This week brings us the release of seven economic reports that are relevant to mortgage rates. Despite the high number of releases that are worth watching, none of them are considered to be highly important or key reports. Tomorrow and Wednesday have nothing scheduled, but the other days all yield multiple releases.
The calendar starts at 8:30 AM ET Tuesday morning when November's Housing Starts data is released. This data isn't known to be highly influential to bonds or mortgage pricing, but it does give us an indication of housing sector strength by tracking new home groundbreakings. Analysts are expecting to see an increase in new home starts, indicating the new home portion of the housing sector strengthened last month. Slowing starts would be favorable for the bond market, although a wide variance is likely needed for the data to cause noticeable movement in the markets or mortgage rates Tuesday morning.
November's Industrial Production report is set for release mid-morning Tuesday. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts are calling for a 0.9% rise in output, mostly a result of the end of the GM strike in late October. Normally, a decline is good news for bonds, but that is not likely due to the heavy impact of GM factories reopening as workers returned to work. A stronger reading would show manufacturing strength and be considered bad news for rates.
Thursday has two of the reports scheduled. Existing Home Sales figures for November will be announced at 10:00 AM ET for one. The National Association of Realtors is expected to say there was little change in home resales last month, indicating a flat housing sector. This report will give us a measurement of housing sector strength and mortgage credit demand. A sizable decline in sales would be considered positive for bonds and mortgage rates because a softening housing market makes broader economic growth more difficult. However, unless the sales figures vary greatly from forecasts, the results will probably have only a minor impact on rates.
November's Leading Economic Indicators (LEI) from the Conference Board is Thursday's other monthly release. This report attempts to measure or predict economic activity over the next three to six months. It is expected to show a 0.1% increase, meaning that it is predicting modest economic growth over the next several months. This probably will not have much of an impact on bond prices or affect mortgage rates unless it shows a much stronger reading than forecasts. The weaker the reading, the better the news it is for bonds and mortgage pricing.
The week's calendar closes with three reports Friday morning. The day starts with November's Personal Income and Outlays data at 8:30 AM ET. It tracks consumer ability to spend and current spending habits. Since consumer spending makes up over two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.3% increase in income and a 0.4% increase in spending. This report also includes the Fed’s preferred inflation reading (PCE index), helping to elevate the report’s importance. If it reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly Friday morning.
The second report of the day will be the third estimate and second revision to the 3rd Quarter Gross Domestic Product (GDP). The GDP is the total of all goods and services produced in the U.S. and is the benchmark reading of economic growth. However, this data likely will not have an impact on mortgage rates unless it varies greatly from its expected reading. Last month's first revision showed that the economy expanded at a 2.1% annual pace during the quarter, up slightly from the initial estimate. This month’s update is expected to show the same 2.1% rate of growth. A revision higher would be considered bad news for bonds. But since this data is quite aged at this point and 4th quarter numbers will be posted next month, this release likely will not affect Friday’s rates.
Lastly, the revised University of Michigan Index of Consumer Sentiment for December will be posted at 10:00 AM ET Friday. Current forecasts are calling for no change from the 99.2 that was announced earlier this month. This means surveyed consumers felt no better or worse about their own financial and employment situations than previously estimated. Bond traders would prefer to see a decline because waning confidence usually means consumers are less likely to make a large purchase in the near future, restricting economic growth. Therefore, the lower the reading, the better the news it is for mortgage rates.
Overall, the data scheduled this week doesn’t indicate it will be another volatile week for rates. After seeing a major bond sell-off Thursday due to China trade news, we saw a strong rebound Friday as investors digested the details of the deal that weren’t released the day before. Unless something new comes to light on the topic it should have less of an influence on the markets than it has had recently. That should allow more traditional and predictable factors to drive trading and mortgage pricing in the immediate future. It looks as if Friday is the most important day of the week while Wednesday could be the calmest day for rates.