But the GSE expects a slowdown in the second half
by Francis Monfort
Fannie Mae has maintained its 2.0% growth forecast for the economy this year – but it still expects growth to slow down during the last six months at 1.9%
The tempered forecast is driven largely by the savings rate increase since December, decelerating corporate profit growth coupled with tax policy uncertainty, and lackluster homebuilding activity and restrained home sales, according to the Fannie Mae’s July 2017 Economic and Housing Outlook.
Expectations for second quarter were more positive, as the government-sponsored enterprise said growth during that period will rebound to 2.7% annualized, an increase from the 1.4% rate a quarter prior. The nation is expected to sustain moderate growth in 2018, as potential changes to fiscal and monetary policy pose upside and downside risks to the forecast.
"While labor market slack continues to diminish, wage growth is not accelerating and inflation has moved further below the Fed's target. These conditions support our call that the Fed will continue gradual monetary policy normalization, announce its balance sheet tapering policy in September, and wait until December for additional data, especially on inflation, before raising the fed funds rate for the third time this year," said Fannie Mae chief economist Doug Duncan. "Construction activity has lost some steam following the first quarter's weather-driven boost," Duncan continued. "Meanwhile, very lean inventory continues to act as a boon for home prices and a bane for affordability, particularly among potential first-time homeowners.”
In terms of total home sales, Duncan said Fannie Mae continues to expect the figure to slow to 3.3% in 2017 given rapid gains in home prices and scarce supply, and despite mortgage lender expectations to further relax credit standards.
