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Press Release

2016 - Moderate Economic Growth Amid Financial Market Turmoil

February 17, 2016

Consumer Spending and a Relatively Healthy Labor Market Should Offset Headwinds

Katie Penote

202-752-2261

WASHINGTON, DC – Economic growth appears to have slowed in late 2015 and at the start of 2016, perhaps foreshadowing another year of potentially unspectacular economic growth, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research Group’s February 2016 Economic and Housing Outlook. Despite a forecasted pickup in consumer spending, a relatively healthy labor market, and strengthening residential investment and government spending, economic growth appears to be hindered by deteriorating financial conditions and increasing global concerns. In addition, the strong dollar and sluggish global economy have hurt manufacturing and net exports, creating a further drag on economic growth.    

“Slowing economic growth, worsening global financial conditions, and weakening inflation expectations have led us to revise our forecast for fed funds rate hikes to two instead of three this year,” said Fannie Mae Chief Economist Doug Duncan. “We believe that the tightening labor market will further boost wages and help increase consumer spending. Recent survey data reaffirm a relatively healthy jobs market with increased job openings, hires, and quits, as well as decreased layoffs and decent gains in average hourly earnings.”

“We expect our 2016 theme ‘housing affordability constrains as expansion matures’ to hold true as home price gains are likely to outpace household income growth as the year continues. However, the expected increase in home prices should help lift underwater mortgages and create a healthier housing market. Meanwhile, increased household formation, low mortgage rates, and easing credit standards and more access to credit for residential mortgages are positive factors for a continued housing expansion. We expect constraints on single-family homebuilding to ease and builders should be able to increase production at a faster pace this year, while the gain in multifamily construction is expected to be more modest than last year.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full February 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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