Overview: While mixed economic data caused some volatility over the past week, it had little net effect, and mortgage rates ended just slightly higher.
Since consumer spending accounts for over two-thirds of all economic activity in the U.S., the retail sales data is a key indicator of growth each month. In June, retail sales rose a solid 0.4% from May, which was above the consensus forecast for an increase of just 0.2%. With three straight months of comparable readings, consumer spending is expected to be a source of strength in the report on second-quarter gross domestic product (GDP) growth, which will be released near the end of the month.
The news was from the housing sector released this week was mixed. As expected, June housing starts posted a small decline from May due to weakness in the multi-family segment, but single-family starts increased 3.5%. Building permits dropped 6% from May to the lowest level since May 2017, but again, this was entirely due to multi-family units. Builders pointed to rising costs and land and labor shortages as obstacles to a faster pace of construction.
The latest data revealed that inflation remained very close to the levels seen for the past year. In June, the core Consumer Price Index (CPI), which excludes the volatile food and energy components, was 2.1% higher than a year ago, up from an annual rate of increase of 2.0% last month.
Looking ahead, the Existing Home Sales report will be released on July 23, followed by the New Home Sales report on July 24. Second-quarter GDP, the broadest measure of economic growth, will come out on July 26. The next Federal Reserve meeting will take place on July 31. In addition, news about ongoing trade negotiations could influence mortgage rates.