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Press Release

Near-Term Growth Outlook Remains Intact as Economy Continues to Accelerate

September 23, 2014

Housing Still Struggling to Gain Traction Amid Consumer Caution

Katie Penote


WASHINGTON, DC – A recent rebound in business investment has bolstered expectations for solid economic growth during the remainder of 2014, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group. The robust headline growth in the second quarter was upgraded from 4.0 to 4.2 percent in the government’s second estimate, with contributions from nearly all major GDP components. In addition, recent data through June showed upward revisions on net, suggesting that second quarter growth likely will be revised higher.

"In our September forecast, we see the economy continuing to accelerate toward 3.0 percent growth in the second half of the year, in line with our prior forecast," said Fannie Mae Chief Economist Doug Duncan. "Business spending and confidence are trending up, and we expect to see a healthy increase in business capital investment in the third quarter following the double-digit annualized gain in the second quarter. Consumer spending fell unexpectedly in July, as more Americans appeared to be building their savings amid weakened income expectations, however a surge in auto sales suggests a reversal in August. If the labor market continues to improve, consumers will likely be more willing to take on additional credit card debt, giving a boost to spending growth. Additionally, a decline in crude oil prices again in August has lowered the cost of gasoline, which we expect to add to disposable income and support spending in the current quarter."

"Recent housing activity isn’t quite as positive, having shown only lukewarm growth since a promising start to the third quarter, but our forecast is little changed from August," said Duncan. "Purchase mortgage applications have trended down over the past three months, despite the declining interest rate environment. We believe this suggests a residual conservatism on the part of consumers and supports our view that the pace of growth in the housing sector will be subdued during the remainder of 2014, with modest improvement in 2015."

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