Fannie Mae lowers economic growth forecast

Fannie Mae lowered its full-year economic growth forecast in May to 1.7%, down from 1.9% growth in the prior month’s forecast and 2.2% at the start of the year. The downgrade is due largely to disappointing first quarter growth of 0.5%, according to the May 2016 Economic Outlook by Fannie Mae’s Economic & Strategic Research Group.

The group’s forecast expects economic growth to pick up later on in 2016 amid improved financial conditions, including growth in consumer spending and improvement in the housing and government sectors. However, it will not be sufficient enough to overcome the damage done during the first quarter of the year, according to the report.

“Consumers and businesses showed caution at the end of the first quarter,” Fannie Mae Chief Economist Doug Duncan said in a news release. “Job creation slowed in April, and participation in the labor force gave back some of the recent gains. Nevertheless, the uptick in both hours worked and average hourly earnings should boost labor income and help support consumer spending in the current quarter. In addition, we saw a healthy rebound in April auto sales and greater demand for consumer loans.

“Home sales are expected to pick up heading into the spring season amid the backdrop of declining mortgage rates, rising pending home sales and purchase mortgage applications, and continued easing of lending standards on residential mortgage loans,” Duncan said in the release. “Meanwhile, the homeownership rate showed signs of stabilizing during the first quarter of this year, he said. “The relatively high homeownership rates among baby boomers have helped offset low homeownership rates among millennials, many of whom remain on the sidelines due to ongoing affordability issues.”

To read the full May 2016 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast and Multifamily Market Commentary, visit the Economic & Strategic Research site at

By |2019-11-25T08:25:43-06:00June 14th, 2016|Financial Services|0 Comments

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