This week brings us the release of five pieces of economic data for the markets to digest in addition to a couple of Treasury auctions, but none are considered to be extremely important. There is something relevant taking place each day of the week. We also will be following non-data issues such as the trade war with China, geopolitical events from overseas and global economic news.
July's Durable Goods Orders will start the week’s calendar early tomorrow morning. This Commerce Department report is an important measurement of manufacturing sector strength. It tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years such as appliances, electronics and airplanes. Analysts are expecting to see a rise of 1.2% in new orders, pointing towards manufacturing sector strength. This data is known to be quite volatile from month to month, so an increase of this size doesn't raise too much concern about the economy. However, a much larger increase will be bad news for the bond market and mortgage rates. A secondary reading that excludes more volatile transportation-related orders is expected to rise 0.1%. The softer the reading, the better the news it is for the bond and mortgage markets.
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 an idea about 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 131.0, which would be a decline from July's 135.7. The lower the reading, the better the news for bonds and mortgage pricing.
Wednesday has no relevant economic reports, but it does have the first of this week’s two Treasury auctions that are worth watching. 5-year Notes will be sold Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors, bringing more funds into the bond market. The buying of bonds that follows translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during early afternoon hours Wednesday and Thursday.
Thursday has 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 benchmark 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 a strong annual rate of 2.1%. Thursday's revision is expected to show that the GDP actually rose 2.0%, meaning the economy was a slightly weaker 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 Friday 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 0.5% 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. It is also worth mentioning that an inflation reading within this data is what the Fed relies heavily on during their FOMC meetings.
The final report of the week will be the University of Michigan's revised Index of Consumer Sentiment for August. This sentiment index also helps us track consumer willingness to spend. It is expected to show little change from August's preliminary reading of 92.1. 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, tomorrow is a good candidate for most active day of the week for mortgage rates due to the Durable Goods report and weekend news on tariffs between the U.S. and China that appears to be favorable for bonds. Thursday may also bring some movement if the GDP reading revises more than expected. The calmest could be Wednesday, assuming stocks don't rally or go into selling mode. While this week doesn't appear to be an overly busy week, there still is a good possibility of seeing another active week for the markets and mortgage pricing.