This week brings us the release of five pieces of monthly economic data that are relevant to mortgage rates with three of them considered to be highly important. The bond market will be closed tomorrow in observance of the Columbus Day holiday as will most banks, so there will not be an update to this report. The stock markets will be open for trading though. This means that many lenders that are open for business will likely not be issuing new rates tomorrow, opting to use Friday afternoon's pricing or not accepting new rate locks. The bond market will reopen for regular trading Tuesday morning.
September's Consumer Price Index (CPI) will start this week’s economic releases at 8:30 AM ET Tuesday. It tracks inflationary pressures at the very important consumer level of the economy. Rising inflation erodes the value of a long-term bond’s future fixed interest payments, making them less appealing to investors now. Often, the result ends up being higher mortgage rates. Analysts are expecting to see a 0.2% increase in the overall index and an increase of 0.2% in the more important core data that excludes more volatile food and energy costs. A larger than expected increase in the core reading would be bad news, likely pushing bond prices lower and mortgage rates higher, while weaker numbers should help lower rates Tuesday.
The second release of the week is September's Producer Price Index (PPI) early Wednesday morning. This index is the sister release of the CPI, measuring inflationary pressures at the manufacturing level of the economy. It is expected to show a 0.2% rise in both the overall and core readings. Good news for mortgage rates would be weaker readings.
Thursday doesn’t have anything we need to be concerned with other than the weekly unemployment update. However, Friday has three relevant reports scheduled, starting with the highly important Retail Sales data at 8:30 AM ET. This Commerce Department report measures consumer level sales and is so important to the markets because consumer spending makes up over two-thirds of the U.S. economy. If spending is strong, overall economic growth is likely to be stronger, making bonds less attractive to investors. If we see weaker than expected readings in this report, the bond market should respond favorably, pushing mortgage rates lower. Current forecasts are calling for a 0.7% increase in sales. Good news for the bond market and mortgage pricing would be a much smaller increase.
Next up is September's Industrial Production data at 9:15 AM ET Friday. This release will give us an indication of manufacturing strength by tracking output at U.S. factories, mines and utilities. Forecasts are showing a 0.7% rise in output from August's level, meaning that manufacturing activity strengthened last month. A larger increase in production would be negative for bonds and mortgage rates as it would indicate economic strength. A decline in output would be favorable for mortgage shoppers.
The last release of the week will be posted by the University of Michigan late Friday morning. Their Index of Consumer Sentiment for October will give us an indication of consumer confidence, which helps us measure consumer willingness to spend. If consumer confidence in their own financial situations 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 large purchase. This influences future consumer spending data and, therefore, can impact the financial markets. It is expected to show a reading of 81.0, meaning confidence was a bit stronger from September's level of 80.4. A decline would be considered favorable news for bonds and mortgage rates because waning consumer spending usually translates into slower economic growth.
Overall, Friday looks to be the most important day for mortgage rates due to the importance of the Retail Sales data and the fact multiple reports will be posted, but Tuesday could be active also following the long weekend and the release of the CPI. There is something that may affect mortgage rates scheduled each day this week, so it would be prudent to keep an eye on the markets if closing in the near future and still floating an interest rate.