1. PBCTPBCT 1 2003 Economic Summit Outlook: Economy At The Cross-Roads What’s Next? May 30, 2003 Foxwoods Resort Casino Todd P. Martin First VP & chief economist People’s Bank 203.338.4826 Todd.Martin@peoples.com

2. PBCTPBCT 2 What’s Next? "The things we don't know. That's what's got Americans on edge. We are a nation that likes to know. We want to know if we're going to war. We want to know whom we can trust. We want to know if our jobs are secure. We want to know if the stock market is a better deal than the racetrack. We want to know if our next medical bill will set us back a year's wages. We want to know if boarding airplanes makes us targets. And following the Columbia tragedy, we want to know if our technologies can live up to the faith we put in them. The short answer to all these things: We don't know." USA Today, 2/04/03

3. PBCTPBCT 3 Wall of Worry Jobs War Code Orange - Terrorism SARS & Mad Cow Deflation Weak Dollar Corporate Malfeasance Weak Global Growth North Korea - Iran Widening Federal & State Budget Deficits Widening Trade Deficit Weak Capital Spending High Debt Levels Wake of Stock Bubble - Negative Wealth Effect Excess Capacity

4. PBCTPBCT 4 Reasons To Be Encouraged 40-Year low Interest Rates Federal Tax Cuts Strong Productivity Weaker Dollar Saddam Gone - War Went Well Falling Oil Prices Housing Booming Confidence Rebounds Stocks Up From Lows Improving Corporate Profits 94% Employed - Real Income Growth Positive Economy Has Been Remarkably Resilient

5. PBCTPBCT 5 US Economic Outlook Economic Growth will remains sub-par for the first half of 2003 due to high level of uncertainty The Fed will err on the side of accommodative monetary policy –Risk assessment: Risk of deflation greater than inflation –Watching Post-War data closely - will not tighten until unemployment rate falls decisively. The Consumer has kept expansion alive with record mortgage refinance and zero % auto loans. Longer-term, corporate profits, capital investment, and job growth needs to improve to sustain recovery. Risks to the downside, but combination of stimulative fiscal & monetary policy, strong productivity, low inflation, weaker dollar, and improving corporate profits should set the stage for better growth in the second half of 2003.

6. PBCTPBCT 6 The economy looks better than it feels…. Source: Conference Board, People’s Bank

7. PBCTPBCT 7 …But feels worse than it looks Source: Conference Board, BLS, People’s Bank monthly change (thousands) SA

8. PBCTPBCT 8 Productivity is soaring Source: Conference Board, People’s Bank

9. PBCTPBCT 9 Interest Rates are at 40-50 year lows Source: Conference Board, Bloomberg, People’s Bank 10 Year Treasury Note Yield vs. Targeted Fed Funds Rate %

10. PBCTPBCT 10 Mortgage refi helps fuel consumer spending Source: MBA, People’s Bank

11. PBCTPBCT 11 ISM index shows sharp drop in manufacturing Source: Conference Board, ISM, People’s Bank Institute of Supply Management Survey (formally NAPM)

12. PBCTPBCT 12 Jobless Claims trend higher again Source: Bloomberg, BLS, People’s Bank US Weekly Initial Jobless Claims - 4 week MA

13. PBCTPBCT 13 Core Inflation rate up just 1.5% Source: Conference Board, Bloomberg, People’s Bank CPI & CPI less food & energy - YOY% change

14. PBCTPBCT 14 CT Economic Outlook People’s Bank Business Barometer shows Connecticut Economy has stalled-out Downturn was not a repeat of early 1990s due to more diversified employment mix (defense a stabilizing factor) - balanced real estate markets - banks have adequate capital & credit available. Job losses continue, unemployment rates by LMAs have more than doubled since mid-2000, but the Stamford, Danbury & New London LMAs still have relatively tight job markets. CT vulnerable to national (and global) economy, falling stocks, rising oil prices, and deteriorating state fiscal condition.

15. PBCTPBCT 15 People's Bank Business Barometer stalls Source: People’s Bank, Centerprise Advisors

16. PBCTPBCT 16 The CT economy is bouncing along the bottom Source: People’s Bank, Centerprise Advisors Current downturn milder than early 1990s recession

17. PBCTPBCT 17 CT unemployment rate still lower than US rate Source: CT Labor Department % of labor force (SA)

18. PBCTPBCT 18 CT unemployment claims still too high, but lower than early 1990s peak Source: CT Labor Department

19. PBCTPBCT 19 Unemployment rates have more than doubled CT Unemployment Rates % by Labor Market Area (NSA) Source: CT Labor Dept.

20. PBCTPBCT 20 CT employment growth under-performs US Source: BLS, CT Labor Department Better performance than early 90’s recession, but starting to slip again

21. PBCTPBCT 21 CT Job losses across the board YOY Change in CT Non-Farm Employment Mar. 2003 vs. Mar. 2002 ( Not SA) Source: CT Labor Department

22. PBCTPBCT 22 Fewer job gains than losses in CT YOY Change in CT Non-Farm Employment Mar. 2003 vs. Mar. 2002 ( Not SA) Source: CT Labor Department

23. PBCTPBCT 23 Housing permits off to a weaker start this year Source: CT DECD % Change in CT New Housing Permits Authorized YTD Jan. - Mar. 2003 vs. 2002 by LMA Weaker activity due to weather, lack of land, & more stringent zoning

24. PBCTPBCT 24 CT Home Price growth starting to moderate Source: FHLMC, People’s Bank Conventional Mortgage Home Price index - annual growth rates %

25. PBCTPBCT 25 Housing is not overbuild like the mid-1980s Source:CT DECD, New England Economic Project Total housing permits authorized in CT in units 2002-2005 is forecast

26. PBCTPBCT 26 Auto registrations down just 0.6% YTD in 2003 Source: CT Labor Department Connecticut New Auto Registrations Processed YTD - (Jan. - Mar.)

27. PBCTPBCT 27 Tax revenues up 3.1% over last year Source: State of CT Dept. of Revenue Services Year-to-Date % change in CT Tax Revenues ( FY 02-03 vs. FY 01-02 July - Mar. ) Up $221 million

28. PBCTPBCT 28 Fall in income taxes offset by increases in other taxes Source: State of CT Dept. of Revenue Services Year-to-Date change in CT Tax Revenues ( FY 02-03 vs. FY 01-02 July - Mar. ) $ Millions

29. PBCTPBCT 29 Summary Growth will remain sub-par through first half 2003 - Iraq overshadowed economic data through mid-April Fed may err on the side of lower rates by the June FOMC meeting but short-term rates should begin to rise by mid-2004 Connecticut economic growth has stalled - meaningful job growth not likely until at least 2004 - Higher Taxes will hamper recovery Watch: Jobless Claims - employment - purchasing managers’ index - oil prices - home prices - consumer confidence - chain store sales - ‘geopolitical uncertainties’

30. PBCTPBCT 30 For more information... Please visit our web site at www.peoples.com for Economic Analysis [click on Investments] and other bank products & services