WASHINGTON: US economic growth is expected to drop to 1.3 percent in the first quarter of 2019 while the housing market will remain steady, U.S. Federal National Mortgage Association, better known as Fannie Mae, said on Wednesday.
"We expect headline growth in the first quarter of 2019 to fall to 1.3 percent annualized - the slowest quarterly growth in over three years," said Doug Duncan, chief economist of Fannie Mae, reports Xinhua.Fannie Mae said the weak growth resulted from consumer caution following significant volatility in households' financial assets in the fourth quarter.
Citing fading fiscal stimulus and continued sluggishness in business investment and consumer spending, Fannie Mae predicted that the real GDP growth in 2019 could drop to 2.2 percent, down from 3.1 percent in 2018.
Fannie Mae also noted that risks to its forecast "exist primarily on the downside," which included slower global growth and ongoing U.S.-China trade uncertainty.
"As we weigh the downside risks to the economy - including moderating international growth and trade uncertainty - we now project that the Fed will wait until the fourth quarter to raise rates, if at all," said Duncan.
Fed held its interest rate steady on Wednesday, saying it would end the balance sheet reduction program in September.
For the outlook of U.S. housing market in 2019, Fannie Mae continued to expect stable home sales in 2019, as solid labor market and strong household formation could support the housing demand.Even as slowing house price appreciation and more attractive mortgage rates would ease the affordability concerns in the housing market, Fannie Mae noted the situation was still facing challenge.
"Considering the general inventory shortage and strong demand for housing, affordability remains a key challenge facing the industry, particularly in the conforming space," Duncan added.