WASHINGTON, June 24, 2014 /PRNewswire/ -- Economic activity
contracted in the first quarter of 2014, weakening the odds that
full-year growth will top last year's pace, according to Fannie
Mae's (OTC Bulletin Board: FNMA) Economic & Strategic Research
Group. The reversal of an unsustainable buildup in inventory
investment subtracted 1.6 percentage points from GDP in the first
quarter, compared to the initially reported 0.6 percentage point
drag. Additionally, disruptive weather and a rare drop in real
exports also weighed on growth. Although incoming data show a
pickup in activity heading into the current quarter, any strength
during the remainder of the year is not expected to be enough to
overcome the weakness in the first quarter. For all of 2014, the
Group forecasts economic growth of 2.1 percent – one-half a
percentage point below the 2013 pace.
"We remain confident that the first-quarter drop in activity
will reverse, and we are seeing some positive signs in the current
quarter, but economic growth likely will be playing catch-up for
the rest of the year," said Fannie Mae Chief Economist Doug Duncan. "Consumer spending appears to have
been the only real contributor to growth in the first quarter.
Although spending dipped again in April, it seems to have rebounded
in May. Consumers should get a boost going forward due to continued
rising household net worth, which is improving rapidly but remains
well below the 2006 peak, as well as firming labor market
conditions, which have showed steady albeit unspectacular
gains."
"Home price improvements have contributed to consumers'
household wealth, but overall growth in the housing market pulled
back in the first quarter, with major housing indicators coming in
lower year over year compared to the first quarter of 2013," said
Duncan. "More recent housing indicators were mixed, with only
moderate improvement despite the decline in long-term interest
rates. We expect that total home sales in 2014 will be about 2.0
percent lower than in 2013, with new home sales advancing somewhere
in the 12-15 percent range and existing home sales declining year
over year."
For an audio synopsis of the June
2014 Economic Outlook, listen to the podcast on the Economic
& Strategic Research site at www.fanniemae.com. Visit the site
to read the full June 2014 Economic
Outlook, including the Economic Developments Commentary, Economic
Forecast, and Housing Forecast.
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.
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SOURCE Fannie Mae