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Fannie Mae Forecasts Economic Growth Despite Global Headwinds

mixed-numbersEconomic growth is expected to move upward in the fourth quarter following a disappointing third quarter, according to Fannie Mae's Economic & Strategic Research (ESR) Group.

The research shows that economic growth for all of 2015 is projected to reach 2.2 percent, with a another increase in 2016 to 2.4 percent. The ESR Group attributes the growth spurt to solid consumer spending growth, an uptick in construction activity, and growing home sales and prices. These positive economic condition should offset global headwinds.

However, Fannie Mae reported that a strong U.S. dollar and weak global growth will likely continue to place negative pressure on manufacturing and exports in the near term.

He continued, “An uptick in average hourly earnings and low unemployment numbers in the October jobs report are contributing to a positive outlook for consumer spending. In addition, recent data suggesting that consumers are becoming more comfortable using their credit cards and that banks are loosening lending standards amid rising demand for consumer loans bodes well for future growth.”

In terms of the housing market, Fannie Mae says that "recent housing and mortgage news has been mixed."

Housing starts rebounded in September to more than 1.2 million units, following two months of declines, the report showed. Meanwhile permits and new home sales both decreased in September. Existing home sales did well in September, almost returning to July's expansion best, while pending home sales fell.

"We see consumer spending as the biggest driver of growth moving into 2016, backed by positive fundamentals including an improving labor market and household net worth."

Doug Duncan, Fannie Mae Chief Economist


“Despite mixed housing and mortgage market data, our forecast for housing activity is little changed over the past several months,” Duncan said. “The supply of existing homes remains lean amid slowing new single-family construction, putting significant upward pressure on home prices. While this helps boost home equity, it hurts affordability, especially for potential first-time homebuyers."

"Meanwhile, we expect mortgage rates to rise only gradually through next year, and an improving income trend should help support affordability. We foresee total home sales improving further in 2016, albeit at less than half of the 8.0 percent increase expected this year," he said.

Click here to view the full report.

About Author: Xhevrije West

Xhevrije West is a talented writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.

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