Retail Sales Jump

May 16 2016

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The economic data released over the past week was generally better than expected. Strength was seen in retail sales, the labor market, and consumer sentiment. As a result, mortgage rates ended the week a little higher, but they remain near the best levels of the year. 

After a slow start to the year, Friday's report on retail sales went a long way to increase optimism about stronger economic growth during the second quarter. April retail sales, excluding the volatile auto component, jumped 0.8% from March, which was far more than expected. It was the largest monthly gain in nearly a year. The results for March also were revised higher. 

Despite what appeared to be a weak report on jobless claims, this week's labor market data was encouraging. A spike in jobless claims was seen, but this was due to a strike at Verizon. Nice gains were seen in the JOLTS report, which measures job openings and labor turnover rates. The JOLTS report helps to provide a broader picture of the performance of the labor market. Job openings in March increased to levels which were very close to record highs. The "quits rate" also was at levels consistent with a healthy labor market. Employees are more likely to voluntarily leave their jobs if they are confident that they will find a better job.

Looking ahead, Housing Starts, Industrial Production, and the Consumer Price Index (CPI), a widely followed monthly inflation report, will come out on Tuesday. CPI looks at the price change for goods and services which are sold to consumers. The Fed Minutes from the April 27 meeting will come out on Wednesday. These detailed minutes provide additional insight into the debate between Fed officials and have the potential to significantly move markets. Existing Home Sales will be released on Friday. 

Topics: The Money Source, mortgage news, consumer price index, economic data, economic growth, mortgage rates, housing starts, retail sales, jolts, industrial production, US labor market

Strong Job Gains

Mar 07 2016

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A wide range of major U.S. economic data was released over the past week covering the labor market, manufacturing, services, and housing. Overall, the data suggested that U.S. economic growth and inflation were a little stronger than expected. As a result, mortgage rates ended the week higher. 

Friday's Employment report showed that job gains remained strong. Against a consensus forecast of 190K, the economy added 242K jobs in February. Upward revisions to prior months added another 30K. The economy has added an average of 228K jobs per month over the last three months. The Unemployment Rate remained at 4.9%, as expected.

Average hourly earnings, an indicator of wage growth, declined slightly from January, well below the consensus for a modest increase. After a concerning rise in wages in January, the decline in February was good news for mortgage rates and partially offset the negative effect of the strong job gains.

The February ISM national manufacturing survey released on Tuesday indicated that things may be turning a little more positive for this sector. The survey rose to the best level in five months. For mortgage rates, one component of the survey was concerning. The prices paid component measures the change in the prices that manufacturers charge. In February, the survey on prices paid revealed a much higher reading than was expected, hinting at rising inflation. This follows significant increases in the recent broad-based monthly inflation measures. Mortgage rates are highly influenced by the outlook for future inflation. As inflation expectations rise, so do mortgage rates. 

Looking ahead, the biggest event next week will be the European Central Bank (ECB) meeting on Thursday. It is expected that the ECB will announce additional stimulus measures, which could include an expansion of its bond purchase program. Very little U.S. economic data will be released next week. Import Prices will come out on Friday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Topics: Ali Vafai, The Money Source, Correspondent Mortgage, employment report, economic growth

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