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A second quarter broad-based rebound combined with some revisions in the first quarter economic activity has given a boost to 2014 full-year economic expectations, according to the August 2014 Economic Outlook put together by Fannie Mae's Economic and Strategic Research Group. The housing market lost momentum in the second quarter, however, as near-term indicators show that growth slowed from the first quarter. Residential investment, although expected to contribute to growth in 2014 and 2015, is not expected to be a major driver of economic growth going forward as was originally forecasted.
While consumer spending was the primary driver of GDP in the first quarter, nearly every main component of GDP improved in the second quarter. Inventories and employment support combined with consumer spending have raised expectations for economic growth by 3 percent, which pushes the overall economic forecast for 2014 up four-tenths to 1.9 percent. Even though consumer spending is expected to be a major driver of overall economic improvement, consumers still seem to be conservative when it comes to "big ticket" purchases such as homes, according to Fannie Mae chief economist Doug Duncan.
For the second time in as many days, New York-based hedge fund Pershing Square Capital Management sued the U.S. government over the handling of Fannie Mae and Freddie Mac profits. The new complaint made by Pershing Square, filed in the U.S. District Court, alleged that the company was told that the GSE stockholders did not have fundamental shareholder rights. Pershing Square suggested that the GSE dividends being diverted into Treasury, which amount to billions of dollars, should be divided among the common shareholders for the GSEs.
