Fannie Mae raises 2017 growth outlook

Accelerating economic activity drove the increase, but uncertainty remains

Fannie Mae raises 2017 growth outlook
Fannie Mae has increased its 2017 economic growth outlook for the first time this year as the second quarter saw an improved estimate of real gross domestic product growth in spite of heightened uncertainty from the impact of Hurricanes Harvey and Irma.

Fannie Mae’s economic and strategic research group now expects growth of 2.2%, compared to the previous estimate of 2%. The change follows a second quarter that recorded stronger consumer spending and nonresidential investment.

Downside risks to the forecast include geopolitical and trade uncertainties, while investment in business equipment may result in positive impacts.

"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.”

Duncan said Fannie Mae still expects higher home prices and the inventory shortage to keep home sales flat in the second half of 2017 compared to the first half. Housing appears to be heading for further softening given the year-to-date lows recorded for third-quarter existing- and new-home sales along with other market indicators, Duncan said.

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