ARLINGTON, Va.—Expect auto lending to be “stable” in 2017 with not a great deal of growth, and look for the housing market to continue its sluggish expansion.
Those are two predictions from NAFCU Chief Economist and Director of Research Curt Long, who shared his 2017 Economic Outlook in the trade association’s December Monitor.
Long’s forecast:
- “GDP continues to register at roughly 2%, auto sales remain strong, and the housing market has shown flashes of promise. Meanwhile, conditions abroad remain tenuous,” said Long. “A year ago, slowdowns in China appeared to be the greatest area of concern, while today Europe looks to be more of a near-term threat, as 2017 will see Britain seeking to work through its exit from the EU, and several continental elections could be impacted by the recent wave of populism. But the greatest source of domestic uncertainty by far is President-elect Trump’s economic agenda, and its potential to boost short-term growth.
- “The process of normalizing interest rates has proceeded more slowly than most anticipated. Earlier this month the Federal Reserve initiated just the second increase to the federal funds rate target since 2006,” said Long. “In its most recent round of forecasts, the committee indicated that it expects three quarter-point rate hikes next year. However, a fiscal stimulus package combined with protectionist trade policies has the potential to boost inflation back toward the Fed’s 2 percent target. If inflation does improve, it would provide the Fed with the necessary ammunition to raise rates more quickly.”
- “Growth in the housing market has been frustratingly slow recently, mirroring that of the overall economy. That trajectory – at least where purchase loans are concerned – is unlikely to change in 2017, while refinance activity will fade,” stated Long. “Affordability concerns have centered on price growth lately, but interest rates will likely be more influential next year.”
- “Auto sales have plateaued as the overhang of pent-up demand from the recession has been exhausted. Rising interest rates and an increasing share of leases are the chief headwinds. Stability rather than growth is expected in the near term,” said Long.
- “Consumers continue to project confidence. With the stock market surging, households are well-positioned to drive the economy in 2017. Wage growth also appears poised to improve next year, which will likely support consumer spending growth,” concluded Long.