The economy continues to accelerate, but recovery is moving at a sluggish pace, according to the Fannie Mae Economic & Strategic Research Group.
The housing industry is gradually strengthen with both existing and new home sales posting gains in the third quarter compared to last quarter. Year-over-year home sales also posted the largest increase since 2006 at 5%.
However, the looming fiscal cliff and the ongoing, related debt ceiling debate are expected to be major barriers to a strong economic recovery.
Consumer spending accounted for 70% of gross domestic product, which led to a significant growth during the third quarter. Housing is expected to contribute to GDP this year with an additional increase in 2013.
With GDP currently representing 2.5%, such growth isn’t likely to provide a significant boost to the economic recovery.
“The tone of the economic data we’ve seen during the past month has been modestly favorable, but our expectations for growth this year remain subdued,” said chief economist Doug Duncan of Fannie Mae.
He added, “While the pick-up of activity in the third quarter is encouraging, it is compared to the weak pace seen in the second quarter and doesn’t portend a robust recovery in the near term. More encouraging, perhaps, is that the slight increase in consumer spending appears to have fed into the overall housing market data, particularly home sales and starts.”
