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Thursday, February 9, 2012

Wells Fargo's Monthly Economic & Financial Commentary- February 2012

- Real economic growth of 2.0 to 2.5 percent is expected, as gains in personal consumption, equipment and software spending, and residential investment will outpace weakness in structures and government spending.

- We remain cautious about the recent decline in the unemployment rate, as the degree of improvement may reflect a seasonal adjustment issue and a decline in the labor force participation rate.

- Inflation will slow down in the year ahead as commodity and producer prices moderate and unit labor costs rise slowly.

- We expect short-term interest rates to remain low for most of the year, while longer-term borrowing rates should rise as the search for yield continues and investors seek better investment opportunities.

- We believe a European recession is currently underway, which should lower export growth and earnings for some U.S. companies, at least in the near term.

- Tensions in the Middle East could lead to a spike in oil prices, and possibly an extended period of uncertainty that might limit the supply of oil in a pattern reminiscent of the 1970s.

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