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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