This week is packed with relevant economic releases that have the potential to affect mortgage rates. There are eight relevant economic reports for the bond and mortgage markets to digest in addition to another FOMC meeting. We have data or other events every day, so we should see plenty of movement in rates this week. The data scheduled ranges from minor to extremely important, meaning some reports will have a much bigger impact on rates than others.
The first release of the week will come from the Commerce Department who will post September's Personal Income and Outlays report at 8:30 AM ET tomorrow morning. This data gives us an indication of consumer ability to spend and current spending habits. There also is an inflation reading in the data that the Fed relies on during their FOMC meetings. This report is important to the markets because consumer spending makes up such a large part of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns that make long-term securities, such as mortgage-related bonds, less attractive to investors. Analysts are expecting to see a 0.4% increase in income and a 0.4% rise in spending. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing.
October's Consumer Confidence Index (CCI) is next, coming late Tuesday morning. This Conference Board index gives us a measurement of consumer willingness to spend. It is expected to show a decline in confidence from last month's 138.4 reading. That would mean that surveyed consumers were less optimistic about their own financial and employment situations than they did last month, indicating they are less likely to make large purchases in the near future. That would be favorable news for the bond market because consumer spending makes up over two-thirds of our economy. Current forecasts are showing a reading of 135.8. The lower the reading, the better the news it is for mortgage rates.
Wednesday has two morning moderately important reports to watch. The first is the 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 than expected. This report tracks changes in private-sector jobs, using ADP's 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 accurate in predicting results of the monthly government report that follows a couple days later. Still, because we often see a reaction to the report, we should be watching it. Analysts are expecting it to show that 180,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.
The 3rd Quarter Employment Cost Index (ECI) will be released at 8:30 AM ET Wednesday. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.7%. A smaller than expected increase would be good news for mortgage rates, but this is not one of the more important reports of the week.
Thursday also has two reports scheduled, one of which is very important to the markets. The less important will be the 3rd Quarter Productivity reading at 8:30 AM ET. It is expected to show a 2.1% improvement in worker productivity during the quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern. This is a relatively low importance report, so it will take a significant variance from forecasts for it to directly affect mortgage rates.
The second and more important report of the day will be the Institute for Supply Management's (ISM) manufacturing index for October at 10:00 AM ET. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first every month that tracks the preceding month's activity. Wednesday's release is expected to show a reading of 59.0, indicating that manufacturer sentiment slipped from September's level 59.8. This means fewer surveyed manufacturing executives felt business improved during the month than in September, hinting at weaker manufacturing sector activity. A smaller than expected reading would be good news for bonds and likely lead to lower mortgage rates Thursday.
Friday brings us the release of the almighty Employment report for October at 8:30 AM ET. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for no change to the unemployment rate, holding at 3.7%. It is also expected to show an increase in payrolls of 190,000, rebounding from September's disappointing 134,000 jobs. The third headline number is average earnings that is expected to reveal a 0.2% rise. Weaker than expected readings should raise concerns about the labor market and rally bonds enough to improve mortgage rates noticeably, especially if the stock markets react poorly to the news.
The week's calendar will close late Friday morning when September's Factory Orders data is released. This report is similar to last week's Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 0.4% increase in new orders from August's level. A large decline would be good news for the bond market and mortgage rates while an unexpected rise would be bad news. However, it is worth noting though, that this report is not considered to be highly important to mortgage rates and it follows a major release. Therefore, it probably will not play a role in Friday's mortgage pricing.
Overall, the single most important day is Friday due to the Employment report, but Thursday is expected to be pretty active also. We have plenty of relevant data set for release this week along with more corporate earnings that influence stocks. This makes it quite likely that we will see another active week for mortgage rates. Accordingly, please maintain contact with your mortgage professional if still floating a rate and closing in the near future.