The economy was stronger in the second quarter than previously thought, fueled by an acceleration in business investment. The economy grew at a 3.7% annual pace during the quarter, up from a previous estimate of 2.3%. Consumer spending was revised up to 3.1%, and business investment was revised up to a 3.2% increase instead of a .6% drop.
On another positive note, after a steep decline in June, sales of new homes rebounded in July, jumping 5.4% to an annual pace of 507,000 and marking the biggest gain of the year. At July’s sales pace, it will take 5.2 months to clear the market.
Pending home sales edged up .5% in July after falling in June. According to the National Association of Realtors, “While demand and sales continue to be stronger than earlier this year, realtors have reported since the spring that available listings in affordable price ranges remain elusive for some buyers trying to reach the market and are likely holding back sales from being more robust…Overall, the prospects for ongoing strength in the housing market remain intact for now. The U.S. economy is growing — albeit at a modest pace — and the labor market continues to add jobs.”
Consumer spending rose .3% in July, following a similar gain in June, as households increased auto purchases. At the same time inflation was muted, ticking up .1%. Core inflation, which excludes food and energy, moderated to a 1.2% gain over the past year, well below the Fed’s 2% target.
The economy picked up in July, according to the Chicago Fed National Activity Index, which swung into positive territory with a reading of .34.