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WWee eexpectxpect a grgradualadual momoveve clocloserser ttoo the 2% ttargetarget ooverver the fforecastoreeccast horizhorizonon XXQGHUSLQQHGE\GRPHVWLFGHPDQGDQGPRGHUDWHO\VWURQJHUJURZWKDEURDG/DERXUFRVWVVKRXOGoUPVRPHZKDWZLWKFRQWLQXHGJDLQVLQQGHUSLQQHGE\ GRPHVWLF GHPDQG DQG PRGHUDWHO\ VWURQJHU JURZWK DEURDG /DERXU FRVWV VKRXOG oUP VRPHZKDW ZLWK FRQWLQXHG JDLQV LQ hiring demand. United States — Economic Forecasts, 2012-2014F 2013 2014 2015 20122012 2013F2013F 2014F2014F 2Q2Q 3QF 4QFF1QF1QF 22QF3QFQF 3QF 44QFQF 1QF GDP SAARSAAR 2.5% 1.9% 2.0% 2.9% 3.0% 3.1% 3.1% 3.0% YYoYo2.8%1.6%Y 2.8% 1.6% 2.6%11.6.4 6 11.4. 11.9.39 22.3.522.5.822.8. 33.0.10 3.13. Domestic Demand SAAR 2.1.1 1.7 2.02.0 3.23.2 3.3 3..33 3.43.4 3.2 YYoYoY 2 2.4.4 11.5.552.71.51.5 2.7 1.5 1.5 1.51.5 2.22.2 2.52.5 2.9 3.33.3 3.3 Consumption SAARSAAR 1.81.88 1.81. 2.72.07 3.03.33.33.13.13. 3.43.24 3.23. YoYYo2Y 2.22.91.91.982.82.91.91.91.91. 2.22.32 2.32.72.72.03.03. 3.23.32 3.33. Business Investment SAAR 4.7.7 3.9 3.43.4 4.74.7 4.7 5..11 5.45.4 5.5 YYoYoY 7 7.3.3 22.4.444.42.43.3 4.4 2.4 3.3 1.81.8 4.14.1 44.2.2 4.5 5.05.0 5.2 HousinHousing Investment SSAARAAR 14.2 10.3 99.1.14.420.719.61 14.4 20.7 19.6 14.3 14.0 YYoYo12.913.2Y 12.9 13.2 14.6 15.2 14.2 11.5 12.0 13.6 15.9 17.2 17.1 Government SAAR -0.4 -1.7 -2.8-2.8 1.11.1 -0.7-0.7 0.0 0.10.1 0.0 YYoYoY - -1.01.0 - -2.42.4 --0.70.7 - -2.02.0 - -3.23.2 -2.3-2.3 -1.0 -1.0-1.0 -00.6.6 0.10.1 -0.2 Exports SAARSAAR 8.08.80 4.84. 5.75.67 5.65.65.65.84.84. 5.25.12 5.15. YoYYo5Y 3.53.72.72.765.65.02.02.13.13. 4.24.02 6.06.45.45.45.45. 5.35.23 5.25. ImportsImports SSAARAAR 66.9.9 3 3.5.5 4.74.7 6.46.4 6.76.7 6.1 6.06.0 6.3 YYoYoY 2 2.2.2 1 1.8.885.71.21.9 5.7 1.2 1.9 3.93.9 5.45.4 5.35.3 6.0 6.36.3 6.3 PCE Deflator YoYYo8Y 1.81.21.21.291.91.11.11.21.21. 1.21.52 1.51.12.12.12.12. 2.12.11 2.12. Core PCE Deflator YoYYo8Y 1.81.31.31.3 1.91.29 1.21.21.21. 1.41.54 1.51.91.91.02.02. 2.12.11 2.12. UUnemplonemployment Rate % 8.18.1 7.47.4 6.76.7 7.67.6 7.3 77.2.2 7.17.1 6.9 6.8 6.66.6 6.5 S&PS 500 Profits (US$ Per Share))5.5 YoYYoY 6.16.1 5.55.5 6.26.2 5.8 4.2 77.6.6 6.26.2 5.6 7.0 5.9 NA Notes:Notes: F Citi forecast. E Citi EstimatEstimate.e. YoY Year-to-year percent change. SAAR Seasonally adjusted annual rate. Domestic demandemandd excludes inventories and net exportsexports.. Sources:Sources: Bureau of Economic AnalAnalysis,ysis, BBureauureau of Labor StatisticsStatistics,, I/B/E/S,I/B/E/S, Treasury Department, Wall Street JournaJournall and Citi Research forecasts Interest Rate and Bond Market Forecasts as of 23 October 2013 QQuauarteerlyrly A Averageverage CCurrenturrent 44QQ 1 133 1 1QQ 1 144 22QQ 1 144 3 3QQ 1 144 4 4QQ 1144 1 1QQ 1 155 US PolicPolicyy Rate (FedFed FundsFund s) End Quarter 0.25 0.250.25 0.25 0.250.25 0.250.25 0.250.25 0.25 3-Month Libor 0.24 0.240.24 0.24 0.320.32 0.450.45 0.550.55 0.65 2 Year TreasurTreasury YYieldield 00.30.30 00.33.33 0 0.43.43 0.580.58 0.730.73 0.900.90 1.08 5 Year TreasurTreasury Yield 1.29 11.32.32 1.48 1.751.75 1.981.98 2.152.15 2.38 1010 Year TreasurTreasury Yield 2.52 2.562.56 2.70 22.95.95 3.153.15 3.253.25 3.40 3030 Year TreasurTreasury YieldYield 33.62362.62 33.69369.69 3 3.88388.88 4.134.13 4.284.28 4.354.35 4.50 22-10-10 Year TreasuTreasurry CurvCurvee 222 222424 228 223838 224343 235235 233 2 Year Swap Spread ((SwapSwapSwap Less GovtGovt) , bp 13 15 19 20 20 20 20 10 Year Swap SSppreadrea d ( (SwSwaapp Less GovGovt t ), bp 1 4 1122 8 5 5 5 5 30 Year Swap Spread ((SwapSSwapwap Less GovGovtt ), bp -3 -5-5 -10 -14-14 -18-18 -23-23 -25 3030 Year MortMortggagage Yield 4.28 44.29.29 4.40 4.634.63 4.834.83 4.984.98 5.15 1100 Y Yearear B Breakevenreakeven I Inflationflation218n 218 222424 2 23838 224343 2 24040 2 23838 2 23535 $OOH[SUHVVLRQV RI RSLQLRQ DUH VXEMHFW WR FKDQJH ZLWKRXW QRWLFH DQG DUH QRW LQWHQGHG WR EH D JXDUDQWHH RI IXWXUH HYHQWV 7KLV GRFXPHQW LV IRU LQIRUPDWLRQ RQO\ DQG GRHV QRW FRQVWLWXWH D VROLFLWDWLRQ WR EX\ RU VHOO DQ\ oQDQFLDO product. 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Chairman Michael Holewinski FIrlolmi ntaxoabiilsity mof tarannsacutiofnas tco tquualirfyeingrs President for economic incentives, tax opportunities Gregory W. Baise Editor and risks can be highly complex — Stefany J. Henson information from IMA member McGladrey The Illinois Manufacturer is published quarterly by the Illinois Manufac - turers’ Association. All rights IMA MEMBER PROFILE: C. Cretors & Company reserved. The title, The Illinois By Dan Naumovich ..........................................................................14 Manufacturer, is a trademark of the Illinois Manufacturers’ Association. Risk management for manufacturers: Achieving results Copyright 2013© Illinois through smart insurance and employee relations practices Manufacturers’ Association. By Tonya G. Newman and Sonya Rosenberg, Neal, Gerber & Eisenberg LLP ...........22 Reproduction of all or any part is prohibited except by written permis - sion of the publisher.