Economy Struggles to Maintain Lackluster Growth

Downside Risks Continue to Predominate Alongside Effects of Summer Drought

Housing Remains a Relative Bright Spot

Sep 18, 2012, 09:00 ET from Fannie Mae

WASHINGTON, Sept. 18, 2012 /PRNewswire/ -- Recent data indicate continued sluggish economic growth for the second half of the year, according to Fannie Mae's (OTC Bulletin Board: FNMA) Economic & Strategic Research Group. Downside risks such as the European debt crisis, the looming fiscal cliff, and a deceleration in hiring have materialized over the past couple of months, creating a significant drag overall. The U.S. drought will likely compound the current slump as it is expected to increase prices of food and other agricultural commodities. Combined with the increase in gasoline prices since early July, headline inflation is expected to pick up, which may stifle real consumer spending growth in the current quarter and may weigh further on consumer attitudes in the coming months.

"The September outlook carries forward many of the trends in July and August, which are keeping growth expectations at sub-2.0 percent for the rest of the year as well as for all of 2012," said Fannie Mae Chief Economist Doug Duncan. "Compensating for some of the economy's sluggishness is an increasingly positive, though subdued, housing market. We expect home sales of approximately 9 percent for 2012 and we should see steady improvement from there, although it will take some time before we reach healthy norms."

Home prices ticked up further in recent months – with various measures in the second quarter posting the best performance since 2005 – indicating that prices likely hit bottom in the first quarter of 2012. Year-to-date home sales also gained more ground in July. New home sales increased about 20 percent above the same period last year (when they set a record low) and existing home sales grew about 10 percent over last year (the best showing since 2007). While housing has improved during the past 12 months, activity remains well below historical standards and continues to show signs of only modest growth through the rest of 2012.

For an audio synopsis of the September 2012 Economic Outlook, listen to the podcast on the Economic & Strategic Research site at Visit the site to read the full September 2012 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.

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.

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by purchasing or guaranteeing mortgage loans originated by mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.

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SOURCE Fannie Mae