[1]Stronger-than-expected economic activity for the second quarter will drive accelerated economic growth for the second half of 2015, according to the July 2015 Economic Outlook released Thursday by Fannie Mae [2]'s Economic & Strategic Research (ESR) Group [3].
The U.S. economy contracted at an annualized rate of 0.2 percent [4] in the third and final Q1 estimate from the Bureau of Economic Analysis [5] released in late June. Improved conditions in Q2 were driven by increases in consumer spending and residential and nonresidential investments, combined with a waning drag from net exports, according to Fannie Mae. In the July Economic Outlook, Fannie Mae expects the economy to pick up to an annualized rate of 2.8 percent in Q2, which is 0.4 percentage points higher than the June estimate.
Despite volatile economic conditions overseas that could pose headwinds to the U.S. economy, the ESR Group's estimate for full-year economic growth in July is an annualized rate of 2.1 percent, up from June's forecast of 1.9 percent, according to Fannie Mae.
"Our second-half outlook is little changed overall, but we have upgraded our full-year outlook due to the upward revision to first-quarter GDP and our more optimistic view for the second quarter," Fannie Mae Chief Economist Doug Duncan said. "We believe consumer spending will be the largest contributor to growth for the remainder of the year, particularly as consumers’ confidence, household net worth, and income growth prospects have continued to strengthen amid an improving jobs market. On the downside, the drop in oil prices will likely continue to weigh on nonresidential investment in structures, and on balance we expect net exports to be a drag on growth this year, due in large part to the debt crisis in Greece and deteriorating economic conditions in China."
Duncan said Fannie Mae's housing outlook is largely unchanged in the July forecast, with leading housing indicators such as housing starts, mortgage rates, single-family home sales, existing home sales, and single-family mortgage originations pointing to "continued improvement" into the summer.
"We expect to see strong sales, lean inventories, and rising confidence through the rest of the year, which should support increased home building activity and give an added boost to economic growth," Duncan said. "Although a lack of skilled labor may hurt construction activity, our forecast calls for housing starts to average 1.12 million units. We expect existing and new home sales to climb by approximately 5 and 25 percent, respectively, and total mortgage originations to rise approximately 24 percent to $1.46 trillion, with a refinance share of 47 percent."
Click here [6] to see Fannie Mae's July 2015 Housing Forecast; click here [7] to see the Economic Forecast; click here [7] to see Economic Developments.