2013: Transition to "Normal"?


By Pete Bakel

The trend of gradual but below-potential economic
growth seen in 2012 is expected to carry over through 2013 and into 2014. This
modest growth path combined with the real GDP growth rate during the recovery
from 2009 to this point of 2.2 percent annualized give credence to claims that
the recovery’s slow pace has become the “new normal,” according to Fannie Mae’s
Economic & Strategic Research Group. The fiscal cliff and ongoing debt
ceiling debate, which are likely to suppress consumer spending in the first half
of 2013, continue to present potentially strong headwinds to meaningful growth
activity. Overall, a 2 percent growth rate is forecasted for 2013, similar to
the subdued pace of 2012.

This is despite the fact that the housing
sector, which has become a bright spot in the economy since home prices began to
rebound in 2012, is expected to provide a rising contribution to GDP in 2013 and
in coming years. Recent data indicate that the housing recovery has transitioned
to a faster upward track, boosted by an improving labor market and low mortgage
rates. Overall, home sales, home prices, and home building activity as well as
homebuilder confidence appear to be on the upswing, having risen to multi-year

“What we view as sub-par economic growth may actually continue to
be par for the course for the near term,” says Fannie Mae Chief Economist Doug
Duncan. “We expect the fiscal policy climate to act as a drag on growth this
year with possible implications on the direction of the economy in the long
term. As fiscal policy debates subside later in the spring, we expect to see
some upward trend in economic activity, with growth accelerating moderately in
the second half of the year. That momentum will find support in the form of
continued, albeit slow, improvement in the housing sector. In the longer term,
the gradual return of manufacturing to the U.S. and increasing domestic energy
production will work together to accelerate economic growth. However, we
anticipate overall growth in 2013 will remain below its potential, extending
what has been a slow recovery.”

For an audio synopsis of the January 2013
Economic Outlook, listen to the podcast on the Economic
& Strategic Research
site at www.fanniemae.com. Visit the site to read
the full January 2013 Economic Outlook, including the Economic Developments
Commentary, Economic Forecast, Housing Forecast, and Multifamily Market

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.


For more
information, visit www.fanniemae.com.