Fannie Mae Anticipates Short but Painful Downturn

Fannie Mae’s Economic and Strategic Research Group has reduced its outlook for economic growth over the entire year from 2.2% to 1.8%. They now expect it to contract by 3.1%. Much of the negative impact from the pandemic is expected in the current (2nd) quarter, a reduction of 25.3% on top of a projected loss of 3.3% in the 1st Quarter. This is being based on an end to the social distancing orders in late May and a gradual resumption of business activity in June. There will be above average growth in the remaining two quarters, 7.6% and 13.6% respectively. Growth for 2021 is projected at 4.8 percent. They expect the biggest hits in the second quarter will be to personal consumption -34.2%, fixed residential investment -36.2%, and fixed business investment -31.9%. Fannie Mae expects the unemployment rate to average nearly 12% in the 2nd Qtr., but to ease back to around 7% by year’s end.