The Upside and Downside to Current Economy

Looming geopolitical tensions and the growing potential for a U.S. government shutdown as well as a technical default pose risks to the economy but are not expected to derail full-year growth of 2.0 percent, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s August 2017Economic and Housing Outlook. The economy grew 1.9 percent on an annualized basis during the first half of the year, slower than the expected 2.1 percent in the prior forecast. However, the second-half outlook is slightly stronger, with consumer spending and business investment helping to support growth. After subtracting sizably from growth last quarter, residential investment also will likely be a modest contributor during the second half of the year.

“We are keeping our full-year economic growth outlook at 2.0 percent as risks to our forecast are roughly balanced,” said Fannie Mae Chief Economist Doug Duncan. “On the upside, consumer spending growth might not moderate as much as we have accounted for in our forecast. A build-up in inventory also should be positive for growth this quarter and nonresidential investment in structures will likely continue to improve as oil prices stabilize. In addition, the decline in the dollar and a pickup in global growth should support manufacturing and exports, although the outlook for the trade sector is clouded by uncertainty surrounding trade policy. Headwinds include tax policy uncertainty that could delay business investment, the risk of a partial government shutdown this fall if Congress fails to pass spending appropriations, a technical default if the debt ceiling isn’t raised, and an increase in global political unease. However, we believe these headwinds and tailwinds essentially net out overall, and we stand by our view that economic growth will remain on track for 2.0 percent in 2017.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full August 2017 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.

SOURCE Fannie Mae

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