Mortgage Market Update
This week has only four monthly economic reports set for release, but two of them are considered to be very important to the markets. There is nothing of importance scheduled for tomorrow, the only day of the week without a report that is expected to influence rates to some degree.
August's Consumer Price Index (CPI) will start this week’s activities at 8:30 AM ET Tuesday. The CPI is the sister release to last week’s Producer Price Index, but measures inflationary pressures at the more important consumer level of the economy. Rising inflation is a hot-topic in the markets currently, so this report will be watched closely. There are two readings in the report- the overall and core data. Core figures will draw more attention than the overall reading as they exclude more volatile food and energy prices. Current forecasts show a 0.4% increase in the overall reading and a 0.3% rise in the core reading. The weaker the readings, the better the news it is for bonds and mortgage rates.
Next up is August's Industrial Production data at 9:15 AM ET Wednesday. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important, meaning it can influence mortgage rates if it shows a noticeable variation from forecasts. A 0.4% rise from July's level of output is what market participants are expecting to see. A larger increase would be negative news for bonds and mortgage rates, while a weaker than expected figure would be considered favorable news.
The second highly important release of the week comes early Thursday morning when the Commerce Department gives us their Retail Sales report for August. The data will give us a measurement of consumer spending that is extremely relevant to the markets because it makes up over two-thirds of the U.S. economy. Current forecasts are calling for a 0.7% drop in sales. Analysts are also calling for a 0.1% decline in sales if more volatile auto transactions are excluded. Stronger than expected sales would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate the economy is growing faster than predicted.
Friday has a single report to close out this week’s calendar. The University of Michigan's Index of Consumer Sentiment for September will give us an indication of consumer confidence in their own financial situations. This type of index projects consumer willingness to spend. If a consumer's confidence in their own financial situation is rising, they are more apt to make large purchases in the near future. On the other hand, if they are growing more concerned about their job security or finances, they probably will delay making that sizable purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 72.0 that would mean confidence strengthened from August's level of 70.3. The lower the reading, the better the news it is for mortgage rates.
Overall, either Tuesday or Thursday may end up being the most active day for rates since they both have economic releases that are considered to be extremely important. The calmest day may be Wednesday, but it is safe to assume that we will see a change to pricing several days this week. Accordingly, it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future.