On a positive note, the economy firmed up in the second quarter, expanding 2.3% on a boost in consumer spending. Americans upped their purchases of big ticket items like cars and trucks, as well as clothing and furniture, driving spending up 2.9%.
At this week’s FOMC meeting, the Fed left interested rates unchanged, leaving the option for a rate hike later this year on the table. The central bank said that “economic activity has been expanding moderately in recent months” while “the labor market continued to improve, with solid job gains and declining unemployment”. The Fed stopped short of providing any clues about when a rate hike will happen: “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term”.
Pending home sales dropped 1.8% in June, slipping from the highest level in over nine years in May, and marking the first decline in six months. “Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above some buyers’ comfort level. The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows”, according to the National Association of Realtors.
Durable goods orders rose in 3.4% in June, driven by demand for passenger planes, as bookings for commercial aircraft rose 66%. However, excluding transportation, orders rose .8%.
Labor costs in the US rose in the second quarter at the slowest pace in 33 years, increasing .2% – the smallest gain since records began in 1982.