In 2014, according to Fannie
Mae’s Economic & Strategic Research Group, there will be an abatement in
economic policy uncertainty relating to fiscal and monetary issues, which is
expected to lay the foundation for improvement in private sector activity and
accelerated economic growth.
The group predicts increased
business and consumer spending that will boost economic growth throughout the
year. This is due to growing momentum in economic activity, including a
noteworthy rebound in consumer sentiment after a dip associated with the recent
government shutdown and expected labor market improvements likely to support
income growth. Growth is expected to accelerate to 2.9 percent this year, up
from an estimated 2.6 percent in 2013.
Fannie Mae’s full-year 2014
economic forecast takes three key growth drivers into account: an increase in
spending activity from forces in the private sector, declining fiscal drag from
the federal government, and continued improvement in the nation’s housing
market. A great deal of the policy uncertainty seen in 2013 has cleared to some
degree, increasing the possibility for an increase in growth as consumers and
businesses – which held back on spending amid those policy concerns – may
become more free with their spending this year.
“We expect the contribution
from consumer spending to rise to about 2.0 percentage points, up from an
estimated 1.6 percentage points last year,” said Fannie Mae Chief Economist
Doug Duncan. “In addition, as consumer demand climbs, business confidence
should improve and add to growth in the form of stronger hiring and capital
investment.”
Continued housing recovery
in the U.S. is also expected to add to GDP, doubling from 0.3 percentage points
last year to 0.6 percentage points in 2014. This is largely due to new
homebuilding activity. In spite of a rise in mortgage rates since the spring,
many housing indicators posted strong gains at the end of last year, and
consumer attitudes toward housing are strengthening – all of which are good
signs for continued but measured 2014 housing recovery. Though Fannie Mae doesn’t
expect growth to break the 3 percent barrier in 2014, the organization does
believe the economy is on a sustainable path for ongoing growth with upside
potential.
An audio synopsis of the
January 2014 Economic Outlook is available in podcast form on the Economic
& Strategic Research site at www.fanniemae.com. The January 2014 Economic
Outlook, including the Economic Developments Commentary, Economic Forecast and
Housing Forecast, can also be read in its entirety on the website.
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