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GDP DATA CONFIRMS SLOW GROWTH

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GDP data was released Friday revealing headline economic growth of 2.8% versus consensus of 3.1%. Real economic growth after inflation was only 1.7% for 2011. Negatively affecting the data were lower state and local government spending, private inventory investment and, believe it or not, federal government spending.

While the all-important, and much watched by the Fed, PCE (Personal Consumption Expenditures) was higher it was a disappointment overall. This may reflect what the Fed saw in the data (weak growth) which then caused them to keep interest rates low for a long period. They must worry this slow growth condition is going to be with us for a long time. This is hardly encouraging.

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