Consumer Confidence Presses on Despite Fiscal Uncertainty

Improving news on housing and employment has given a lift to consumer confidence, despite fiscal cliff drama, according Freddie Macs U.S. Economic and Housing Market Outlook for January.

The report noted the 155,000 jobs that were added in December and the overall gain of 1.86 million jobs for all of 2012.

Freddie Mac expects the U.S. economy to see another two million news jobs in 2013, which would eventually lower the unemployment rate. However, the projection was based on the assumption that uncertainty over fiscal policy debates in the first quarter wont derail the economic expansion, the report stated.

The GSE also highlighted the increase in home sales, and said over the first 11 months of 2012, homes sales have climbed 9 percent from the same year ago period. The GSEexpects sales to display similar gains in 2013.

As we begin 2013, the economy is undoubtedly at a better place now than at this time in 2012. And despite the clouds of fiscal uncertainty facing the country, positive jobs reports and the strengthening housing market continue to be the bright spot as we begin the New Year, said Frank Nothaft, Freddie Mac VP and chief economist.

Although the Conference Boards consumer confidence index took a hit in December, falling to 65.1 from Novembers 71.5, Freddie Mac noted some positives.

Regardless, consumer confidence is up from its Great Recession low, and as consumer attitudes on the economic outlook improve, more potential homebuyers will emerge and feel financially secure in making an offer to purchase a home, the report stated.

To answer the question of the role of policy uncertainty in influencing the economy, Freddie Mac pointed to research by economists from Stanford University and the University of Chicago.

According to the research, increases in policy uncertainty precede declines in economic growth and employment.

For instance, increases in policy uncertainty equal to the increase observed from 2006-2011 could cost the US economy up to 2.3 percent in lost GDP and 2.3 million fewer jobs, the report explained.

With the Consumer Financial Protection Bureaus release of a finalized qualified mortgage rule, Freddie Mac says some of the uncertainty regarding mortgage lending guidelines may have cleared.

Source:  DSNews