Washington, D.C.—Recent data indicate that economic growth in the first quarter has accelerated to an above-trend—but likely unsustainable—pace of 3.2 percent, according to Fannie Mae’s Economic & Strategic Research Group. A significant buildup in business inventories provided a one-time boost to first quarter growth and is expected to resume a more balanced level in the second quarter. Meanwhile, several other key indicators late in the first quarter, including a downbeat March jobs report, were soft, presaging a more moderate pace for the rest of the year. The Group expects growth to come in at approximately 2.3 percent for 2013—still modest by recovery standards, but a pickup from the 2012 and 2011 pace of 1.7 percent and 2.0 percent, respectively.
The continued housing recovery and rising home prices are expected to provide a cushion to growth this year and present the most likely source of upside to our forecast. Residential investment has made a positive or neutral contribution to economic growth for seven consecutive quarters, ending in 2012, with similar activity expected in 2013. Housing’s contribution to growth also continues to climb home as sales reached multi-year highs in the early stages of 2013.