Fiscal policy issues and political economic uncertainty will be the key factors in determining the degree of consumer and business activity during 2012, according to a new analysis released by Fannie Mae's Economics & Mortgage Market Analysis Group.
According to Fannie Mae, the forthcoming presidential election, the potential expiration of tax provisions for businesses and households, and the ongoing healthcare debate are among the key issues that will keep the economy moving at a moderate pace, with growth of 2.3% expected for the year. However, Europe's sovereign debt crisis and the impact of a potential European recession will be the primary risks to U.S. growth this year.
On the housing front, Fannie Mae forecasts continued improvement in the labor market and increased activity in the housing market. Fannie Mae predicts that housing is ‘trending in a positive direction with incremental improvement expected to continue throughout 2012 – albeit only modestly initially, and moving from historic lows.’
‘We're entering 2012 with decent momentum, especially on the employment side, which is fostering positive household and consumer behavior,’ says Doug Duncan, Fannie Mae's chief economist. ‘Unfortunately, we expect this momentum to slow as we move through the first half of the year. 2012 will be replete with policy changes and challenges that involve the global economy, the domestic economy and the housing sector. We expect the net effect will be a year of moderate growth edging away from the 2011 threat of a double dip.’