Economic Activity Continues to Underperform Despite Third Quarter Spike

   Economic Activity Continues to Underperform Despite Third Quarter Spike

Fiscal Cliff Remains Key Risk Factor to Near-Term Growth

Contribution of Housing Small but Growing

PR Newswire

WASHINGTON, Dec. 18, 2012

WASHINGTON, Dec. 18, 2012 /PRNewswire/ --The accelerated pace of economic
activity seen in the third quarter has ebbed, revealing a continued sluggish
recovery in the fourth quarter, according to Fannie Mae's (OTC Bulletin Board:
FNMA) Economic & Strategic Research Group. Full data regarding the disruptions
from Hurricane Sandy and the effect on consumer and business confidence due to
fiscal cliff uncertainties are not yet available, but both are likely to
restrain growth in the current quarter and near term. Other factors including
the Euro zone recession, sovereign debt crisis, and tensions in the Middle
East also continue to pose potential risks to future growth. However, despite
an expected 1.2 percentage point drag due to fiscal tightening, modest
economic growth of sub-2 percent remains forecasted through early 2013 with a
pickup in activity beginning in the second half of the year.

"With data pointing to soft economic conditions and the fiscal policy debate
hanging in the balance, we expect growth in the current quarter to moderate
from the pace seen last quarter," said Fannie Mae Chief Economist Doug Duncan.
"On the bright side, the housing market has stayed resilient and continues to
show signs of a strong, sustained recovery. Mortgage rates remain close to
historic lows and home sales and home prices are trending positively. For the
first time since 2005, residential investment is poised to contribute to
annual economic growth this year, albeit on a small scale."

"Despite unsteady macroeconomic conditions, we anticipate housing and mortgage
activity to gain momentum in 2013," continued Duncan. "As expected, the
Federal Open Market Committee's action last week shifts monetary policy into
cruise control, as long as the unemployment rate remains elevated and
inflation stays under control. We expect mortgage rates to remain low next
year, continuing to support the housing market. Total home sales should
increase by approximately 8 percent in 2013, following an estimated 10 percent
rise in 2012. Although home prices have dipped during the seasonally weak fall
and winter seasons, year-over-year gains have strengthened significantly above
2011 levels, and we expect that trend to continue in coming years."

For an audio synopsis of the December 2012 Economic Outlook, listen to the
podcast on the Economic & Strategic Research site at Visit
the site to read the full December 2012 Economic Outlook, including the
Economic Developments Commentary, Economic Forecast, Housing Forecast, and
Multifamily Market Commentary.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's
Economic & Strategic Research (ESR) Group included in these materials should
not be construed as indicating Fannie Mae's business prospects or expected
results, are based on a number of assumptions, and are subject to change
without notice. How this information affects Fannie Mae will depend on many
factors. Although the ESR Group bases its opinions, analyses, estimates,
forecasts, and other views on information it considers reliable, it does not
guarantee that the information provided in these materials is accurate,
current, or suitable for any particular purpose. Changes in the assumptions or
the information underlying these views could produce materially different
results. The analyses, opinions, estimates, forecasts, and other views
published by the ESR Group represent the views of that group as of the date
indicated and do not necessarily represent the views of Fannie Mae or its

Fannie Mae is a leading provider of mortgage credit in the United States. We
guarantee and purchase loans so that families can buy homes, refinance their
existing mortgages, or access affordable rental housing. Fannie Mae is focused
on assisting homeowners in distress, stabilizing neighborhoods, and
encouraging sustainable lending. We are committed to improving our financial
condition and our priorities are aligned with the public interest. Our work
supports the housing recovery today and is helping to build a better housing
finance system for the future.

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SOURCE Fannie Mae

Contact: Pete Bakel, +1-202-752-2034 or Resource Center: 1-800-732-6643
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