April 29, 2011
Weekly Economic & Financial Commentary
Economic Recovery Proceeds at a Moderate Pace
After much anticipation, Fed Chairman Ben Bernanke atlast held his press conference with select print journalists this week. As expected, the mostly preparedremarks contained no new information, but did providemore clarity on the Fed’s economic outlook, inflation andinflation expectations and the expiration of the large-scale asset program, commonly known as QE2.
U.S. real GDP grew at only a 1.8 percent rate in the firstquarter, which was exactly in line with our conservativeforecast, but well below the previous quarter’s solid gain.
Bars = Compound Annual Rate Line = Yr/Yr % Change-8%-6%-4%-2%0%2%4%6%8%10%96979899000102030405060708091011-8%-6%-4%-2%0%2%4%6%8%10%Real GDP: Q1 @ 1.8%Real GDP: Q1 @ 2.3%
Royal Wedding Aside, Britons Are Gloomy
British GDP grew at an annualized rate of 2.0 percent inthe first quarter, reversing the decline in the previousquarter. In general, however, the pace of the recovery remains sluggish. In our view, growth in consumerspending will likely remain lackluster over the next few quarters.
Although inflation at present is well above the Bank of England’s target, we expect policy rates to remainunchanged over the next few months. Most policymakers believe that the sluggish pace of recovery will causeinflation to recede in coming months.
U.K. Real GDP
Bars = Compound Annual Rate Line = Yr/Yr % Change-12%-10%-8%-6%-4%-2%0%2%4%6%200020022004200620082010-12%-10%-8%-6%-4%-2%0%2%4%6%Compound Annual Growth: Q1 @ 2.0%Year-over-Year Percent Change: Q1 @ 1.8%
Wells Fargo U.S. Economic Forecast
Forecast2010 2011 2008 2009 2010 2011 20121Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Real Gross Domestic Product
220.127.116.11.18.104.22.168.60.0-22.214.171.124.7Personal Consumption126.96.36.199.02.72.31.82.6-0.3-188.8.131.52.2Inflation Indicators
"Core" PCE Deflator184.108.40.206.80.91.01.31.220.127.116.11.21.8Consumer Price Index18.104.22.168.22.214.171.124.93.8-0.31.63.33.3Industrial Production
126.96.36.199.26.04.44.13.9-3.3-11.15.35.04.0Corporate Profits Before Taxes
37.637.026.4188.8.131.52.26.7-16.4-0.4184.108.40.206Trade Weighted Dollar Index
76.178.873.673.270.671.072.073.074.377.775.671.675.5Unemployment Rate220.127.116.11.18.104.22.168.22.214.171.124.68.2Housing Starts
0.620.600.590.530.560.580.640.700.900.550.590.620.83Quarter-End Interest Rates
Federal Funds Target Rate0.250.250.250.250.250.250.250.251.8126.96.36.199.19Conventional Mortgage Rate4.974.744.354.714.8188.8.131.526.045.044.695.155.7010 Year Note3.842.972.533.303.473.703.753.803.663.263.223.684.23
Forecast as of: April 29, 2011
Compound Annual Growth Rate Quarter-over-Quarter
Year-over-Year Percentage Change
Federal Reserve Major Currency Index, 1973=100 - Quarter End
Millions of Units
Annual Numbers Represent Averages
U.S. Review 2U.S. Outlook 3Global Review 4Global Outlook 5Point of View 6Topic of the Week 7Market Data 8