This edition of our Economic Indicators is a recap of the first half of the year. We have included a summary below of our first half forecast relative to the state of the economy, followed by the Economic Indicators chart. For more detailed charts and analysis, please download our Economic Details presentation, which can be found at the bottom of this email.

• Below is the same indicators chart we shared with you in May, which includes the key economic indicators for the first half of 2009. The arrows on this chart now illustrate the cumulative movement of these indicators since we made our forecast in November 2008, essentially recapping our sequence of mailings showing the monthly increments.

• We are tracking slightly below our base case from November 2008, which forecasted real GDP to fall 2.1% for CY 2009 versus CY 2008. The 2009 spring evidence suggests that we have, as anticipated, reached a trough in both the consumer and housing sectors. The current Parthenon outlook has real GDP declining 2.8% in 2009.

• This recession is twice as deep as past major recessions, but is not a depression. Our November 2008 real GDP forecast for 2009 was 0.7% or $132 billion higher than our current outlook for 2009. The greatest exceptional distress has been experienced in the auto industry, which accounts for 73% ($97 billion) of the discrepancy. The remaining difference was largely driven by aggressive cutbacks in exports and business equipment. Imports, which have fallen faster than domestic spending, have cushioned some of the blow to GDP.

• Going forward, we will be closely paying attention to consumer spending, business capital spending, and inventories. Despite stimulus measures of reduced taxes or extended unemployment benefits, there has not yet been any clear evidence of a corresponding, major bounce in consumer spending albeit there has been a leveling. The exceptionally drastic cuts in business equipment, jobs, and inventories can be interpreted two ways – as a positive sign that there will be no traditional post-recession capacity excess to overcome, or as a negative if they reflect pervasive, stubborn business conservatism.

• This is the last month we will include two of the key indicators, which will be replaced with two new indicators regarding business capital spending and inventories. First, we will remove the Federal Personal Tax Relief indicator, which was unknown at the time of the November forecast and of great relevance in the first half. The amount of the stimulus in the American Recovery and Reinvestment Act has been resolved and factored in to our current forecast. And this is the last month we will share the TED (T-bill and Eurodollar) spread risk indicator, which calculates the difference between the interest rates on interbank loans and Treasury bills and was at record highs in the fourth quarter of 2008. This credit risk premium has returned to more normal levels in the first half of 2009. Look for our revised forecast next month, which will include the Bureau of Economic Analysis’ comprehensive revision of the past 3 years of national income and spending data. Given the exceptionally weak jobs data in 2008, the spending revisions may be massively adverse.