First-Quarter Economic Growth Stronger Than Expected

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News Release

April 17, 2013

First-Quarter Economic Growth Stronger Than Expected

Consumer Spending Surprisingly Resilient, but Sustainability Uncertain

Housing Continues to Build Momentum

Pete Bakel

202-752-2034

WASHINGTON, DC – Recent data indicate that economic growth in the first quarter has accelerated to an above-trend—but likely unsustainable—pace of 3.2 percent, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research Group. A significant buildup in business inventories provided a one-time boost to first quarter growth and is expected to resume a more balanced level in the second quarter. Meanwhile, several other key indicators late in the first quarter, including a downbeat March jobs report, were soft, presaging a more moderate pace for the rest of the year. The Group expects growth to come in at approximately 2.3 percent for 2013—still modest by recovery standards, but a pickup from the 2012 and 2011 pace of 1.7 percent and 2.0 percent, respectively.

“The April forecast reflects the growing realization that 2013 is off to a good start from a GDP perspective, but we expect the stronger-than-expected first quarter pace to slow somewhat in the second quarter,” said Fannie Mae Chief Economist Doug Duncan. “On the downside, tax hikes, sequestration, and the euro-zone crisis still pose significant risks to our forecast, and the fiscal tightening will likely affect consumer spending and other economic activity in coming months. However, the housing recovery continues to broaden and may be more robust than we anticipate, helping to offset fiscal headwinds.”

The continued housing recovery and rising home prices are expected to provide a cushion to growth this year and present the most likely source of upside to our forecast. Residential investment has made a positive or neutral contribution to economic growth for seven consecutive quarters, ending in 2012, with similar activity expected in 2013. Housing’s contribution to growth also continues to climb home as sales reached multi-year highs in the early stages of 2013.

For an audio synopsis of the April 2013 Economic Outlook, listen to the podcast on the Economic & Strategic Research site at www.fanniemae.com. Visit the site to read the full April 2013 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.

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