WASHINGTON, DC—Notwithstanding a resurgence of growth in the second quarter, the full-year expectation continues to be that the US economy will grow by just 2% in 2017, Fannie Mae said Monday. The GSE's July 2017 Economic and Housing Outlook points to the likelihood of a slight slowdown in Q3 and Q4.
“While second quarter growth is poised to rebound, we expect growth to moderate through the remainder of 2017,” says Doug Duncan, chief economist with Fannie Mae. “Consumer spending, traditionally the largest contributor to economic growth, is sluggish and is lagging positive consumer sentiment and solid hiring.”
Even as labor market slack continues to diminish, Duncan continues, “wage growth is not accelerating,” while inflation has moved further below the target set by the Federal Reserve. “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 federal funds rate for the third time this year.”
GDP growth is expected to rise to 2.7% on annualized basis for Q2, up from 1.4% in Q1, Fannie says. The rally won't last, though, as growth is expected to slow to 1.9% in the year's second half.
Among other factors to support this projection, Fannie cites a decline of one percentage point in the savings rate since December, pointing to increased caution among consumers. Furthermore, corporate profit growth is decelerating, and residential sales are less likely to maintain the pace in Q3 and Q4 thanks to lackluster homebuilding activity and tight inventories.
“Construction activity has lost some steam following the first quarter's weather-driven boost,” says Duncan. “Meanwhile, very lean inventory continues to act as a boon for home prices and a bane for affordability, particularly among potential first-time homeowners.
“According to our second quarter Mortgage Lender Sentiment Survey, lenders expect to ease credit standards further,” he continues. “However, we continue to project that the pace of growth in total home sales will slow to 3.3% this year, as we believe rapid home price gains amid scarce supply will remain a hurdle for potential homebuyers despite improvements in credit access.”
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
