monthly macro manual · our fed funds forecast is unchanged: one more hike this year, then three in...

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

November 7, 2018

Key Takeaways

2

Developments since our October Monthly Economic Outlook

Our updated forecast for Q4-2018 U.S. real GDP growth is 2.5%. Government spending will continue toprovide a boost to growth, and we expect a rebound in business fixed investment in Q4. We think personalconsumption growth will cool from the third quarter’s robust pace but remain supportive of overall GDPgrowth. Residential construction is likely to remain a weak spot, in our view.

Our fed funds forecast is unchanged: one more hike this year, then three in 2019 occurring in Q1, Q2 andQ3. As next year comes into view, we think economic conditions will remain strong enough for the Fed tocontinue hiking each quarter through Q3-2019, eventually pushing the fed funds rate a bit above neutral.

Our U.S. Treasury yield forecast is largely unchanged. We continue to expect rates to rise across the entireTreasury curve over the next few quarters, though we expect the pace to slow by late next year.

We have pared back our expectations for global growth modestly. Despite the U.S. outperformance,growth continued to slow in China and the Eurozone in Q3. The potential meeting between PresidentTrump/President Xi at the G20 summit on Nov. 30 will be key to the outlook for trade and global growth.

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2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

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

GDP - CAGR: Q3 @ 3.5%

GDP - Yr/Yr Percent Change: Q3 @ 3.0%

Forecast

Source: International Monetary Fund, U.S. Department of Commerce and Wells Fargo Securities

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Real Global GDP GrowthYear-over-Year Percent Change, PPP Weights

Period Average

WF

Forecast

Monthly Macro Calendar: November 5-December 7

3

Source: Bloomberg LP and Wells Fargo Securities

Monday Tuesday Wednesday Thursday Friday

5 6 7 8 9

ISM Non -Ma nu fa ct u ring Index JOLT S Jobs Open in gs FOMC Ra t e Decision PPI Fina l Dem a nd (YoY)

October 6 0.3 Septem ber 7 .0M Pr ev iou s 2 .2 5 %; Nov em ber 2 .2 5 % (W) Septem ber 2 .6 %; October 2 .5 % (W)

RBA Ra t e Decision Unit ed St a t es Midt erm Elect ion s Unit ed Kingdom GDP (YoY)

Pr ev iou s 1 .5 0% Q2 1 .2 %; Q3 1 .4 % (W)

Qu a rles* (Fed Boa rd of Gov ernors)

Spea ks on Str ess Test in g

12 13 14 15 16

Da ly * (Sa n Fra nciso Fed) Ja pa n A nn u a lized GDP (QoQ) Qu a rles* (Fed Boa rd of Gov ernors) Qu a rles* (Fed Boa rd of Gov ernors) Ev a ns (Ch ica go Fed)

Spea ks on th e Econ om ic Ou tlook Q2 3 .0% A ppea r s befor e Hou se Fin . Ser v .Pa n el A ppea r s befor e Sen a te Ba n kin g Pa n el Spea ks a t Fix ed In com e For u m Rou n dta ble

Ka sh ka ri (Min n ea polis Fed) Powell* (Fed Ch a ir) Ret a il Sa les (MoM) Indu st ria l Produ ct ion (MoM)

Spea ks a t Con fer en ce on Im m ig r a t ion Discu sses Econ om y a t Da lla s Fed ev en t Septem ber 0.1 % Septem ber 0.3 %

CPI (YoY) Im port Price Index (YoY)

Septem ber 2 .3 % Septem ber 3 .5 %

19 20 21 22 23

Hou sin g St a rt s (MoM) Du ra ble Goods Orders T h a nksgiv ing Da y Ca na da CPI (YoY)

Septem ber -5 .3 % Septem ber 0.7 % U.S. Ma r kets Closed Septem ber 2 .2 %

Exist ing Hom e Sa les (MoM)

Septem ber -3 .4 %

Ja pa n Na t l CPI (YoY)

Septem ber 1 .2 %

26 27 28 29 30

Bost ic*, Ev a n s a n d George New Hom e Sa les (MoM) Person a l Incom e (MoM) Eu rozon e CPI (YoY)

Spea k on Pa n el a t Con fer en ce in New Yor k Septem ber -5 .5 % Septem ber 0.2 % October 2 .2 %

Con su m er Con fiden ce In dex Powell* (Fed Ch a ir) FOMC Meet ing Minu t es 2018 G20 Su m m it

October 1 3 7 .9 Spea ks to Econ om ic Clu b of New Yor k Bu en os A ir es, A r g en tin a

3 4 5 6 7

ISM Ma nu fa t u ring Index Ba nk of Ca na da Ra t e Decision T ra de Ba la nce Non fa rm Pa y rolls

October 5 7 .7 Pr ev iou s 1 .7 5 % Septem ber -$5 4 .0B October 2 5 0,000

Reserv e Ba nk of India Ra t e Decision Fed. Gov . Con t inu ing Resolu t ion Expires

Pr ev iou s 6 .2 5 % (Rev er se Repo Ra te) 7 of 1 2 A ppr ops. Bills Cu r r en t ly Un der CR

Powell* (Fed Ch a ir)

Test ifies Befor e Join t Econ om ic Com m ittee

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 8

Fiscal policy will continue to propel economic growth abovepotential in the near-to-medium term. Economic growth should befairly broad-based, with housing the notable exception.

Upside scenario: After a solid three quarters, consumption andinvestment maintain momentum in Q4, helping to push full-yeargrowth above 3.0%, with momentum headed into 2019.

Downside scenario: Higher interest rates pressure consumers andbusinesses, while a trade war adds to uncertainty and inflationpressures, causing economic growth to start slowing earlier than wecurrently expect.

Key Themes and Upside/Downside Scenarios

U.S. Growth Outlook

4

Most recent real GDP growth forecast for Q4-2018: 2.5% (seasonally adjusted annual rate)

Change since last Monthly Economic Outlook: -0.3 percentage points

Commentary: Real GDP growth looks poised to post another solid quarter to end the year, albeit at aslightly slower pace. We expect a solid holiday season for consumer spending (more on that on page 10)while government spending will continue to boost growth. After temporary weakness in Q3, we expectbusiness fixed investment spending to rebound in Q4. Affordability issues, tax changes and higher mortgagerates will continue to weigh on the housing sector, which has been a laggard of late.

Real GDP growth forecast for full-year 2019: 2.7%

Change since last Monthly Economic Outlook: -0.1 percentage points

Commentary: Our forecast for 2019 economic growth largely remains unchanged. We still expect strongergrowth in H1-2019 to give way to a gradual softening starting in the second half of the year as governmentspending, corporate profits and disposable income begin to decelerate.

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Real Personal Consumption ExpendituresBars = CAGR Line = Yr/Yr Percent Change

PCE - CAGR: Q3 @ 4.0%

PCE - Yr/Yr Percent Change: Q3 @ 3.0%

Forecast

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

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

PCE Deflator: Q3 @ 2.2%

"Core" PCE Deflator: Q3 @ 2.0%

Forecast

Federal Reserve Watch

Inflation Forecast

Our inflation forecast is largely unchanged for 2019 and2020. Rising labor and material costs will likely continueto generate additional inflation pressures throughout2019. We expect inflation to soften slightly in 2020 asenergy prices begin to moderate.

Labor Market Forecast

We expect the unemployment rate to steadily declinethroughout our forecast horizon as employers continue toadd jobs. We look for the employment cost index, whichmeasures wages & salaries and other compensation costs,such as benefits, to surpass 3.0% growth on ayear-over-year basis in 2019 for the first time 2008.

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

Fed Funds Outlook

Fed Funds Forecast for 2018

One more 25 bps hike in Q4


Three 25 bps hikes – in Q1, Q2 and Q3

Rationale: With the labor market remaining white hotand inflation cresting above the Fed’s 2.0% target, weexpect the Fed to continue hiking rates until monetarypolicy is mildly restrictive.


One 25 bps cut in Q4 as quarterly economic growtheventually falls to slightly below 2.0% in H2-2020.

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Federal Funds Target RateUpper Bound, Percent

Federal Funds: Q3 @ 2.25%

Forecast

6

U.S. Interest Rate Outlook

Source: Federal Reserve Board and Wells Fargo Securities

FOMC: Where are balance sheet normalization and IOER headed?

The minutes from the September FOMC meeting offered little color on hot topics such as Fed balancenormalization and another possible IOER tweak.

The minutes from the November FOMC meeting will be released on Nov. 29. These could offer some keyinsights into what the outlook is for the balance sheet and IOER, among other topics.

Wage gains: Will recent momentum be sustained?

Wage and salary measures from the employment release and the employment cost index were strong across-the-board in recent readings. If this strength continues, might it spark a more hawkish Fed?

Net Treasury Issuance: How well will markets digest the continued onslaught of Treasury supply?

The U.S. Treasury increased coupon auction sizes by a bit less than expected at the Oct. 31 refunding. Evenwith no further increases, net Treasury issuance will likely be about $1.4 trillion in 2019, up 145% since 2017.

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 2.75 3.00 3.25 3.25 3.25 3.25 3.25 3.00

3 Month LIBOR 2.31 2.34 2.40 2.70 2.95 3.15 3.40 3.40 3.40 3.40 3.40 3.15

Prime Rate 4.75 5.00 5.25 5.50 5.75 6.00 6.25 6.25 6.25 6.25 6.25 6.00

Conventional Mortgage Rate 4.44 4.57 4.63 4.90 5.05 5.15 5.25 5.30 5.30 5.25 5.20 5.15

3 Month Bill 1.73 1.93 2.19 2.40 2.65 2.90 3.05 3.10 3.05 3.00 2.95 2.75

6 Month Bill 1.93 2.11 2.36 2.60 2.85 2.95 3.10 3.15 3.10 3.05 3.00 2.80

1 Year Bill 2.09 2.33 2.59 2.75 3.00 3.05 3.15 3.20 3.15 3.10 3.05 2.90

2 Year Note 2.27 2.52 2.81 2.95 3.10 3.15 3.25 3.25 3.20 3.15 3.10 3.00

5 Year Note 2.56 2.73 2.94 3.10 3.25 3.35 3.45 3.50 3.45 3.40 3.35 3.25

10 Year Note 2.74 2.85 3.05 3.30 3.45 3.55 3.65 3.70 3.70 3.65 3.60 3.55

30 Year Bond 2.97 2.98 3.19 3.50 3.65 3.80 3.90 3.95 4.00 4.00 3.95 3.90

Forecast as of: November 7, 2018

Wells Fargo U.S. Interest Rate Forecast

20202018 2019

Actual Forecast

Though economic growth has slowed in theEurozone, it remains a bit above potential growth,which most analysts believe is roughly 1.5%. Slack inthe labor market continues to diminish; theunemployment rate is 8.1%, the lowest it has beensince 2008. While the recent slowdown in economicgrowth suggests a more hawkish ECB will not beforthcoming anytime soon, we remain of the viewthat the ECB will end quantitative easing by year-end and increase its deposit rate in Q3-2019. Welook for the 10-year German bund yield to finishnext year at 1.1%, up about 65 bps from today.

Eurozone GDP Growth Disappoints…

Real GDP growth in the Eurozone was disappointingin Q3-2018, rising 0.2% (not annualized) on asequential basis. Based off of individual country-level data we have so far, it appears strength inFrance in Q3 was offset by weakness in the Germanand Italian economies. Some noise in the auto sectorlikely weighed on growth, particularly in Germany,but real GDP has clearly decelerated in the Eurozonein 2018. Headline consumer price inflation is thehighest it has been since 2013 and may be weighingon consumption growth. Some softening in theChinese economy has also likely been a factor.

…but the ECB Remains on Track

Global Economic Outlook: Advanced Economies

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Eurozone GDP GrowthBars = CAGR Lines = Yr/Yr Percent Change

Eurozone GDP CAGR: Q3 @ 0.6%

Eurozone GDP Yr/Yr: Q3 @ 1.7%

Forecast

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Eurozone Unemployment RateSeasonally Adjusted

Eurozone Unemployment: Oct @ 8.1%

Source: Bloomberg LP, IHS Markit and Wells Fargo Securities

8

Global Central Bank Watch

European Central Bank

It would likely take a material increase in core inflation to spark a more hawkish tone from the ECB.

Were real GDP to decelerate further, this would likely influence our outlook for an ECB rate hike in 2019. Anescalation in Italian budget drama represents another downside risk.

Bank of Japan

We expect the BoJ to raise its main policy rate to 0.00% and increase the band of its 10-year yield target to25 bps in Q2-2019.

Bank of England

We look for the BoE to remain on hold for the remainder of the year in the face of Brexit uncertainty.

Bank of Canada

We expect the BoC to match the Fed next year with three rates hikes, with the next hike occurring in Q1-2019.

What Are We Watching in the Month Ahead?

Wells Fargo Central Bank Policy ForecastsCurrent WF Next Forecasted

Policy Rate Policy Change

September 2018

25 bps hike

September 2018 End QE Program at end of 2018

Confirmed taper of asset purchases to €15 billion/month in Oct. 2018 Next Rate Hike: Q3-2019 (Deposit Rate)

August 2018 Maintain size of balance sheet through Q4-2019

25 bps hike Next Rate Hike: Q2-2019

July 2018 Maintain annual asset purchases of ¥80 trillion

QQE and a greater degree of variation in 10-year govt. bond yield target Change 10-year govt. bond yield tolerance band in Q2-2019

October 2018

25 bps hike


Canada (BoC) 1.75

Last Major Policy ChangeCentral Bank

Next Rate Hike: Q1-2019

United Kingdom (BoE) 0.75

Japan (BoJ) -0.10

United States (FOMC) 2.25

-0.40

(Deposit Rate)Eurozone (ECB)

Next Rate Hike: Q4-2018

Source: Bloomberg LP and Wells Fargo Securities

President Trump and President Xi are tentatively setto meet on Nov. 30 and discuss a possible resolutionto the trade spat, among other topics. Should anagreement come to pass, there would likely be someupside risk to our Chinese GDP forecast. However,in the absence of a deal, the tariff rate of 10% placedon $200 billion of U.S. imports from China will riseto 25% on January 1. Furthermore, President Trumphas threatened tariffs on the remaining $267 billionof U.S. imports from China. Should these go intoeffect, there would likely be additional downside riskto our outlook for Chinese economic growth.

Chinese Economic Growth Slows in Q3

Real GDP growth in China slowed in Q3-2018,falling from a 6.7% year-over-year pace to 6.5%.Though a relatively small move, it was the first moveof more than +/- 0.1 percentage points in Chinesereal GDP growth since Q1-2015.

Our forecast for real GDP growth in China has easedslightly, to 6.1% in 2019 and 6.0% in 2020. It isimportant to bear in mind that, even in the absenceof a trade war, economic growth would likely beslowing in China due to an aging population, longer-term deleveraging efforts and a slowing in the paceof industrialization/technological adaption.

Trade Key to the Outlook for China

Global Economic Outlook: Developing Economies

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Thousands

China Working Age PopulationMillions of Persons Aged 15-64

China: 2015 @ 1,014.5 Million

UN Projections

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China Real GDP GrowthYear-over-Year Percent Change

China Real GDP Growth: Q3 @ 6.5%

Forecast

Source: CEIC, IHS Markit, United Nations and Wells Fargo Securities

Personal consumption expenditures contributed about threepercentage points to the overall Q3 headline GDP figure of3.5%. With such considerable momentum in spending, there isscope for sales to ramp up in the remaining months of the year.

Data for the first nine months of the year point to considerablespending momentum across almost all of the categories in ourholiday sales measure. On average, almost every category ofholiday spending sees its largest portion of annual sales takeplace in the month of December. Overall, we expect nominalholiday sales to increase about 4.5% this season.

With sales set for another strong season, retailers are facing achallenge they have not seen in years: finding workers. Thetight labor market makes it tricky and more costly to findseasonal workers, but it also makes services, which are morelabor-intensive than goods, cost more. To that point, for thosein the market for traditional gifts this year, like electronics andtoys, goods prices are down compared to a year ago.

Excluding gas from our inflation index of common holidayoutlays, the holidays are likely to cost about 0.5% less than lastyear, although that is the smallest decline in about three years.Even if consumers are not seeing the same breaks in prices as inrecent years, the holidays still look like a bargain compared tothe broader economy, where inflation is up 2.2%.

For further reading, see our recent report “The Goose is GettingFat: Holiday Sales Outlook”.

10

Topic of the Month

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Holiday InflationYear-over-Year Percent Change of 3-Month Moving Average

Total: Aug @ 2.0%Total Ex-Gas: Aug @ -0.4%Total Ex-Food & Energy: Aug @ -2.0%PCE: Aug @ 2.3%

The Goose is Getting Fat: Holiday Sales Outlook

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Holiday Sales for November & DecemberYear-over-Year Percent Change, SA, Blue Bar=WF Forecast

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

https://image.mail1.wf.com/lib/fe8d13727664027a7c/m/3/holiday-outlook-2018.pdf

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 q420182018

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 3.5 2.5 2.3 2.6 2.5 2.3 2.1 2.0 1.8 1.8 #### 2.2 #### #### 2.9 #### #### 2.7 #### #### 2.2 ####

Personal Consumption 1.8 2.9 2.2 3.9 0.5 3.8 4.0 2.8 2.2 2.9 2.6 2.5 2.1 2.2 1.8 1.7 #### 2.5 #### #### 2.7 #### #### 2.8 #### #### 2.2 ####

Business Fixed Investment 9.6 7.3 3.4 4.8 11.5 8.7 0.8 6.6 4.7 4.9 4.4 4.0 3.7 3.6 2.9 2.8 #### 5.3 #### #### 6.8 #### #### 4.8 #### #### 3.7 ####

Equipment 9.1 9.7 9.8 9.9 8.5 4.6 0.4 7.7 3.8 4.2 3.7 3.1 2.7 2.6 2.1 2.0 #### 6.1 #### #### 7.1 #### #### 4.1 #### #### 2.8 ####

Intellectual Property Products 8.0 6.6 1.7 0.7 14.1 10.5 7.9 7.4 4.8 5.3 4.7 4.6 4.7 4.6 3.7 3.6 #### 4.6 #### #### 7.6 #### #### 6.1 #### #### 4.5 ####

Structures 12.8 3.8 -5.7 1.3 13.9 14.5 -7.9 3.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.5 #### 4.6 #### #### 4.8 #### #### 4.1 #### #### 4.5 ####

Residential Construction 11.1 -5.5 -0.5 11.1 -3.4 -1.3 -4.0 0.0 1.5 2.0 2.5 2.5 2.5 2.5 2.0 2.0 #### 3.3 #### #### -0.1 #### #### 0.6 #### #### 2.4 ####

Government Purchases -0.8 0.0 -1.0 2.4 1.5 2.5 3.3 3.2 2.7 2.2 1.6 0.8 0.7 0.5 0.3 0.1 #### -0.1 #### #### 1.8 #### #### 2.5 #### #### 0.8 ####

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

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

Net Exports -845.5 -844.1 -845.9 -899.2 -902.4 -841.0 -939.0 -968.7 -983.5 -1006.4 -1021.6 -1032.5 -1034.3 -1044.2 -1042.0 -1036.4 #### -858.7 #### #### -912.7 #### #### -1011.0 #### #### -1039.2 ####

Pct. Point Contribution to GDP -0.1 0.1 0.0 -0.9 0.0 1.2 -1.8 -0.6 -0.3 -0.5 -0.3 -0.2 0.0 -0.2 0.0 0.1 #### -0.4 #### #### -0.3 #### #### -0.5 #### #### -0.1 ####

Inventory Change -2.4 11.9 64.4 16.1 30.3 -36.8 76.3 75.0 71.0 70.0 71.0 71.0 70.0 69.0 69.0 69.0 #### 22.5 #### #### 36.2 #### #### 70.8 #### #### 69.3 ####

Pct. Point Contribution to GDP -0.8 0.2 1.0 -0.9 0.3 -1.2 2.1 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 #### 0.0 #### #### 0.1 #### #### 0.2 #### #### 0.0 ####

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

Nominal GDP (a) 3.9 4.2 4.8 5.1 4.3 7.6 4.9 4.8 5.5 5.3 5.2 4.9 4.5 4.6 4.1 4.4 #### 4.2 #### #### 5.2 #### #### 5.3 #### #### 4.7 ####

Real Final Sales 2.6 2.8 1.8 3.2 1.9 5.4 1.4 2.8 2.4 2.7 2.5 2.4 2.2 2.0 1.8 1.8 #### 2.2 #### #### 2.8 #### #### 2.6 #### #### 2.2 ####

Retail Sales (b) 4.9 4.1 4.2 5.6 4.5 5.7 5.9 4.5 5.0 4.4 4.2 4.5 4.5 4.4 4.4 3.7 #### 4.7 #### #### 5.2 #### #### 4.5 #### #### 4.2 ####

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

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

PCE Deflator 2.0 1.6 1.6 1.8 1.9 2.2 2.2 2.1 2.3 2.4 2.7 2.7 2.5 2.5 2.4 2.4 #### 1.8 #### #### 2.1 #### #### 2.5 #### #### 2.4 ####

"Core" PCE Deflator 1.8 1.6 1.5 1.6 1.7 1.9 2.0 2.0 2.1 2.2 2.3 2.3 2.2 2.2 2.2 2.1 #### 1.6 #### #### 1.9 #### #### 2.2 #### #### 2.2 ####

Consumer Price Index 2.6 1.9 2.0 2.1 2.3 2.6 2.6 2.4 2.4 2.6 2.9 2.9 2.7 2.7 2.5 2.5 #### 2.1 #### #### 2.5 #### #### 2.7 #### #### 2.6 ####

"Core" Consumer Price Index 2.1 1.8 1.7 1.7 1.9 2.2 2.2 2.3 2.3 2.6 2.7 2.7 2.5 2.3 2.4 2.4 #### 1.8 #### #### 2.2 #### #### 2.6 #### #### 2.4 ####

Producer Price Index (Final Demand) 2.0 2.2 2.4 2.8 2.8 3.0 2.9 2.6 2.6 2.6 2.9 3.1 2.9 2.9 2.7 2.6 #### 2.3 #### #### 2.8 #### #### 2.8 #### #### 2.8 ####

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

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Real Disposable Income (a) 4.5 2.2 2.2 2.3 4.4 2.5 2.5 2.5 2.8 2.6 2.6 2.6 2.6 2.5 2.2 2.0 #### 2.6 #### #### 2.9 #### #### 2.6 #### #### 2.5 ####

Nominal Personal Income (b) 4.1 4.3 4.5 4.6 4.3 4.7 4.6 4.3 4.5 4.8 4.8 4.8 4.6 4.3 4.2 3.9 #### 4.4 #### #### 4.5 #### #### 4.7 #### #### 4.2 ####

Industrial Production (a) 1.0 5.0 -1.5 7.7 2.5 5.3 3.3 3.6 2.4 4.2 1.2 4.0 2.5 4.7 0.7 0.1 #### 1.6 #### #### 3.8 #### #### 3.2 #### #### 2.8 ####

Capacity Utilization 75.4 76.2 75.8 77.0 77.2 77.8 78.0 78.3 78.5 78.6 78.6 78.8 78.9 79.1 79.0 78.9 #### 76.1 #### #### 77.8 #### #### 78.6 #### #### 79.0 ####

Corporate Profits Before Taxes (b) 3.0 3.6 2.8 3.3 5.9 7.3 8.0 6.2 5.6 1.8 0.5 -0.8 -1.6 -2.2 -2.6 -3.4 #### 3.2 #### #### 6.9 #### #### 1.7 #### #### -2.4 ####

Corporate Profits After Taxes 6.0 6.2 6.4 7.3 15.1 15.8 17.0 12.5 4.7 1.9 0.3 -1.0 -1.8 -2.4 -2.9 -3.7 #### 6.5 #### #### 15.1 #### #### 1.4 #### #### -2.7 ####

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

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

Federal Budget Balance (c) -317 4 -143 -225 -375 -7 -172 -321 -396 -63 -270 -337 -416 -63 -283 -364 #### -666 #### #### -779 #### #### -1050 #### #### -1100 ####

Trade Weighted Dollar Index (d) 94.0 90.5 88.1 87.5 86.3 90.0 90.1 92.0 91.0 89.3 88.3 87.0 86.0 85.0 84.0 83.0 #### 91.1 #### #### 89.6 #### #### 88.9 #### #### 84.5 ####

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

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

Nonfarm Payroll Change (e) 177 190 142 221 218 217 190 203 170 170 160 160 150 140 100 90 #### 182 #### #### 207 #### #### 165 #### #### 120 ####

Unemployment Rate 4.7 4.3 4.3 4.1 4.1 3.9 3.8 3.7 3.7 3.6 3.6 3.5 3.4 3.3 3.3 3.3 #### 4.4 #### #### 3.9 #### #### 3.6 #### #### 3.3 ####

Housing Starts (f) 1.23 1.17 1.17 1.26 1.32 1.26 1.22 1.29 1.30 1.31 1.32 1.32 1.33 1.34 1.34 1.35 #### 1.20 #### #### 1.27 #### #### 1.31 #### #### 1.34 ####

Light Vehicle Sales (g) 17.1 16.8 17.1 17.6 17.1 17.2 16.9 17.0 16.8 16.7 16.7 16.6 16.6 16.5 16.4 16.3 #### 17.1 #### #### 17.1 #### #### 16.7 #### #### 16.5 ####

Crude Oil - Brent - Front Contract (h) 54.6 50.8 52.2 61.4 66.9 74.6 75.8 78.0 80.0 85.0 88.0 82.0 80.0 74.0 70.0 70.0 #### 54.7 #### #### 73.9 #### #### 83.8 #### #### 73.5 ####

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

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

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 2.75 3.00 3.25 3.25 3.25 3.25 3.25 3.00 #### 1.13 #### #### 2.13 #### #### 3.06 #### #### 3.19 ####

3 Month LIBOR 1.15 1.30 1.33 1.69 2.31 2.34 2.40 2.70 2.95 3.15 3.40 3.40 3.40 3.40 3.40 3.15 #### 1.26 #### #### 2.44 #### #### 3.23 #### #### 3.34 ####

Prime Rate 4.00 4.25 4.25 4.50 4.75 5.00 5.25 5.50 5.75 6.00 6.25 6.25 6.25 6.25 6.25 6.00 #### 4.13 #### #### 5.13 #### #### 6.06 #### #### 6.19 ####

Conventional Mortgage Rate 4.20 3.90 3.81 3.94 4.44 4.57 4.63 4.90 5.05 5.15 5.25 5.30 5.30 5.25 5.20 5.15 #### 3.99 #### #### 4.63 #### #### 5.19 #### #### 5.23 ####

3 Month Bill 0.76 1.03 1.06 1.39 1.73 1.93 2.19 2.40 2.65 2.90 3.05 3.10 3.05 3.00 2.95 2.75 #### 0.95 #### #### 2.06 #### #### 2.93 #### #### 2.94 ####

6 Month Bill 0.91 1.14 1.20 1.53 1.93 2.11 2.36 2.60 2.85 2.95 3.10 3.15 3.10 3.05 3.00 2.80 #### 1.07 #### #### 2.25 #### #### 3.01 #### #### 2.99 ####

1 Year Bill 1.03 1.24 1.31 1.76 2.09 2.33 2.59 2.75 3.00 3.05 3.15 3.20 3.15 3.10 3.05 2.90 #### 1.20 #### #### 2.44 #### #### 3.10 #### #### 3.05 ####

2 Year Note 1.27 1.38 1.47 1.89 2.27 2.52 2.81 2.95 3.10 3.15 3.25 3.25 3.20 3.15 3.10 3.00 #### 1.40 #### #### 2.64 #### #### 3.19 #### #### 3.11 ####

5 Year Note 1.93 1.89 1.92 2.20 2.56 2.73 2.94 3.10 3.25 3.35 3.45 3.50 3.45 3.40 3.35 3.25 #### 1.91 #### #### 2.83 #### #### 3.39 #### #### 3.36 ####

10 Year Note 2.40 2.31 2.33 2.40 2.74 2.85 3.05 3.30 3.45 3.55 3.65 3.70 3.70 3.65 3.60 3.55 #### 2.33 #### #### 2.99 #### #### 3.59 #### #### 3.63 ####

30 Year Bond 3.02 2.84 2.86 2.74 2.97 2.98 3.19 3.50 3.65 3.80 3.90 3.95 4.00 4.00 3.95 3.90 #### 2.89 #### #### 3.16 #### #### 3.83 #### #### 3.96 ####

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


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 Major Currency Index, 1973=100 - Quarter End (i) Annual Numbers Represent Averages

(e) Average Monthly Change

ForecastActual

2017 2018 2019 2020

ForecastActual

12

U.S. Economic Forecast: Change Since Last Monthly Macro Manual (October 10, 2018)

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

q420182018

2017 2018 2019 2020 2017 2018 2019 2020

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Qq42018 q42018 q42018 q42018q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018

Real Gross Domestic Product (a) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.18 q42018 -0.26 q42018q42018 -0.16 q42018 -0.05 q42018 -0.07 q42018 -0.04 q42018q42018 -0.06 q42018 -0.03 q42018 -0.03 q42018 -0.01 0.00 0.01 -0.09 -0.05

Personal Consumption q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.65 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.08 0.08 0.00

Business Fixed Investment q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -4.68 q42018 1.28 q42018q42018 -0.01 q42018 -0.01 q42018 -0.01 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.53 -0.36 0.00

Equipment q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -3.73 q42018 2.87 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.31 0.05 0.00

Intellectual Property Products q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.77 q42018 2.25 q42018q42018 0.01 q42018 0.01 q42018 0.01 q42018 0.01 q42018q42018 0.01 q42018 0.01 q42018 0.01 q42018 0.00 0.00 0.24 0.51 0.01

Structures q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -14.85 q42018 -4.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -2.26 -2.70 0.00

Residential Construction q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -4.52 q42018 -2.50 q42018q42018 -3.00 q42018 -3.00 q42018 -2.00 q42018 -1.50 q42018q42018 -1.00 q42018 -0.50 q42018 -0.50 q42018 0.00 0.00 -0.73 -2.70 -1.12

Government Purchases q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.09 q42018 0.11 q42018q42018 0.34 q42018 0.58 q42018 0.54 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.02 0.29 0.10q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018

q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018

Net Exports q42018 0.0 q42018 0.0 q42018 0.0 q42018 0.0 q42018q42018 0.0 q42018 0.0 q42018 -22.4 q42018 -22.9 q42018q42018 -23.2 q42018 -23.6 q42018 -24.0 q42018 -24.4 q42018q42018 -24.7 q42018 -25.1 q42018 -25.5 q42018 -25.9 0.0 -11.3 -23.8 -25.3

Pct. Point Contribution to GDP q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -0.16 q42018 -0.01 q42018q42018 -0.01 q42018 -0.01 q42018 -0.01 q42018 -0.01 q42018q42018 -0.01 q42018 -0.01 q42018 -0.01 q42018 -0.01 0.00 -0.06 -0.07 -0.01

Inventory Change q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 28.33 q42018 25.00 q42018q42018 20.00 q42018 18.00 q42018 14.00 q42018 15.00 q42018q42018 14.00 q42018 14.00 q42018 14.00 q42018 14.00 0.00 13.33 16.75 14.00

Pct. Point Contribution to GDP q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.22 q42018 -0.07 q42018q42018 -0.11 q42018 -0.04 q42018 -0.08 q42018 0.02 q42018q42018 -0.02 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.07 0.02 -0.01q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018


Nominal GDP q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.20 q42018 -0.66 q42018q42018 -0.14 q42018 0.07 q42018 -0.10 q42018 0.01 q42018q42018 -0.12 q42018 0.19 q42018 -0.33 q42018 0.22 0.00 -0.02 -0.13 -0.03

Real Final Sales q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -0.76 q42018 0.14 q42018q42018 -0.05 q42018 -0.01 q42018 0.02 q42018 -0.06 q42018q42018 -0.04 q42018 -0.03 q42018 -0.03 q42018 -0.01 0.00 -0.09 -0.09 -0.03

Retail Sales (b) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -0.20 q42018 -0.41 q42018q42018 -0.42 q42018 -0.41 q42018 -0.22 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.16 -0.26 0.00q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018


Inflation Indicators (b) q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018

PCE Deflator q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -0.03 q42018 -0.11 q42018q42018 -0.11 q42018 -0.07 q42018 -0.05 q42018 0.04 q42018q42018 0.02 q42018 0.05 q42018 -0.02 q42018 0.02 0.00 -0.04 -0.05 0.02

"Core" PCE Deflator 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018 -0.01 q42018 -0.03 q42018q42018 -0.03 q42018 -0.03 q42018 -0.02 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.01 -0.02 0.00

Consumer Price Index q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -0.06 q42018 -0.17 q42018q42018 -0.18 q42018 -0.18 q42018 -0.12 q42018 -0.01 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.06 -0.12 0.00

"Core" Consumer Price Index q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -0.03 q42018 -0.05 q42018q42018 -0.05 q42018 -0.06 q42018 -0.03 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.02 -0.03 0.00

Producer Price Index (Final Demand) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -0.02 q42018 -0.17 q42018q42018 -0.18 q42018 -0.18 q42018 -0.16 q42018 -0.01 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.05 -0.14 0.00

Employment Cost Index q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.02 q42018 0.02 q42018q42018 0.02 q42018 0.02 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.01 0.01 0.00q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018


Real Disposable Income (a) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -0.05 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.01 -0.01 0.00

Nominal Personal Income (b) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.04 q42018 0.02 q42018q42018 0.02 q42018 0.02 q42018 -0.02 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.01 0.00 0.00

Industrial Production (a) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.14 q42018 -0.15 q42018 -0.07 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.00 -0.02 0.00

Capacity Utilization q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.03 q42018 -0.06 q42018 -0.10 q42018q42018 0.02 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.03 0.00 0.00

Corporate Profits Before Taxes (b) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.00 0.00 0.00

Corporate Profits After Taxes q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.00 0.00 0.00q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018


Federal Budget Balance (c) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -4.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -4.00 0.00 0.00

Trade Weighted Dollar Index (d) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 1.50 q42018q42018 1.25 q42018 0.75 q42018 1.00 q42018 0.75 q42018q42018 1.25 q42018 1.00 q42018 1.25 q42018 1.25 0.00 0.38 0.94 1.19q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018


Nonfarm Payroll Change (e) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 23.33 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 5.83 0.00 0.00

Unemployment Rate q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 -0.07 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.02 0.00 0.00

Housing Starts (f) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 -0.03 q42018 -0.05 q42018q42018 -0.05 q42018 -0.05 q42018 -0.04 q42018 -0.05 q42018q42018 -0.06 q42018 -0.06 q42018 -0.07 q42018 -0.08 0.00 -0.02 -0.05 -0.07

Light Vehicle Sales (g) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.04 q42018 0.24 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.07 0.00 0.00

Crude Oil - Brent - Front Contract (h) q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 -4.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -1.00 0.00 0.00q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018


Quarter-End Interest Rates (i) q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018

Federal Funds Target Rate q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.00 0.00 0.00

3 Month LIBOR q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.00 0.00 0.00

Prime Rate q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.00 0.00 0.00

Conventional Mortgage Rate q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 -0.05 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.01 0.00 0.00

3 Month Bill q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 0.00 0.00 0.00

2 Year Note q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 -0.05 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.01 0.00 0.00



30 Year Bond q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 -0.05 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 q42018q42018 0.00 q42018 0.00 q42018 0.00 q42018 0.00 0.00 -0.01 0.00 0.00q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018 q42018q42018 q42018 q42018 q42018


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 Major Currency Index, 1973=100 - Quarter End (i) Annual Numbers Represent Averages

(e) Average Monthly Change

Actual ForecastForecastActual

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) 3.8% 3.6% 3.4% 3.6% 3.8% 3.7%

Advanced Economies1 2.5% 2.4% 2.0% 2.2% 2.3% 2.3%

United States 2.9% 2.7% 2.2% 2.5% 2.7% 2.6%

Eurozone 1.9% 1.9% 1.7% 1.8% 1.8% 1.8%

United Kingdom 1.2% 1.6% 1.6% 2.4% 2.1% 2.0%

Japan 1.2% 1.1% 0.4% 1.0% 1.1% 1.9%

Canada 2.2% 2.2% 1.7% 2.4% 2.2% 2.0%

Developing Economies1 4.7% 4.5% 4.4% 4.5% 4.8% 4.6%

China 6.6% 6.1% 6.0% 2.1% 2.3% 2.2%

India 7.7% 7.5% 7.3% 4.6% 5.1% 4.8%

Mexico 2.2% 2.4% 2.3% 4.9% 4.1% 3.7%

Forecast as of: November 7, 20181Aggregated Using PPP Weights

CPI

(End of Quarter Rates)

2020

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

U.S. 2.70% 2.95% 3.15% 3.40% 3.40% 3.40% 3.30% 3.45% 3.55% 3.65% 3.70% 3.70%

Japan -0.01% 0.00% 0.00% 0.00% 0.01% 0.01% 0.16% 0.20% 0.24% 0.27% 0.30% 0.30%

Euroland1 -0.35% -0.35% -0.30% -0.10% 0.15% 0.40% 0.55% 0.70% 0.90% 1.00% 1.10% 1.20%

U.K. 0.85% 0.85% 1.10% 1.10% 1.35% 1.35% 1.55% 1.65% 1.90% 2.00% 2.10% 2.20%

Canada2 2.20% 2.45% 2.70% 2.95% 2.95% 2.95% 2.65% 2.80% 2.90% 3.00% 3.05% 3.05%

Forecast as of: November 7, 20181 10-year German Government Bond Yield 2 3-Month Canada Bankers' Acceptances

Wells Fargo International Interest Rate Forecast

10-Year Bond

2018 20192018 2019 2020

3-Month LIBOR

14

International Forecast: Change Since Last Monthly Macro Manual (October 10, 2018)

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) -0.02% -0.10% -0.05% -0.02% -0.02% -0.06%

Advanced Economies1 0.00% -0.13% -0.03% -0.01% -0.05% -0.06%

United States 0.04% -0.10% -0.05% -0.03% -0.06% -0.07%

Eurozone -0.07% -0.25% -0.03% -0.01% -0.05% -0.06%

United Kingdom 0.05% 0.05% 0.08% 0.04% 0.07% -0.02%

Japan 0.00% -0.11% -0.08% 0.03% -0.06% -0.12%

Canada 0.00% 0.00% 0.00% -0.11% -0.04% 0.07%

Developing Economies1 -0.03% -0.08% -0.05% -0.03% 0.01% -0.05%

China -0.07% -0.15% -0.10% 0.03% 0.00% -0.10%

India2 0.00% 0.00% 0.00% -0.25% 0.00% 0.00%

Mexico 0.18% 0.02% 0.00% 0.11% 0.14% 0.00%

Forecast as of: November 7, 20181Aggregated Using PPP Weights

(End of Quarter Rates)

Q4 Q1 Q2 Q3 Q4 Q1 Q4 Q1 Q2 Q3 Q4

U.S. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% -0.05% 0.00% 0.00% 0.00% 0.00%

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

Euroland1 0.00% -0.05% -0.05% 0.05% 0.10% 0.10% -0.10% -0.10% -0.05% -0.05% -0.05%

U.K. 0.05% 0.00% 0.15% 0.05% 0.25% 0.25% -0.15% -0.15% 0.05% 0.00% 0.00%

Canada2 0.05% 0.05% 0.05% 0.05% 0.10% 0.10% -0.05% 0.00% 0.00% 0.00% 0.00%

Forecast as of: November 7, 20181 10-year German Government Bond Yield 2 3-Month Canada Bankers' Acceptances

Changes to the Wells Fargo International Interest Rate Forecast

3-Month LIBOR

20182018 2019 2020 2019

10-Year Bond

Wells Fargo Securities Economics Group

15

Global Head of Research, Economics & Strategy

Diane Schumaker-Krieg ………………… ………[email protected]

Global Head of Research, Economics & Strategy

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]

Azhar Iqbal, Econometrician [email protected]

Tim Quinlan, Senior Economist [email protected]

Sarah House, Senior Economist [email protected]

Senior Economists

Economists

Charlie Dougherty, Economist [email protected]

Erik Nelson, Macro Strategist [email protected]

Michael Pugliese, Economist [email protected]

Brendan McKenna, Macro Strategist [email protected]

Economic Analysts

Administrative Assistants

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, the FinancialIndustry Regulatory Authority, and the Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through subsidiaries including, but not limited to,Wells Fargo & Company, Wells Fargo Bank N.A., Wells Fargo Clearing Services, LLC, Wells Fargo Securities International Limited, Wells Fargo Securities Canada, Ltd., Wells Fargo Securities AsiaLimited and Wells Fargo Securities (Japan) Co. Limited. Wells Fargo Securities, LLC. is registered with the Commodities Futures Trading Commission as a futures commission merchant and is amember in good standing of the National Futures Association. Wells Fargo Bank, N.A. is registered with the Commodities Futures Trading Commission as a swap dealer and is a member in goodstanding of the National Futures Association. Wells Fargo Securities, LLC. and Wells Fargo Bank, N.A. are generally engaged in the trading of futures and derivative products, any of which may bediscussed within this publication. Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC’s researchanalysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm which includes, but is not limited to investment banking revenue. The informationand 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 liabilityfor any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general informationonly and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity anddistinct from affiliated banks and is a wholly owned subsidiary of Wells Fargo & Company © 2018 Wells Fargo Securities, LLC.

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