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Press Release

Economic Growth Outlook Subpar Again as 2016 Progresses

May 17, 2016

Consumers and Businesses More Cautious Amid Slowdown in Labor Market

Pete Bakel

202-752-2034

WASHINGTON, DC – Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group lowered their full-year economic growth forecast to 1.7 percent, down from 1.9 percent growth in the prior forecast and 2.2 percent at the start of the year. The downgrade is due largely to disappointing first quarter growth of 0.5 percent. The ESR Group expects economic growth to bounce back as we move through 2016 amid improved financial conditions, with consumer spending remaining an engine for growth and the housing and government sectors making positive contributions. However, it will not be sufficient enough to overcome the damage done during the first quarter of the year.

“Consumers and businesses showed caution at the end of the first quarter,” said Fannie Mae Chief Economist Doug Duncan. “Job creation slowed in April and participation in the labor force gave back some of the recent gains. Nevertheless, the uptick in both hours worked and average hourly earnings should boost labor income and help support consumer spending in the current quarter. In addition, we saw a healthy rebound in April auto sales and greater demand for consumer loans. While the Fed appears to be less worried about financial turmoil abroad, the vote on whether the U.K. will leave the European Union, scheduled to occur about a week after the June Federal Open Market Committee meeting, should keep the Fed from raising interest rates next month.”

“Home sales are expected to pick up heading into the spring season amid the backdrop of declining mortgage rates, rising pending home sales and purchase mortgage applications, and continued easing of lending standards on residential mortgage loans,” said Duncan. “Meanwhile, the homeownership rate showed signs of stabilizing during the first quarter of this year, as the relatively high homeownership rates among Baby Boomers have helped offset low homeownership rates among Millennials, many of whom remain on the sidelines due to ongoing affordability issues.”

Visit the Economic & Strategic Research site at https://www.fanniemae.com/ to read the full May 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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