This week brings us five monthly economic reports that could affect mortgage rates, one of which is considered to be a major release. In addition to the data, we also have an afternoon filled with Fed FOMC events midweek. Tomorrow is the only day of the week without something scheduled that we need to be concerned about.
August's Industrial Production data will start this week's activities at 9:15 AM ET Tuesday. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important, meaning it can influence mortgage rates if it shows a noticeable variation from forecasts. A 1.1% rise from July's level of output is what market participants are expecting to see. A larger increase would be negative news for bonds and mortgage rates, while a weaker than expected figure would be considered favorable news.
Wednesday has several important events that are likely to cause noticeable movement in the financial and mortgage markets. The day starts with the highly important Retail Sales report for August at 8:30 AM ET. This Commerce Department report will give us a measurement of consumer spending that is extremely relevant to the markets because it makes up over two-thirds of the U.S. economy. Current forecasts are calling for a 1.0% increase in sales. Analysts are also calling for a 1.0% rise in sales if more volatile auto transactions are excluded. Stronger than expected sales would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate stronger than thought economic growth.
More big events will come Wednesday afternoon. They start with the FOMC meeting that will adjourn at 2:00 PM ET. There is no possibility of the Fed changing key short-term interest rates this week. What will be of interest is verbiage in the post-meeting statement that follows up on Chairman Powell’s recent announcement that they will change their thought process about inflation targets and monetary policy. The markets are looking for specifics and details that were not included when he made this announcement during the Jackson Hole Conference late last month.
Also at 2:00 PM ET Wednesday, the Fed will release their revised economic projections for the U.S. The markets are interested in whether Chairman Powell and friends think the economy is rebounding quicker or slower than previously thought and how long they expect to keep key rates at their current level of near zero percent. Key readings the markets will be looking for are the unemployment rate, inflation and overall GDP growth. Downward revisions by the Fed will be good news for bonds and mortgage pricing since it would mean the economy is not as strong as they expected it would be by this time.
The adjournment, post-meeting statement and economic projections will be followed by a press conference with Chairman Powell at 2:30 PM ET. All Fed meetings are highly important, but this one is particularly significant for the financial and mortgage markets as they are looking for some clarity from the Fed. Analysts and market traders will be watching his words carefully. Any question or answer at the press conference can impact the markets, so there is a decent chance of seeing quite a bit of volatility Wednesday afternoon.
Besides the weekly unemployment update, Thursday also has the release of August's Housing Starts. It tracks groundbreakings of new home projects but likely will not affect mortgage rates unless its results vary greatly from forecasts. It is expected to show that starts of new homes slipped just a bit last month, indicating calm in the new home part of the housing sector. A stronger housing sector makes broader economic growth more likely, meaning the larger the decline in this report the better the news it is for rates.
Friday has two releases set to be posted, both at 10:00 AM ET. One will be the University of Michigan’s Index of Consumer Sentiment for September that will give us an indication of consumer confidence in their own financial situations. This type of index projects consumer willingness to spend. If a consumer's confidence in their own financial situation is rising, they are more apt to make large purchases in the near future. On the other hand, if they are growing more concerned about their job security or finances, they probably will delay making that sizable purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 75.0 that would mean confidence strengthened slightly from August's level of 74.1. The lower the reading, the better the news it is for mortgage rates.
The final report of the week will come from the Conference Board who will post their Leading Economic Indicators (LEI) for August. The moderately important LEI index attempts to predict economic activity over the next three to six months. It is expected to show a 1.3% increase, indicating they are predicting moderate growth in economic activity over the next several months. A larger increase would be considered negative news for bonds and mortgage pricing.
Overall, Wednesday is easily the most important day of the week due to the Retail Sales report and Fed schedule. Tomorrow may end up being the calmest day for rates. Also worth noting are rumors that some lenders may soon reimpose the .500 point refinance fee that was announced last month and then delayed until December. That could be as soon as this week or possibly a few weeks out. The fee only applies to refinance loans that are regulated by the Federal Housing Finance Agency (FHFA). Still, it would be wise to clarify that situation with your lender if still floating an interest rate as it may make sense to lock a rate before that fee does start again.