WASHINGTON, DC - The economy is struggling to regain the momentum lost since the beginning of 2011 as higher gasoline prices and supply-chain disruptions due to the Japan tragedy during the first half of the year combined to restrain growth, according to the July 2011 Economic Outlook released today by Fannie Mae's Economics & Mortgage Market Analysis Group. Economic growth in the second quarter is estimated to have moved at the same anemic 1.9 percent pace seen during the first quarter. However, motor vehicle production is on track for a rebound and we've seen a decline in oil prices, which should encourage growth of about 3 percent for the current quarter before slowing modestly in the final quarter. Full-year growth is projected to slow to 2.4 percent, down from 2.8 percent in 2010.
The economy's inability to gain traction stems from continued uncertainty. The ongoing European and U.S. sovereign debt issues may have a significant downside impact on the banking system and broader financial markets, both here in the U.S. and abroad. Housing, a central piece of the economic story, continues to add nothing to economic growth, with home sales expected to rise only slightly over last year's numbers. And, two consecutive very poor employment reports have compounded issues for an already stressed labor market.
"Clearly, the renewed slowdown in hiring underscores the uncertainty surrounding the economic outlook," said Fannie Mae Chief Economist Doug Duncan. "The lack of sustained, robust job growth continues to push out into the future the time for the housing market to heal, which is crucial to a meaningful economic expansion."
For an audio synopsis of the July 2011 Economic Outlook, listen to the podcast on the Economics & Mortgage Market Analysis site at www.fanniemae.com. Visit the site to read the full July 2011 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, and Housing Forecast.
Also available via link from the Economic Developments Commentary is the Multifamily Market Commentary by Kim Betancourt, Director, Multifamily Economics and Market Research. The Commentary provides data on second-quarter 2011 preliminary multifamily trends.
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.