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Wednesday, May 18, 2011

Wells Fargo’s Monthly Economic Outlook – May 2011

-     Real GDP grew at a 1.8 percent pace in the first quarter and is expected to grow at a 2.0 percent pace during the current quarter, as growth remains restrained by cutbacks in government spending, the struggling housing market, and the fallout from the Japanese earthquake.
.     For the year, we expect real GDP to rise 2.4 percent, which is well below consensus, as we believe many forecasters are underestimating the resolve to reduce federal government spending and the pressure on state and local governments to do the same.
-     Final sales to domestic purchasers are expected to increase at a 4.4 percent pace in the second quarter and 2.5 percent for 2011, reflecting solid gains in consumer spending and business fixed investment.
-     We expect the headline CPI to climb 3.9 percent on a fourth-quarter-to-fourth-quarter basis in 2011, and look for the core CPI to climb 2.0 percent.
.     The Federal Reserve’s preferred price measure, the core PCE deflator, is expected to rise 1.8 percent.

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