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Fannie Mae Predicts Economic Growth in Q3

Up and Down Graph BHDespite the lackluster economic growth experienced in the first half this year (1.0 GDP growth), Fannie Mae’s Economic and Research Group (ESR) is predicting economic growth to accelerate up to 2.6 percent in the second half, according to the ESR’s Economic & Housing Outlookfor September 2016 released Monday.

The ESR Group’s full-year forecast for 2016 is 1.8 percent, consistent with the prior month’s forecast. Recent stagnant wage growth and a jobs report that failed to meet expectations in August might not be the indication of a trend, according to Fannie Mae.

The drivers of the accelerated growth for the remainder of the year are expected to be consumer and government spending, despite a cooldown in consumer activity to date in Q3, according to Fannie Mae.

“Consumers continue to carry the economy and the earnings slowdown in the August jobs report may be an aberration in the recently improving personal income growth trend,” Fannie Mae Chief Economist Doug Duncan said. “However, the declining trend in business productivity has negative implications for businesses’ profit outlook, as low productivity tends to boost labor costs, which could act as a headwind for hiring and investment. Corporate profits are down 4.9 percent from one year ago, extending their streak of annual declines. We expect nonresidential fixed investment to post a modest increase in the third quarter following three consecutive quarterly declines, while residential investment is likely to decline for the second consecutive quarter.”

In housing, existing-home sales slowed in July down to an annual rate of 5.39 million as inventory concerns persist; however, the HUD/Census Bureau new home sales report covering July provided some encouragement for the industry, as sales totaled 585,000, an increase of 12 percent over-the-month and 31 percent over-the-year.

“A bright spot for housing market activity is the strengthening of new home sales, which is significantly outperforming activity in recent years,” said Duncan. “The share of new home sales that are under construction or not started has climbed to nearly 70 percent, improving the outlook for single-family homebuilding. Existing home sales underperformed 2015 for the first time in July, however year-to-date sales are still 2.6 percent higher than during the same period last year. Additionally, the share of for-rent multifamily building starts has trended up with recent trends in homebuilding activity favoring the rental market.”

About Author: Kendall Baer

Kendall Baer is a Baylor University graduate with a degree in news editorial journalism and a minor in marketing. She is fluent in both English and Italian, and studied abroad in Florence, Italy. Apart from her work as a journalist, she has also managed professional associations such as Association of Corporate Counsel, Commercial Real Estate Women, American Immigration Lawyers Association, and Project Management Institute for Association Management Consultants in Houston, Texas. Born and raised in Texas, Baer now works as the online editor for DS News.
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