % Spea ks to Econ om ic Clu b of New Yor k Ma r ch 0.1 %

Mem oria l Da y

[U.S. Ma r kets Closed]

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ISM Ma nu fa ct u ring Index Powell* (Fed Boa rd of Gov ernors) ISM Non -Ma nu fa ct u ring Index T ra de Ba la nce Non fa rm Pa y rolls

A pr il 5 2 .8 Open in g Rem a r ks a t Fed Fr a m ew or k Con f. A pr il 5 5 .5 Febr u a r y -$4 9 .4 B A pr il 2 6 3 ,000

Eu rozon e CPI (YoY) Cla rida * (Fed Boa rd of Gov enors) Eu ropea n Cent ra l Ba nk Meet in g

A pr il 1 .7 % Open in g Rem a r ks a t Fed Con fer en ce Pr ev iou s -0.4 0% (Deposit Ra te)

Reserv e Ba n k of A u st ra lia Meet in g U.S. Federa l Reserv e Beige Book Reserv e Ba nk of India Meet ing

Pr ev iou s 1 .5 0% Pr ev iou s 6 .0% (Repu r ch a se Ra te)

Note: (W) = Wells Fa r g o Est im a te, (C) = Con sen su s Est im a te, * = v ot in g FOMC m em ber in 2 01 9

Possible Wh it e Hou se Decision on A u t o

T a riffs

May 2019

The data continue to support our baseline theme for 2019:slower growth compared to last year, but no recession on the horizon.

Upside scenario: Trade uncertainty across the globe dissipates after aU.S.-China deal is reached and the USMCA is passed, while thedovish shift by major central banks helps keep the expansion going.

Downside scenario: The lagged effect of higher interest ratespressures consumers and businesses, while trade uncertaintycontinues to weigh on global manufacturing. Coupled with fadingfiscal stimulus, economic growth in the United States slows moresharply than we currently expect.

Key Themes and Upside/Downside Scenarios

U.S. Growth Outlook

4

Initial real GDP growth forecast for Q2-2019: 2.5% (seasonally adjusted annual rate)

Change since last Monthly Economic Outlook: -0.2% percentage point

Commentary: Real GDP growth surprised to the upside in Q1, registering a 3.2% annualized pace. Thedetails of the strong print, however, were somewhat disappointing. The inventories component contributed0.7 percentage point to headline growth, and net exports contributed another 1.0 percentage point, in partdue to an outright decline in imports. Thus, the “core” domestic demand components, including personalconsumption, business investment, residential construction and government spending, grew just 1.4%. Still,given the recession fears that arose late last year, and given how poorly GDP growth was tracking early in Q1,a reading north of 3% is an encouraging development. Furthermore, personal consumption looks poised tobounce back in Q2, supporting domestic demand growth.

Real GDP growth forecast for full-year 2019: 2.8% (2.5% Q4-over-Q4)

Change since last Monthly Economic Outlook: +0.2 percentage point

Commentary: Our forecast for 2019 GDP growth is a bit stronger than last month, largely due to thestronger-than expected Q1. On balance, we expect real GDP growth of about 2.5% for the rest of the year.

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Real Final Sales to Domestic PurchasersBars = CAGR Line = Yr/Yr Percent Change

Real Fin Sales to Dom. Purch. - CAGR: Q1 @ 1.4%

Real Fin Sales to Dom. Purch. - Yr/Yr Pct Chg: Q1 @ 2.6%

Forecast

Source: U.S. Department of Commerce and Wells Fargo Securities

May 2019 5

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PCE Deflator & "Core" PCE DeflatorYear-over-Year Percent Change

PCE Deflator: Q1 @ 1.4%

"Core" PCE Deflator: Q1 @ 1.7%

Forecast

Federal Reserve Watch

Inflation Forecast

We have revised our inflation forecast down modestly.Although we expect core inflation to bottom out and risefrom here, we do not expect core PCE inflation to returnto 2% in 2019. For more on the “transitory” inflationdevelopments, see page 10.

Labor Market Forecast

Employers continue to add jobs at an impressive rate.Year-to-date, job growth has averaged 205K per month.That marks only a modest slowdown from the 223Kmonthly rate of 2018. Solid jobs gains, steady wagegrowth and slower inflation bode well for personalconsumption growth in the months ahead.

Source: Federal Reserve Board, U.S. Department of Commerce and Wells Fargo Securities

Fed Funds Outlook

Fed Funds Forecast for 2019

Rates to remain unchanged at 2.25%-2.50%

With inflation currently running below the Fed’s targetand likely to remain so in the near-term, conditions nolonger justify a rate hike in 2019, in our view. But, the Fedprobably will not feel compelled to cut rates anytime sooneither, as growth remains at or above potential andinflation is unlikely to slow much more.

Fed Funds Forecast for 2020

One 25 bps cut in Q4-2020

As quarterly economic growth falls below 2% in H2-2020,we anticipate policy may need to become less restrictive.

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FOMC: Appropriate Pace of Policy FirmingMidpoint of Target Federal Funds Rate at Year-End

Longer Run2019 2020 2021

March 2019

May 2019 6

U.S. Interest Rate Outlook

Source: Federal Reserve Board and Wells Fargo Securities

U.S. Economic Growth: A bounce back in domestic demand?

U.S. real GDP growth surprised to the upside in Q1-2019, but trade and inventories accounted for more thanhalf of the gain. Will private domestic demand (private consumption and investment) bounce back in Q2?

Inflation: Stuck Below 2%?

It would likely take higher inflation than we currently forecast for the Fed to take a hawkish turn and resumehiking interest rates. Will the inflation data surprise to the upside?

Can foreign central banks get back on track?

Even if the Fed were to resume hiking rates, U.S. monetary policy is much closer to neutral than is the case inmost other advanced economies. If foreign economies like the Eurozone and the United Kingdom can get backon track, tighter monetary policy abroad could push long-term U.S. rates higher even in the absence of Fedtightening.

What Are We Watching in the Month Ahead?

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Quarter End Interest Rates

Federal Funds Target Rate 1.75 2.00 2.25 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.25

3 Month LIBOR 2.31 2.34 2.40 2.81 2.60 2.65 2.65 2.65 2.65 2.65 2.65 2.40

Prime Rate 4.75 5.00 5.25 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.25

Conventional Mortgage Rate 4.44 4.57 4.63 4.64 4.28 4.20 4.25 4.30 4.35 4.30 4.25 4.15

3 Month Bill 1.73 1.93 2.19 2.45 2.40 2.40 2.40 2.40 2.40 2.40 2.35 2.15

6 Month Bill 1.93 2.11 2.36 2.56 2.44 2.45 2.45 2.45 2.45 2.40 2.35 2.15

1 Year Bill 2.09 2.33 2.59 2.63 2.40 2.50 2.50 2.45 2.45 2.40 2.30 2.10

2 Year Note 2.27 2.52 2.81 2.48 2.27 2.45 2.45 2.40 2.40 2.30 2.20 2.05

5 Year Note 2.56 2.73 2.94 2.51 2.23 2.45 2.50 2.50 2.45 2.35 2.30 2.20

10 Year Note 2.74 2.85 3.05 2.69 2.41 2.60 2.65 2.70 2.75 2.70 2.65 2.55

30 Year Bond 2.97 2.98 3.19 3.02 2.81 2.95 3.00 3.05 3.10 3.10 3.05 3.00

Forecast as of: M ay 8, 2019

Forecast

Wells Fargo U.S. Interest Rate Forecast

20202018 2019

Actual

May 2019

Private domestic demand in South Korea has beeneven softer. Based off of our calculations using theGDP data, we estimate that private domesticdemand on a year-over-year basis–essentiallyprivate consumption and private investment–wasthe weakest since 2009.

The more upbeat economic data out of China are anencouraging sign, and South Korea policymakerswill likely enact some fiscal stimulus to prop updemand. That said, the South Korean weakness is aclear illustration of the widespread slowdown in theglobal economy.

South Korea Slowdown Raises Eyebrows

The South Korean economy is a relatively open,trade-oriented economy with close trade ties toChina in particular. South Korea’s exports are about44% of its GDP, and about one quarter to a third ofthose exports go to China. Thus, when South Koreanreal GDP growth was unexpectedly negative inQ1-2019, the print raised some concern that theglobal economy in general and China in particularmay not be out of the woods yet.

Korea’s merchandise export volumes have softened,with the latest month of data (March) showing a3% year-over-year decline.

Global Economy Yet to Fully Halt Slide

Global Economic Outlook: Advanced Economies

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South Korean Real GDPBars = Compound Annual Rate Line = Yr/Yr % Change

Compound Annual Growth: Q1 @ -1.4%

Year-over-Year Percent Change: Q1 @ 1.8%

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South Korean Private Domestic DemandYear-over-Year Percent Change

GDP: Q1 @ 1.8%Final Private Domestic Demand: Q1 @ -1.9%*

* Wells Fargo estimate

Source: IHS Markit, Datastream and Wells Fargo Securities

May 2019 8

Global Central Bank Watch

European Central Bank

With core inflation remaining stagnant near 1% and the Eurozone economy still sluggish, we do not expect arate hike from the ECB until Q1-2020.

Bank of Japan

We do not expect the BoJ to make any material changes to monetary policy in 2019. With global growthsoftening, other central banks adopting more dovish stances and an increase in the consumption tax scheduledto take place later this year, even small tweaks to policy are likely too much of a risk for the BoJ to undertake.

Bank of England

With Brexit uncertainty likely to linger for much of the year, we do not anticipate a rate hike from the BoEuntil Q1-2020.

Bank of Canada

We have also moved out the next rate hike from the BoC. We expect to the BoC to remain on hold untilQ1-2020, at which point we expect a 25 bps hike.

What Are We Watching in the Month Ahead?

Current WF Next Forecasted

Policy Rate Policy Change

December 2018

25 bps hike

December 2018

Confirmed end of QE program at end of 2018

August 2018

25 bps hike

July 2018

QQE and a greater degree of variation in 10-year govt. bond yield target

October 2018

25 bps hike

Forecast as of: May 08, 2019

Canada (BoC) 1.75

Wells Fargo Central Bank Policy Forecasts

Last Major Policy ChangeCentral Bank

Next Rate Hike: Q1-2020

United Kingdom (BoE) 0.75

Japan (BoJ) -0.10

United States (FOMC) 2.50

-0.40

(Deposit Rate)Eurozone (ECB)

Next Rate Cut: Q4-2020



No change through end-2020


May 2019

That said, it has taken considerable stimulus just tokeep growth stable, and even absent the cyclicalweakness there are structural reasons to believe theChinese economy should continue to gradually slow.Our forecast is for full-year real GDP growth inChina of 6.2% in 2019 and 6.0% in 2020.

There are clear downside risks to this forecastshould U.S.-China trade relations deterioratefurther. Our baseline forecast assumes there are noadditional tariffs implemented, be it new tariffs ongoods not previously subject to them or simplyhigher rates on existing tariffs.

Chinese Stimulus Having an Effect

The Chinese economy grew 6.4% year-over-year inQ1, the same growth rate registered in Q4-2018.Retail sales and industrial production data weremuch stronger than expected, offering signs that theChinese economy is stabilizing rather thancontinuing to slow.

As we have noted previously, Chinese policymakershave implemented a slew of monetary and fiscaleasing measures to help stabilize the economy, and itdoes not surprise us that these policies have helpedkeep real GDP growth from slowing too sharply.

Trade Threat Still Lingering

Global Economic Outlook: Developing Economies

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China Real GDP GrowthYear-over-Year Percent Change

China Real GDP Growth: Q1 @ 6.4%

Forecast

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Chinese Industrial Production IndexYear-over-Year Percent Change of 3-Month Moving Average

3-Month Moving Average: Mar @ 8.5%


May 2019

The FOMC’s preferred measure of trend inflation, the PCEdeflator ex-food and energy, slipped further below the Fed’s 2%target in March. In his most recent post-FOMC press conference,Chair Jerome Powell characterized the recent softness as“transient,” and we agree that the weakness in inflation since thestart of the year is exaggerated relative to the trend.

In January, the cost of “portfolio management and investmentadvice” tumbled 4.6%, which was enough to shave off almost afull tenth from the core index. This is an imputed measure tiedheavily to changes in equity markets. In addition, a newmethodology introduced in March contributed to the largest everone-month decline in apparel prices.

Alternative measures show the trend in inflation holding upbetter. Powell cited the Dallas Fed’s Trimmed Mean PCEdeflator, which currently sits at 2.0%. In the Trimmed MeanPCE, items are sorted based on their monthly price change, withitems at the tails of the distribution thrown out. Unlike atraditional “core” index, food and energy can therefore beincluded if monthly changes are moderate.

The resilience of this measure and other alternative inflationindices suggests the slowdown in the core PCE deflatoroverstates recent weakness in inflation. That said, although wethink inflation is likely to edge back up in the coming months, wedo not expect core PCE inflation to re-visit 2.0% this year. Withcore inflation only slowly rising from here in our forecast, weexpect neither rate cuts nor hikes from the FOMC in 2019.

10

Topic of the Month

How “Transient” Is the Slowdown in Inflation?

Source: U.S. Department of Commerce, Federal Reserve System and Wells Fargo Securities

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PCE Deflator vs. Core PCE DeflatorYear-over-Year Percent Change

PCE Deflator: Mar @ 1.5%

"Core" PCE Deflator: Mar @ 1.6%

FOMC's 2.0% Inflation Target

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Alternative Inflation MeasuresYear-over-Year Percent Change

Trimmed Mean PCE: Mar @ 2.0%

Median CPI: Mar @ 2.8%

Sticky CPI: Mar @ 2.4%

May 2019 11

U.S. Economic Forecast

Source: U.S. Department of Commerce, U.S. Department of Labor, IHS Markit, Federal Reserve Board and Wells Fargo Securities

Wells Fargo U.S. Economic Forecast

Q4 2010 q120192019

2017 2018 2019 2020

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q#### #### #### #### #### #### #### ####

Real Gross Domestic Product (a) 1.8 3.0 2.8 2.3 2.2 4.2 3.4 2.2 3.2 2.5 2.2 2.5 2.1 2.1 1.8 1.8 #### 2.2 #### #### 2.9 #### #### 2.8 #### #### 2.1 ####

Personal Consumption 1.8 2.9 2.2 3.9 0.5 3.8 3.5 2.5 1.2 2.9 2.4 2.4 1.9 2.0 1.8 1.9 #### 2.5 #### #### 2.6 #### #### 2.4 #### #### 2.1 ####

Business Fixed Investment 9.6 7.3 3.4 4.8 11.5 8.7 2.5 5.4 2.7 4.0 3.1 3.4 3.9 3.6 2.9 2.8 #### 5.3 #### #### 6.9 #### #### 3.9 #### #### 3.5 ####

Equipment 9.1 9.7 9.8 9.9 8.5 4.6 3.4 6.6 0.2 1.2 1.4 1.8 3.1 2.6 2.1 2.0 #### 6.1 #### #### 7.4 #### #### 2.5 #### #### 2.2 ####

Intellectual Property Products 8.0 6.6 1.7 0.7 14.1 10.5 5.6 10.7 8.6 7.8 4.7 4.6 4.7 4.6 3.7 3.5 #### 4.6 #### #### 7.5 #### #### 7.8 #### #### 4.7 ####

Structures 12.8 3.8 -5.7 1.3 13.9 14.5 -3.4 -3.9 -0.8 2.5 4.5 5.0 4.5 4.0 3.5 3.5 #### 4.6 #### #### 5.0 #### #### 0.8 #### #### 4.2 ####

Residential Construction 11.1 -5.5 -0.5 11.1 -3.4 -1.3 -3.6 -4.7 -2.8 2.0 2.0 1.5 1.5 1.5 1.0 1.0 #### 3.3 #### #### -0.3 #### #### -1.4 #### #### 1.5 ####

Government Purchases -0.8 0.0 -1.0 2.4 1.5 2.5 2.6 -0.4 2.4 3.7 1.6 1.0 0.7 0.7 0.4 0.3 #### -0.1 #### #### 1.5 #### #### 1.9 #### #### 1.0 ####

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#### #### #### #### #### #### #### ####

Net Exports -845.5 -844.1 -845.9 -899.2 -902.4 -841.0 -949.7 -955.7 -899.3 -918.3 -898.0 -911.1 -903.5 -901.8 -904.5 -903.6 #### -858.7 #### #### -912.2 #### #### -906.7 #### #### -903.3 ####

Pct. Point Contribution to GDP -0.1 0.1 0.0 -0.9 0.0 1.2 -2.0 -0.1 1.0 -0.4 0.4 -0.3 0.2 0.0 -0.1 0.0 #### -0.4 #### #### -0.3 #### #### 0.0 #### #### 0.0 ####

Inventory Change -2.4 11.9 64.4 16.1 30.3 -36.8 89.8 96.8 128.4 104.0 71.3 87.3 80.0 80.0 80.0 80.0 #### 22.5 #### #### 45.0 #### #### 97.8 #### #### 80.0 ####

Pct. Point Contribution to GDP -0.8 0.2 1.0 -0.9 0.3 -1.2 2.3 0.1 0.7 -0.5 -0.7 0.3 -0.2 0.0 0.0 0.0 #### 0.0 #### #### 0.1 #### #### 0.3 #### #### -0.1 ####

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Nominal GDP (a) 3.9 4.2 4.8 5.1 4.3 7.6 4.9 4.1 3.8 5.2 4.3 4.6 4.3 4.3 3.6 3.7 #### 4.2 #### #### 5.2 #### #### 4.6 #### #### 4.3 ####

Real Final Sales 2.6 2.8 1.8 3.2 1.9 5.4 1.0 2.1 2.5 3.3 2.9 2.1 2.3 2.1 1.8 1.8 #### 2.2 #### #### 2.7 #### #### 2.6 #### #### 2.3 ####

Retail Sales (b) 4.9 4.1 4.3 5.7 4.8 5.7 5.7 3.4 2.9 3.0 3.0 4.0 4.9 4.4 4.4 3.8 #### 4.7 #### #### 4.9 #### #### 3.2 #### #### 4.4 ####

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Inflation Indicators (b) #### #### #### #### #### #### #### ####

PCE Deflator 2.0 1.6 1.6 1.8 1.9 2.2 2.2 1.9 1.4 1.6 1.7 1.8 2.2 2.1 2.0 2.0 #### 1.8 #### #### 2.0 #### #### 1.6 #### #### 2.1 ####

"Core" PCE Deflator 1.8 1.6 1.5 1.6 1.7 1.9 2.0 1.9 1.7 1.6 1.7 1.7 1.9 2.1 2.0 2.0 #### 1.6 #### #### 1.9 #### #### 1.7 #### #### 2.0 ####

Consumer Price Index 2.5 1.9 2.0 2.1 2.2 2.7 2.6 2.2 1.6 2.0 2.0 2.2 2.6 2.3 2.2 2.2 #### 2.1 #### #### 2.4 #### #### 2.0 #### #### 2.3 ####

"Core" Consumer Price Index 2.1 1.8 1.7 1.8 1.9 2.2 2.2 2.2 2.1 2.1 2.2 2.1 2.2 2.1 2.2 2.1 #### 1.8 #### #### 2.1 #### #### 2.1 #### #### 2.1 ####

Producer Price Index (Final Demand) 2.0 2.2 2.4 2.7 2.8 3.0 3.1 2.8 2.0 1.9 1.9 1.8 2.4 2.3 2.3 2.2 #### 2.3 #### #### 2.9 #### #### 1.9 #### #### 2.3 ####

Employment Cost Index 2.4 2.4 2.5 2.6 2.7 2.8 2.8 2.9 2.8 3.0 3.0 3.1 3.2 3.2 3.3 3.3 #### 2.5 #### #### 2.8 #### #### 3.0 #### #### 3.2 ####

#### #### #### #### #### #### #### ####

#### #### #### #### #### #### #### ####

Real Disposable Income (a) 4.5 2.2 2.2 2.3 4.4 1.8 2.6 4.3 2.4 3.3 3.1 3.0 2.9 2.8 2.7 2.5 #### 2.6 #### #### 2.9 #### #### 3.0 #### #### 2.9 ####

Nominal Personal Income (b) 4.1 4.3 4.5 4.6 4.3 4.5 4.5 4.6 4.1 4.2 4.2 4.0 4.1 4.2 3.9 3.6 #### 4.4 #### #### 4.5 #### #### 4.1 #### #### 4.0 ####

Industrial Production (a) 2.4 5.6 -0.8 7.5 2.3 4.6 5.2 4.0 -0.3 0.3 1.6 2.2 0.5 0.7 0.7 0.1 #### 2.3 #### #### 4.0 #### #### 2.0 #### #### 1.0 ####

Capacity Utilization 75.5 76.5 76.3 77.6 77.9 78.5 79.1 79.5 79.0 78.8 78.9 79.1 79.0 79.1 79.0 78.9 #### 76.5 #### #### 78.7 #### #### 78.9 #### #### 79.0 ####

Corporate Profits Before Taxes (b) 3.0 3.6 2.8 3.3 5.9 7.3 10.4 7.4 7.4 6.2 3.7 5.7 3.5 1.5 -0.5 -2.0 #### 3.2 #### #### 7.8 #### #### 5.7 #### #### 0.6 ####

Corporate Profits After Taxes 6.0 6.2 6.4 7.3 15.1 15.8 19.6 14.3 6.4 6.0 3.5 5.5 3.4 1.4 -0.8 -2.3 #### 6.5 #### #### 16.2 #### #### 5.3 #### #### 0.4 ####

#### #### #### #### #### #### #### ####

#### #### #### #### #### #### #### ####

Federal Budget Balance (c) -317 4 -143 -225 -375 -7 -172 -319 -372 -63 -221 -301 -449 -66 -233 -315 #### -666 #### #### -779 #### #### -975 #### #### -1050 ####

Trade Weighted Dollar Index (d) 112.9 109.7 104.1 106.1 103.1 107.3 107.6 110.1 109.8 109.0 108.8 107.8 106.5 105.8 104.5 103.3 #### 108.9 #### #### 106.4 #### #### 108.8 #### #### 105.0 ####

#### #### #### #### #### #### #### ####

#### #### #### #### #### #### #### ####

Nonfarm Payroll Change (e) 173 190 136 218 228 243 189 233 186 201 170 160 150 140 100 90 #### 179 #### #### 223 #### #### 179 #### #### 120 ####

Unemployment Rate 4.6 4.4 4.3 4.1 4.1 3.9 3.8 3.8 3.9 3.7 3.7 3.6 3.5 3.5 3.6 3.6 #### 4.4 #### #### 3.9 #### #### 3.7 #### #### 3.6 ####

Housing Starts (f) 1.23 1.17 1.17 1.26 1.32 1.26 1.23 1.19 1.19 1.26 1.27 1.28 1.28 1.29 1.30 1.30 #### 1.20 #### #### 1.25 #### #### 1.27 #### #### 1.29 ####

Light Vehicle Sales (g) 17.1 16.8 17.1 17.6 17.1 17.2 16.9 17.5 16.8 16.6 16.7 16.6 16.6 16.5 16.4 16.3 #### 17.1 #### #### 17.2 #### #### 16.7 #### #### 16.5 ####

Crude Oil - Brent - Front Contract (h) 54.6 50.8 52.2 61.4 66.9 74.6 75.8 68.6 63.8 70.0 68.0 68.0 68.0 67.0 66.0 65.0 #### 54.7 #### #### 71.5 #### #### 67.4 #### #### 66.5 ####

#### #### #### #### #### #### #### ####

#### #### #### #### #### #### #### ####

Quarter-End Interest Rates (i) #### #### #### #### #### #### #### ####

Federal Funds Target Rate 1.00 1.25 1.25 1.50 1.75 2.00 2.25 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.25 #### 1.13 #### #### 1.96 #### #### 2.50 #### #### 2.44 ####

3 Month LIBOR 1.15 1.30 1.33 1.69 2.31 2.34 2.40 2.81 2.60 2.65 2.65 2.65 2.65 2.65 2.65 2.40 #### 1.26 #### #### 2.31 #### #### 2.64 #### #### 2.59 ####

Prime Rate 4.00 4.25 4.25 4.50 4.75 5.00 5.25 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.25 #### 4.13 #### #### 4.96 #### #### 5.50 #### #### 5.44 ####

Conventional Mortgage Rate 4.20 3.90 3.81 3.94 4.44 4.57 4.63 4.64 4.28 4.20 4.25 4.30 4.35 4.30 4.25 4.15 #### 3.99 #### #### 4.54 #### #### 4.26 #### #### 4.26 ####

3 Month Bill 0.76 1.03 1.06 1.39 1.73 1.93 2.19 2.45 2.40 2.40 2.40 2.40 2.40 2.40 2.35 2.15 #### 0.95 #### #### 1.97 #### #### 2.40 #### #### 2.33 ####

6 Month Bill 0.91 1.14 1.20 1.53 1.93 2.11 2.36 2.56 2.44 2.45 2.45 2.45 2.45 2.40 2.35 2.15 #### 1.07 #### #### 2.14 #### #### 2.45 #### #### 2.34 ####

1 Year Bill 1.03 1.24 1.31 1.76 2.09 2.33 2.59 2.63 2.40 2.50 2.50 2.45 2.45 2.40 2.30 2.10 #### 1.20 #### #### 2.33 #### #### 2.46 #### #### 2.31 ####

2 Year Note 1.27 1.38 1.47 1.89 2.27 2.52 2.81 2.48 2.27 2.45 2.45 2.40 2.40 2.30 2.20 2.05 #### 1.40 #### #### 2.53 #### #### 2.39 #### #### 2.24 ####

5 Year Note 1.93 1.89 1.92 2.20 2.56 2.73 2.94 2.51 2.23 2.45 2.50 2.50 2.45 2.35 2.30 2.20 #### 1.91 #### #### 2.75 #### #### 2.42 #### #### 2.33 ####

10 Year Note 2.40 2.31 2.33 2.40 2.74 2.85 3.05 2.69 2.41 2.60 2.65 2.70 2.75 2.70 2.65 2.55 #### 2.33 #### #### 2.91 #### #### 2.59 #### #### 2.66 ####

30 Year Bond 3.02 2.84 2.86 2.74 2.97 2.98 3.19 3.02 2.81 2.95 3.00 3.05 3.10 3.10 3.05 3.00 #### 2.89 #### #### 3.11 #### #### 2.95 #### #### 3.06 ####

#### #### #### #### #### #### #### ####


Notes: (a) Compound Annual Growth Rate Quarter-over-Quarter (f) Millions of Units - Annual Data - Not Seasonally Adjusted

(b) Year-over-Year Percentage Change (g) Quarterly Data - Average Monthly SAAR; Annual Data - Actual Total Vehicles Sold

(c) Quarterly Sum - Billions USD; Annual Data Represents Fiscal Yr. (h) Quarterly Average of Daily Close

(d) Federal Reserve Advanced Foreign Economies Index, 2006=100 - Quarter End (i) Annual Numbers Represent Averages

(e) Average Monthly Change

ForecastActual

2017 2018 2019 2020

ForecastActual

May 2019 12

U.S. Economic Forecast: Change Since Forecast from April 19, 2019

Source: U.S. Department of Commerce, U.S. Department of Labor, IHS Markit, Federal Reserve Board and Wells Fargo Securities

Changes to the Wells Fargo U.S. Economic Forecast

q120192019

2017 2018 2019 2020 2017 2018 2019 2020

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Qq12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019

Real Gross Domestic Product (a) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.62 q12019 0.09 q12019 -0.17 q12019 0.00 q12019q12019 0.09 q12019 0.00 q12019 0.02 q12019 0.03 0.00 0.00 0.15 0.01

Personal Consumption q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.13 q12019 0.36 q12019 -0.01 q12019 -0.01 q12019q12019 0.13 q12019 -0.01 q12019 -0.01 q12019 -0.01 0.00 0.00 0.10 0.05

Business Fixed Investment q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -0.39 q12019 1.80 q12019 -2.57 q12019 0.02 q12019q12019 0.01 q12019 0.01 q12019 0.01 q12019 0.01 0.00 0.00 -0.08 -0.19

Equipment q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -1.08 q12019 1.26 q12019 -5.55 q12019 0.01 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 -0.72 -0.60

Intellectual Property Products q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 1.37 q12019 2.48 q12019 0.01 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.81 0.15

Structures q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.22 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.06 0.00

Residential Construction q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -4.62 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 -1.15 0.00

Government Purchases q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -0.34 q12019 -0.14 q12019 -0.16 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.10 q12019 0.20 0.00 0.00 -0.13 0.00q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019

q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019

Net Exports q12019 0.0 q12019 0.0 q12019 0.0 q12019 0.0 q12019q12019 0.0 q12019 0.0 q12019 0.0 q12019 0.0 25.4 q12019 28.8 q12019 29.2 q12019 29.6 q12019q12019 29.9 q12019 30.1 q12019 30.4 q12019 30.7 0.0 0.0 28.2 30.3

Pct. Point Contribution to GDP q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.37 q12019 0.07 q12019 0.01 q12019 0.01 q12019q12019 0.01 q12019 0.01 q12019 0.01 q12019 0.01 0.00 0.00 0.15 0.01

Inventory Change q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 18.39 q12019 -10.71 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 1.92 0.00

Pct. Point Contribution to GDP q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.37 q12019 -0.61 q12019 0.23 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.01 -0.01q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019


Nominal GDP q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.56 q12019 0.03 q12019 -0.14 q12019 0.00 q12019q12019 0.09 q12019 0.00 q12019 0.02 q12019 0.03 0.00 0.00 0.13 0.01

Real Final Sales q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.01 q12019 0.93 q12019 -0.40 q12019 0.00 q12019q12019 0.09 q12019 0.00 q12019 0.02 q12019 0.03 0.00 0.00 0.13 0.03

Retail Sales (b) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019


Inflation Indicators (b) q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019

PCE Deflator q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -0.08 q12019 -0.10 q12019 -0.10 q12019 -0.10 q12019q12019 -0.01 q12019 0.01 q12019 0.00 q12019 0.00 0.00 0.00 -0.10 0.00

"Core" PCE Deflator 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -0.10 q12019 -0.16 q12019 -0.16 q12019 -0.16 q12019q12019 -0.06 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 -0.15 -0.01

Consumer Price Index q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.17 q12019 0.12 q12019 0.12 q12019q12019 0.12 q12019 -0.05 q12019 0.00 q12019 0.00 0.00 0.00 0.10 0.02

"Core" Consumer Price Index q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.01 q12019 0.01 q12019 0.01 q12019q12019 0.01 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.01 0.00

Producer Price Index (Final Demand) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

Employment Cost Index q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -0.11 q12019 -0.12 q12019 -0.14 q12019 -0.15 q12019q12019 -0.06 q12019 -0.05 q12019 -0.04 q12019 -0.04 0.00 0.00 -0.13 -0.05q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019


Real Disposable Income (a) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -0.73 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 -0.18 0.00

Nominal Personal Income (b) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -0.11 q12019 -0.35 q12019 -0.35 q12019 -0.35 q12019q12019 -0.25 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 -0.29 -0.06

Industrial Production (a) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

Capacity Utilization q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

Corporate Profits Before Taxes (b) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 3.75 q12019 2.32 q12019 -2.71 q12019 -0.16 q12019q12019 0.00 q12019 0.50 q12019 2.10 q12019 -1.00 0.00 0.00 0.74 0.45

Corporate Profits After Taxes q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 3.72 q12019 2.31 q12019 -2.71 q12019 -0.16 q12019q12019 0.00 q12019 0.50 q12019 2.09 q12019 -1.00 0.00 0.00 0.74 0.45q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019


Federal Budget Balance (c) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 -33.58 q12019 -33.58 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

Trade Weighted Dollar Index (d) q12019 18.97 q12019 19.18 q12019 16.03 q12019 18.59 q12019q12019 16.87 q12019 17.32 q12019 17.51 q12019 18.32 17.75 q12019 17.00 q12019 17.50 q12019 17.00 q12019q12019 17.00 q12019 16.50 q12019 16.25 q12019 15.75 17.83 17.43 17.31 16.38q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019


Nonfarm Payroll Change (e) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 5.33 q12019 31.00 q12019 10.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 11.58 0.00

Unemployment Rate q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 -0.07 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 -0.02 0.00

Housing Starts (f) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -0.04 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

Light Vehicle Sales (g) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 -0.06 q12019 -0.09 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 -0.04 0.00

Crude Oil - Brent - Front Contract (h) q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 2.00 q12019 2.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 1.00 0.00q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019


Quarter-End Interest Rates (i) q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019

Federal Funds Target Rate q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

3 Month LIBOR q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

Prime Rate q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

Conventional Mortgage Rate q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

3 Month Bill q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00

2 Year Note q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00



30 Year Bond q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 q12019 0.00 q12019 0.00 q12019 0.00 q12019q12019 0.00 q12019 0.00 q12019 0.00 q12019 0.00 0.00 0.00 0.00 0.00q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019 q12019 q12019 q12019 q12019q12019 q12019 q12019 q12019


Notes: (a) Compound Annual Growth Rate Quarter-over-Quarter (f) Millions of Units - Annual Data - Not Seasonally Adjusted

(b) Year-over-Year Percentage Change (g) Quarterly Data - Average Monthly SAAR; Annual Data - Actual Total Vehicles Sold

(c) Quarterly Sum - Billions USD; Annual Data Represents Fiscal Yr. (h) Quarterly Average of Daily Close

(d) Federal Reserve Advanced Foreign Economies Index, 2006=100 - Quarter End (i) Annual Numbers Represent Averages

(e) Average Monthly Change

ForecastActualForecastActual

Please note: For the Trade Weighted Dollar Index, we have transitioned to forecasting the Fed’s Advanced Foreign Economies (AFE) index (previously the Fed’s Major Currency index).

May 2019 13

International Outlook

Source: International Monetary Fund and Wells Fargo Securities

Wells Fargo International Economic Forecast

(Year-over-Year Percent Change)

GDP

2018 2019 2020 2018 2019 2020

Global (PPP Weights) 3.6% 3.4% 3.3% 3.6% 3.4% 3.6%

Advanced Economies1 2.2% 2.1% 1.8% 2.0% 1.7% 2.0%

United States 2.9% 2.8% 2.1% 2.4% 2.0% 2.3%

Eurozone 1.8% 1.1% 1.4% 1.8% 1.3% 1.5%

United Kingdom 1.4% 1.3% 1.4% 2.5% 2.0% 2.0%

Japan 0.8% 0.7% 0.4% 1.0% 1.0% 1.5%

Canada 1.8% 1.7% 1.6% 2.3% 1.8% 2.0%

Developing Economies1 4.5% 4.3% 4.3% 4.8% 4.5% 4.6%

China 6.6% 6.2% 6.0% 2.1% 2.2% 2.3%

India 7.3% 6.9% 7.1% 3.9% 3.8% 4.5%

Mexico 2.0% 1.6% 1.5% 4.9% 4.1% 3.8%

Forecast as of: May 8, 20191Aggregated Using PPP Weights

CPI

(End of Quarter Rates)

Q2 Q3 Q4 Q1 Q2 Q3 Q2 Q3 Q4 Q1 Q2 Q3

U.S. 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.60% 2.65% 2.70% 2.75% 2.70% 2.65%

Japan -0.10% -0.10% -0.10% -0.10% -0.10% -0.10% 0.04% 0.08% 0.10% 0.13% 0.16% 0.16%

Eurozone1 -0.40% -0.40% -0.40% -0.20% -0.20% 0.00% 0.15% 0.25% 0.35% 0.45% 0.55% 0.65%

U.K. 0.75% 0.75% 0.75% 1.00% 1.00% 1.25% 1.25% 1.30% 1.60% 1.70% 1.75% 1.85%

Canada 1.75% 1.75% 1.75% 2.00% 2.00% 2.00% 1.85% 1.90% 2.00% 2.05% 2.05% 2.00%

Forecast as of: May 8, 20191 10-year German Government Bond Yield

2020 2019 2020

Wells Fargo International Interest Rate Forecast

10-Year BondCentral Bank Key Policy Rate

2019

May 2019 14

International Forecast: Change Since Forecast from April 19, 2019

Source: International Monetary Fund and Wells Fargo Securities

Changes to the Wells Fargo International Econom ic Forecast

GDP CPI

2018 2019 2020 2018 2019 2020

Global (PPP Weights) -0.09% 0.01% -0.01% 0.17% 0.01% -0.01%

Advanced Economies1 -0.13% 0.07% -0.02% -0.20% 0.05% -0.03%

United States 0.00% 0.15% 0.01% 0.00% 0.12% -0.05%

Eurozone 0.02% 0.06% -0.08% 0.00% -0.01% 0.00%

United Kingdom 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Japan 0.00% -0.08% -0.02% 0.00% 0.00% 0.00%

Canada 0.00% 0.00% -0.05% 0.00% 0.01% -0.05%

Developing Economies1 -0.09% -0.03% 0.00% 0.44% -0.03% 0.01%

China 0.00% 0.00% 0.02% 0.00% 0.00% 0.00%

India2 0.00% 0.00% 0.00% 0.00% -0.12% 0.00%

Mexico 0.00% -0.33% -0.24% 0.00% -0.01% 0.10%

Forecast as of: May 8, 20191Aggregated Using PPP Weights

(End of Quarter Rates)

Q2 Q3 Q4 Q1 Q2 Q3 Q2 Q3 Q4 Q1 Q2 Q3

U.S. -0.15% -0.15% -0.15% -0.15% -0.15% -0.15% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Japan -0.02% -0.02% -0.02% -0.02% -0.02% -0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Euroland1 -0.05% -0.05% -0.05% -0.05% -0.05% 0.05% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

U.K. -0.15% -0.35% -0.40% -0.35% -0.40% -0.35% -0.20% -0.30% -0.10% -0.10% -0.10% -0.05%

Canada -0.30% -0.50% -0.55% -0.50% -0.50% -0.45% 0.00% -0.05% -0.10% -0.15% -0.15% -0.10%

Forecast as of: May 8, 20191 10-year German Government Bond Yield

2020 2019 2020

Changes to the Wells Fargo International Interest Rate Forecast

Central Bank Key Policy Rate 10-Year Bond

2019

Please note: For the International Interest Rate Forecast, we have transitioned to forecasting the central bank key policy rate in this table.

May 2019

Wells Fargo Securities Economics Group

15

Jay H. Bryson, Global Economist …[email protected]

Mark Vitner, Senior Economist [email protected]

Sam Bullard, Senior Economist [email protected]

Nick Bennenbroek, Macro Strategist [email protected]

Tim Quinlan, Senior Economist [email protected]

Azhar Iqbal, Econometrician [email protected]

Sarah House, Senior Economist [email protected]

Charlie Dougherty, Economist [email protected]

Erik Nelson, Macro Strategist [email protected]

Michael Pugliese, Economist [email protected]

Brendan McKenna, Macro Strategist [email protected]

Economists & Macro Strategists Economic Analysts

Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission, theFinancial Industry Regulatory Authority, and the Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through subsidiariesincluding, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A., Wells Fargo Clearing Services, LLC, Wells Fargo Securities International Limited, Wells Fargo SecuritiesCanada, Ltd., Wells Fargo Securities Asia Limited and Wells Fargo Securities (Japan) Co. Limited. Wells Fargo Securities, LLC. is registered with the Commodities Futures TradingCommission as a futures commission merchant and is a member in good standing of the National Futures Association. Wells Fargo Bank, N.A. is registered with the Commodities FuturesTrading Commission as a swap dealer and is a member in good standing of the National Futures Association. Wells Fargo Securities, LLC. and Wells Fargo Bank, N.A. are generallyengaged in the trading of futures and derivative products, any of which may be discussed within this publication. Wells Fargo Securities, LLC does not compensate its research analystsbased on specific investment banking transactions. Wells Fargo Securities, LLC’s research analysts receive compensation that is based upon and impacted by the overall profitability andrevenue of the firm which includes, but is not limited to investment banking revenue. The information and opinions herein are for general information use only. Wells Fargo Securities,LLC does not guarantee their accuracy or completeness, nor does Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person upon anysuch information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation withrespect to the purchase or sales of any security or as personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated banks and is a whollyowned subsidiary of Wells Fargo & Company © 2019 Wells Fargo Securities, LLC.

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