Looking Forward To 2015 Economic Growth
The housing market is still grinding its way upward, while economic growth is slowing after a 2014 mid-year jump, but 2015 economic growth is expected to top the 2014 economic growth rate.
Economic growth in the United States is slowing from the strong mid-2014 numbers to a more moderate pace heading into next year. However, continued improvements in employment, income, and consumer and business spending are expected to drive 2015 economic growth year-over-year overall, according to Fannie Mae’s Economic & Strategic Research Group to levels that should exceed the tepid overall growth rate of 2014.
2015 Economic Growth Projected At 2.5 Percent
Full-year 2015 economic growth is expected to come in at 2.5 percent, which is a modest increase over the 2.1 percent economic growth which is presently forecast for 2014. Although the global economic slowdown in the Europe, China, and Japan, as well as ongoing geopolitical events in Russia, Ukraine, and the Middle East, remain the largest downside risks to the forecast, the Economic & Strategic Research Group believes the risk of recession is low.
“The pace of growth around the middle of the year was well above trend, driven by an unsustainable rebound after a weak first quarter, and we anticipate that the fourth-quarter numbers will presage a more modest pace for 2015,” said Fannie Mae Chief Economist Doug Duncan. “We are still seeing some conservatism on the part of consumers, who remain hesitant to take on significant credit and mortgage debt in the wake of the economic downturn. However, recent data show that their confidence is growing amid strengthening employment numbers and household incomes, which we expect to continue next year and eventually drive stronger consumption. The Fed has responded to all of this by ending its securities purchase program, which was intended to support the expansion, and we don’t anticipate any change in their balance sheet until next September after they begin to raise interest rates.”
Don’t Expect Housing Boom In 2015
“The housing market continues to grind its way upward, but we don’t expect a breakout performance in 2015 as the fundamentals remain somewhat muted,” said Duncan. “Home building activity improved during the third quarter due primarily to the multifamily segment, which we expect to grow further next year, but the single-family segment has been relatively flat for some time. Although interest rates still are relatively low, the temporary burst in refinance activity appears to have subsided, and we expect that the market will turn more toward the purchase market in 2015. Overall, our view of housing starts, home sales, and home price trends is largely unchanged from the prior forecast – we believe that mortgage activity in 2015 will be very similar to 2014.”
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Additional Fannie Mae Research
Visit the Economic & Strategic Research site at Fannie Mae to read the full November 2014 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.