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Press Release

Economic Growth Expected to Strengthen During Second Half of 2014, But Not Enough to Save the Year

July 23, 2014

Housing Data Suggest Continued but Modest Rebound in Housing Market

Katie Penote


WASHINGTON, DC – Economic growth during the second half of 2014 likely won’t be strong enough to offset the weak activity from the first two quarters of the year, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group. The economy experienced the worst performance in five years during the first quarter of 2014, due in large part to a significant downward revision in healthcare spending, and incoming data suggest only a moderate pickup in growth for the second quarter – likely resulting in an essentially flat first half of the year. In the third and fourth quarters, economic activity is expected to accelerate, driven largely by consumer spending and, to a lesser degree, business capital investment and residential investment. Additionally, government spending is expected to contribute to growth for the first time in five years while inventory investment and net exports are expected to subtract from growth this year. On balance, the ESR Group has revised their full-year 2014 GDP forecast to real growth of approximately 1.5 percent, down from 2.1 percent in the prior forecast.

"Our findings in the July forecast suggest that full-year growth in 2014 likely will be weaker than 2013," said Fannie Mae Chief Economist Doug Duncan. "We expect the economy to grow approximately 3.0 percent in the second half of the year, although there is an element of uncertainty given government statisticians’ difficulty in assessing the full scope of healthcare expenditures. Overall, our forecast calls for growth to come in at around 1.5 percent for the year, which would be the worst performance of Q4-over-Q4 growth in the current economic expansion. On the bright side, real personal income grew for the fifth consecutive month in May and hiring has continued on an upward trajectory, which should help boost consumer spending during the remainder of 2014."

"Housing data point to a continued but modest rebound in the housing market, in line with our prior forecast," said Duncan. "Recent housing activity picked up seasonally as we expected, yet many indicators remain near or below the levels for the same period last year. For all of 2014, we continue to expect total home sales to decline about 2.0 percent and total mortgage originations to decline approximately 41.0 percent. We also expect total single-family mortgage debt outstanding to rise slightly this year before strengthening further in 2015."

For an audio synopsis of the July 2014 Economic Outlook, listen to the podcast on the Economic & Strategic Research site at Visit the site to read the full July 2014 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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