WASHINGTON – Aug. 21
2013 – Economic growth continues to gain momentum in the second half of the
year, as expected, despite the slow start at the beginning of 2013, according
to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research Group’s full-year
forecast.
Both the economy and housing remain on track, Fannie Mae predicts, with GDP (gross domestic product) expected to come in at approximately 2.0 percent in 2013 and accelerating to 2.6 percent in 2014.
The largely optimistic report finds that fiscal drag is waning, the housing recovery continues, and manufacturing and business investment are rebounding. Furthermore, consumer spending and the employment sector appear to be growing sustainably, which may help to offset downside risks from the expected tapering of the Federal Reserve’s securities purchases.
“Our macroeconomic and housing forecast shows very little change from July, and the steady pickup during the past few months validates our expectations for the second half of the year,” says Fannie Mae Chief Economist Doug Duncan. “The biggest risk to this forecast is the expected reduction in the Federal Reserve’s asset purchases, which would likely put additional upward pressure on interest rates and lead to some volatility in capital markets. Although the nature and timing of the tapering are still to be determined, we continue to expect the Fed will scale back its asset purchases and end the program by spring. In addition, we may see some fiscal tightening this fall as the debate over federal spending and the debt ceiling takes place.”
The housing recovery appears to have weathered some of the uncertainty, although additional growth is expected to be modest rather than robust while the market waits to see credit conditions ease as interest rates rise. That rise in mortgage rates has led to a drop-off in refinance activity, but so far hasn’t seemed to impact home purchase activity.
Fannie Mae’s report predicts that home prices will continue to climb, although at a slower pace than the dramatic levels seen during the past 12 months.
Both the economy and housing remain on track, Fannie Mae predicts, with GDP (gross domestic product) expected to come in at approximately 2.0 percent in 2013 and accelerating to 2.6 percent in 2014.
The largely optimistic report finds that fiscal drag is waning, the housing recovery continues, and manufacturing and business investment are rebounding. Furthermore, consumer spending and the employment sector appear to be growing sustainably, which may help to offset downside risks from the expected tapering of the Federal Reserve’s securities purchases.
“Our macroeconomic and housing forecast shows very little change from July, and the steady pickup during the past few months validates our expectations for the second half of the year,” says Fannie Mae Chief Economist Doug Duncan. “The biggest risk to this forecast is the expected reduction in the Federal Reserve’s asset purchases, which would likely put additional upward pressure on interest rates and lead to some volatility in capital markets. Although the nature and timing of the tapering are still to be determined, we continue to expect the Fed will scale back its asset purchases and end the program by spring. In addition, we may see some fiscal tightening this fall as the debate over federal spending and the debt ceiling takes place.”
The housing recovery appears to have weathered some of the uncertainty, although additional growth is expected to be modest rather than robust while the market waits to see credit conditions ease as interest rates rise. That rise in mortgage rates has led to a drop-off in refinance activity, but so far hasn’t seemed to impact home purchase activity.
Fannie Mae’s report predicts that home prices will continue to climb, although at a slower pace than the dramatic levels seen during the past 12 months.
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