January 13, 20122012 -- Year of the Political Economy
WASHINGTON, DC – Fiscal policy issues and political economic uncertainty will take center stage in determining the degree of consumer and business activity – key drivers of economic growth - during 2012, according to Fannie Mae’s (FNMA/OTC) Economics & Mortgage Market Analysis Group. The forthcoming presidential election, potential expiration of tax provisions for businesses and households, and the ongoing healthcare debate are among the uncertainties expected to keep the economy moving at a moderate pace with growth of 2.3 percent expected for the year. Moreover, contagion effects from the sovereign debt crisis in the euro zone, which appears to be slipping into recession, are expected to remain as a primary risk to growth in 2012.
Consumers seem to have gotten out of their summer rut due in large part to improving labor market conditions and improving attitudes toward employment prospects and future income. As consumer sentiment shows signs of improvement, so do recent housing indicators, which are trending in a positive direction with incremental improvement expected to continue throughout 2012 – albeit only modestly initially, and moving from historic lows.
“We’re entering 2012 with decent momentum, especially on the employment side, which is fostering positive household and consumer behavior. Unfortunately, we expect this momentum to slow as we move through the first half of the year,” said Fannie Mae Chief Economist Doug Duncan. “2012 will be replete with policy changes and challenges that involve the global economy, the domestic economy, and the housing sector. We expect the net effect will be a year of moderate growth edging away from the 2011 threat of a double dip.”
For an audio synopsis of the January 2012 Economic Outlook, listen to the podcast on the Economics & Mortgage Market Analysis site at www.fanniemae.com. Visit the site to read the full January 2012 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.