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21
DESPITE SLOWDOWN, FANNIE MAE EXPECTS
ECONOMIC GROWTH
A weaker-than-expected first quarter has
researchers at Fannie Mae amending their
forecast for growth in 2014, but they still project
acceleration as the year progresses.
In its Economic and Housing Outlook for
April, Fannie Mae's Economic and Strategic
Research Group notes economic activity slowed
in Q1 even more than was forecasted, partly due
to a sharp decline in inventory investment as
consumer spending waned.
Citing that drop—as well as unusual
weather patterns and a "surprising widening"
in February's net exports—the group brought
its projection for first-quarter economic growth
down 0.5 percentage points to 1.5 percent
annualized.
Even with the adjustment, Fannie's
prediction calls for economic growth at 2.7
percent in 2014, a slight increase over last year's
2.6 percent expansion.
"e 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," explained
Doug Duncan, chief economist at Fannie Mae.
Supporting that growth forecast are expected
improvements in consumer spending, relief from
fiscal policy concerns, and strengthening in the
housing market—though expectations for the
latter also had to be scaled back, thanks to the
year's slow start.
"Some but not all of the weakness is likely
related to the abnormally severe winter weather
and should rebound in coming months," the
group said. "However, a significant share of
the weakness appears to be related to the sharp
decline in housing affordability and could persist
for some time."
However, Duncan added, "the recent loss of
momentum is likely a temporary one."
e group expects sales of new, single-family
homes to rise 14.8 percent over 2013's total to
494,000, a downward revision from 519,000. e
forecast looks worse for existing homes, which
are now expected to fall 1 percent to about 5
million.
Origination projections have also been
brought down, with purchase originations
expected to hit $724 billion as refinances drop to
$417 billion.
Overall, Fannie Mae expects housing to
contribute 0.3 percentage points to this year's
economic growth.
