While the Fed held its benchmark rate near zero at this week’s FOMC meeting, the central bank is on track to raise interest rates this year. The majority of Fed officials “are anticipating that a rate increase this year will be appropriate. That assumes, as you can see that they are expecting a pickup in growth in the second half of the year and further improvement in labor market conditions”, according to Fed Chair Janet Yellen. Just 2 of 17 officials believe the Fed should wait till 2016 for a rate hike.
On a positive note, builder confidence improved in June, rising to the highest level since September. According to the National Association of Home Builders, “Builders are reporting more serious and committed buyers at their job sites and this is reflected in recent government data showing that new-home sales and single-family construction are gaining momentum”. Measures of current sales conditions, buyer traffic and sales expectations showed healthy gains for the month.
Consumer prices rose .4% last month on a spike in gas prices ahead of the summer driving season, marking the biggest gain in more than two years. Gas prices jumped 10.4% – the largest increase in six years. Food prices were flat for the second month in a row.
On the downside, industrial production slipped .2% in May, while output for April was revised down to a drop of .5%. With last month’s decline, output has not increased since November.
Housing starts slowed last month, but a surge in permits signaled strength in the market. New construction slipped 11.1% to an annual rate of 1.04 million units, but permits for future construction rose 11.8% to 1.28 million – the fastest pace since August 2007. Permits have been above a one million unit pace since July.
In the first quarter, 254,000 mortgaged properties regained equity, according to CoreLogic. The number of properties with negative equity now stands at 5.1 million, or 10.2% of properties with a mortgage.