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Fannie Projects Strong Economic Finish for 2011

by admin

Fannie Mae's last economic report of the year shows the economy finishing strong in 2011.

A new economic report from the Fannie Mae Economics & Mortgage Market Analysis Group states that the U.S. economy is poised to finish the year strongly, though 2012 may prove to be a tricky year.

According to the report, the economy grew at a 2.5 percent rate in the fourth quarter, the strongest quarterly growth for 2011. On top of that, employment growth was strong at 140,000 private sector jobs in November, auto sales were positive, and relatively promising housing data, from construction to new-home sales, also indicated a strong finish to 2011.

Fannie Mae was hopeful but sober in its interpretation of the data.

“Fourth-quarter economic activity indicates that 2011 will end on a positive note,” the report summarized. “Nevertheless, the U.S. economy continues to face many obstacles, with momentum expected to slow going into 2012.”

The main fear going into 2012, the report stated, was the European sovereign debt crisis, which concerns the finances of several of the most powerful economies in the eurozone. With several eurozone nations slipping into recession the last quarter – and with many of the top U.S. banks involved in numerous financial deals with those countries – the report predicted “ongoing volatility” for the U.S. in 2012.

Also, several other factors involving spending, such as wages, salary income and real disposable income, were all revised lower in the third and fourth quarter. Yet ironically, real consumer spending went up for those quarters, suggesting that consumers dipped into their savings to sustain their spending habits.

Doug Duncan, the Fannie Mae chief economist, reaffirmed that housing and the U.S. economy may be heading into a bumpy stretch.

“It’s important to recognize that we’re ending 2011 on a stronger note than we’ve seen throughout the year. Unfortunately, however, our 2012 outlook is not as rosy as our forecast for the fourth quarter of 2011,” Duncan said. “Despite recent near-term improvement, the housing market will likely remain subdued next year – a reflection of the winter season, an expected slowdown in economic activity, and a potential increase in distressed sales.”

Of course, the economists at Fannie Mae are hardly the only analysts analyzing the 2012 economic climate, and not all of those competing views are negative. Fannie’s sister GSE, Freddie Mac, for instance, issued a 2012 report late last week that was much more optimistic in its outlook, predicting increased housing activity and multifamily lending.

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