Post-Hurricane Economic Resiliency and Business Optimism Drive 2017 Growth Forecast Higher
WASHINGTON, DC – The full-year 2017 economic growth forecast increased two-tenths to 2.4 percent following a stronger-than-expected estimate of third quarter real GDP growth and an improvement to the fourth quarter outlook, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s November 2017 Economic and Housing Outlook. Consumer spending ended last quarter on a firm note and is expected to post a solid gain in the fourth quarter due in part to robust post-hurricane durable goods replacement demand. Business fixed investment should also add to growth, thanks to ongoing regulatory easing, energy prices amenable to machinery orders and exploration activity, and a declining dollar through most of this year. Housing, however, remains a soft spot and is expected to subtract from GDP growth for the third consecutive quarter. Lean housing inventory continues to provide a tailwind to home prices at the expense of affordability. As expected, Jerome Powell was nominated to replace current Fed Chairwoman Janet Yellen. If he is confirmed, gradual monetary policy normalization will likely continue, supporting our expectation that the Fed will announce its third rate hike of the year at next month’s Federal Open Market Committee meeting, followed by two rate increases in 2018.
“The first print of third quarter economic growth showed surprising resiliency. The expected economic hit from the recent natural disasters either failed to materialize or was drowned out by business optimism,” said Fannie Mae Chief Economist Doug Duncan. “Recent data showed a stronger pickup in domestic demand than anticipated, leading us to increase our growth forecast for the final quarter of this year and coming quarters. We also revised higher our 2018 growth forecast to 2.0 percent. Tax cuts, if enacted, present upside risk to our growth forecast for next year but could also lead to more aggressive Fed action. Housing still remains a drag on the economy, as shortages of labor and available lots, coupled with rising building material prices, further complicate existing inventory, affordability, and sales challenges.”
Visit the Economic & Strategic Research site at www.fanniemae.com to read the full November 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.
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