Global ic outlook -S Key questions Global growth expected to be around 3% in e What are the prospects for the global economy in 4Q 2012 and 1Q 2013? 2012 and 2013 © What are the risks that the US economic recovery will falter in the near term? e When is the European economy likely to emerge from contraction? e What is the near-term outlook for the Chinese economy? Seqeigs 0 e Canada 24 2.0 2.3 2.9 2.0 2.3 Brazil DoD 1.5 45 65 5.4 GD: CIO View (Probability: 75%*) Sluggish expansion Asia/Pacific Japan OB 232003 OOO 2 a8 m 5 y Australia 2:1 37 3:2 3.4 7 2:5 ¢ Global economic activity has shown signs of improvement over the last month — albeit from a low base. Importantly, China S~=~<SSCSCOBSC*OASC‘i CO the JPM global composite PMI (a survey measuring economic activity) rose significantly to 52.5 in September from 50.9 SS ——————— in August. The increase was driven by improvements in both manufacturing and service sector activity. Thus, the Germany 3109 TT 25 17 1S global manufacturing PMI rose marginally to 48.9 from 48.1, while the services PMI jumped two index points to 54. tance ___ tT 9 be ete te * Geographically, improvements were concentrated in the emerging markets and the US. Indeed, we think that Pee downside risks in the US have diminished lately and we expect the moderate recovery to continue ahead. Chinese data Switzerland 1911 ~*+1.4 02-05 1.2 are still mixed, but we think that an improvement in the economic momentum is in the cards in 4Q. In the EMU and woe Ot se SS UK, recent PMI surveys deteriorated but we still expect the EMU to improve gradually in coming quarters. Overall, we OE expect the moderate improvement in global economic activity to continue ahead. A key driver here is the latest wave ‘ 4 m . ls : Source: UBS CIO, as of 24 October 2012 of ultra-expansionary monetary policy. Downside risks have diminished somewhat in recent months. We expect Greece ; } ; . : i . ‘ : : : In developing the ClO economic forecasts, ClO economists