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Consumer Spending Jumps

Overview: Light trading volume resulted in some volatility around Easter weekend, but mortgage rates ended the past week nearly unchanged. The recently released economic data for March revealed a rise in consumer spending, while the news from the housing sector was mixed.


Consumer spending accounts for about 70% of all economic activity in the U.S., and data from the monthly Retail Sales report is a primary indicator, making it one of the most highly anticipated reports each month. The report has been unusually volatile in recent months for a variety of reasons, such as the government shutdown and the size and issuance of this year’s tax refunds. Following a small decline in February, retail sales jumped 1.6% in March, which was far above the consensus forecast and the largest increase since September 2017. Even excluding the auto component, which often exhibits wide monthly swings, results were strong.

The latest housing sector data contained both positive and negative elements. In March, sales of previously owned (existing) homes, which make up about 90% of the market, fell more than expected from February and were 5% lower than a year ago. By contrast, sales of new homes, which make up the remaining 10% of the market, were a good deal stronger than expected and were at the highest level since November 2017. Finally, housing starts fell short of the consensus forecast in March, as single-family starts dropped to their lowest level since September 2016.

Week Ahead

Looking ahead, first quarter gross domestic product (GDP), the broadest measure of economic growth, will be released on Friday. The core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Federal Reserve, will come out on April 29. The next Fed meeting will take place on May 1. No change in rates is expected, and investors will be looking for guidance about future monetary policy. After that, the key Employment Report will be released on May 3. In addition, news about trade negotiations between the U.S. and China could affect mortgage rates.

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