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Fannie: U.S. Economic Recovery ‘Flirting’ with New Downturn

""Fannie Mae"":http://www.fanniemae.com/kb/index?page=home cast the U.S. economic recovery as on the rocks Monday with a report suggesting that events at home and abroad primed the country for a return to recession. The GSE cited restlessness in European financial markets, sluggish growth in emerging economies, and upheaval in the Middle East as reasons why America may be bordering on a double-dip.


According to the GSE's Economics & Mortgage Market Analysis Group, which publicizes statements about macroeconomic trends every month, third-quarter data suggests that U.S. GDP will chug below 2 percent for the remainder of the year and into 2012.

The dismal forecast makes it less likely that the U.S. economy will stave off worries about a new recession and force the unemployment rate to persist at or above 9 percent, the mortgage giant says.

""The economy appears to be on a cusp, flirting with another economic downturn after more than two years of tepid recovery from the most severe recession in the post World War II [sic] era,"" Fannie began in the outlook.


Among other factors for a double-dip recession, Fannie touched on the debt crisis in Europe, most recently affecting Greece, and a slowdown for economic heavyweights like China.

Tumbling autocracies in Egypt, Libya, and Tunisia over 2011 make it more likely for oil prices to skyrocket, further crimping consumers and their wallets.

Fannie also portrayed wary consumers as unhelpful for the housing recovery, framing ""muted"" home purchases around record-low mortgage rates and an all-time high for home affordability.

It beheld low single-family home construction, alongside rising multifamily construction ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô a category of construction typical for rental units - as reflective of the economic strain.

""The weakening economic backdrop, a persistently high unemployment rate, and fear of a double-dip recession are casting a shadow over the housing market,"" Doug Duncan, chief economist for the GSE, said in a statement.

He highlighted a less-than-hopeful response by respondents to a recent national survey by Fannie, the results for which signaled ""a continued shift of sentiment toward renting and away from ownership, at least in the near term,"" he said.

""In the second quarter, 26 percent of Americans were worried about their job stability,"" Duncan added. ""When combined with the 9 percent of unemployed households, you have more than a third of the potential workforce worried about their employment status. This is hardly a strong support for housing demand.""

The new outlook from Fannie follows another forecast from August, which revised expectations for GDP growth to 1.4 percent from 3.1 percent from the past year.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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