From Stuart Crawford at V.I.P. Mortgage:
Over the past week, a batch of weaker than expected economic reports more than offset a higher than expected inflation reading. As a result, mortgage rates ended the week just a tad lower.
Recent economic data has suggested that the pace of economic growth in the U.S. is slowing. Retail Sales (excluding the volatile auto component) unexpectedly declined in September, and the August results were revised downward as well. Accounting for about 70% of economic activity, retail sales are an important indicator of economic activity. In addition, job openings declined and the Philly Fed manufacturing index fell short of the consensus. Comments from the Fed did not improve the outlook either. The Fed's Beige Book reported that economic growth in recent weeks was "modest" and that wage gains were "mostly subdued."
Slower growth should reduce inflationary pressures, but the September core consumer price index (CPI), which excludes food and energy, rose 1.9% for the year, up from 1.8% in August. This was the highest reading since July 2014. The inflation rate is a key factor in the Fed's decision about raising the federal funds rate. Fed officials will be watching to see if this is the start of an upward trend. IF it actually is, we could be closer to a rate hike. It really is still anyone’s guess as to when the rate hike will ACTUALLY happen.
This week we have a light economic calendar, with most the data around housing. The NAHB builder sentiment index was released this morning, and builder confidence is slightly higher than expected. Later in the week we will have readings on Housing Starts and Existing Home Sales.
Stuart can be reached at 480.776.2954