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 except tomorrow, with the most important things coming late in the week. Therefore, we can expect to see a pretty active week for bonds 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 noticeable 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 120.3, which would be a small decline from July's 121.1. The lower the reading, the better the news for bonds and mortgage pricing.
Wednesday's has two relevant reports that we will be watching. The first 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 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 180,000 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.
The second release of the day will be the first revision to the 2nd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. The GDP is the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. This reading is the second of three that we see each quarter. Last month's preliminary reading revealed that the economy grew at an annual rate of 2.6%. Wednesday's revision is expected to show that the GDP actually rose 2.8%, meaning the economy was a bit stronger than previously thought from April through June. A smaller than expected reading should help lower mortgage rates, especially if the inflation portion of the release does not get revised higher. There will be a final revision issued next month, but it probably will have little impact on mortgage rates since traders will be more interested in the current quarter's activity.
July's Personal Income and Outlays report will be released early Thursday morning, giving us a measurement of consumer ability to spend and current spending habits. It is expected to show an increase of 0.3% in income and a 0.4% rise 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.
Friday as three reports being released, two of which are considered extremely important to the financial and mortgage markets. One of those is August’s Employment report at 8:30 AM ET. The Labor Department will post the unemployment rate, number of new jobs added or lost and average hourly earnings for this month. 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 remain unchanged at 4.3% and that 183,000 jobs were added during the month. The average earnings reading is forecasted to rise 0.2%. 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 as it would give the Fed a good reason to raise key short-term interest rates sooner than later.
The other big news Friday 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 56.8, up from last month's reading of 56.3. A reading above 50 is considered a sign of economic growth because it means that more surveyed manufacturers felt business improved during the month than those who felt it had worsened. A decline in the index would likely cause selling in the stock markets and lead to an improvement in mortgage rates Friday, assuming the Employment report didn’t show any surprises.
The final report of the week will be the University of Michigan's revised Index of Consumer Sentiment for August. This sentiment index helps us track consumer willingness to spend. It is expected to show a decline from August's preliminary reading of 97.6. If it revises lower, consumers were less confident about their personal financial situations than previously thought. This would be good news for the bond market and mortgage rates because waning confidence usually means that consumers are less likely to make large purchases in the near future. The lower the reading we get, the better the news it is for mortgage shoppers.
Overall, Friday is the most important day of the week due to the significance of the Employment and ISM reports. The calmest day may be tomorrow or Tuesday. With so much on tap this week, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the new future.