In its April 2014 Economic Outlook, Fannie Mae’s Economic & Strategic Research Group said that the economy is expected to gain momentum in the second quarter. The group said that government spending and diminishing drag from a slowdown in inventory stockpiling contribute to the growth, as well as consumer and business capital spending, relief from fiscal policy concerns and improvements in the housing sector.
Even with improvement, however, the housing sector may not be moving as quickly as other segments of the economy.
“We have downgraded our housing forecast slightly due to a lackluster sales picture, but the recent loss of momentum is likely a temporary one,” said Fannie Mae Chief Economist Doug Duncan. “Overall, we expect housing to add 0.3 percentage points to economic growth this year. While existing home sales have remained essentially flat, we continue to believe that new home sales will increase at a double-digit pace. Housing starts are expected to rise to about 1.05 million units in 2014, up from 925,000 in 2013 but approximately 50,000 fewer than we expected at the beginning of the year due to builders’ credit and labor constraints.”
The group forecasted a 2.7 percent growth rate for all of 2014, comparable to the 2.6 percent pace in 2013.
“The April economic forecast is similar to February and March, where slow growth has been the common denominator, but we expect to see a slight pickup beginning this quarter,” Duncan said. “A slower pace of inventory accumulation is likely to weigh on gross domestic product in the first half of 2014 but loosen its hold in the second half of the year as businesses increase production. Government spending is expected to contribute to growth for the first time in five years, and the lack of additional broad-based tax increases combined with less uncertainty over fiscal policy should enable some strengthening in the private sector. Consumer confidence will likely trend up throughout the year, supported by improving financial market conditions and household net worth. However, the long-term effects of new healthcare rules and related costs on real consumer spending will need to be monitored in the coming months. Overall, we expect real consumer spending to accelerate to 2.8 percent in 2014, a 0.5 percentage point increase from 2013.”
For an audio synopsis of the April 2014 Economic Outlook, listen to the podcast on the Economic & Strategic Research site at www.fanniemae.com. Visit the site to read the full April 2014 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast and Multifamily Market Commentary.
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