Uma Mime Vol 8 3q08

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(Memorandum of Industry Momentum and Economics)Third Quarter 2008 Vol. 08

This publication will address economic and industry performance important to Utah and Intermountain businesses, as well as specific industries

and sectors of significance to UM&A. We will attempt to include as many national and regional indicators as needed to convey need-to-know

information that can assist us in business development and on-going projects. When applicable, we will also wave our own flags of

achievement.

EconomicOverview

Theresilienceofournationaleconomycontinuestobetestedatthiswriting. ThefinalupdatetosecondquarterGrossDomestic

Productshowsgrowthatanannualizedrateof2.8percent,followinga0.2percentannualizeddeclineinthefourthquarter2007

anda0.9percentinclinelastquarter. In perspective,thefourthquarterssliderepresentedtheworstperformancesincethird

quarter2001,whenoureconomywaslastinrecession. Whilecurrentperformancedisturbstheprevailingrecessionarytrend

(whichdidnotcorrespondtotheconventionaldefinitionofrecessione.g.twoconsecutivequartersofdecliningrealGDP),it

hewsto thesuddenslowdownduringthewinter,andthetemporarynatureof[$94billionin]federaltaxrebatesdistributedto

consumers.

Moreover,it

does

not

reflect

slowing

global

economic

conditions

which

over

the

past

three

years

have

contributed

to

exportgrowthamajorbuoyofGDPuntilnow.

GDPsincreasewasdrivenbyexports,personalconsumptionexpenditures,federalgovernmentspending,nonresidential

construction,andstatelocalgovernmentspending.Exportsgrewatablisteringrateof12.3percentduringthequarter,following

5.1percentinthefirstquarter. (Imports,whichdepressGDP,decreased 7.3percent,vs.0.8percentlastquarter.)RealPersonal

Consumptionexpendituresincreased1.2 percent,comparedwith0.9percentlastquarter. RealNonResidentialfixedinvestment

increased2.5percent,steadywith2.4percent. NonResidentialStructuresincreased18.5percent,doublethepreviousquarters

8.6percent. Theseareconsistentwithunderlyingbusinesscapitalinvestmenttrendsthroughtheeconomicslowdown.

Offsetscomprised

business

inventory

investment,

residential

fixed

investment,

equipment

and

software.

More

to

this

point:

Final

salesofcomputerscontributed0.15percenttosecondquartergrowth,following0.05percentlastquarter,andmotorvehicle

outputsubtracted1.01percentfromsecondquartergrowth,followingasubtractionof0.41percentlastquarter. Conventional

calculationsofpriceinflation(excludingvolatilefoodandenergy)increased2.2percent,thesameamountaslastquarter.

Declinesinthepriceofrefinedpetroleumproductssincethefirstquarterhaveyettobedigestedbythesupplychain,and,

converselyhavebeenretainedbyseveralindustriesagribusiness,miningandconstructionevenasglobaldemandhas

slackened. Preliminarystudiesrevealthebumpindisposableincomeattributedtoourtaxrebateswasconsumedinnondurable

goodsandothermassmerchandiseproducts,whoserelativeweightwasgreaterinlowincomehouseholds. TheU.S.Labor

Departmentsrevised2nd

quarterProductivity&Costsreportindicatedproductivity(theamountofoutputforanhourofwork)rose

ata4.3

percent

annual

rate

during

the

quarter;

this

was

afull

percentage

point

higher

than

most

economists

expected.

Correspondinglaborcostsslid0.5percent;thecombinationofhigherproductivityandlowercostsshouldhelpcontainprice

inflationandgivetheFederalReserveBoardmorelatitudeoncreditpolicygoingforward.

AfewmacroeconomicobservationsAsthecurrentfinancialcrisesinsubprimelending,structuredproductsandbankexposurescontinuetounwind,thereappear

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Amongthepitfallsofrelyingexclusivelyonmonetarypolicy,forinstance,thereare:

Potentialbuildupofpriceinflationpressuresifsuchpolicyremainsslackfortoolong. (i.e.whileitseasytoimplementthepolicy,itisconsiderablymoredifficulttoreverseitonceitgainsmomentumandspreadsthroughtheeconomy)

Monetarypolicystransmissionmechanismdependsonafluidfinancialsystem,operatingwithinanotablynarrownetworkwithnodesthataresensitivetothecostofcredit,suchashousingandautomobiles.

Theriskthataprotractedperiodoflow(butofcourse,attractive)interestratesmaydistortlongterminvestmentdecisions,provokinga[global]searchforyieldswhichalsocanresultinexcessiverisktaking. (which,inrecenthistory,has

contributedtoglobalassetpricebubbles)

Consequently,anincreasingchorusofeconomistsconsidersmonetarypolicytobeourfirstlineofdefense,nottobereliedupon

exclusively,fortoolong. Moreover,taking[alternative]preemptivemeasurestoreducethelikelihoodordepthoffinancialcriseswouldobviatetheneedtoexercisemonetarymuscle,withitsglobalmultipliereffects. Amongthethemesexpressedbyaconsensus

groupofeconomistsisgreatermarketdiscipline;thatis,bothinvestorsandcreditorsneedtimely/accurate information,butmore

significantly,thewakeupcallthattheircapitalisatriskallthetime. Ofcourse,thedemandforgreatertransparency[and

standardization]willbuildthisconsciousnesslevel,butitismoredifficulttoconveytocreditors,forinstancethattheir

investmentsinthelargestfinancialinstitutionsareatrisk! Butmarketdisciplineofitselfisnottheonlyalternative.

SincetheincreasedcadenceoffinancialinnovationstraddlingtheGlassSteagallActsrescission(1999),ithasbecomeextremely

difficult

for

both

market

players

and

regulators

to

keep

current

with

the

financial

landscape.

One

of

the

basic

antidotes

proffered

by

aconsensusofindustryeconomistsaddressestheneedforanewsetofbestpracticesinthefinancialsector,anditscorporate

utilitycounterpartselsewhere. IncontextofthecurrentfinancialstabilitylegislationpassedbytheU.S.Congress,itremainstobe

seenifthisupdatedregulatoryregimenwillbe1)builtintothelawand2)implementedintimelyfashion,toassuagetheglobal

financialmarketsconcerns. Consideringglobalmonetaryauthorityactionsrecently,theflatworldisflatterthanever.

Belowweaddresskeyperformanceindicatorsnationally,andrecenttrendsregionally:

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Thisphenomenonhasbledintomanufacturingandtransportation,alongwiththecostsoffuel. Asthehousingballoonhasdeflated,

alongwiththeequitiesmarketaperceptionoflosthouseholdwealthretailers(whichincludesrestaurantsandmotorvehicle

dealers)havealsolosttraffic.

Withinthemanufacturingsector,Durablegoodsareusuallythefirsttoshowweaknessinaslowdown;volumeinthewhitegoods

marketofmotorvehicles/majorapplianceshasdepressedprofitsinfabricatedmetalsandelectricalequipment,ona36monthlag.

Wereitnotforexports,thissectorwouldhavesufferedmorelosses.

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EmploymentTrendsintheIntermountainRegion

Overtheperiodspanningourmostrecenteconomicgrowth,20032007,theIntermountainRegionhasgrownatapacemuch

greaterthan

the

rest

of

the

country.

The

following

conclusions

can

be

drawn

regarding

Intermountain

employment

growth

in

key

industrycontributorsduringthesefiveyears,andinthepastyear:

1. TotalNonFarmEmployment20032007: TotalNonFarmEmployment20072008(2Q)Arizona 16.5% 1.1%

Colorado 8.7% 1.3%

Idaho 15.2% 0.6%

Nevada 19.9% 0.5%

Utah 17.2% 1.0%

Wyoming

15.2%

2.8%

2. Construction&MiningEmployment20032007: Construction&MiningEmployment20072008(2Q)Arizona 13.1% 13.4%

Colorado 19.8% 0.5%

Idaho 32.5% 8.6%

Nevada 24.1% 8.8%

Utah 44.6% 8.5%

Wyoming 56.8% 9.4%

3. ManufacturingEmployment20032007 ManufacturingEmployment20072008(2Q)Arizona 1.7% 2.2%

Colorado 7.1% 2.7%

Idaho 0.0% 7.5%

Nevada 18.6% 0.0%

Utah 14.3% 0.0%

Wyoming 11.1% 0.0%

4. Prof/Tech/SciEmployment 20032007 Prof/Tech/SciEmployment 20072008(2Q)Arizona 25.1% 1.1%

Colorado 22.4% 1.7%

Idaho 18.6% 0.0%

Nevada 30.5% 3.1%

Utah 26.0% 2.5%

Wyoming 18.8% 5.6%

5. Education/Health SvcEmployment20032007 Education/Health SvcEmployment20072008(2Q)Arizona 27.1% 3.3%

Colorado 17.4% 4.2%

Idaho 22.6% 2.7%

Nevada 28.0% 4.3%

Utah 23.7% 5.0%

Wyoming 9 7% 3 0%

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7. Leisure&HospitalityEmployment20032007 Leisure&HospitalityEmployment20072008(2Q)

Arizona 18.5% 1.1%

Colorado 13.1% 2.2%

Idaho

18.5%

0.0%Nevada 12.3% 0.0%

Utah 17.2% 2.7%

Wyoming 9.7% 3.0%

8. FinancialServicesEmployment20032007 FinancialServicesEmployment20072008(2Q)Arizona 11.9% 3.8%

Colorado 2.6% 1.3%

Idaho 22.2% 0.0%

Nevada

8.6%3.1%

Utah 13.8% 1.3%

Wyoming 20.0% 9.1%

IndicatorsofoverrelianceontheConstructionindustrycanbeseenacrosstheregion(exceptingWyoming,whichenjoysaresilient

Miningsector);therelativecompetitivestatureofManufacturingandProfessional/Scientific/Technicalservicessectorsshowthat

overall,UtahandColoradoarebestpositionedtowithstandthecurrenteconomicslowdown.TheFinancialServices sector,astied

tomortgagebanking,consumerandcommerciallending,showstheeffectsofeconomicslowdown,beginninginmid2007. Impacts

onthis

sector

will

depend

on

the

severity

of

job

losses

in

other

industries

and

the

longevity

of

the

current

financial

crisis.

The

demographiccompositionoftheIntermountainRegion,nonetheless,willcontinuetosupportmodestexpansionof

Education/Health Servicesemployment,whileLeisure/Hospitalitywhicharemoredependentondisposableincomeandoutof

statevisitorshavealreadyshowndeclines.

Adepictionofrelativeindustryemploymentsharesfollows:

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DisposablePersonalIncomeTrends

AnotherindicatorofeconomichealthrelativetotheindividualhouseholdsofourregionisDisposablePersonalIncome,whichis

definedasPersonalIncomelessPersonalCurrentTaxes. PersonalCurrentTaxesconsistsofincometaxes,motorvehiclelicenses,

andpersonalpropertytaxes. Duringthemostrecenteconomicgrowthcycle,theIntermountainRegionhassurpassedthenational

averagegrowthpaceofbothDisposablePersonalIncomeandDisposablePerCapitaPersonalincome,andthisisexpectedto

continuethroughthecurrenteconomicdownturn.

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AtStatelevel,DisposablePersonalIncomegrewthefastestinNevada(42%),followedbyArizonaandUtah(35%),Wyoming(33%),

Idaho(31%)

and

Colorado

(26%).

This

compares

favorably

with

the

national

cumulative

25%,

and

is

attributable

to

migration

of

manufacturing,professional/technical/scientificservices,alongwithconstructionactivity;alloftheseindustriesalsohavewages

aboveaverage,andgeneratehigherdisposableincomeforretail,hospitalityandleisureactivity. Athouseholdlevel,DisposablePer

CapitaPersonalIncomegrowthexceededthenationalaverage(20%)inWyoming,NevadaandUtah27%,24%,21%,

respectivelybuttrailedbysimilarmarginsinArizona,IdahoandColorado. Inabsoluteterms:

DisposablePerCapitaPersonalIncomeTrends

%Change

2003 2004 2005 2006 2007 200307

Arizona $24,391 $25,957 $27,034 $28,190 $29,056 19.1%

Colorado 30,269 31,716 33,211 34,627 35,760 18.1%

Idaho 23,169 24,906 25,299 26,525 27,513 18.7%

Nevada 28,508 30,772 33,074 34,151 35,300 23.8%

Utah 22,574 23,634 24,928 25,961 27,390 21.3%

Wyoming

29,817

32,096

33,237

35,970 37,969 27.3%

Nat'lAvg $28,053 $29,563 $30,576 $32,222 $33,667 20.0%

(Source: U.S.DepartmentofCommerce/Bureau ofEconomicAnalysis)

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GeneralEconomicConditionsinUtahincontextofSeptember2008NationalFinancialCrisis

Favorable:

Utahsunemploymentrateisup,butonlyto3.7%,whichreflectscontinuedqualityjobgrowth,andremainsbelowthatofthenation(6.1%). Majorindustriesarestillhiring,andthepreviouslaborshortagesaresomewhatalleviated. HelpWantedadvertising

remainsrobust.

Utahshousingmarketsareslipping,butcomparedwithArizonaandNevada,ourdownturnisstillmilder,andwillrecoversooner.

Housingpricesdidnotjumpasquickly,andinventoriesareconsidered closetoequilibriumStatewide. Commercialandindustrial

spaceisstillbarelykeepingaheadofdemand.

Pricesforfuelandfoodaremoderating,reflectingnationaltrends. However,sinceUtahisamajortransportationanddistribution

hub,pricespikesaremoderated. Laborwageincreaseshavealsobeenmuted,duetotheslowpaceofeconomicgrowthlately. Still,

there

remain

spot

shortages

in

skilled

manufacturing,

health

care

and

professional/scientific/technical

services,

which

have

contributedtowageincreasesinthosesectors.

Tourismandhospitalityareresilient,duetotherelativeweaknessoftheU.S.dollar,andprevalenceofstaycationsthisyear.

Absentadverseweather,theskiindustryexpectsanotherrecordyear,duetoresortupgrades.Tradeshowsandconventions,

typicallybookedyearsahead,compriseafullschedule,andarenotassensitivetomildeconomicdownturns.

Recentglobaldemandforenergyandmineralshaskeptactivityathighlevels,anddemandwillremainstrongasUtahisamajor

producerofpetroleumproducts,naturalgasandcoalforpowerplants. DiscoveriesofcrudeoilandnaturalgasinCentraland

EasternUtah,respectively,willsustainthesector,irrespectiveofpoliticalchanges.

NationalresearchstudiesincludeUtahinthetoptenhightechnologycentersagain,andthesectorisconsideredrobust. The

biotechand

medical

device

sub

sectors

are

the

fastest

expanding

beyond

the

Wasatch

Front,

attracting

European

partners,

while

computersoftwarepushesoutfromSaltLaketoadjacentcounties.

Utahsfinancialservicessectorisnotasaffectedaselsewhere,exceptingthosecompaniestieddirectlytothehomemortgage

industry. Commercialbanksandcreditunionsdidnotoverextendthemselves,evenasrealtorspushedformorebusinessduringthe

housingboom.

Utahsventurecapitalistscontinuetoenjoynationalattention,anditsFundofFundswhichinvestsinventurecapitalcompanies

hasearnedanotherinjectionofseveraltensofmillionsdollarsfromDeutscheBank. As[nationallyowned]commercialbanks

tightentheirlendingstandardsduringthisrebound,venturecapitalbusinesswillbecomeamoreimportantpartofthetotalfinancial

servicessector.

Unfavorable:

UtahreleaseditsworstemploymentreportinfiveyearsinSeptember,asjobcreationwasdownto0.1percent(net1,800jobsyear

todate);thiswasnotablybehindthepeakachievedatfiscalyearend2006,when54,000jobswerepropagated. About48,000

UtahnswereunemployedinSeptember,comparedwith38,000thepreviousyear.Thelargestlosseswereexperiencedin

construction,financeandrealestate,andareexpectedtobleedintomanufacturing/wholesaletradebeforethecalendaryearis

over.

The

unemployment

rate,

nonetheless,

is

3.7

percent,

compared

with

a

national

rate

of

6.1

percent.

WhileUtahshomepricesdidnotexperiencetherunupsinmajorcitiesfrom20022006,saleshaveslowedandpricesaredown10

20%fromlastyear. Thereisnosignofabottomyet. Newhomeconstructionhasslowedinresponsetothenationaleconomic

perceptionandmoreforsalesignsinpricierneighborhoods.

Theslowinghousingmarket,combinedwithscarcitiesinotherbuildingmaterials,havesoftenedpricesformineralcommodities. The

creditcrunchisadverselyaffectingsmallerenergycompanies,whichneedcapitaltoexpandexistingoil+gasfieldstomeetpresent

energydemand. Laborandequipment,nonetheless,areinshortsupply.

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IdahoEconomicConditionsandupdatedoutlook

Idahosofficialeconomicauthorities,andindependentbankingsourcesrevisedtheirstatewideEconomicOutlookdownwardduring

thequarter.

Plunges

in

home

construction,

high

energy

prices,

soft

housing

values,

and

consumer

caution

(tied

to

recent

negative

economicperceptions)haveallcontributed. Currentestimatesshowtheweakestemploymentsince2002,withover8,000jobslost

duringthelastyearintheconstructionandmanufacturingsectors.Overthesameperiod,allofIdahosjobcreationhasbeen

providedbytheservicesector,ledbyeducation&healthservices,leisure&hospitality,informationservicesandlocalgovernment

employment. Overall,NonFarmEmploymentfellata2.2%[seasonallyadjustedannual]rateduringthefirstquarter,andslipped

by0.4%inthesecondquarter. WhileIdahosunemploymentraterankedamongthenationslowest(3.1%)earlierin2008,inthe

thirdquarteritexceeded4%. ManyIdahobusinesseshavefelttheGemStateisgenerallyinsulatedfromglobaldevelopmentsbut

highcommodityprices,increasedminingactivity,widercreditspreads,narrowercreditavailabilityandtighterlendingstandardsare

currentlyaffectingthewholestate. DespiteMicronsMarchselectionofBoiseforanexpandedprocessingfacility,theyhavejust

announcedaglobal

cutback

which

is

expected

to

eliminate

1,500

jobs

in

Idaho.

On

the

bright

side,

with

projects

like

Hoku

ScientificsnewpolysiliconplantandNordicWindpowersturbineplantinPocatello,itisprojectedthatIdahoseconomywillresume

solidgrowthby2010.

ArizonaEconomicConditionsandupdatedoutlook

Sincethe

fourth

quarter

of

2007,

Arizonas

economy

has

continued

to

shed

jobs,

30,000

alone

in

the

construction

sector,

which

accountedfornearlyallofthenetlossesthroughthesecondquarter2008. EmploymentgrowthintheGreaterPhoenixMSAhas

deceleratedfromapeakof7.2%yearonyearinSeptember2005to 1.5%attheendofsecondquarter2008,resultingina4.5%

unemploymentrate.Statewide,FinancialServicesjobshavebeendrainedbythesubprimemortgagefallout,and

Professional/Scientific/Technicalserviceshavefollowed. Manufacturinghasseencontractionsfor18months,despiteregionaland

globaldemand.Evengovernmentpayrollshaveseenlossesthepastyear. TheonlysectorsdisplayingstrengthareEducationand

HealthServices,whichhaveadded10,000jobsoverthelastyear,and30,000sinceSeptember2005. Homepricescontinueto

tumble,asthejobmarkethasdeteriorated;speculatorshavewithdrawnfromthemarketandforeclosureshavespiked,leaving

supplyanddemanddisproportionatelyoutofbalance. Creditqualityhascontinueddeteriorating,intandemwiththerisein

mortgagedelinquencies

and

foreclosures,

in

both

prime

and

sub

prime

markets.

Further

slowing

in

the

national

economy,

protractedconcernsaboutcreditandtheongoinghousingpriceslumpwillweighonthestate,andeconomistsatWellsFargoBank

haveforecastacontractionof0.4%in2008fortheGreaterPhoenixMSA. Employmentisprojectedtoshrinkby0.8%,andthe

unemploymentratetoendat4.2%. AsmeasuredbytheCaseShillerPriceIndex,homepricesareforecasttofall26.7%in2008and

afurther15.4%in2009. ItisgenerallybelievedthatuntilthisIndexfallstothelevelof2004prices,thehousingcrisiswillcontinue.

NevadaEconomicConditionsandupdatedoutlook

Atmidyear,acombinationofpersistenthousingmarketslippageandseasonalityposedmoreseriouschallengestoNevadas

economy. Thestatewide[seasonallyadjusted]unemploymentratejumpedto6.6%,anincreaseof1.7%overtheyear. Thisreflects

thelossof27,000jobs,mostofthemintheconstructionandfinancialservices industry,sincethepeakofNevadaseconomiccycle

inmid2006. Bycomparison,theTrade/Transportation/Utilitiessectorhasgainedabout10,000jobssince,buthasslippedrecently,

andtheEducation/HealthCaresectorcontinuestogrowsteadily. Normally,seasonalemploymentlossesoccuratthistime;

however State & Local Government employment fell by nearly 6 000 this year and was not absorbed by the private sector To add

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slowdramatically. TheheadlineinTheLasVegasSunofSeptember28saiditclearly: WhatwecanexpectLessspending,fewer

newresorts,slowergrowthgetusedtoit.

Global

Economic

Outlook

AstheprevailingwindsofeconomicslowdowncontinuedriftingacrosstheAtlantic,wethoughtittimelytosharethe

viewsofrespondentstoamidyearsurveyconductedbyMergermarket,thepurveyorofonlineM&Atransactional

information. Amongitsfindings:

Totalrespondentshadagenerallybleakoutlookforglobaleconomicgrowthin2009. Overall,61%expectadecreaseingrowth,whileonly15%expectanincrease. Corporaterespondentshadacomparativelypositiveoutlook,however,witha

belowaverage52%expectingadecreaseandanaboveaverage30%expectinganincrease.

Privateequityexecutiveswerethemostexpectantofadecreaseineconomicgrowth,butnoneexpectedthedecreasetobesignificant.Themostnotablekeywordsincluded: growthinothercountrieswillkeeptheglobaleconomyhealthyand

considerthegrowthofChina,India,BrazilandEasternEurope.

Mostrespondentshighlightedtheimpedimenttogrowthposedbycreditproblems,anditsrelationshiptoconsumerspending. Instability,ingeneral,wasblamedforalackofconsumerconfidenceworldwide,which,inturn,wouldaffect

spendingpatterns.

Amajorityofrespondents(61%)believetheU.S.economyisineitherpoororverypoorcondition. Again,corporaterespondentswerethemostoptimistic,andfinancialadvisorstheleastoptimistic. Still,thecorporateoptimistswerea

minority,as

slightly

less

than

half

(48%)

gave

the

U.S.

economy

apoor

rating,

and

only

4%

rating

it

healthy.

Curiously,65%ofEuropeanrespondentslabeltheU.S.economypoor,comparedwith45%ofAmericanrespondents.

Whileasmall(butstillaboveaverage)5%ofAmericanrespondentssaidtheU.S.economywashealthy,noEuropean

respondentsagreed.

Allbut22%ofoverallrespondentsexpecttheU.S.toenterarecession;themajority78%couldnotagreeonwhen,however. Some40%forecastarecessionbeforetheendof2008,whileasimilar38%predictedtheonsetduringorafter

2009.

Consistentwiththerelativeoptimismofthecorporaterespondents,42%ofthemdonotseearecessioninournearfuture.Althoughstillaminority,thisisnearlytripletheamountofprivateequityexecutivesandfinancialadvisorsexpressinga

positiveoutlook

for

the

U.S.

economy.

NationalEconomicOutlook

Severalprofessionalsurveysconductedduringthelastmonthaddressingtherealtimeissueswhichaffectbusinessesand

consumerswereconsistentinthedownwardrevisionsoftheirforecaststhroughnextyear. Amongtheanecdotalresponses,the

generalconsensusacrossseveraleconomictradeassociationsis:

1) Theyseenogrowthinthefourthquarter2008,incontextofannualized[realGDP]growthof1.0percentinthethirdquarter. Theyexpecttheeconomytoremainsluggishthroughthefirstquarter2009,growingatanannualizedrateof

1.3%.

2) DespiteforecastsofnoquarterlydeclineinGDP,twothirdsnowbelievearecessionhasalreadybegun,orwillbeginduringthefourthquarter2008.

3) Recent credit market deteriorationswill drive the unemployment rate up to 7 0 percent by mid year 2009 a full

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increaseshouldbemutedto2.3percent(4

thQuarteron4

thQuarter2009),incontrastwiththisyears4.2percent.

Note: theslowingisinrangeofFedscomfortzone.

8) OneofthefiscaleffectsoftheslowdownisawideningoftheFederalBudgetDeficittomorethan$480billionin2009,comparedwithestimatesof$410billioninfiscal2008. Note:thisdoesnotincludeexpectedimpactofthe

EmergencyEconomicStabilizationpackage.

9) AFederalReserveBankfedfundstargetrateincreasepreviouslyexpectedbyfirstquarter2009hasnowbeenprojectedfordelayuntilatleastmidyear,withayearend2009rateat3.00percent.

10) Corporateprofitsareexpectedtodeclineby5.9percentatyearend2008,andrebound4.4%in2009.Anothereconomicconsensusgroupsuggeststhatsincetheonlyfavorableelementofgrowthhasbeenforeigndemand,andtheU.S.

Dollarhasgainedvalueagainstmanycurrencies,aglobalslowdowncouldindeedwashbackonus. Signsofslowdownhavealready

dampenedpriceinflationhere,andinternationalcrudeoilpriceshavebeendrivenbelow$80.00abarrelsincetheendof

September. TheFederalReserveBoardisnowtakingintoaccountthemediumterminflationsituation,increasedhousehold

borrowingcosts,

tighter

credit

conditions

and

aprotracted

housing

market

retrenchment.

It

remains

to

seen

through

the

economictroughwhetherenergydrivenpriceswillberetainedbythesupplychain,orasseenalreadyinchemicalsand

institutionaltransportationcarriersiftheywillpassthecostsalongtoendusers. Analogouswiththecompetitiveenvironmentof

eachindustry,italreadyappearsmanysupplychaincompanieshavedeterminedthisisaonetimeopportunitytoplaytothe

inflationaryexpectationsofconsumers,andbuildinsurchargestotheirpricesthroughtheendof2008. Thiswillsqueezeretail

consumersfurther,anddiscretionaryspendingwillbecurtailedastheChristmasholidayseasonapproaches.

TheglobalbankingenigmawillbediscussedinournextUM&AMIME;inthemeantime,wewillrelaycommentaryofnotable

developmentsastheyoccur.

Prepared by Dean C. Dinas, Research Director, United Mergers & Acquisitions

Informationin

this

report

has

been

obtained

by

UM&A

from

sources

believed

to

be

reliable.

UM&A

cannot,

however

guarantee

the

accuracyorcompletenessofthisinformation,norisUM&Aresponsibleforanyerrors,omissionsordamagesarisingfromtheuseof

thisinformation.

2008UnitedMergers&Acquisitions,6985UnionParkCenter,SaltLakeCity,Utah84047. ALLRIGHTSRESERVED.

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ForecastofKeyEconomicIndicatorsatSeptember2008ForecastPeriods

2007 2008 2009 2010

Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2

RealGrossDomesticProduct 4.8 0.2 0.9 3.3 0.7 0.2 1.0 2.0 2.6 2.9 3.1 3.2

%change,yearonyear 2.8 2.3 2.5 2.2 1.2 1.3 1.3 1.0 1.4 2.1 2.6 2.9

RealDisposablePersonalIncome 3.1 0.6 0.7 11.4 6.9 0.9 2.8 2.6 2.5 2.9 3.5 3.4


RealBusinessInvestment 8.8 3.4 2.4 2.3 0.5 0.6 1.8 0.2 1.6 2.9 3.2 4.2


ChangeinBusinessInventories 16.0 8.1 10.2 49.4 26.3 20.7 12.3 3.8 7.3 16.8 22.5 29.7

($bn,chained2000px,annualrate)

IndustrialProduction 3.6 0.3 0.4 3.2 0.6 0.2 0.2 1.6 2.7 2.8 3.0 3.4


ConsumerPrices 2.8 5.1 4.4 5.1 6.2 2.4 2.4 2.0 2.4 2.3 2.3 2.3


ProducerPrices 1.6 9.2 9.3 10.7 8.1 2.5 1.4 0.9 1.7 1.5 1.5 1.8


UnemploymentRate% 4.7 4.8 4.9 5.3 5.8 6.1 6.2 6.3 6.3 6.2 6.1 6.0

3monthTreasuryBillRate 3.7 3.3 1.4 1.8 1.8 1.8 2.0 2.2 2.6 2.9 3.4 3.6

10yearTreasuryBondYield 4.6 4.2 3.4 4.0 3.9 4.0 4.1 4.2 4.4 4.6 4.9 4.9

1ChangefrompriorquarteratSeasonallyAdjustedAnnualRate 2EndofQuarter Source: ConsensusEconomics,Inc.

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Uma Mime Vol 8 3q08