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,:,,:,+ CHANDLER <br />f ass~r <br />ECONOMIC ROL1h~IDL1P ~ 'nt;~r~"r <br />SECOND QUARTER ADVANCED GDP <br />The initial reading for Q2 2006 Gross Domestic Product <br />(GDP) reported an annualized growth rate of 2.5%, down <br />sharply from Q1's final reading of 5.6%. This reading was <br />at the low end of market participant forecasts, which had <br />been running in the 2.5% -3.0% range. This report reflects <br />a slowing economy, as the accumulated affects of high <br />energy prices and 17 FOMC rate increases finally begin to <br />take hold. <br />^IL PRICES <br />Oil prices for West Texas Intermediate traded in a narrow <br />range in July. The price per barrel closed the month at <br />$74.40 up slightly from $73.93 per barrel. Price levels <br />remained high as supply disruption concerns related to the <br />Middle East political tensions continued to worry the <br />energy markets. <br />CREDIT SPREADS MIXED <br />CONSUMER AND PRODUCER PRICES <br />During June, the economy's headline inflation readings moved <br />higher as the CPI report's housing component pushed prices <br />higher. The year-over-year CPI increased to 4.3% from 4.2%. <br />Also the year-over-year Core CPI (CPI less food and energy) <br />increased 0.2% to 2.6%. This Is the third month in a row of <br />higher Core CPI and the highest reading since February 2002. <br />Core CPI merits monitoring as future worries about potential <br />non-energy price inflation would be observed in the Core CPI <br />data. <br />LABOR MARKETS <br />The July non-farm payroll employment report showed an <br />increase of only 113,000 jobs. Currently, the three-month <br />average for non-farm payroll employment is 108,000 jobs. The <br />unemployment rate also unexpectedly increased to 4.8%. This <br />month's report continues to confirm a near term moderation of <br />the growth trend in the labor markets. <br />3-month top-rated commercial paper 0.23 0.34 (0.1 1) <br />2-year AA corporate note 0.43 0.39 0.04 <br />5-year AA corporate note 0.60 0.57 0.03 <br />5-year Agency note 0.39 0.41 (0.02) <br />Source 9loomberg Data as of 7/31 /06 <br />MIXED ECONQMIC DATA <br />Trade Balance (63.8) $Bln MAY 06 (63.3) $Bln APR 06 (56.6) $Bln MAY 05 <br />GDP 2.5% JUN 06 5.6% MAR 06 3.3% JUN 05 <br />Unemployment Rate 4,8%JUL 06 4.6% JUN 06 5.0% JUL 05 <br />Prime Rate 8.25% JUL 06 8.25% JUN 06 6.25% JUL 05 <br />CRB Index 349.83 JUL 06 346.39 JUN 06 312.001UL 05 <br />Oil (West Texas Int.) $74.40 JUL 06 $73.93 JUN 06 $60.57 JUL 05 <br />Consumer Price Index (y/o/y) 4.3% JUN 06 4.2% MAY 06 2.5% JUN 05 <br />Producer Price Index (y/o/y) 4.9% JUN 06 4.5% MAY 06 3.7% JUN 05 <br />Dollar / EURO 1.28 JUL 06 1.28 JUN 06 1.21 JUL 05 <br />Source: Bloomberg <br />® 2006 ChandlerASSet Management Inc, An Independent Registered Investment Advisee <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 industries, <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. Pale ~ <br />CHANDLER ASSET MANAGEMENT ^ 9255Towne Centre Drive, Ste 350 ^ San Diego, CA 92121 ^ 800 317 4747 ^ chandlerasset.com <br />