Growth projections unchanged despite political tensions

As tension mounts in Washington, Fannie Mae kept its annual growth predictions unchanged for 2017.

The company explained even a potential government shutdown won’t be enough to derail the projected growth.

And a government shutdown isn’t the only political tension lingering. Fannie Mae also mentioned the looming geopolitical tensions which pose risks to the economy.

Fannie Mae held its economic forecast steady at 2% for the year, according to the August 2017 Economic and Housing Outlook report from Fannie Mae Economic and Strategic Research Group.

“We are keeping our full-year economic growth outlook at 2% as risks to our forecast are roughly balanced,” Fannie Mae Chief Economist Doug Duncan said. “On the upside, consumer spending growth might not moderate as much as we have accounted for in our forecast.”

“A build-up in inventory also should be positive for growth this quarter and nonresidential investment in structures will likely continue to improve as oil prices stabilize,” Duncan said. “In addition, the decline in the dollar and a pickup in global growth should support manufacturing and exports, although the outlook for the trade sector is clouded by uncertainty surrounding trade policy.”

The economy increased by 1.9% in the first half of this year, however Fannie Mae predicts the growth will increase to 2.1% during the second half. Fannie Mae attributes the expected pickup in growth to consumer spending and business investment. After subtracting sizably from growth last quarter, residential investment also will likely be a modest contributor during the second half of the year.

However, there are still setbacks the economy could experience through the second half of the year.

“Headwinds include tax policy uncertainty that could delay business investment, the risk of a partial government shutdown this fall if Congress fails to pass spending appropriations, a technical default if the debt ceiling isn’t raised, and an increase in global political unease,” Duncan said. “However, we believe these headwinds and tailwinds essentially net out overall, and we stand by our view that economic growth will remain on track for 2% in 2017.”