Economy Picks Up Steam; Manufacturing Is One Component Helping To Pave The Way

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Posted by Heidi Schwartz

Economic growth continues to gain momentum in the second half of the year, as expected, despite the slow start at the beginning of 2013. Fannie Mae’s Economic & Strategic Research Group’s full-year forecast for the economy remains on track, with GDP expected to come in at approximately 2.0 percent in 2013 and to accelerate to 2.6 percent in 2014.

Fiscal drag is waning, the housing recovery continues, and manufacturing and business investment are rebounding, helping to boost growth. Furthermore, consumer spending and the employment sector appear to be growing sustainably, which may help to offset downside risks from the expected tapering of the Federal Reserve’s securities purchases.

“Our macroeconomic and housing forecast shows very little change from July, and the steady pickup during the past few months validates our expectations for the second half of the year,” said Fannie Mae Chief Economist Doug Duncan. “The biggest risk to this forecast is the expected reduction in the Federal Reserve’s asset purchases, which would likely put additional upward pressure on interest rates and lead to some volatility in capital markets. Although the nature and timing of the tapering are still to be determined, we continue to expect the Fed will scale back its asset purchases and end the program by spring. In addition, we may see some fiscal tightening this fall as the debate over federal spending and the debt ceiling takes place.”

For a summary of the latest report, download this PDF.

 

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