With Fed hike done deal economists eye next one

The long-awaited interest rate hike is history after the Federal Reserve finally pulled the trigger last week for just the second time in a decade. Now, it’s on to bigger and better things – like judging if economic reports are strong enough to warrant another rate increase as soon as March. This week brings a batch of data on consumer spending, business investment, housing and the final estimate of economic growth in the third quarter.

Existing home sales have been healthy, rising a total 6 percent in September and October. And mortgage applications for home purchases advanced in November as rising mortgage rates coaxed buyers into making a move before borrowing costs increase further. But pending home sales, a gauge of future contracts, edged up just 0.1 percent in October, notes Nomura economist Lewis Alexander. Economists estimate the National Association of Realtors will report Wednesday that existing home sales fell 1.4 percent last month to a still-solid seasonally adjusted annual rate of 5.52 million.

The economy bounced back in the third quarter after nine listless months, according to the Commerce Department’s second estimate, growing 3.2 percent at an annual rate, as strong consumer spending more than offset paltry business investment. Commercial construction was revised up recently, suggesting businesses spent a bit more than believed, Alexander says. Economists reckon Commerce will report Thursday that growth last quarter will be revised up to 3.3 percent.

Consumer spending also got off to a good start in the fourth quarter with a 0.3 percent increase in October on the heels of a 0.7 percent rise the previous month. Last week’s retail sales report for November was disappointing, showing sales ticked up just 0.1 percent. Economists figure Commerce will announce that total consumer spending increased a healthy 0.4 percent last month.

Business investment has been sluggish the past couple of years, mostly because of the oil downturn and a weak global economy and strong dollar that have hurt U.S. exports.

But oil prices have risen this year and the dollar leveled off until a recent rally.

Core business capital goods orders excluding aircraft and defense – a proxy for business capital spending – have been choppy but rose 0.4 percent in October. Economists expect Commerce’s durable goods report to show core orders up 0.4 percent. New home sales fell 1.9 percent in October but signs point to a rebound in November, including the increase in mortgage applications. Economists estimate Commerce will report Friday that new home sales rose 2.1 percent last month to a seasonally adjusted annual rate of 575,000.

Source: Florida Realtors