In a widely anticipated move, the Federal Reserve increased interest rates for the first time in almost a decade, voting unanimously to raise the target range for the fed funds rate by a quarter-point to .25% – .50%. Speaking at a press conference following the announcement, Fed Chair Janet Yellen said that “the economic recovery has clearly come a long way, although it is not yet complete. The committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen”.
Builder sentiment declined in December, with the NAHB/Wells Fargo index falling to 61, as measures of current sales conditions, buyer traffic and the six-month outlook all declined. According to the NAHB, “Overall, builders are optimistic about the housing market, although they are reporting concerns with the high price of lots and labor…For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery. With job creation, economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 2016.”
Builders started construction on more homes in November, as housing starts jumped 10.5% to an annual pace of 1.17 million, with multi-family building leading the increase with a gain of 18.1%. At the same time, housing permits climbed 11% to a 1.289 million unit pace – the highest in 5 months.
On the downside, industrial production fell .6% in November, marking the third straight monthly decline, and the fastest monthly decline since March 2012. The decline followed a .4% drop in October.
Consumer prices were flat in November, while a measure of core inflation, stripping out food and energy, rose .2% for the third straight month. The cost of health care, shelter and vehicles rose, while energy prices fell 1.3% and food prices slipped .1%.