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The Economy

August 6, 2014 | Weekly Commentary

The big economic release of the week was US Gross Domestic Product rebounding to 4 percent growth in the second quarter, from a revised 2.1 percent contraction during the 1st quarter.  The increase reflected positive contributions from personal consumption expenditures, private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment.  Initial Jobless Claims continued the run of good data as benefits came in at 302,000 in the week ending July 26th.  Despite the decline in initial jobless claims, the US Unemployment Rate rose to 6.2 percent in July from 6.1 percent in June.  This confirms more folks are coming back into the jobs market attempting to obtain employment, which have previously been long term unemployed or underemployed.  Personal incomes rose .39 percent in June over the prior month thus extending consumer confidence.  This is a slew of positive economic releases which is supporting a snap back in economic activity from the first quarter.

The data released over the prior week in relation to Federal Reserve policy supports low rates for an extended period of time.  Inflation, tracked by the personal consumption expenditures price index, came in at 1.6 percent year over year and .2 percent month over month.  When weighing subdued inflationary pressures with an improving jobs market, the Fed believes they can keep rates low until they confirm greater labor participation and inflation.

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