Fannie Mae: Improvement continues – but slowly

WASHINGTON – Jan. 28, 2013 – Fannie Mae economists issued their forecast for 2013, and it boils down to what you saw in 2012 is what you’ll get in 2013 – gradual but below-potential economic growth.

This modest growth path gives credence to claims that the recovery’s slow pace has become the “new normal,” according to Fannie Mae’s Economic & Strategic Research Group. The fiscal cliff and ongoing debt ceiling debates are likely to suppress consumer spending in the first half of 2013 and continue to present potentially strong headwinds. Overall, Fannie Mae forecasts a 2 percent growth rate for 2013, similar to the subdued pace of 2012.

However, the housing sector has become a bright spot in the economy since home prices began to rebound in 2012 and is expected to provide a rising contribution in 2013 and coming years, even if it doesn’t significantly kick-start a faster rebound. Overall, home sales, home prices, and home building and homebuilder confidence appear to be on the upswing, having risen to multi-year highs.

“What we view as sub-par economic growth may actually continue to be par for the course for the near term,” says Fannie Mae Chief Economist Doug Duncan. “We expect the fiscal policy climate to act as a drag on growth this year … ” though with “some upward trend in economic activity … in the second half of the year. That momentum will find support in the form of continued, albeit slow, improvement in the housing sector.”

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