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Quarter-End Insights

Outlook for the Economy

We could bolt ahead for two or three more quarters just from relatively visible catalysts.

I continue to believe that the economy is just beginning its improvement cycle and can bolt ahead for two or three more quarters just from catalysts that are relatively visible today. If economic conditions line up correctly, and we avoid external shocks to the economy, the second half of 2010 could show continuing growth.

Beyond that, my crystal ball grows cloudier. Specifically, I am looking for 3.5%-4.0% growth in real GDP in the fourth quarter of 2009 and 3.5% for all of 2010, with the front half of the year a little stronger than the back half. My estimates are higher than the general consensus. With this higher growth rate, I expect inflation for 2010 to be closer to 3% versus general expectations of 2% price increases.