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ECONOMIC NEWS: Home resales slip, but key growth barometer points upward

Will the U.S. economy deliver meaningful growth in the months ahead?

The latest results from the housing market were mixed, but The Conference Board said its Leading Economic Index for August rose 0.4 percent, which CNBC said exceeded the 0.2 percent increase that economists Reuters polled were expecting.

“The August gain is consistent with continuing growth in the U.S. economy for the second half of the year, which may even see a moderate pickup,” Ataman Ozyildirim, director of business cycles and growth research at The Conference Board, said in a statement. “While the economic impact of recent hurricanes is not fully reflected in the leading indicators yet, the underlying trends suggest that the current solid pace of growth should continue in the near term.”

The August reading followed solid June (0.6 percent) and July (0.3 percent) increases.

In the housing market, the Commerce Department said starts were lower in August, but permits for new homes rose sharply. Starts fell 0.8 percent, to an annual rate of 1.18 million, from an upwardly revised 1.19 million in July.

Home resales were lower in August for the fourth time in five months as a shortage of homes for sale crimped activity in the market. The National Association of Realtors said sales fell 1.7 percent, to a seasonally adjusted annual rate of 5.35 million, from 5.44 million in July.

"Steady employment gains, slowly rising incomes and lower mortgage rates generated sustained buyer interest all summer long, but unfortunately, not more home sales," Lawrence Yun, the NAR’s chief economist, said in a statement.

"What's ailing the housing market and continues to weigh on overall sales is the inadequate levels of available inventory and the upward pressure it's putting on prices in several parts of the country. Sales have been unable to break out because there are simply not enough homes for sale."

Sales in the South fell 5.7 percent for the month, to an annual rate of 2.15 million, and are 0.9 percent lower than a year earlier.

"Some of the South region's decline in closings can be attributed to the devastation Hurricane Harvey caused to the greater Houston area,” Yun said. “Sales will be impacted the rest of the year in Houston, as well as in the most severely affected areas in Florida from Hurricane Irma. However, nearly all of the lost activity will likely show up in 2018."

The Commerce Department will release its August report on new-home sales today and The Conference Board will deliver its Consumer Confidence Index for September. On Friday, the University of Michigan will release its final Consumer Sentiment Index for September.

Builder confidence for new single-family homes slipped this month on fears that the hurricanes will make it difficult to find workers and materials. The National Association of Home Builders/Wells Fargo housing market index declined by three points, to 64.

“The recent hurricanes have intensified our members’ concerns about the availability of labor and the cost of building materials,” NAHB chairman Granger MacDonald, a home builder and developer from Kerrville, Texas, said in a statement.  “Once the rebuilding process is under way, I expect builder confidence will return to the high levels we saw this spring.”

The NAHB said any index reading above 50 indicates good conditions.

“Despite this month’s drop, builder confidence is still on very firm ground,” NAHB chief economist Robert Dietz added. “With ongoing job creation, economic growth and rising consumer confidence, we should see the housing market continue to recover at a gradual, steady pace throughout the rest of the year.”

There was no change in interest rates at last week’s meeting of the Federal Open Market Committee, the policy-making panel of the Federal Reserve, although economists are expecting a move at the December meeting.

The Fed did announce a plan to reduce its bond holdings. Starting in October, it will reduce its $4.5 trillion balance by $10 billion a month. That figure will gradually rise during the next year to $50 billion a month.

The Fed bought trillions of dollars in U.S. Treasury and mortgage securities in the years that followed the financial crisis in 2008 in an effort to keep borrowing costs low and keep the economy growing.

"Economic activity has been rising moderately so far this year," Fed chairman Janet Yellen said. "We think the economy is performing well."

"We are working down our balance sheet because we feel stimulus is no longer needed," she added.

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