First Quarter Economic Growth Stronger then...

First-Quarter Economic Growth Stronger Than Expected

Posted By susanne On April 17, 2013 @ 4:33 PM In Finance and Economy,Real Estate Information,Real Estate News,Real Estate Trends

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 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 [1] site at www.fanniemae.com [2].

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