Fannie Mae: ‘Politics’ Affirms Conservative Growth Forecast

Fannie Mae, Washington, D.C., said the increasing unlikelihood of policy changes in Washington this year reinforce a “modest” economic growth forecast.

The Fannie Mae Economic & Strategy Group’s April Economic and Housing Outlook said the 2017 growth forecast remains at a modest 2.0 percent. But the report warned that near-term risk of a potential government shutdown could weigh on consumer and business confidence.

“While nearly all measures of confidence remain strong, some hard economic data–including consumer spending and auto sales–are now trending lower,” the report said. “Weak economic news and increased geopolitical risks have moved long-term interest rates lower. Housing activity through February fared better than other hard economic indicators partly due to the warm winter weather.”

The forecast calls for a seasonal uptick in listings going into the spring selling season that should help alleviate “extremely tight” housing inventory. “In addition, recent declines in mortgage rates may motivate some homebuyers to enter the market before rates pick up as the Federal Reserve continues to normalize monetary policy,” the report said.

“We’re intrigued by the disparity between elevated consumer and business optimism and signs of decelerating first quarter economic growth,” said Fannie Mae Chief Economist Doug Duncan. “However, we expect growth to rebound this quarter as special factors that weighed on growth partially unwind.”

Duncan said Fannie Mae expects two more Federal Open Market Committee interest rate hikes (June and September) and a change to its reinvestment policy in December.