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The Economic Outlook

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  1. The Economic Outlook Presented by: Mark M. Zandi,Chief Economist May 30, 2008

  2. The Economy is Contracting… Change in Payroll jobs, ths., Source: BLS

  3. …In An Increasing Number of States… In recession Near recession Expansion

  4. …As Households Buckle Under The Stress Household debt in delinquency or default, $ bil, annualized Sources: Equifax, Moody’s Economy.com

  5. An Unprecedented Housing Downturn... % change from peak, Sources: Fiserv Lending Solutions, Census, Moody's Economy.com Home Sales Housing Starts House Price Forecast peak-to- trough Peak to 07Q3 90s peak to trough 80s peak to trough

  6. ...Most Everywhere… Projected peak-to-trough house price decline, U.S. = -24% < -30% Sources: Fiserv Lending Solutions, Moody's Economy.com, OFHEO -20 to -30% -10 to -20% 0 to -10% No decline

  7. …As the Market is Awash in Inventory... Number of vacant homes for sale, Thousands Source: Census

  8. …And Home Sales Will Be Slow To Revive… Bond issuance, $ bil, annualized, Source: Thompson

  9. …And the Surge in Foreclosures… First mortgage loan defaults, ths, SAAR Sources: Equifax, Moody's Economy.com

  10. A Dangerous Combination of Negative Equity… Number of underwater homeowners, Thousands Sources: Equifax, Moody's Economy.com

  11. ...Across Much of the Country… % of households defaulting on their first mortgage, ’08q1 Below U.S. Near U.S. Above U.S. U.S. = 2% Sources: Equifax, Moody's Economy.com

  12. Subprime Financial Shock Still Reverberates… Difference between 3 month Libor and Treasury bill yields Subprime financial shock LTCM Y2K S&L crisis Tech bust Thai baht Peso crisis Orange County

  13. …As Financial Sector Losses Mount… Projected Losses, $bil, Source Moody’s Economy.com

  14. …And There May Be Other Shoes to Fall? Financial guarantor stock prices Ambac MBIA Radian Mar ‘07 Jul ‘07 Jan ‘08

  15. Consumers Struggle with Falling House Prices… Sources: Census, Realtors Core retail sales growth 3 mo. MA (R) House-price growth 6 mo. lead (L)

  16. …Tighter Credit… Net % of banks tightening consumer loan standards Carter Administration Credit Controls Subprime Financial Shock Source: Federal Reserve

  17. …And $4 Gasoline WTI, $ per barrel (L) Gasoline price $ per gallon (R) Sources: WSJ, Energy Department

  18. Global Economy Holds Tough… Real GDP growth, 2007Q4 Indonesia Argentina Europe China [6.5, 16.8] [11.5, 11.9] North America Asia Malaysia South America Russia India Netherlands Brazil Colombia Norway Korea Hong Kong Euro zone Mexico Czech Republic Germany Sweden Australia Denmark Belgium Greece Philippines France Spain U.K. Italy Canada Hungary Japan New Zealand Poland U.S. Portugal

  19. …And Corporate Balance Sheets Are Strong Interest Coverage Ratio for Nonfinancial Corporations Source: BEA, Moody’s Economy.com

  20. An Unprecedented Easing in Monetary Policy… Federal funds rate, Sources: FRB, Moody’s Economy.com Nominal Real

  21. …As The Fed Thinks Outside the Monetary Box… Federal Reserve balances, $ bil

  22. …But Policymakers Must Get More Aggressive Mortgage securities issuance, $ bil, annualized

  23. www.economy.com