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Expected Time of Arrival is "Relatively Soon"

Learning Opportunities

The Fed spoke, the market reacted…and now what? More waiting. As expected, after two days of discussion, the FOMC left interest rates unchanged and did not announce an exact beginning to the balance sheet reduction program. The committee did tweak the timing for beginning the program from "this year" to "relatively soon." The only other significant change in the statement from a month ago was the omission of the word "somewhat" when describing inflation running below the two percent target. Sounds like the Fed may be getting more comfortable with inflation staying below two percent. The fed funds futures market is betting a 42 percent chance of a rate increase in December.

Other Key Indicators this Week:

GDP – The economy rebounded in the second quarter as consumer and business spending increased. Second quarter GDP rose 2.6 percent after revised lower growth of 1.2 percent in the first quarter. The average growth rate for the first half of 2017 is 1.9 percent, an improvement over 1.4 percent growth during the same period in 2016. Consumer spending jumped 2.8 percent. Business spending on equipment increased the most in two years. The jump in business spending suggests businesses remain confident about continued demand in the U.S. and abroad. The weak link in the economy remains housing, which declined 6.8 percent. This was the largest decrease since 2010. A lack of buildable land, rising prices and the low inventory of homes for sale are hampering the housing industry.

Housing – New and existing home sales followed different paths in June. Sales of new homes increased 0.8 percent, while sales of previously owned homes fell 1.8 percent. The median price for a new home fell 3.1 percent from a year ago as builders began to listen to buyers’ needs for more moderately priced homes. The inventory of newly built homes was at its highest level since June 2009. On the other side of the street, however, there continues to be a lack of affordable previously owned homes for sale. The supply of existing homes on the market fell 7.1 percent from a year ago, boosting the median sales price higher by 6.5 percent.

Durable Goods – Orders for goods meant to last more than three years increased 6.5 percent in June. This was the largest monthly gain in more than three years. The large increase was due mostly to a surge in aircraft orders, up 131 percent. When you remove the orders related to transportation, orders rose 0.2 percent. Orders for business equipment fell 0.1 percent, following a revised upward gain of 0.7 percent in May. Orders for communications gear and machinery made solid gains. Orders for motor vehicles and parts remained weak, falling 0.6 percent.

Between the Numbers:

Liquidity is getting tighter at credit unions as lending activity continues to grow. Overall lending increased 1.1 percent in May, pushing year-over-year loan growth to 10.9 percent. This was the fastest pace in almost 12 years. Auto lending continues to drive loan demand. Used auto loans picked up the most during May, increasing 1.7 percent. With the Federal Reserve seemingly on hold for the next rate hike, this is a good time to consider increasing your liquidity with CD issuance or term loans.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.