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Fannie Mae: Meaningful economic growth appears unlikely in 2017

Keeps its modest economic growth forecast

Fannie Mae held its economic growth forecast steady in April at 2% for the year, saying policy changes that could result in meaningful economic growth seem unlikely for this year, according to the company’s economic and strategic research group’s April 2017 Economic and Housing Outlook.

The outlook explains that while confidence among consumers and in the industry is currently high, near-term risk of a potential government shutdown could bring confidence levels down.

Last month, Fannie Mae announced it would be taking a “wait and see” approach to some of President Donald Trump’s policies.

“Our economic forecast remains unchanged in April as we continue to await details on the new Administration’s plans,” Fannie Mae Chief Economist Doug Duncan said. “We’re intrigued by the disparity between elevated consumer and business optimism and signs of decelerating first-quarter economic growth.”

“However, we expect growth to rebound this quarter as special factors that weighed on growth partially unwind,” Duncan said.

Fannie Mae explained that some economic data, such as consumer spending and auto sales, are tending lower. Weak economic news and increased geopolitical risks moved long-term rates lower.

However, housing data remains high due to the unusually warm winter weather. In fact, the group suggests a seasonal uptick in listings this spring will ease housing inventory shortages.

Fannie Mae also predicted recent declines in mortgages rates could cause some buyers to enter the housing market before the rates begin to rise once again as the Federal Reserve continues to normalize monetary policy.

“With the firming of the Fed’s favored measure of inflation, reduced labor market slack, and the more hawkish tone of the Federal Open Market Committee at its March meeting, we foresee that the Fed will hike rates two more times this year, in June and September, and announce a change to its reinvestment policy in December,” Duncan said.

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