Economic Growth Outlook Holds Steady for 2016
Encouraging Signs from Consumer Spending and Housing Activity in Early Q2 Now Tempered by Labor Market Slowdown
WASHINGTON, DC – Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group’s full-year economic growth forecast remains unchanged in June from the prior forecast of 1.7 percent. Recent data emphasize the uneven nature of the current economic expansion. Consumer spending and housing activity have picked up, but a slowing trend in hiring and business investment has increased downside risks to the forecast. Headwinds facing businesses include declining profits, weakening productivity, and rising labor costs.
“The bearish May jobs report signaled a further loss of momentum in the labor market. Weak hiring and downward revisions to the prior two months’ payroll gains contributed to the Fed’s decision not to raise interest rates in June,” said Fannie Mae Chief Economist Doug Duncan. “Our expectation, which we’ve held since April, remains one rate hike this year, most likely in September.”
“Housing activity is gaining strength heading into the summer, with pending home sales rising to a decade high. In addition, new home sales surged to an expansion best, a positive for single-family homebuilding, especially since only a small share of new homes for sale are completed and ready to occupy,” said Duncan. “However, recent pullbacks in construction hiring, likely due to a shortage of skilled workers, could weigh on the outlook for the sector. With little improvement in the current housing supply picture so far, we expect only moderate housing expansion this year.”
Visit the Economic & Strategic Research site at www.fanniemae.com to read the full June 2016 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.
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