Improving labor-market conditions and a strong increase in consumer spending led to solid economic growth, according to the May 2010 Economic Outlook released this week by Fannie Mae's Economics & Mortgage Market Analysis group.
The economy is expected to grow at a 3.5% pace for the year, but concerns over European sovereign debt and possible long-term effects of the Gulf of Mexico oil spill bring uncertainty to the overall 2010 forecast. A welcome surge in home sales points to the positive impact of the home-buyer tax credit, although the increase will likely be temporary as incentives wind down, the Fannie Mae team reports.
‘Strong momentum coming out of the first quarter puts us in the direction of a self-sustaining economic recovery,’ says Fannie Mae Chief Economist Doug Duncan, adding that consumer spending grew at the fastest pace in three years and that the job market posted gains across the board. Home sales grew in March and may continue for a few months – the result of buyers rushing to sign contracts before the tax credit expired at the end of last month.
‘We continue to project a pullback in home sales starting in July, as the tax credit will likely pull sales forward into the second quarter,’ says Duncan. ‘The pace of employment growth and confidence in the labor market will be key factors for a pick up in home sales by the end of the year.’
Fannie Mae's full May 2010 Economic Outlook is available on the Economics & Mortgage Market Analysis site at www.fanniemae.com.
SOURCE: Fannie Mae