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CHANDLER <br />AssEr <br />r~nnNAOEnnENr <br />E C O N D M I C R D U N D U P tELE(3RATING OUR 20TH YEAR., <br />CONSUMER PRICES <br />During May, the economy's headline inflation reading <br />showed a 4.2% year-over-year rate, an increase from <br />April's 3.9% indication. The year-over-year Core CPI (CPI <br />less food and energy) remained at a 2.3% rate. <br />Although inflation readings remain somewhat elevated, <br />the Fed continues to expect inflation to moderate as <br />growth slows in the months ahead. <br />RETAIL SALES <br />During May, Retail Sales were much stronger than expected, but <br />the year-over-year growth declined to a 2.5% annual rate. <br />Recently, consumers have slowed their spending in reaction to <br />higher energy prices, the housing market contraction, and a <br />general tightening of credit standards. ,The recent arrival of tax <br />rebate checks has helped mitigate this weakness somewhat. <br />HOUSING STARTS LABOR MARKETS <br />Single-family housing starts declined by 1.0% in May, to The June non-farm payroll employment report showed a <br />a 0.67 million annual pace. This follows April's reading of decrease of 62,000 jobs and the unemployment rate remained <br />0.68 million. The latest decline was the lowest level since at 5.5%. The payroll data reflected the sixth consecutive month <br />March 1991. Recent data has supported the financial of negative job growth. June's employment report validates the <br />market concern thatrothe decline in the housing market recent financial market concern about a slowing economy <br />has not yet run its course. impacting the labor markets. <br />CREDIT SPREADS MIXED <br />3-month top-rated commercial paper 1.00 0.68 0.32 <br />2-year AA corporate note 0.90 0.87 0.03 <br />5-year AA corporate note 1.47 1.50 (0.03) <br />5-year Agency note 0.85 0.73 0.12 <br />Source: Bloomberg Data as of 6/30/08 <br />ECONOMIC DATA <br />Trade Balance <br />GDP <br />Unemployment Rate <br />Prime Rate <br />CRB Index <br />Oil (West Texas Int.} <br />Consumer Price Index (y/oty) <br />Producer Prite Index (y/o/y) <br />Dollar / EURO <br />Source: Bloomberg <br />(60.9) $Bln APR 08 <br />1 .0% MAR 08 <br />5.50% JUNE 08 <br />5.00% JUNE 08 <br />462.74 JUNE 08 <br />$140.00 JUNE 08 <br />4.2% MAY 08 <br />7.2% MAY 08 <br />1.58 JUNE 08 <br />(56.5) $Bln MAR 08 <br />0.6% DEC 07 <br />5.50% MAY 08 <br />5.00% MAY 08 <br />422.17 MAY 08 <br />5127.35 MAY 08 <br />3.9% APR 08 <br />6.5% APR 08 <br />1.56 MAY 08 <br />(60.3) $Bln APR 07 <br />0.6% MAR 07 <br />4.60% JUNE 07 <br />8.25% JUNE 07 <br />315.74 JUNE 07 <br />$70.68 JUNE 07 <br />2.7%MAY07 <br />3.9% MAY 07 <br />1.35 JUNE 07 <br />Data as of 6/30/08 <br />® 2008 Chandler Asset Management, Inc, An Independent Registered Investment Adviser. <br />The information contained herein was obtained from sources we believe robe reliable, but we do not guarantee its accuracy Opinions and forecasts regarding industries, <br />companies, and/or the economy are aU subject to change at any time, based on market and other conditions, and should not be construed as a recommendation. <br />Page 3 <br />CHANDLER ASSET MANAGEMENT ^ 9255 Towne Centre Drrve, Ste 350 ^ San Diego, CA 92121 ^ 800 3 17 4747 ^ chandlerasset.com <br />