News Release

June 20, 2016

Economic Growth Outlook Holds Steady for 2016

Encouraging Signs from Consumer Spending and Housing Activity in Early Q2 Now Tempered by Labor Market Slowdown

Katie Penote

202-752-2261

WASHINGTON, DC – Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group’s full-year economic growth forecast remains unchanged in June from the prior forecast of 1.7 percent. Recent data emphasize the uneven nature of the current economic expansion. Consumer spending and housing activity have picked up, but a slowing trend in hiring and business investment has increased downside risks to the forecast. Headwinds facing businesses include declining profits, weakening productivity, and rising labor costs.

“The bearish May jobs report signaled a further loss of momentum in the labor market. Weak hiring and downward revisions to the prior two months’ payroll gains contributed to the Fed’s decision not to raise interest rates in June,” said Fannie Mae Chief Economist Doug Duncan. “Our expectation, which we’ve held since April, remains one rate hike this year, most likely in September.”

“Housing activity is gaining strength heading into the summer, with pending home sales rising to a decade high. In addition, new home sales surged to an expansion best, a positive for single-family homebuilding, especially since only a small share of new homes for sale are completed and ready to occupy,” said Duncan. “However, recent pullbacks in construction hiring, likely due to a shortage of skilled workers, could weigh on the outlook for the sector. With little improvement in the current housing supply picture so far, we expect only moderate housing expansion this year.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full June 2016 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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