By Steve Matthews – Feb 5, 2013 9:49 AM CT
Federal Reserve Governor Elizabeth Duke said she’s upbeat about the outlook for the U.S. economy in part because of a rebound in housing, even after growth stalled during the fourth quarter.
“I’m actually on the optimistic side,” Duke said today in response to audience questions during a speech in Duluth, Georgia. “If you look at the underlying thesis, the growth in consumer spending and some of the business growth, I think there is some momentum building, particularly in the area of housing.”
Duke backed the Federal Open Market Committee decision last week to continue purchasing securities at the rate of $85 billion a month. The Fed said economic growth “paused in recent months, in large part because of weather-related disruptions and other transitory factors,” while “the housing sector has shown further improvement.”
The FOMC announced its decision on Jan. 30, the same day the Commerce Department said gross domestic product shrank at an annual rate of 0.1 percent during the fourth quarter as a plunge in defense spending swamped gains for consumers and businesses. Fed policy makers expect growth of 2.3 percent to 3 percent this year, according to their forecasts in December.
The housing rebound will help ensure the lapse in growth proves to be temporary, Duke, a former community banker, said today.
“We are seeing steady increases in house prices,” she said. “We are seeing improvements in new residential construction and also in household formation, which is the demand for houses.”