Economy growing but could do better
WASHINGTON – Aug. 21, 2012 – Economic activity slowed during the first half of 2012, according to Fannie Mae’s latest economic report – but a housing recovery remains on track.
Inflation-adjusted consumer spending growth dropped nearly a percentage point during the second quarter to a one-year low of 1.5 percent, as spending fell in June for the first time since last August. However, strong July retail sales helped soothe concern of another pullback.
In addition, the July jobs report posted the strongest gain in five months with 163,000 new jobs created. If sustained, such job growth may bolster weak consumer and small business confidence, helping to offset headwinds presented by the domestic policy environment and European debt markets.
Still, Fannie Mae’s (FNMA/OTC) Economic & Strategic Research Group predicts modest economic growth through the end of this year, with a nod to existing risks that could change that forecast.
“The July data hasn’t changed our forecast for slow growth in 2012, but we’re increasingly focused on the looming ‘fiscal cliff’ near year-end,” says Fannie Mae Chief Economist Doug Duncan. “The debt ceiling debate … may spur further caution among consumers and businesses alike. On the bright side, we continue to see positive trends in the housing sector, which is showing signs of a durable, long-term recovery.”
The broad housing outlook has stayed generally positive. The expected increase in home sales in 2012 over 2011 remains steady at approximately 9 percent, and home price expectations for the remainder of the year are now trending upward.
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