This week brings us the release of seven pieces of economic data for the markets to digest, including a couple of extremely important reports. There is relevant data being posted each day of the week, but the most important stuff comes during the latter days.
Unlike many Mondays, tomorrow does bring us one of those reports. July's Personal Income and Outlays report will be released early tomorrow morning, giving us a measurement of consumer ability to spend and current spending habits. It is expected to show an increase of 0.4% in income and a 0.3% increase in spending. Since consumer spending makes up over two-thirds of the U.S. economy, weaker than expected numbers would be considered good news for the bond market and mortgage rates.
The Conference Board will post their Consumer Confidence Index (CCI) for August late Tuesday morning. This index measures consumer sentiment about their personal financial and employment situations, giving us a measurement of consumer willingness to spend. A decline in confidence would indicate that surveyed consumers probably will not make a large purchase in the immediate future. That would be a sign of economic weakness and should drive bond prices higher, leading to lower mortgage rates Tuesday. It is expected to show a reading of 97.0, which would be a small decline from July's 97.3. The lower the reading, the better the news for bonds and mortgage pricing.
Wednesday's only data worth watching is the ADP Employment report before the markets open. This release has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. It report tracks changes in private-sector jobs of the company's clients that use them for payroll processing. I don't have much faith in the data but the markets do react to it, so we watch it. It is expected to show 170,000 new private-sector jobs were added last month. A higher number would be negative news for mortgage rates while a much smaller than expected increase would be favorable.
There are two reports scheduled for Thursday. The first is the revised 2nd Quarter Productivity numbers that measure employee productivity in the workplace. Strong levels of productivity allow the economy to expand without inflation concerns. It is expected to show a downward change from the previous estimate of a 0.5% decline. Forecasts are currently calling for a 0.6% decrease, meaning productivity was weaker than previously thought. This would be negative news for the bond market and mortgage rates, but the markets will be more focused on the day's next release than this data.
Thursday's big news will be the release of the Institute for Supply Management's (ISM) manufacturing index at 10:00 AM ET. This index measures manufacturer sentiment and is expected to show 52.2, slipping from last month's reading of 52.6. A reading below 50 is considered a recessionary sign because it means that more surveyed manufacturers felt business worsened during the month than those who felt it had improved. A larger than expected decline in the index would likely cause selling in the stock markets and lead to an improvement in mortgage rates Thursday.
The biggest news of the week comes Friday morning. The Labor Department will post the unemployment rate, number of new jobs added or lost and average hourly earnings for August early Friday morning. The ideal scenario for the bond market and mortgage rates is rising unemployment, a drop in payrolls and earnings to fall slightly. Analysts are expecting to see that the unemployment rate fell 0.1% to 4.8% and that 180,000 jobs were added during the month. Weaker than expected readings would signal employment sector weakness and would be very good news for bonds and mortgage rates Friday. However, if we get stronger than expected numbers, mortgage rates will probably spike higher Friday as it would give the Fed a good reason to raise key short-term interest rates sooner than later.
July's Factory Orders data will close out this week’s calendar late Friday morning. This report measures manufacturing sector strength and is similar to last week's Durable Goods Orders, but includes orders for both durable and non-durable goods. It is expected to show a 2.0% increase in new orders. A smaller than expected rise would be favorable for bonds, but I don't see this data causing much movement in rates unless its results vary greatly from forecasts since the big-ticket products portion of the report was released last week and the monthly Employment report is considered to be a key release.
Overall, Friday is likely to be the most important day for mortgage rates but Thursday could also be pretty active. The best candidate for calmest day is Wednesday, assuming that the ADP release shows no surprises. Tuesday also carries the possibility of being one of the calmer days of the week. However, I believe we are in for an active week in the financial and mortgage markets.