WASHINGTON, Jan. 22, 2019 /PRNewswire/ -- Economic growth
is projected to slow to 2.2 percent in 2019, down from last year's estimated pace of 3.1 percent, as financial conditions
threaten to deteriorate further and fiscal stimulus is expected to fade, according to the Fannie Mae Economic and Strategic
Research Group's January 2019 Economic and Housing Outlook. While consumer spending was the biggest driver of 2018 economic growth, the
boost in household incomes from the Tax Cuts and Jobs Act will likely wane this year, and the government shutdown and additional
volatility in the stock market could weigh on Americans' confidence and willingness to spend. The ESR Group expects consumer
spending growth to slow to 2.3 percent in 2019 from an estimated pace of 2.8 percent in 2018. However, the group notes that labor
market conditions should remain solid, with strong employment and wage growth offering potential bright spots amid some dark
clouds in the form of trade tensions and slower growth abroad.
How the Fed proceeds through the year remains central to the forecast. Given the Fed's recent shift to a more dovish stance –
acknowledging that it can "afford to be patient about further policy firming" – the ESR Group expects only one interest rate
increase in 2019, with tightening financial conditions and muted inflationary pressure. The housing market will likely find
stable ground as mortgage rates are expected to change little this year, allowing potential homebuyers time to adjust after last
year's erratic interest rate environment. When combined with the ESR Group's forecast of a slower pace of house price
appreciation this year, stable rates should support affordability and buyer confidence. Thus, the ESR Group's theme for 2019 is
The Economy's Slowing, the Fed Slows, Housing Plateaus.
"Economic growth in 2018 will likely turn out to be the strongest of the current expansion, and inflation remained anchored
even as the unemployment rate dipped to multi-decade lows. However, home sales experienced a setback, partly attributable to the
most aggressive pace of monetary tightening of the expansion," said Fannie Mae Chief Economist Doug
Duncan.
"This year, the expansion is likely to become the longest on record, but the path to continued growth faces a number of
downside risks with fewer upside risks," said Duncan. "With fading impacts of fiscal policy and tight financial conditions around
the globe, we're seeing moderating economic growth in the next couple of years. The Fed's continued efforts to unwind
expansionary monetary policies implemented during the recession have the potential to add to the headwinds facing the economy.
However, we believe that contained price pressures should afford the Fed sufficient latitude to slow or pause rate hikes this
year. This will allow the economy to continue growing, albeit at a slower pace, and housing to regain its footing."
Visit the Economic & Strategic Research site at www.fanniemae.com to read the full January 2019 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.
Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We
partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing
finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.
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SOURCE Fannie Mae