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Fannie Mae: Economy Ready for Rebound After Historic Setback

08.19.2020

According to the latest commentary from the Fannie Mae Economic and Strategic Research Group, America’s economy is surprisingly poised to bounce back in the coming quarter.

Although the U.S. economy experienced a setback in the second quarter, contracting by 32.9% (annualized), all seems not to be lost according to experts.

Even though this second quarter showing marked the largest decline since the demobilization efforts after World War II, experts point to the healthy rate of recovery in the economy that was seen this past May and June, a momentum which they say is perfectly setting up this coming third quarter for an equally healthy rebound.

Specifically, experts predict that the third quarter GDP growth will be roughly 27.2% (annualized). Further support of this positive outlook for the future of the economy is now-declining coronavirus case rate, as well as current support being offered by fiscal and monetary policy in the U.S. The experts have even pointed to the fact that many households have increased their savings while reining in spending during these uncertain times, thus creating an environment for future consumer spending throughout the year as people gain more confidence with the current state of affairs.

Even though there are decided risks that could complicate this positive outlook, such as a surge in COVID-19 cases and further lockdowns, the experts from the ESR group still are staying optimistic.

Doug Duncan, Fannie Mae SVP and Chief Economist, further elaborated on the group’s economic forecast, particularly in how the pandemic will affect it: “The economy’s climb back from the sudden and severe setback of the second quarter is fully underway, but we believe the future pace will be driven largely by the path of the novel coronavirus and how the public responds to coronavirus-related information.”

Duncan added: “Consumers have savings to draw on, but some are holding that savings in reserve until the economy and labor markets improve. Others are spending on a discretionary basis as they await evidence that the virus has receded sustainably. Our base scenario assumes that Congress will agree upon additional fiscal stimulus in support of consumers and businesses, and that the economy will only shrink 3.1 percent in 2020 relative to 2019, measured on a fourth-quarter-over-fourth-quarter basis.”

Further details on what to expect were provided by Duncan: “We believe housing will continue to be a sector with relative strength amid the larger downturn, as long-running supply constraints exacerbate demographic and interest rate demand-side factors that are supporting home price growth. The recently observed increase in purchase demand is largely due to pent-up demand as buyers are acting now after delaying purchases in the spring. We are, however, seeing some early signs of shifting buyer preference to locate to lower density areas, potentially driving some additional purchase activity. Here, our baseline forecast sees purchase volumes of $1.3 trillion in 2020.”

by Andy Beth Miller (via www.themreport.com)

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