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<br />ECONOMIC ROUNDUP <br /> <br />CONSUMER AND PRODUCER PRICES <br />During November, the economy's headline inflation <br />reading rose slightly as the year-aver-year CPI increased to <br />2.0% from 1.3% in October. Despite this increase, the <br />overall CPI level recorded its second lowest reading since <br />March 2004. The year-over-year Core C PI (C PI less food and <br />energy) eased to 2.6%. While the trends in both Overall <br />and Core CPI have improve.d recently, Core CPI remains <br />above the FOMC's comfort level. GOing forward, market <br />observers will watch carefully to see if the past two months' <br />decline In the Core C PI marks the beginning of a trend <br />towards lower inflation <br /> <br />OIL PRICES <br />011 prices for West Texas Intermediate decreased in <br />December. The price per barrel closed the month at $61.05 <br />down from $64.62 per barrel. Price levels decreased due to <br />unusually warm winter weather across much of the United <br />States. <br /> <br />CREDIT SPREADS MiXED <br /> <br />rl <br />.J <br /> <br />CHANDLE~ <br />ASS" <br />M/\Nf\GEM~N'T <br /> <br />LASOR MARKETS <br />The December non-farm payroll employment report showed an <br />increase of 167,000 Jobs, higher than the consensus forecast for <br />a gain of 100,000. One of the main causes for this increase was <br />unseasonably warm and dry weather, which contributed to <br />stronger than expected construction payrolls. The six-month <br />average for non-farm payroll employment is now 161,000 jobs. <br />December's employment report indicates continued moderate <br />growth in the labor market. <br /> <br />HOUSING STARTS <br />Single-family housing starts rose by 8.1 % in November, to a 1.28 <br />million annual pace. This follows October's reading of 1.18 <br />million, which was the lowest In six years Single family housing <br />permits and new home sales indicators were little changed. <br />Although November's data was more positive than the previous <br />periods, several more months of data will be required to <br />ascertain if the housing decline is reaching a bottom or If further <br />weakness can be expected. <br /> <br /> <br />3-month top-rated commercial paper <br />2-year AA corporate note <br />5-year AA corporate note <br />5-year Agency note <br /> <br />0.21 <br />0.33 <br />0.59 <br />0.27 <br /> <br />Source,' Bloomberg <br /> <br />MIXED ECONOMIC DATA <br /> <br />0.19 <br />0.34 <br />0.59 <br />0.27 <br /> <br />0.02 <br />(001) <br />0.00 <br />000 <br /> <br />Data as of 12/31/06 <br /> <br /> <br />Trade Balance (58.9) $Bln OCT 06 (64.3) $Bln SEP 06 (666) $Bln OCT 05 <br />GDP 2.0% SEP 06 2.6% JUN 06 42% SEP 05 <br />Unemployment Rate 4.5% DEC 06 4.5% NOV 06 4.9% DEC 05 <br />Prime Rate 8.25% DEC 06 8.25% NOV 06 7.25% DEC 05 <br />CRB Index 307.26 DEC 06 32153 NOV 06 33183 DEC 05 <br />Oil (West Texas Int) $61.05 DEC 06 $63.13 NOV 06 $61.04 DEC 05 <br />Consumer Price Index (y/o/y) 2.0% NOV 06 1.3% OCT 06 3.5% NOV 05 <br />Producer Price Index (y/o/y) 0.9% NOV 06 (1.6)% OCT 06 4.4% NOV 05 <br />Dollar / EURO 1.32 DEC 06 1.32 NOV 06 1.18 DEC 05 <br />Source' Bloomberg <br /> <br />@ 2007 Chandler Asset Management Inc, An Independent Registered Investment Adviser. <br />The information contained herein was obtained from sources we believe to be reliable. but we do not guarantee its accuracy Opinions and forecasts regarding industnes, <br />companies, and/or the economy are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation. <br /> <br />Page 3 <br /> <br />CHANDLER ASSET MANAGEMENT III 9255 Towne Centre Drive, Ste 350 III San Diego, CA 92121 1.1 8003174747 III chandlerasset.com <br />