2014 Economic Growth Expectations Get Boost from Second Quarter Rebound - KAIT-Jonesboro, AR-News, weather, sports

2014 Economic Growth Expectations Get Boost from Second Quarter Rebound

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SOURCE Fannie Mae

Housing's Contribution to GDP Downgraded Following Sluggish Q2

WASHINGTON, Aug. 18, 2014 /PRNewswire/ -- A broad-based rebound in second quarter economic growth, combined with the upward revision to first quarter economic activity, has provided some lift to 2014 full-year growth expectations, according to Fannie Mae's (OTC Bulletin Board: FNMA) Economic & Strategic Research (ESR) Group. Recent data show that every main component of GDP, with the exception of net exports, contributed positively to growth in the second quarter-a sharp contrast from the first quarter in which consumer spending was the main driver of GDP. Improvements in consumer spending, inventories, and employment support an upward revision in growth expectations to approximately 3.0 percent for the second half of 2014, raising the forecast for all of 2014 by four-tenths to 1.9 percent.

Conversely, the outlook for the housing market has deteriorated as housing activity appeared to have lost momentum at the end of the second quarter and near-term indicators suggest only minor improvement in the second half of the year. Although residential investment still is expected to be a contributor to growth in 2014 and 2015, it does not appear likely to be a growing driver of growth going forward, as expected in the prior forecast.

"The August outlook supports our expectation that the economy will grow in the second half of the year at slightly above trend and push full-year growth into positive territory, albeit still weak by historical standards," said Fannie Mae Chief Economist Doug Duncan. "We expect the forecast will get a boost from consumer spending, which appears positive in the current quarter given the improving trends in personal income and hiring. Additionally, consumers surveyed in our July National Housing Survey reported being more optimistic about their personal income and expenses despite a more pessimistic view about the direction of the economy. However, how healthcare spending will affect consumers poses a significant uncertainty given the substantial revisions on the healthcare front."

"With respect to housing's contribution to growth this year, we have downgraded our outlook following the disappointing housing activity seen during the first half of the year," said Duncan. "The impact on mortgage rates from the market's expectation that the Federal Reserve would soon start tapering their securities purchases, combined to some degree with the weather effect in the first half of 2014, led to very little seasonal growth in housing. In the first six months of the year, total sales have run below last year's pace. Additionally, on the demand side, there appears to be a conservatism among consumers and their willingness to take on big-ticket purchases, such as homes. This leads us to believe that 2014 will finish lower in total sales figures than 2013 – and that 2015, while stronger than 2013 and 2014, will not be the breakout year some are expecting."

For an audio synopsis of the August 2014 Economic Outlook, listen to the podcast on the Economic & Strategic Research site at www.fanniemae.com. Visit the site to read the full August 2014 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

Fannie Mae enables people to buy, refinance, or rent a home.

Visit us at: http://www.fanniemae.com/progress

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©2012 PR Newswire. All Rights Reserved.

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