Several temporary factors helped pushed down first-quarter GDP growth. However, the winding down of these temporary factors should allow GDP growth to improve in the third quarter. We forecast that second-quarter GDP growth will come in at around a 2½ % annualized rate, but we expect GDP to expand at an annualized 3½% rate in the second half of the year and to continue to strengthen through 2012. Meanwhile, conditions continue to fare moderately worse in the Twelfth Federal Reserve District than in the nation as a whole, with unemployment rates in many District states remaining well above the national unemployment rate. Although, District unemployment rates have shown considerable declines in recent months. As the effects of recent commodity price increases wear off, we expect headline PCE inflation will subside below a 1½ % annualized rate in the second half of this year.