Economic growth for the third quarter of the year likely came in weaker than expected, largely because of a worsening net exports picture, but fourth-quarter growth is expected to withstand ongoing headwinds, according to Fannie Mae’s Economic & Strategic Research (ESR) Group. Slowing global growth and the appreciating dollar should continue to weigh on the U.S. trade deficit as we move through the remainder of 2015.
In addition, the employment picture remains murky as the September jobs report came in well below expectations, showing the weakest average employment gain over a three-month period since February 2014. However, because consumer spending should remain supportive and the negative impact from the strong dollar should dissipate, the ESR Group expects the economy to strengthen slightly to 2.4 percent in 2016 from a forecast of 2.2 percent for 2015.
In the housing market, recent indicators were mixed. Single-family and multifamily starts, existing home sales, and pending home sales dropped in August. On the upside, new home sales reached a new expansion high in August, and builders’ confidence rose to a fresh recovery best in September, which should help boost homebuilding activity, if the skilled labor shortage alleviates. Overall, expectations of housing activity are little changed, with total home sales projected to rise approximately 8 percent in 2015 and an additional 4 percent in 2016. Projected mortgage originations for 2015 were revised higher in this month’s forecast as a result of the ESR Group’s annual benchmark to the 2014 Home Mortgage Disclosure Act data.
“Despite recent headwinds, which likely will slow economic growth compared to the first half of 2015, we see positive trends for consumer spending and housing heading into the fourth quarter,” says Fannie Mae Chief Economist Doug Duncan. “Strong home price gains should help drive an increase in household net worth again in the third quarter, and, combined with low gasoline prices and mortgage rates, should support strong consumer spending throughout the rest of the year.”
Visit the Economic & Strategic Research site at www.fanniemae.com to read the full October 2015 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.