WASHINGTON: Concerns about the global economic recovery, including lingering worries regarding European sovereign debt, and increasing caution at home among private employers and consumers are evidence of the tenuous nature of the current economic recovery, according to the July 2010 Economic Outlook released today by Fannie Mae's (OTC Bulletin Board: FNMA) Economics & Mortgage Market Analysis Group. The group has revised its projected growth for 2010 to 2.8 percent from 3.2 percent, and remains on guard for a setback amidst increased uncertainty and downside risks.

"We have shifted into a lower gear in the economic expansion, due in no small part to the increase in financial-market volatility in recent months," said Fannie Mae Chief Economist Doug Duncan. "As a result, private-sector employers are tentative about hiring decisions; businesses are building cash, but generally are investing in capital rather than labor. That reluctance to hire has had a knock-on effect on consumers, who are spending less as the deleveraging process continues."

The headwinds in housing have also picked up, according to the group. Though the anticipated expiration of the homebuyer credit had led to forecasts of diminished activity in the third quarter, the fall off was steeper than expected. The group now expects housing sales in 2010 to be basically flat, though it expects a modest recovery for housing in the fourth quarter and into next year -- due in large part to the support that historically low mortgage rates are providing.

"We believe that residential investment will have a neutral effect on economic growth this year, which makes the current recovery quite unusual," Duncan said. "Housing has historically played a significant role in leading the country out of recession."

For an audio synopsis of the July 2010 Economic Outlook, listen to the podcast on the Economics & Mortgage Market Analysis site at www.fanniemae.com. Visit the site to read the full July 2010 Economic Outlook, including the Economic Developments commentary, Economic Forecast, and Housing Forecast.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economics & Mortgage Market Analysis (EMMA) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the EMMA group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the EMMA group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.

SOURCE Fannie Mae