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Fannie Mae Economist: When Will Economy Bounce Back?

raining money credit riskAccording 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.”

 

 

About Author: Andy Beth Miller

Andy Beth Miller is an experienced freelance editor and writer. Her main focus is travel writing, and when she is not typing away from her computer at her home in the Hawaiian Islands, she is regularly roaming the world as a digital nomad, and loving every minute of it. She has been published in myriad online and print magazines, is a fan of all things outdoors, and finds life (and all of its business, technological, and cultural facets) fascinating in their constant evolution. She is excited to spectate as the world changes, and have a job that allows her to bring a detailed account of those constant shifts to her readers at home and abroad.
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