This week brings us the release of five pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting. Only one of the economic reports is considered to be highly important to the markets and mortgage rates, but a couple do carry enough significance to influence mortgage rates if they show a wide variance from forecasts. Monday has nothing of importance scheduled, so look for stock movement and overseas bond momentum to heavily influence our bond trading and mortgage rates.
April's Consumer Price Index (CPI) will kick off this week’s calendar at 8:30 AM ET Tuesday. This is the sister report of last week's PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and could lead to significant volatility in the bond market and mortgage pricing if they show any significant surprises. Current forecasts are calling for a 0.3% increase in the overall index and a 0.2% rise in the core data reading. The core data is the more important of the two readings as it excludes more volatile food and energy prices. This data can also affect the Fed's timeline for raising key short-term interest rates and will also help dictate mortgage rate direction.
April's Housing Starts will also be posted early Tuesday morning. This report will give us an indication of housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new construction starts from March's reading, hinting at housing sector growth. However, since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts and the CPI matches expectations.
The third piece of data Tuesday is April's Industrial Production report at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.2% increase in production, indicating that manufacturing activity strengthened slightly. A decline in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is considered to be moderately important, so it will likely need to show unexpected strength or weakness to cause movement in mortgage rates.
The next event of the week comes late Wednesday when the minutes of the last FOMC meeting will be released. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation or concerns about economic growth. The goal is to form opinions about the Fed's next move regarding interest rates, which is expected to happen sometime a couple times before the end of the year. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading Wednesday.
Thursday has one monthly report scheduled. That would be April's Leading Economic Indicators (LEI) at 10:00 AM ET Thursday. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.3% increase from March's reading, meaning that economic activity is likely to strengthen over the next few months. A decline would be good news for the bond market and mortgage rates, while a larger increase could cause mortgage rates to inch higher Thursday.
The National Association of Realtors close out the week when they give us their Existing Home Sales report at 10:00 AM ET Friday. This data tracks resales of existing homes in the U.S. during April, giving us a measurement of housing sector strength and mortgage credit demand. This type of data is relevant because a weakening housing sector makes broader economic growth less likely. Current forecasts are calling for a small increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating housing sector weakness. A large increase in sales could lead to bond weakness and a slight increase in mortgage rates Friday morning since a strengthening housing sector raises optimism about general economic growth.
Overall, I believe Tuesday will be the most important day for rates, not just due to the data being posted. Wednesday afternoon could also be pretty active if the minutes show anything of importance. The calmest day will likely be Monday or Thursday.