Consumer Spending Shows Promise Despite Low Levels of Consumer Confidence

Consumer Spending Shows Promise Despite Low Levels of Consumer Confidence

WASHINGTON, DC — Housing activity is expected to rebound later this year but at a slower pace than previously projected according to the March 2010 Economic Outlook released today by Fannie Mae's (FNM/NYSE) Economics & Mortgage Market Analysis Group. A surprising drop in new and existing home sales disappointed, but the setback is viewed as temporary with gains expected in the second quarter then trending up on a sustainable basis by year end. The outlook continues to call for moderate economic growth of 3.0 percent for 2010, as the labor market appears poised to create jobs, the service sector shows improvement, and consumer spending joins in as part of the economic storyline. Consumer spending grew a solid 0.3 percent in January, suggesting a pickup in the first quarter despite the possibility of a slow down in February.

The recent growth in consumer spending is a positive sign for first quarter gains. However, anxiety over job and income prospects continues to weigh on consumer confidence which will likely lead to moderate spending growth in the coming quarters," said Fannie Mae Chief Economist Doug Duncan. "Strengthening growth in the service sector and more favorable financial conditions overall keep us optimistic that we are moving forward with the recovery, albeit at a lower trajectory than previously forecast.