Economy constrained by the conflicting effects of high inflation and a strong labor market

Housing activity is expected to slow through 2023 due to higher mortgage rates and higher house prices

Washington, August 22, 2022 /PRNewswire/ — Tighter monetary policy and rising inflation remain the main causes of economic stagnation despite strong job growth, according to the report. August 2022 Comment from Fannie Mae (OTCQB: FNMA) Economic and Strategic Research (ESR) Group. Her ESR Group’s latest forecasts for full-year 2022 and full-year 2023 real gross domestic product (GDP) growth were essentially flat, at 0.0% and -0.4%, respectively, compared to last month. The continued forecast of negative real GDP growth beyond 2023 is due to tighter monetary policy weighing on business and housing investment, and still-rising inflation weighing on consumer spending. It is due to being The ESR Group expects inflation to slow gradually, with the headline consumer price index projected to average 7.2% per year by the end of 2022 and 1.8% per year by the end of 2023, while energy prices We note that it is unstable to predict headline inflation due to fluctuations in . Potential new supply chains or manufacturing disruptions. The Core Personal Consumption Expenditure Price Index, the focus of the Federal Reserve, is expected to hit 2.9% at the end of 2023.

ESR Group expects total home sales to decline by 16.2% in 2022. The decline represents a further downward revision from his forecast of a 15.6% decline last month. Mortgage interest rates have fallen in recent months. The latest forecast also forecasts total mortgage origination activity. $2.47 trillion in 2022 $4.47 trillion Further reduction in 2021 $2.29 trillion 2023.

“The economy is doing great as we had previously predicted,” he said. Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “The short-term drop in gas prices has given consumers a breather and an opportunity to shift some of their spending elsewhere. Similarly, lower interest rates at the longer end of the yield curve. should support the economy through the end of 2022. This is why we are forecasting modest economic growth in the second half of the year. We maintain our view that a gradual recession is likely to emerge in the future.

Mr Duncan continued: , and how much additional tightening would bring core inflation down to the Federal Reserve’s desired target. In our view, continued strength in the labor market suggests that the Federal Reserve is likely to remain aggressive through the end of the year. “

To read the full story, visit the Economic & Strategic Research site at August 2022 Economic outlook including commentary on economic trends, economic forecasts, housing forecasts and commentary on the multifamily market. To receive email updates from other housing market research by Fannie Mae’s Economic & Strategic Research Group, click here.

Fannie Mae’s Economic and Strategic Research (ESR) Group’s opinions, analyses, estimates, projections and other views contained in these materials should be construed as indicative of Fannie Mae’s business prospects or expected results. should not be used and are based on many assumptions and are subject to change without notice. How this information affects Fannie Mae depends on many factors. ESR Group bases its opinions, analyses, estimates, projections and other views on information it believes to be reliable, but we do not believe that the information provided in these materials is accurate, current or suitable for any particular purpose. does not guarantee that Changes in the assumptions or information underlying these views could cause materially different results. Analyzes, opinions, estimates, forecasts and other views published by the ESR Group represent the views of the ESR Group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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