WASHINGTON, Dec. 14 (Xinhua) -- U.S. Federal National Mortgage Association, better known as Fannie Mae, said on Friday that U.S. economic growth would drop to 2.3 percent in 2019 while the housing market would stabilize as economic growth slows.
"We expect full-year 2018 economic growth to come in at 3.1 percent - an expansion high - before slowing markedly to 2.3 percent in 2019 and 1.6 percent in 2020," said Doug Duncan, chief economist of Fannie Mae.
The government-sponsored enterprise said that the drop in growth was largely due to the waning impact of the Budget Reconciliation Act, a widening trade deficit, and moderating business investment growth.
"Fading fiscal policy, worsening net exports, and moderating business investment all contribute to our projection that GDP growth will begin to slow in 2019," said Duncan.
Fannie Mae said that "the most notable downside risks" to its economic forecast include the trade tensions between the United States and China and volatility in the U.S. stock market.
Although consumer spending would push the headline growth, business fixed investment growth may be further constrained in the near term by increasing tariffs, trade uncertainty, interest rates and input costs.
Speaking of interest rates, Duncan mentioned three rate hikes could happen in the near future.
"The labor market continues to be one of the economy's high points, and with inflation hovering around the Fed's 2.0-percent target, we maintain our call that the Fed will hike rates once more in December and two more times in 2019, despite rising market expectations of fewer hikes amid stock market volatility," said Duncan.
For U.S. housing market specifically, Duncan said that Fannie Mae expects residential fixed investment to resume a positive growth trajectory as housing starts rise and home sales stabilize.
"However, affordability is likely to remain an industry concern, particularly among first-time homebuyers," said Duncan.
