'Unusually Uncertain' Outlook Tamping Down Economic Activity According to Fannie Mae's Economics & Mortgage Market Analysis Group
By Fannie Mae, PRNESunday, August 15, 2010
Downside Risks Dominate, but Upside Potential Exists
WASHINGTON, August 16, 2010 - Uncertainty in the economy confirms lower expectations for economic
growth and a slower-than-normal recovery, according to the August 2010
Economic Outlook released today by Fannie Mae's (OTC Bulletin Board: FNMA)
Economics & Mortgage Market Analysis Group. The forecast calls for 2.5
percent growth in the second half of 2010, with some pickup expected in 2011.
Housing activity, a central component to the recovery, is expected to be flat
for the remainder of the year due to a greater than expected number of sales
being pulled forward into the second quarter. Low 30-year fixed mortgage
rates, projected to average 4.5 percent for 2010, are expected to boost
refinance activity but likely will not be low enough to trigger a refinance
boom.
"The inability of the financial sector, business, and households to
determine the likelihood of events on the economic horizon is making planning
for the future difficult," said Fannie Mae Chief Economist Doug Duncan. "It
is particularly difficult to know how the economy will evolve given recent
and forthcoming policy changes. Because of this uncertainty, downside risks
are trumping upside potential. Corporate profits are strong, but uncertainty
around future labor costs is hindering near-term hiring. The Fed is
reinvesting maturing MBS into Treasuries as a strategy to keep long-term
interest rates low, but uncertainty about reform in the financial sector is
constraining credit availability. Consumers are lowering their leverage and
positioning themselves to resume consumption, but they face uncertainty about
employment and the renewal or expiration of tax cuts," said Duncan. "The
upside possibilities are there, however the key sectors are reticent to
contribute meaningfully to expansion."
For an audio synopsis of the August 2010 Economic Outlook, listen to the
podcast on the Economics & Mortgage Market Analysis (
www.fanniemae.com/media/economics/index.jhtml?p=Media&s=Economics+%26+
Mortgage+Market+Analysis) site at www.fanniemae.com. Visit the site to
read the full August 2010 Economic Outlook, including the Economic
Developments commentary, Economic Forecast, and Housing Forecast.
Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's
Economics & Mortgage Market Analysis (EMMA) 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 EMMA 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 EMMA 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.
Fannie Mae exists to expand affordable housing and bring global capital
to local communities in order to serve the U.S. housing market. Fannie Mae
has a federal charter and operates in America's secondary mortgage market to
enhance the liquidity of the mortgage market by providing funds to mortgage
bankers and other lenders so that they may lend to home buyers. Our job is to
help those who house America.
Pete Bakel, Fannie Mae, +1-202-752-2034
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