Growth Warms Even as Hurricanes Cloud Economic Outlook

Matthew Classick

202-752-3662

WASHINGTON, DC –  An improved second quarter estimate of real gross domestic product (GDP) growth helped push the full-year growth forecast higher despite increased economic uncertainty following Hurricanes Harvey and Irma, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s September 2017 Economic and Housing Outlook. The ESR Group now forecasts growth of 2.2 percent in 2017, up from the previous estimate of 2.0 percent, due to greater strength in consumer spending and nonresidential investment in the second quarter. Geopolitical and trade uncertainties also continue to pose downside risks, while investment in business equipment offers a potential upside. Housing started the third quarter on a soft note as both existing and new home sales reached year-to-date lows and leading indicators pointed to further softening. Finally, the ESR Group expects the Fed to go ahead with its announcement to taper the balance sheet later this month; however, continued softness in inflation could sideline the next Fed rate increase until next year, versus the ESR Group’s current call for a December hike.

“For the first time in 2017, we have increased our full-year growth outlook. The upgrade reflects economic activity gaining momentum at the end of the second quarter, though we see a great deal of uncertainty surrounding the forecast,” said Fannie Mae Chief Economist Doug Duncan. “The list of uncertainties now extends beyond the geopolitical and legislative, as the effects of Hurricanes Harvey and Irma will require time to untangle. Historically, natural disasters that hit heavily populated areas led to substantial near-term declines in economic activity but meaningful rebounds in subsequent quarters due to rebuilding efforts. Thus, economic growth in the second half of 2017 could still average a slightly stronger pace than the first half. Unfortunately, we continue to expect home sales to be flat during the second half of the year compared to the first half due to strong home price appreciation and lean inventories.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full September 2017 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.