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Press Release

Third Quarter Growth Strong but Checked by Trade, Weaker Gains in Consumer and Business Demand

September 17, 2018

Matthew Classick


WASHINGTON, DC – The Fannie Mae Economic and Strategic Research Group maintained its third quarter 2018 economic growth forecast of 3.2 percent annualized amid an expected slowdown in consumer spending and business fixed investment growth, according to its September 2018 Economic and Housing Outlook. The ESR Group also noted that trade and housing will likely subtract from growth this quarter, while citing inventory restocking and increased government spending as potentially positive contributors.

“In the second quarter, we marked the ninth anniversary of the current economic expansion; however, it’s also likely that we marked its high point,” said Fannie Mae Chief Economist Doug Duncan. “On the whole, macroeconomic fundamentals remain strong, but signs increasingly point to a softening of third quarter real GDP growth as trade resumes its role as a drag on GDP, and consumer and business demand growth retreat from previous highs. We expect full-year 2018 growth to be the best of the expansion before slowing next year as fiscal stimulus runs its course. The labor market remains solid, and with inflation continuing to straddle the Fed’s two-percent target, our call for two more interest rate hikes in 2018 is unchanged. We expect housing to be a drag once again this quarter. But in a welcome development, some construction material prices have softened, which should help builders to continue to build smaller or less expensive homes most in demand from potential first-time homebuyers. Additionally, the crunch on for-sale inventories of existing homes has eased slightly, hopefully setting up an improvement in the housing market next year.”

The ESR Group’s full-year growth forecasts of 3.0 percent and 2.3 percent for 2018 and 2019, respectively, also remained unchanged. Key downside risks include escalating trade tensions with China and possible contagion from increasing financial stress and currency devaluation in many emerging markets, including Turkey, Argentina, and South Africa. Declining auto demand is likely to weigh on spending. However, the consumer should continue to demonstrate strength overall, and business fixed investment growth should remain healthy. As the dollar gathers further strength and the impact of last quarter’s frontloading of exports ahead of expected tariffs reverses, trade will likely detract from growth this quarter and going forward. Corporate profits also continue to provide positive news on a pre-tax and post-tax basis but may soon be challenged by rising labor and material costs, a flattening of the yield curve, a stronger dollar, and slowing global growth. In the near term, the lack of housing inventory, particularly at the lower end of the price spectrum, continues to restrain home sales and support home price appreciation.

Visit the Economic & Strategic Research site at to read the full September 2018 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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