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Exhibit 39: CFO Optimism About the US Economy Chief financial officers’ confidence is at its highest level in a decade. % 90 % of CFOs More Optimistic Than Previous Quarter Recession 64.1 0 2004 2006 2008 2010 2012 2014 2016 Data through December 2016. Note: The survey questionnaire is delivered online to senior financial executives and subscribers of CFO Magazine from both private and public companies. Source: Investment Strategy Group, Haver Analytics. Exhibit 40: Eurozone Real GDP Growth Economic activity has been surprisingly resilient and higher than expected. % YoY 2.5 5 mReal GDP Growth @ Consensus Estimate* 2.0 2.0 2.0 | 19 18 17 17 7 : 13 . | 4014 1015 2015 3015 4015 1016 2016 3016 wn o i Data through 03 2016. Source: Investment Strategy Group, Bloomberg. * One quarter prior to release. the new administration’s policies remain uncertain, a moderate-sized stimulus package of around $200 billion per year seems likely.!°? While the direct impact of such a package is estimated to boost GDP growth by only 0.3 percentage point in 2017, the positive indirect impact of tax cuts and stronger anticipated GDP on household and business confidence is arguably more important. Indeed, both consumer and CFO confidence have recently hit their highest readings in over a decade (see Exhibit 39). Our View on US Growth As the expansion enters its eighth year, it is natural to question its durability. But far from showing its age, the US economy begins 2017 at an above- trend growth pace, with little evidence of cyclical imbalances or other excesses that typically portend the end of the business cycle. If anything, the slow pace of this recovery has elongated its life span, a dynamic that is likely to persist this year. Perhaps in macroeconomics, as in life, age is just a number. Eurozone: Weathering the Storm The Eurozone has faced its share of challenges in recent years. Not only did it relapse into recession in 2011, but it also endured a domestic sovereign bond and banking crisis at the same time. More recently, it has been buffeted by a spate of tragic terrorist attacks, an immigration crisis, the Brexit vote, a failed Italian constitutional referendum and renewed concerns about the solvency of its banking system. Yet despite this onslaught of headwinds, the real economy has been remarkably stable in the last two years. That fact is evident in Exhibit 40, which shows real GDP growth has sustained an above-trend pace over this period, an outcome that clearly exceeded consensus forecasts. Business sentiment has remained equally steadfast over this period, suggesting that the rapidity of shocks may have effectively inured confidence to bad news (see Exhibit 41). Meanwhile, real household disposable income grew by 2.3% over the past year—the fastest pace since 2007. We expect this stability to persist in 2017, with our forecast calling for 1.2-1.9% real GDP growth. Keep in mind that there is ample scope for above-trend growth to continue, as the level of Eurozone GDP still stands below its potential. On this point, the OECD, IMF and European Commission each currently estimate an output gap of around 2%, indicating slack in the economy. The Eurozone’s still elevated 9.8% unemployment rate corroborates this point. 42 | Goldman Sachs | JANUARY 2017 HOUSE_OVERSIGHT_014575