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Feb 5, 201509:26 AMOpen Mic

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Market and economic update: U.S. economic data softened in fourth quarter

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U.S. economic data has softened from the robust activity levels in the second and third quarters of 2014. Gross domestic product grew just 2.6% in the fourth quarter. Consumer spending and investment activity remained solid, but government spending slowed after providing strong contributions in the middle of 2014.

Net exports also slowed U.S. economic activity, likely due to a stronger U.S. dollar. Looking into the new year, lower energy prices and an improving jobs market are likely lifting consumer spirits. The Conference Board and University of Michigan consumer sentiment indexes reached their highest post-recession levels. This week’s employment report should provide further indication of a healthy labor market, although the pace of decline in the unemployment rate is likely to slow. Rising consumer confidence may provide some lift to labor force participation.

Outside the United States, economic data remains weak but does not seem to be deteriorating. In Europe, deflation remains a risk, but confidence among businesses and consumers is not flagging and the employment market seems to be recovering. Bank of Japan’s quantitative easing program has helped the economy avoid deflation, but the weak yen has hurt consumer spending.

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