WASHINGTON, D.C.- Consumer confidence and job creation have remained resilient in the face of all the talk about dysfunction and partisan sniping in the nation's capital, says a new study just released by Fannie Mae's Economic and Strategic Research group. “Activity in both the stock and housing markets also picked up recently and continues to act as a tailwind for the economy,” the study also says. Most other economic indicators have remained positive, including the pace of manufacturing, and will help grow the economy in the next quarter.

But all this good news does not mean that businesses should have no concerns. “While consumers seemed to have shrugged off their concerns about the fiscal policy debate earlier in the year, they will likely face headwinds in coming months from the delayed impact of higher social security taxes and sequestration,” says Fannie Mae Chief Economist Doug Duncan. “Our March forecast indicates that the first quarter will be stronger than we originally thought, and we've certainly stepped back from any perception of there being a recession anytime soon. The broad-based gains in the jobs report suggest that the recovery is widening across the economy, but the impact of sequestration, which includes both layoffs and furloughs, may seep into the employment sector in coming months.”

Still, Fannie Mae expects economic growth to hit 2.1% this year, hoping that a strong housing market and robust business investment will overcome the fiscal tightening required by sequestration. However, this prediction assumes that the contending parties in Washington will reach a deal to lessen the impact of sequestration. If they don't reach a deal, Fannie estimates that full sequestration could shave one-half of a percentage point off projected economic growth.