REAL ESTATE NEWS

FANNIE MAE THINKS WE CAN AVOID A DOUBLE DIP RECESSION

Published on Friday, November 20, 2020

Both Fannie Mae and CBRE expect GDP to fare well next year, even with cautious consumers now pulling back as new cases rise.

 

While the recent surge in Coronavirus cases is worrisome—and consumer behaviors and governmental policies happening in response to the nationwide increases could impact economic growth—they are unlikely to prompt a double dip recession, as some economists feared, stated Fannie Mae in a new report.<

“The continued geographic shift and now resurgence of COVID-19 has raised risks to the pace of growth, though in our view not to the level of a potential second recessionary downturn,” said Doug Duncan, Fannie Mae senior vice president and chief economist.

In fact, the report said, if lockdowns and social distancing mandates are avoided, economic growth in the coming quarters could “substantially surpass” the baseline forecast.

Still, in the near-term, there will be some adjustment taking place. Fannie Mae revised downward its projections for the fourth quarter of 2020 and the first quarter of 2021, due in part to recent shifts in consumer behavior toward more modest shopping on the heels of the virus’ reemergence.

But thanks to the approximately seven months that the nation has had to adjust to the virus, consumers’ actions don’t appear to be fueled by panic. To date, regional measures of economic activity do not appear to be responding as negatively to the resurgence as they did in prior months, the GSE said.

However, some signs of a shift toward greater social distancing are emerging. Fannie Mae points to an interesting metric: Google Trends’ search term data on restaurants and dining. One of the most at-risk sectors of the economy, it has showed a pullback over the past couple of weeks. Over the past year, while it hasn’t been a perfect  relationship, there’s been a correlation between Google search activity and consumer spending on food establishments. Data from OpenTable, a restaurant reservation platform, also indicated a correlation between states with the largest increases in cases and slowdowns in recent reservation activity.

Therefore, Fannie Mae concluded, no matter the level of any upcoming outbreak, consumer and firm behaviors likely will be affected by increasing COVID-19 cases, but to a much lesser degree than what was seen in prior periods.

Ultimately, Fannie Mae predicts, the domestic labor market’s recovery and accumulated household savings likely will be enough to drive continued real GDP growth, which is now forecast at 3.3% for full-year 2021, slightly below last month’s projection, and 3.0% for full-year 2022.

A similar prediction recently was made
Barkham’s forecast hinges on two premises: that a COVID-19 vaccine soon will be delivered, and that an economic stimulus package will be distributed in the near-term.