With financial situations threatening to worsen in the coming year, economic growth is projected to slow to 2.2 percent in 2019, down from the previous year’s 3.1 percent growth, according to Fannie Mae Economic and Strategic Research Group’s January 2019 Economic and Housing Outlook. Fannie Mae notes that despite the boost in 2018, household income is expected to wane this year, but the labor market is expected to remain solid.
According to Fannie Mae, the housing market should remain relatively stable as interest rates are expected to change very little in 2019, giving potential homebuyers new opportunities following 2018’s “erratic interest rate movement”.
Fannie Mae notes that the Fed’s plan for the year remains central to the forecast, and with tightening financial conditions and muted inflationary pressure, only one interest rate hike expected for the year.
“Economic growth in 2018 will likely turn out to be the strongest of the current expansion, and inflation remained anchored even as the unemployment rate dipped to multi-decade lows. However, home sales experienced a setback, partly attributable to the most aggressive pace of monetary tightening of the expansion,” said Doug Duncan, Chief Economist at Fannie Mae.
“This year, the expansion is likely to become the longest on record, but the path to continued growth faces a number of downside risks with fewer upside risks,” Duncan said. “With fading impacts of fiscal policy and tight financial conditions around the globe, we’re seeing moderating economic growth in the next couple of years. The Fed’s continued efforts to unwind expansionary monetary policies implemented during the recession have the potential to add to the headwinds facing the economy. However, we believe that contained price pressures should afford the Fed sufficient latitude to slow or pause rate hikes this year. This will allow the economy to continue growing, albeit at a slower pace, and housing to regain its footing.”