This week brings us the release of six monthly and quarterly economic reports for the markets to digest in addition to a couple of Treasury auctions and the annual central bank conference. Tomorrow is the only day of the week that does not have something scheduled that may influence mortgage pricing. With so much scheduled, this is likely to be an active week for mortgage rates.
The Conference Board will post their Consumer Confidence Index (CCI) for August at 10:00 AM ET Tuesday morning. This index measures consumer sentiment about their own financial and employment situations, giving us an idea about consumer willingness to spend. If consumers are more confident in their finances, they are more apt to spend. Since consumer spending makes up over two-thirds of the U.S. economy, this data is watched closely. 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 93.0, which would be a small increase from July's 92.6. The lower the reading, the better the news for bonds and mortgage pricing.
July's New Home Sales data is also set for release late Tuesday morning. This report will give us another indication of housing sector strength and mortgage credit demand but tracks only a small portion of all home sales. The strong majority of U.S. home sales were covered in last week’s Existing Home Sales report, meaning this report usually doesn't have much of an impact on mortgage rates. Current forecasts are calling for an increase in sales of newly constructed homes between June and July. A large increase in sales would indicate housing sector strength, making the data negative for mortgage rates.
Wednesday has the most important release of the week with July's Durable Goods Orders scheduled for 8:30 AM ET. 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 4.0% 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 1.9%. The softer the reading, the better the news it is for the bond and mortgage markets.
That day also has the first of this week's two Treasury auctions that are worth watching. 5-year Notes will be sold Wednesday while 7-year Notes go 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.
Along with last week’s unemployment figures, we will also get the first revision to the 2nd Quarter Gross Domestic Product (GDP) reading at 8:30 AM ET Thursday. 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 shrank at an annual rate of 32.9% during the pandemic shutdown. Thursday's revision is expected to show no change to the initial estimate, but with such a sizable contraction, a minor upward or downward adjustment won’t have much of an impact on the markets or rates. There will be a final revision issued next month, although it probably will have little impact on mortgage rates since traders will be more interested in the current quarter's activity.
Worth noting is the annual Jackson Hole central banker conference, usually held in Wyoming. This year’s events will be held virtual due to the pandemic. There has been major news to come out of this event in the past while others have been non-factors. Federal Reserve Chairman Jerome Powell is scheduled to speak at 9:10 AM Thursday, which will be watched very closely. The conference runs Thursday through Saturday, so the markets may react to something from this event Thursday or Friday.
Friday has two pieces of relevant economic data that we need to be concerned with. The first is July's Personal Income and Outlays report at 8:30 AM ET, giving us a measurement of consumer ability to spend and current spending habits. It is expected to show a 0.2% decline in income and a 1.5% rise in spending. Since consumer spending makes up such a large portion of the U.S. economy, weaker than expected numbers would be considered good news for the bond market and mortgage rates. Also adding to the importance of this report is an inflation reading within the data that 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 at 10:00 AM ET. This sentiment index also helps us track consumer willingness to spend. It is expected to show little change from August's preliminary reading of 72.8. 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, Wednesday is a good candidate for most active day of the week for mortgage rates due to the Durable Goods report, but Thursday may also bring noticeable movement if Chairman Powell’s speech yields any surprises. The calmest day could be tomorrow assuming there is no major news between tonight’s post and tomorrow’s open in the markets. There is a strong possibility of seeing an active week for the markets and mortgage pricing. Accordingly, it would be prudent to watch the markets if still floating an interest rate and closing in the near future.