This week brings us the release of six pieces of monthly and quarterly economic reports with one being considered highly important. There is nothing of relevance to mortgage rates scheduled for release tomorrow or Tuesday, so look for the stock markets to drive bond trading and mortgage rates until we get to the start of this week's activities mid-week.
The weeks’ calendar starts Wednesday with three pieces of data scheduled. The first will be July's Retail Sales data at 8:30 AM ET. This highly important report comes from the Commerce Department and will give us a measurement of consumer spending. Consumer level spending figures are extremely relevant to the markets because it makes up over two-thirds of the U.S. economy. Current forecasts are calling for a 0.1% increase in sales. Analysts are also calling for a 0.3% rise in sales if more volatile and costly auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate stronger economic growth.
Employee Productivity and Costs data for the second quarter will also be released early Wednesday morning. It will give us an indication of employee output per hour. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don't see this being a big mover of mortgage rates, but it may influence them slightly during morning trading if the sales data is a dud. Analysts have predicted a 2.0% rise in productivity during the second quarter and a 0.5% increase in labor costs. A sizable increase in productivity and a smaller than expected rise in costs would be favorable news for bonds.
July's Industrial Production report at 9:15 AM ET that measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.4% increase from June's level. A decline would be considered good news for bonds and mortgage rates because it would indicate manufacturing sector weakness and broader economic growth would be more difficult if manufacturing activity is slipping.
July's Housing Starts will be released at 8:30 AM ET Thursday, giving us an indication of housing sector strength and future mortgage credit demand. It usually doesn't cause much movement in mortgage rates unless it varies greatly from forecasts. Thursday's release is expected to show an increase in construction starts of new homes last month. The lower the number of starts, the better the news for the bond market, as it would indicate a weaker than expected new home portion of the housing sector.
The Conference Board is a New York-based business research group that will post its Leading Economic Indicators (LEI) for July late Friday morning. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. A higher than expected reading is bad news for the bond market because it would be predicting that the economy may be strengthening more than thought. However, a weaker reading means that the economy may not grow as much as predicted, making stocks less appealing to investors. This also eases economic growth concerns in the bond market and could lead to slightly lower mortgage rates Friday. It is expected to show an increase of 0.5% in the index, indicating moderate economic growth over the next couple of months. It will take a sizable difference between forecasts and its actual reading for this report to noticeably influence mortgage rates.
The last release of the week will come from the University of Michigan late Friday morning. Their Index of Consumer Sentiment for August will give us an indication of consumer confidence, which projects consumer willingness to spend. If a consumer's confidence in their own financial and employment situation is rising, they are more apt to make large purchases in the near future. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 97.8 that would mean confidence was nearly unchanged from July's level of 97.9. Good news for mortgage rates would be a decline.
Overall, Wednesday is likely to be the most active day for mortgage rates due to the Retail Sales data being posted. Tomorrow also could be active due to further deteriorating conditions in Turkey that have global markets on edge. Tuesday is the best candidate for least important day, with exception to that topic affecting the markets again. We could see some movement in rates any day this week, so please proceed cautiously if still floating an interest rate as this bond rally could reverse course without notice.