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Mortgage Market in Review – July 16, 2018

   

Market Comment

Mortgage bond prices finished the week lower which put upward pressure on rates.  Trade was negative Monday as stocks were stronger.  Producer prices rose 0.3% and the core value, which excludes the volatile food and energy components, also rose 0.3%. Economists expected both components to rise 0.2%. The cost to produce is rising and producers have two options, one is to raise prices and the other is to accept lower profits. If costs continue to rise at the producer level there is no doubt that consumer prices will eventually increase.  We ended the week worse by 1/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Retail Sales Monday, July 16,
8:30 am, et
Up 1.1% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
Industrial Production Tuesday, July 17,
9:15 am, et
Up 0.4% Important.  A measure of manufacturing sector strength.  A lower than expected increase may lead to lower rates.
Capacity Utilization Tuesday, July 17,
9:15 am, et
78% Important.  A figure above 85% is viewed as inflationary.  Weaker figure may lead to lower rates.
NAHB Housing Index Tuesday, July 17,
10:00 am, et
68.5 Moderately Important.  A measure of single family housing.  Weakness may lead to lower mortgage rates.
Housing Starts Wednesday, July 18,
8:30 am, et
1355K Important.  A measure of housing sector strength.  Weakness may lead to lower rates.
Fed “Beige Book” Wednesday, July 18
2:00 pm, et
None Important.  This Fed report details current economic conditions across the US.  Signs of weakness may lead to lower rates.
Weekly Jobless Claims Thursday, July 19,
8:30 am, et
227K Important.  An indication of employment.   Higher claims may result in lower rates.
Philadelphia Fed Survey Thursday, July 19,
10:00 am, et
20.1 Moderately important.  A survey of business conditions in the Northeast.  Weakness may lead to lower rates.
Leading Economic Indicators Thursday, July 19,
10:00 am, et
Up 0.2% Important.  An indication of future economic activity.  A smaller increase may lead to lower rates.

Retail Sales

Retail sales data is the first indication of weakness or strength in consumer spending released each month.  The Bureau of the Census of the US Department of Commerce provides information on how much the consumer spends on the purchase of goods.  This data provides the consumption part of the gross domestic product.  Retail sales data represents merchandise sold for cash or credit by retailers.  Durable goods, such as autos, make up 35% of the figure.  The balance consists of non-durables such as gasoline, restaurants, and general merchandise.  There are several drawbacks to the report.  The data covers purchases of goods only, not services.  It is also not adjusted for inflation and is extremely volatile.  Economists are concerned that the current economic uncertainty will curtail consumer spending.

 

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