This week brings us the release of seven pieces of economic data that are worth watching, including two highly important reports. There also is another FOMC meeting taking place this week. The most important events are mid and late week, so we should see more movement in rates the latter days. Because the reports are spread over four days, we could see noticeable changes to rates multiple days.
There is nothing of importance set for release tomorrow, the only day of the week that doesn’t have something scheduled. June's Personal Income and Outlays data will start this week's activities at 8:30 AM ET Tuesday morning. This report helps us measure consumer ability to spend and current spending habits. If it shows sizable increases, bond selling could lead to higher mortgage rates. Current forecasts are calling for an increase of 0.4% in income and a 0.5% rise in spending. A larger than expected increase in income means consumers have more money to spend, which is not favorable to bonds because consumer spending makes up over two-thirds of the U.S. economy. Ideally, we would like to see declines in spending and income, but the smaller the increase in each, the better the news for mortgage rates.
Also at 8:30 AM Tuesday will be the 2nd Quarter Employment Cost Index (ECI) that tracks employer costs for wages and benefits. This release will give us a measurement of wage-inflation. If it shows a large increase, we may see inflation concerns rise as employers will need to pass those increases into the pricing of their products and services. That would be bad news for bonds and mortgage shoppers. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.7%.
Late Tuesday morning, the Conference Board will release their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment, giving us an idea of consumer willingness to spend. If consumers are more confident in their own financial and employment situations, they are apt to make large purchases in the near future. This is important because consumer spending makes up such a large portion of our economy. If the CCI reading is weaker than expected, meaning that consumers were less confident than thought and likely will delay making a large personal purchase, we may see bond prices rise and mortgage rates drop Tuesday morning. Current forecasts are calling for a reading of 126.6, which would be a slight change from June's 126.4.
Wednesday will also be a busy day, starting with July’s ADP Employment report before the markets open. It 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, using their payroll processing clients as a base. 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. Forecasts show an increase of 175,000 new payrolls. The bond and mortgage markets would prefer to see a smaller increase.
The Institute for Supply Management (ISM) is next with the release of their manufacturing index for July at 10:00 AM ET Wednesday morning. This index measures manufacturer sentiment by surveying trade executives about business conditions during the month and is considered to be of high importance to the markets. A reading above 50.0 means that more surveyed executives felt that business improved last month than those who said it had worsened. Analysts are expecting to see a decline from June's 60.2. Forecasts are calling for a reading of 59.4, meaning manufacturer sentiment slipped last month. That would be favorable news for bonds and mortgage rates as it would indicate weakness in the manufacturing sector. The smaller the reading, the better the news for mortgage rates.
Wednesday afternoon has the adjournment of the FOMC meeting that begins Tuesday. This is not a meeting that will be followed by a press conference with Fed Chair Powell nor is it expected to yield a change to key interest rates. Many analysts believe the Fed will make their next increase to key short-term interest rates in the fall of this year, not this week. Anything in the post-meeting statement that contradicts that theory will cause volatility in the markets. The meeting will adjourn at 2:00 PM ET, so any reaction will come during mid-afternoon hours.
June's Factory Orders data is Thursday's only relevant monthly data, coming at 10:00 AM ET. It helps us measure manufacturing sector strength by tracking orders for both durable and non-durable goods during the month of June. It is similar to last week's Durable Goods Orders report that tracked orders for big-ticket items only. Since a significant portion of the data was released last week, this report likely will not have a big impact on the markets. Analysts are expecting to see a rise in new orders of approximately 0.6%. A much smaller than expected increase would be considered good news for bonds and mortgage pricing, but it will take a large variance from forecasts for this report to heavily influence Thursday's mortgage rates.
Friday brings us the almighty monthly Employment report at 8:30 AM ET. This report gives us the U.S. unemployment rate, number of jobs added or lost during the month and average hourly earnings for July. The best scenario for the bond market is rising unemployment, a sizable loss of jobs and little change in earnings. Friday's report is expected to show that the unemployment rate inched lower last month 0.1% to 3.9% while approximately 190,000 jobs were added to the economy and earnings rose 0.3%. Due to the importance of these readings, we will most likely see quite a bit of volatility in the markets and mortgage pricing Friday morning following their 8:30 AM ET posting.
Overall, Wednesday or Friday is likely to be the most active day for rates. With the ISM index and FOMC meeting both coming Wednesday, it could bring lots of volatility in the morning and afternoon, although the FOMC meeting could be a dud. Friday’s Employment report is always extremely important to the markets. The least active may tomorrow or possibly Thursday. There is a very strong possibility of seeing plenty of volatility in the financial and mortgage markets this week. Therefore, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.