Market Comment
Mortgage bond prices finished the week higher which pushed rates lower. Most of the economic data was weaker than expected. New home sales were 511K. Analysts looked for sales of 520K. Q1 GDP rose 0.5% versus the expected 0.7% increase. Personal income rose 0.4% versus the expected 0.3% increase. Outlays rose 0.1%, expected up 0.2%. Core PCE inflation rose 0.1% and the employment cost index rose 0.6% both as expected. The Fed kept rates unchanged and indicated they expect economic conditions to improve which will require “gradual” rate increases. Higher oil prices tempered some of the rate improvements. Weekly jobless claims were better than expected with a reading of 257K which also worked against us. Mortgage interest rates still finished the week better by approximately 1/8 to 1/4 of a discount point.
Productivity Productivity is the rate at which goods or services are produced. It is most commonly defined in terms of labor, which is the contribution of people to the process. Labor costs represent about two thirds of the value of the output produced. The Bureau of Labor Statistics of the US Department of Labor releases the most widely cited productivity statistics quarterly and annually. Increased productivity is often credited for economic growth with little signs of inflation. Productivity is significant in that as it increases, businesses can produce more with the same or less input. This wealth building effect is vital to the US economy. As productivity increases, the US economy generally performs better. As productivity decreases, the economy generally suffers. While the bond market generally favors signs of weakness in the economy, bonds tolerate growth as long as the economic environment shows little or no inflationary pressures. Keep in mind that rates remain very favorable. Now is a great time to avoid the uncertainty surrounding continued market volatility.
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