Economic Growth Continues; Employment and Income Growth Lead the Way

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News Release

March 19, 2012

Economic Growth Continues; Employment and Income Growth Lead the Way

Increased Balance Between Upside and Downside Risks Indicates Positive Trend

Improvements in Labor Market Key to Housing Sector Gains

Pete Bakel

202-752-2034

WASHINGTON, DC – Recent economic data are pointing to a gradually improving economy. GDP revisions for the fourth quarter of 2011 indicated a stronger underlying pace of demand with higher consumer spending and business investment, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research Group. However, inventory accumulation accounted for about two-thirds of the increase in headline economic growth, while growth from other sources grew at a tepid 1.1 percent annualized pace. The most positive aspect of the GDP revisions was the upward revision to income growth, which revealed a less sharp decline in the saving rate in the second half of 2011. Increased income growth and less saving reduction imply consumer spending has stronger support in the near-term. Overall, the Group expects growth to accelerate from the subdued pace of the first quarter of 2012, strengthening to about 2.5 percent in the second half of the year.

Employment growth has been an important development from a housing sector perspective. Four solid months of private sector payroll growth have given rise to the possibility of overall increased economic activity, with employment playing a pivotal role for a housing recovery.

“Our February National Housing Survey has shown the impact of recent strong private sector employment growth on Americans, as consumer confidence in the direction of the economy has improved by 19 percent since November 2011,” said Fannie Mae Chief Economist Doug Duncan. “We continue to see a better balance of upside and downside risk, as the improving labor market is expected to help turn one of the headwinds in the housing market into a tailwind. On the downside, a rise in gas prices may affect the consumption of other goods and services if prices stay high for a significant period of time.”

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

Also available via link from the Economic Developments Commentary is the new Fannie Mae Data Note: “Single-Family Rental Housing – The Fastest Growing Component of the Rental Market,” which examines single-family rental units as a share of the renter-occupied housing stock. Increased demand for rental housing would help reduce the excess supply of vacant homes for rent and perhaps help convert some of the vacant homes for sale to rental units, decreasing the excess supply of vacant homes for sale, and, in effect, accelerating the stabilization of the overall housing market.

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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