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Friday, August 12, 2011

Wells Fargos Monthly Economic Outlook - August, 2011

- GDP growth should come in at two percent for the second half of this year, reflecting the continued contribution of consumer spending, business investment in equipment and software, and residential and commercial construction.

. Nominal personal income growth benefits from gains in employment and wages, and while we recognize these are very modest at best, they will help improve consumer spending moving forward.

- Structural unemployment has become a greater issue, as skills and job location are significant barriers to filling new positions.

- Inflation, as measured by the core PCE deflator, will approach the Fed’s two percent target by the end of the year.

. Modest economic growth, coupled with a sub-two percent core deflator, dictates that the Fed will not alter the federal funds rate at all this year.

- Corporate profit growth is expected to moderate in the year ahead, reflecting the competitiveness of U.S. firms in a global environment, especially in value-added manufacturing, energy, and consumer products.

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