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Housing’s Contribution to GDP Expected to Improve from 2013

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housing_market_recovery_ladderAn abatement in economic policy uncertainty surrounding fiscal and monetary issues is expected to lay the foundation for improved private sector activity and accelerated economic growth in 2014, according to Fannie Mae’s Economic & Strategic Research Group. With growing momentum in economic activity, including a notable rebound in consumer sentiment following a dip associated with the government shutdown in the fall, as well as expected labor market improvements that are likely to support income growth, the group forecasts an increase in consumer and business spending that will serve to boost economic growth throughout the year. For all of 2014, growth is expected to accelerate to 2.9 percent from an estimated 2.6 percent in 2013.

“Our full-year 2014 economic forecast accounts for three key growth drivers: an acceleration in spending activity from private sector forces, waning fiscal drag from the federal government, and continued improvement in the housing market,” says Fannie Mae Chief Economist Doug Duncan. “Much of the policy uncertainty we saw in 2013 has cleared to some degree, which raises the possibility for a pick-up in growth as consumers and businesses, who held back on their spending amid those policy concerns, might loosen their purse strings this year. We expect the contribution from consumer spending to rise to about 2.0 percentage points, up from an estimated 1.6 percentage points last year. In addition, as consumer demand climbs, business confidence should improve and add to growth in the form of stronger hiring and capital investment.”

“The continued housing recovery also is expected to contribute to GDP, doubling from 0.3 percentage points in 2013 to 0.6 percentage points in 2014, due in large part to new homebuilding activity,” says Duncan. “Despite the rise in mortgage rates since the spring, many housing indicators posted strong gains at the end of 2013 and consumer housing attitudes are strengthening, all of which bodes well for continued but measured housing recovery in 2014. Overall, although we don’t expect growth to break the 3 percent barrier this year, we believe the economy is on a sustainable path for continued growth with upside potential.”

Source: Fannie Mae

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