US new home sales figures lay foundations for June rate hike
Sales of new homes in the United States jumped to their highest level since before the crisis, as the US economy picks up momentum in the second quarter.
The number of newly-built homes sold – on an annual basis – hit 619,000, a jump of 16.6 per cent on last month and around 100,000 ahead of analysts' expectations.
The surge goes some way to confirming that the world's largest economy is picking up after a surprisingly sluggish start to the year. GDP growth came in at 0.5 per cent for the first quarter on an annual basis, but was brushed off by some analysts who pointed to unusually high financial market turmoil during the period.
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The figures will put a bit more energy behind the case for an interest rate rise when the US Federal Reserve next meets in the middle of June. Minutes from the April meeting of the rate-setting Federal Open Market Committee (FOMC) showed that if steady economic data continues to come through, it is "likely" the Federal Funds Target Range will be hiked for only the second time since the recession.
Analysts warned the monthly figures were highly volatile and subject to substantial revisions. Nevertheless, Ian Shepherdson, chief economist at Panetheon Macroeconomics said he would expect to see the annual rate of new home sales staying above the 600,000 mark.
The Dow Jones surged 200 points at the open of the US markets after the figures were released, up 1.1 per cent at 17,692.73. Equities markets have generally been down following the Fed's signals of a looming rate rise last week.