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Political Holding Pattern Affirms Conservative Growth Forecast
Wednesday, April 19, 2017 6:30 AM

The 2017 growth forecast remains at a modest 2.0 percent as policy changes that could result in meaningful economic growth appear unlikely this year, according to the Fannie Mae Economic & Strategic Research (ESR) Group's April 2017 Economic and Housing Outlook. Additionally, near-term risk of a potential government shutdown could weigh on consumer and business confidence.

While nearly all measures of confidence remain strong, some hard economic data, including consumer spending and auto sales, are now trending lower. Weak economic news and increased geopolitical risks have moved long-term interest rates lower. Housing activity through February fared better than other hard economic indicators, partly due to the warm winter weather, and the ESR group expects that a seasonal uptick in listings going into the spring selling season will help alleviate extremely tight inventory. Recent declines in mortgage rates may motivate some homebuyers to enter the market before rates pick up as the Federal Reserve continues to normalize monetary policy.

"Our economic forecast remains unchanged in April as we continue to await details on the new Administration's plans," said Fannie Mae Chief Economist Doug Duncan. "We're intrigued by the disparity between elevated consumer and business optimism and signs of decelerating first quarter economic growth. However, we expect growth to rebound this quarter as special factors that weighed on growth partially unwind. With the firming of the Fed's favored measure of inflation, reduced labor market slack, and the more hawkish tone of the Federal Open Market Committee at its March meeting, we foresee that the Fed will hike rates two more times this year, in June and September, and announce a change to its reinvestment policy in December."

Visit the Economic and Strategic Research site at fanniemae.com to read the full April 2017 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.