Florida Retail Federation Annual Meeting Retailing: Sustaining Your Sails!La Playa Resort, Naples, FloridaNovember 18, 2008

By:Tony Villamil

The Washington Economics Group, Inc.

Estimation and Forecasting of Retail Sales in Florida:An Update

External Macroeconomic Drivers of Economic Activity and Income in Florida: A Framework

FLORIDA ECONOMIC AND INCOME GROWTH DRIVEN BY:

EXTERNAL DRIVERS

2009 Florida Outlook Tendency

Business Climate Steady

US Econ/Fin Markets Recession

Global Economy Recession

US Economic Drivers of Florida

Indicator 2005 2006 2007 2008 2009F RiskF

1. Economic Growth1

( % Real GDP)3.1 2.9 2.0 1.0 -1.0

2. Inflation2 ( % Core CPI/U)

2.2 2.6 2.4 2.6 1.5 --

3. Fed Funds Rate (Avg)3 3.2 4.9 5.0 2.3 1.0 --

4. Unemployment Rate4 (%) 5.1 4.6 4.6 6.8 7.5

Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Federal Reserve and Forecast (F) by The Washington Economics Group, Inc.Notes: 1Data for 2008 is based on IIIQ-08 vs. IIIQ-07. 2Data based on the first half of 2008. 3Annual Average, 2008 is based up to Oct YTD. 4Data for 2008 is based on Sep 2008.

Global Economic Drivers of Florida

Region/Country( GDP, %)

2005 2006 2007 2008 2009F

Developed EconomiesEuro AreaJapanU.K.

1.61.92.1

2.82.42.8

2.62.03.0

1.30.71.0

0.20.5-0.1

Emerging CountriesChinaIndia

10.49.1

12.010.0

12.09.3

9.78.0

7.07.4

Latin American RegionBrazilMexico

3.03.2

3.74.8

5.43.2

4.82.5

4.02.5

Source: IMF, Oct 2008 and United Nations ECLAC.

Sensitivity of Florida Retail Sales

• Population and per-capita income growth accounts for a significant 87 percent of the expected change in overall retail sales

• Consumer expectation and month of the year account for a 12 percent change in retail sales

• The remaining 1 percent change in retail sales can be attributed to random factors, not accounted by the model

Forecast for Retail Sales in 2009, Adjusted for Inflation andBroken Down by Principal Product and Services Sectors

SectorTotal Retail Sales

($ Million)Change from 2008

(Inflation Adjusted %)

Non-Durables $100,522 1.50%

Durables 29,373 3.0%

Tourism/Recreation 68,596 1.32%

Business Related 70,822 4.95%

Automobiles and Accessories 65,633 10.0%

Building Related 23,792 6.0%

Total $358,918 2.0%

Source: Forecast Model, The Washington Economics Group, Inc.

Statistical Analysis

Indicators of Retail Sales

Florida Consumer Confidence Index:A Slight Recovery in 2009

Source: University of Florida BEBR and Forecast (F) by The Washington Economics Group, Inc. Data is based on Dec observations of each year. 2008 is based on Oct data.

9689 90 89

77

60

80

0

20

40

60

80

100

120

2003 2004 2005 2006 2007 2008 2009F

$ Crude Oil/Barrel

Source: Energy Information Administration (EIA) and Forecast (F) by The Washington Economics Group, Inc. Data is based on Dec observations of each year. 2008 is based on Nov data.

$32.2

$43.3

$59.4 $62.4

$91.7

$65.1$70.0

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

2003 2004 2005 2006 2007 2008 2009F

Florida Single-Family Median Home Prices

Source: Florida Association of Realtors and Forecast (F) by The Washington Economics Group, Inc. Data is based on Dec observations of each year. 2008 is based on Sep YTD data.

$158,400

$182,400

$235,100$248,300

$223,600

$196,400$190,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

$260,000

2003 2004 2005 2006 2007 2008 2009F

Florida Unemployment Rate

Source: Florida Agency for Workforce Innovation and Forecast (F) by The Washington Economics Group, Inc. Data is based on Dec observations of each year. 2008 is based on Sep data.

4.5%4.2%

3.2% 3.3%

4.5%

6.8%6.5%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2003 2004 2005 2006 2007 2008 2009F

Florida Taxable Sales:A Modest Increase for 2009

Source: Florida Economic and Demographic Research Database and Forecast (F) by The Washington Economics Group, Inc. Data is based on Aug observations of each year.

$21.7

$22.6

$25.9

$26.9

$25.5

$23.8

$24.5

$20.0

$21.0

$22.0

$23.0

$24.0

$25.0

$26.0

$27.0

$28.0

2003 2004 2005 2006 2007 2008 2009F

Florida Growth and Total Retail Sales

Source: University of Central Florida (UCF), Oct 2008 Forecast.

$100.0

$120.0

$140.0

$160.0

$180.0

$200.0

$220.0

$240.0

$260.0

$280.0

$300.0

2003 2004 2005 2006 2007 2008

$ B

illio

ns

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

Annual G

rowth

Florida Non-Agricultural Employment

Source: Florida Agency for Workforce Innovation. Data is based on December observation of each year. 2008 growth is based on Sep vs. Sep 2007.

1.1%

3.4%

4.0%

2.6%

0.5%

-1.5%-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2003 2004 2005 2006 2007 2008

% C

hang

e fro

m P

revio

us P

eriod

Florida Retail Trade Employment

Source: Florida Agency for Workforce Innovation. Data is based on December observation of each year. 2008 growth is based on Sep vs. Sep 2007.

0.9%

3.1%3.4%

1.3%

-0.1%

-2.4%-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2003 2004 2005 2006 2007 2008

% C

hang

e fr

om P

revi

ous

Perio

d

Concluding Observations

• A modest recovery in Retail Sales expected in 2009, from the low levels experienced in 2008

• It is unlikely that total Retail Sales will reach 2004 levels next year, but a recovery is likely to gather momentum in the last quarter of 2009

• Monetary and fiscal policies are highly stimulative of an economic recovery late in 2009

• Financial federal package now geared to support consumer credit

The Washington Economics Group, Inc.

2655 LeJeune Road, Suite 608Coral Gables, Florida 33134

Phone: 305-461-3811www.weg.cominfo@weg.com

The Washington Economics Group, Inc.

2655 LeJeune Road, Suite 608Coral Gables, Florida 33134

Phone: 305-461-3811www.weg.cominfo@weg.com