Business Outlook

• PMI was registered at 50.8 percent indicating that manufacturing economy is generally expanding. However, compared to October’s 50.9 percent it indicates that manufacturing industry is expanding at a slower rate.

• Profits from current production decreased $19.3 billion in the third quarter, in contrast to an increase of $94.7 billion in the second quarter.

• Domestic profits of financial corporation decreased $29.1 billion in the third quarter, in contrast to an increase of $25.3 in the second.

Purchasing Manager's Index

44

46

48

50

52

54

56

58

Nov-06

Dec-06

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Pe

rce

nta

ge

Corporate Profit

$0.0

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

$1,400.0

$1,600.0

$1,800.0

Billio

ns o

f d

ollars

Due to the weakening of the dollar, the US current account deficit has been declining due to an increase in exports and a decrease in imports.

U.S. Dollar vs. Other CurrenciesUSD to EURO USD to Chinese Yuan

USD to Canadian Dollar (CAD) USD to Japanese Yen

U.S. Dollar Index

The dollar has been dropping due to rumors that the Federal Reserve will cut interest this month.

The dollar has fallen 5% against the pound; 7% against the yen; 10% against the euro; 14% against the Canadian dollar; and 8% against the Federal Reserve’s trade weighted basket of currencies.

Housing Market• Building Permits went down 24.3% compared to October 2006, and Housing

Starts went down 16.4% compared to October 2006.

• Existing Home Sales went down 20.7% compared to October 2006, and current existing home inventory went up by 15.4% compared to October 2006.

• Median sales price of existing home went down by 5.1% compared to last year, and average sales price of existing home went down by 3.4% compared to last year.

• Persistent weakness in the housing market will lead to below-trend growth for the rest of this year.

• Job losses in residential buildings (-9,000) and in residential specialty trade contractors (-13,000) were offset by job gaining in nonresidential specialty trade contractors (+16,000)

Existing Home Sales in the United States & Current Housing Inventory

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

Oct 2006

Dec

Feb Apr Jun Aug Oct

Existing Home Sales

Inventory

Existing Home Sales in the United States & Current Housing Inventory

01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,000

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sept

Oct

2006 2007

Existing Home Sales

Inventory

Sales Price of Existing Homes

0

50,000

100,000

150,000

200,000

250,000

300,000

Oct

r

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

t

Oct

2006 2007

Do

llar

s Median sales price of existinghomes

Average sales price of existinghomes

Consumer confidence has been dropping since August. The Consumer Confidence Index is 87.3, compared to 95.2 in September.

This is the lowest since October 2005; it’s reading then was 85.2.

The Present Situation Index is down 115.4 from 118.0 during October.

Declining Credit

Source: Federal Reserve

•Personal Income increased .2%•Disposable Income increased by .5%•Personal Consumption Expenditures increased by 2%

All figures were lower than the increases economists projected.

Personal Consumption Expenditures(Seasonally adjusted)

0.000.501.001.502.002.503.003.50

2003

:Q4

2004

:Q2

2004

:Q4

2005

:Q2

2005

:Q4

2006

:Q2

2006

:Q4

2007

:Q2

10-Year TIPS-Derived Expected Inflation

0

0.5

1

1.5

2

2.5

3

Jan-

05

Apr-0

5

Jul-0

5

Oct-

05

Jan-

06

Apr-0

6

Jul-0

6

Oct-

06

Jan-

07

Apr-0

7

Jul-0

7

Oct-

07

Oil Prices

Crude oil futures have declined significantly from a high of $98.18 on November 23, amid speculation that OPEC may increase oil production.

Markets DJIA NASDAQ

S&P 500 DJ Wilshire 5000

Source: Bloomberg

Source: Wilshire Associates Source: Bloomberg

Source: Bloomberg

Outstanding Commercial Paper

Source: Federal Reserve