Growth Estimates Point South for Fannie Mae

A weakened second quarter may indicate a slowdown in economic activity for the rest of the year, ""Fannie Mae"":http://www.fanniemae.com/portal/index.html reported Monday.

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According to a report from the GSE, its Economic & Strategic Research Group may have been too optimistic in its original 2012 GDP growth projection of 2.2 percent. Its revised growth rate estimate is 2.0 percent.

The group attributed the waning economic growth to drops in consumer confidence and employment opportunities.

""Breaking pace with a strong first quarter, consumer spending has weakened in recent months as the consumer confidence index fell to the lowest level since January,"" said Fannie Mae in a release. ""Contributing to the downturn is an uncertain job market. The June employment report showed significantly fewer hires compared to the first quarter monthly average, and ongoing concern regarding the European debt crisis and domestic

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financial markets may suppress a meaningful increase in private payrolls before the end of the year.""

Despite the downgrade in anticipated economic growth, Fannie Mae found a silver lining in the housing market. Year-over-year, home sales increased by 9 percent, and single-family housing starts are nearly 20 percent higher (although still below healthy norms).

Fannie Mae expects increased residential investment to contribute to economic growth for the first time since 2005.

In addition, the GSE's June 2012 National Housing Survey showed that homeowners have greater confidence in one-year-ahead home price expectations.

The share of polled customers who said they would buy a home if moving increased by 6 percentage points up to the highest level seen since the survey began.

The group expects housing starts and sales to continue to grow through the rest of 2012 and 2013, owing largely to record low mortgage rates and the belief that housing prices have hit bottom and are likely to increase in the future.

""The data from the past month collectively point to decelerating economic growth, but growth nonetheless,"" said ""Doug Duncan"":http://www.fanniemae.com/portal/about-us/company-overview/leadership/duncan.html, chief economist at Fannie Mae. ""It's now clear that our bias toward downside risks noted in the June forecast have materialized, pushing down our already modest growth projections.

""However, despite signs of deteriorating momentum for economic activity, housing continues to be a bright spot as news from the housing market has been relatively upbeat, presenting a rare upside boost to the economy,"" he added.