This week has seven economic reports set for release that may affect mortgage rates, including two that are considered to be highly important to the financial and mortgage markets. Some of this data can also influence the Fed's monetary policy decision next month, raising the potential of another round of strong volatility in the markets and mortgage rates. Tomorrow is the only day of the week without relevant data scheduled, but still be prepared for movement though.
Tuesday morning has two reports set for release, starting with the first revision to the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. It is expected to show a slight upward revision to last month's preliminary reading of a 2.9% annual rate of growth. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the benchmark measurement of economic growth. Current forecasts call for an increase of 3.0%, meaning that there was a tad more economic activity during the third quarter than previously thought. This would be bad news for the bond market and mortgage rates because strengthening economic growth makes bonds less appealing to investors that hurts bond prices and mortgage rates. Unless we see a much larger increase or a downward revision, I suspect this release will have a minimal impact on mortgage rates. It is the second of the three monthly updates and analysts are looking more towards the current quarter’s activity than what happened during late summer and early fall.
November's Consumer Confidence Index (CCI) will be released late Tuesday morning by the Conference Board. This index helps us track consumer willingness to spend. If a consumer's confidence in their own financial and employment situation is strong, analysts believe that they are more apt to make larger purchases, fueling economic growth. This is important because consumer spending makes up over two-thirds of the U.S. economy and makes long-term securities such as mortgage-related bonds less attractive to investors. Analysts are expecting to see an increase in confidence from last month's level, meaning surveyed consumers were more optimistic about their own financial situations this month than they were last month. This rise is likely related to the post-election stock market gains. A weaker reading than the 100.5 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher Tuesday.
Wednesday has three reports we will be watching. The first is the ADP Employment report before the markets open, which has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report tracks changes in private-sector jobs of the company's clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not very accurate in predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on this week's calendar. Analysts are expecting to see 160,000 new private-sector payrolls for November.
October's Personal Income and Outlays data is the second report of the day Wednesday. This data measures consumers' ability to spend and their current spending habits. It is important because consumer spending is such a large part of the U.S. economy. It is expected to show that income rose 0.4% and that spending increased 0.5%. Weaker than expected readings would mean consumers had less money to spend and were spending less than thought. That would be favorable news for bonds and could lead to improvements in mortgage rates Wednesday morning.
Later Wednesday, the Federal Reserve will release their Beige Book at 2:00 PM ET. This report is named simply after the color of its cover and details economic conditions by Fed region. That information is relied upon heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any noticeable changes from the last update. More times than not though, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist.
November's manufacturing index from the Institute for Supply Management (ISM) will come at 10:00 AM ET Thursday. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a small increase in sentiment from October to November. October's reading was previously announced as 51.9. A weaker reading than the expected 52.1 would be good news for the bond market and mortgage rates, especially if it moves real close to 50.0. A reading below that threshold means that more surveyed business executives felt business worsened during the month than those who felt it had improved. A sub-50 reading is considered a recessionary sign. The lower the reading the better the news it is for bonds because waning sentiment indicates a slowing manufacturing sector and makes broader economic growth less likely. This is one of the two highly important releases this week.
The biggest news of the week comes early Friday morning when the Labor Department posts November's Employment figures. This is arguably the most important monthly report we see, so its impact on the markets and mortgage rates is often significant. It is comprised of many statistics and readings, but the most watched ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate of 4.9% while 180,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.2%. An ideal scenario for mortgage shoppers would be a higher unemployment rate, a much smaller increase in payrolls (or a decline) and no change in the earnings reading. If we are fortunate enough to hit the trifecta with all three, we should see bond prices rise and mortgage rates move much lower Friday. However, stronger than expected readings would likely fuel a bond sell-off that would lead to higher mortgage rates. NOTE: We will be watching the earnings reading more closely than usual after last month’s 0.4% jump. Another sizable increase there should be trouble for bonds and mortgage pricing.
Also worth noting is that extra attention will be given to this month's Employment report because it is the last one before the Fed's FOMC meeting on December 13-14th. It is at that meeting that many analysts and market participants expect the Fed to push key short-term interest rates higher by a quarter-point. If this report meets or exceeds expectations, it is highly likely that the Fed will make that move this month. On the other hand, weaker than expected numbers throws into question whether they will make that rate hike now or wait for the first 2017 meeting to do so. Any possibility of a delay in the rate hike should be taken as good news in the bond market.