HomeBuilders

[mlkrborn]

Slow Economic Growth is the 'New Normal' - Fannie Mae: Trend of Gradual, Below-Potential Economic Growth to Continue in 2013, 2014 >FNMA Fannie Mae
Last update: 1/24/2013 9:30:12 AM

By Saabira Chaudhuri

The gradual but below-potential economic growth seen in 2012 is likely to continue in 2013 and into 2014, according to a new report from Fannie Mae (FNMA).
The mortgage-finance company noted that the recovery's slow pace has become the "new normal," as the fiscal cliff and continuing debt-ceiling debate--which are likely to suppress consumer spending in the first half of 2013--continue to present potentially strong headwinds to meaningful growth activity.
Overall, Fannie forecasts a 2% growth rate for 2013, similar to the "subdued pace" of 2012, despite the fact the housing sector has become a "bright spot in the economy" since home prices began to rebound last year and is expected to provide a rising contribution to GDP in 2013 and in coming years.
Fannie noted that overall, home sales, home prices and home-building activity as well as home builder confidence appear to be on the upswing, having risen to multiyear highs.
"What we view as sub-par economic growth may actually continue to be par for the course for the near term," Fannie Mae Chief Economist Doug Duncan said. "We expect the fiscal policy climate to act as a drag on growth this year with possible implications on the direction of the economy in the long term.
He added that the agency expects to see some upward trend in economic activity as fiscal-policy debates subside later in the spring, with growth accelerating moderately in the second half of the year
In the longer term, Mr. Duncan said the gradual return of manufacturing to the U.S. and increasing domestic energy production will work together to accelerate economic growth; however, Fannie Mae anticipates overall growth in 2013 will remain below its potential.
Write to Saabira Chaudhuri at [e-mail]
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
January 24, 2013 09:30 ET (14:30 GMT)