In continued good news out of the housing market, sales of existing homes rose in July at the fastest pace in ten months, rising 2.4% to an annual pace of 5.15 million units. The gain marked the fourth straight month that the pace of sales has accelerated.
Housing starts surged 15.7% in July to an annual pace of 1.09 million units, reversing two straight months of declines. Building permits rose 8.1% to a 1.05 million unit pace.
Consumer prices edged up just slightly in July, with a .1% increase, as increases in food and rent costs were offset by a decline in energy costs.
The manufacturing sector expanded at the fastest pace in four years, according to Markit’s Purchasing Manager’s Index. The index rose to a reading of 58 in August – the highest since April 2010.
The release of the minutes from the July 29-30 FOMC meeting showed that the Fed is increasingly divided on the progress of the labor market. Some members argued that the surge in hiring along with a rising inflation rate signal that its time for the Fed to start laying the groundwork for a rate hike. Others argued that inflation isn’t a threat and the labor market is still weaker than normal. Most members agreed that more data was needed before the committee would move up the schedule of a rate hike.
Speaking from the sidelines at the Federal Reserve’s annual Jackson Hole meeting, Kansas City Fed President Esther George cautioned that investors have gotten a little too comfortable in assuming that a rate hike is still a long way off: “There’s a lot of complacency right now, and if you look at the market path for interest rates relative, for example, to…the FOMC’s projections, you will see that those have been far apart”. She also noted that “the economy is already showing signs [of improvement]. I don’t want us to be behind the curve in beginning to normalize interest rates”.
With remarks that were in line with the newly released FOMC meeting minutes, speaking at Jackson Hole Fed Chair Janet Yellen said that “the economy has made considerable progress in recovering”, however, “underutilization of labor resources still remains significant”. If progress in the labor continues to accelerate more than expected, or inflation picks up, “increases in the federal funds rate target could come sooner than the Committee currently expects and could be more rapid thereafter”.