US Economic Indicators Preview

(Week of 24 to 30 March 2008)

• Existing and new home sales could have declined again in February, albeit only slightly
• Consumer confidence indicators are likely to deteriorate further in March
• Durable goods orders could have gone up moderately in February, due to aircraft orders
• PCE core deflator's annual rate will probably have decreased to 2% in February

Existing home sales fell to a historical low of 4.89m in January, 33% below the peak reached in September 2005. Given that pending home sales, which have a forerun of 1 to 2 months, also remained close to their record low in January, we expect existing home sales to have declined further to about 4.85m in February. As months' supply reached 10.3 and was thus just below a two-decade high in January, the downward pressure on prices will have continued.

After having gone down by almost 20% in the last three months, new home sales might have continued their downward trend at a slower pace. We forecast that new home sales will have fallen slightly from 5.88m to 5.80m in February. This would be the lowest level since February 1995. Months' supply, which has been rising steadily, could jump over 10% for the first time since 1981.

The Conference Board's consumer confidence plummeted from 87.3 to 75.0 in February, and expectations were at their weakest since the 1991 recession. As private employment has been falling for three months, and an end of house price depreciation is not in sight, we expect consumer confidence to have dropped further to 70.0 in March. The news about defaults in the financial sector, the stock market losses and rising gasoline prices will also be weighing on consumers' mood. For the same reasons, the University of Michigan's final March consumer sentiment could be revised down from 70.5 to 68.0.

In January, durable goods orders fell sharply by 5.3% mom to their lowest level since February 2007. We only expect a slight rebound by about 1.0% mom in February, mainly due to aircraft orders having doubled, as announced by Boeing. But the fact that automobile production has declined further indicates that vehicle orders will have gone down. In addition, the ISM index showed contraction in orders for the third consecutive month, and we are not expecting non-defense capital goods orders ex aircraft, which decreased by 1.5% mom in January, to have rebounded. Thus durable goods orders ex transportation could have fallen again by about 0.5% mom.

We forecast that the final estimate for Q4 GDP will confirm the growth rate at 0.6% qoq. For the whole of 2007, the increase in real GDP slowed from 2.9% to 2.2% yoy, and given the current elevated recession risk, the average growth rate is likely to fall to below 1% this year.

Initial jobless claims jumped by 22k to 378k in the week ending 15 March - the highest level since September 2005. We forecast that jobless claims will have remained on an elevated level of 375k in the week ending 22 March. The fact that the reporting week included a national holiday adds uncertainty to the forecast.

Personal income could have risen by 0.3% mom again in February, as average hourly earnings also went up at that rate, but aggregate weekly hours decreased slightly. Given that retail sales fell markedly by 0.6% mom, we forecast that personal spending will have declined as well, by 0.1% mom. In line with the development of consumer prices, we expect the PCE deflator and the PCE core deflator to have remained unchanged. The PCE core deflator's annual rate could thus have dropped from 2.2% to 2.0%, the upper limit of the Fed's comfort zone.

BHF-BANK
http://www.bhf-bank.com

This report has been prepared by BHF-BANK Aktiengesellschaft on behalf of itself and its affiliated companies (together "BHFBANK Group") solely for the information of its clients.

The information and opinions in this document are based on sources believed to be reliable and acting in good faith, but no representation or warranty, express or implied, is made by any member of the BHF-BANK Group as to their accuracy, completeness or correctness. Opinions and recommendations are given in good faith but without legal responsibility and are subject to change without notice. The information does not constitute advice or personal recommendation, for which the duty of suitability would be owed, but may facilitate your own investment decision. Moreover, you should seek your own advice as to the suitability of an investment matter mentioned herein. Investors are reminded that the price of securities and the income from them can go down as well as up and that the past performance of an investment or a market is not necessarily indicative for future results.

This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete, and this document is not, and should not be construed as, an offer to sell or solicitation of any offer to buy the securities mentioned in it. BHF-BANK Group and its officers and employees may have a long or short position or engage in transactions in any of the securities mentioned in this document, or in any related securities.

This publication must not be distributed in the United States.