As per Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) Economic & Strategic Research Group, the first print of 2Q2015 economic growth failed to meet the expectations and its composition provides a less optimistic outlook for 2015.
The Fed’s upward revision to 1Q2015 growth was basically offset in 2Q2015, due in large part to a decline in nonresidential investment in structures and equipment. These elements, together with continued problems resulting from a decline in global crude oil prices and a strong dollar, are expected to pose grave problems in the current quarter, although government and consumer spending will probably offer support. Housing industry is expected to add to overall growth in 2015, with year-to-date major housing indicators hovering above year-ago levels.
The expert view
Doug Duncan, the Chief Economist at Federal National said that while consumer spending growth surged in the quarter as per expectations, other components disappointed in 2Q2015. However, incoming data implies upward revisions may happen for the second quarter. Moreover, job market remains steady as full-time employment numbers approaching nearer to pre-recession figures. The household net worth reported strong progress in the quarter. On balance, Federal National’s full-year growth outlook projection remains at 2.1%.
The expert at Federal National further added that they hold previous forecast that income growth needs to strengthen, specifically for younger households. It is vital to achieve considerable housing growth. However, the Chief Economist added that they are witnessing some positive improvements in the sector as home sales have increased and inventories are lean, laying a strong platform for strong home price appreciation.
Given uncertainties from China and Greece, continued monetary easing on global front, and an anticipated slow pace of interest rate tightening by the Fed, they expect mortgage rates to rise only through next year.
Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) ended the last trading session unchanged as the volatility kept collapsing in the extreme short term time frame. The volume of the day at 1.8 million against the daily average of 3.3 million reflected that contraction of volatility and the corrective nature of the price well. As the chart attached shows, the stock has been moving in the band of $2.00-$2.60 for the most part in the last 12 months, with occasional spike above the boundaries followed by a mean reversion. The price has been heading to $2.60 once again and obviously the price action here will determine the next directional move.