Economic outlook remains mixed for second half of 2016

Fannie Mae projects economic growth of 2.4% in the second half of the year, up from 1.1% in the first half but slightly below September’s forecast of 2.6%. Overall, the full-year forecast projects 1.8% growth for 2016, according to Fannie Mae’s Economic & Strategic Research Group’s October 2016 Economic and Housing Outlook.

Economic data point to stronger growth in the third quarter, due in large part to improvements in inventory investment and trade but domestic demand appears to have weakened, according a Fannie Mae press release. Consumer spending retreated in August for the first time since January and is expected continue to soften in the fourth quarter as consumers remain cautious about the economy, the release said.

“Recent economic data have been a mixed bag – the good, the bad, and the steady,” Fannie Mae Chief Economist Doug Duncan said in the release. “On the upside, the third print of second quarter GDP showed that the economy grew three-tenths higher than in the second estimate, with an encouraging upward revision in nonresidential fixed investment. The steady news comes from the labor market, with relatively decent conditions overall. The biggest doses of bad news come from consumer spending, the linchpin of economic growth, and residential investment, which appears to have posted a second consecutive sizable drop in the third quarter.

Improving homeownership demand among young adults has been encouraging, but housing activity recently appears to have lost momentum, according to Duncan. “Existing home sales, new home sales, single-family housing starts, and single-family construction spending declined in August,” he said in the release. “In addition, pending home sales and purchase mortgage applications weakened during the month, suggesting continued weakness in existing home sales in the near term amid very lean supply.”

To read the full October 2016 Economic Outlook, visit Fannie Mae’s Economic & Strategic Research site.

By |2019-11-25T07:48:07-06:00October 20th, 2016|Financial Services|0 Comments

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