top of page

Manufacturing Rebounds, Inflation Dips

Overview: The economic data released over the past week again indicated that the recovery from the economic shutdown has been stronger than expected. Mortgage markets were relatively quiet, and rates remained close to record-low levels.


Following a period of weakness caused by the pandemic over the last couple of months, manufacturing activity has picked up considerably. The Institute for Supply Management (ISM) Manufacturing Index jumped from 43.1 to 52.6, which was above the consensus forecast and the highest level since April 2019. Readings above 50 indicate an expansion in the sector.

The reduced economic activity resulting from the partial shutdown to help slow the spread of the coronavirus has caused a decline in inflation, which has helped keep mortgage rates low. In May, the core Personal Consumption Expenditures (PCE) Price Index was just 1% higher than a year ago, which was the same annual rate of increase as last month. Core PCE is the indicator favored by the Federal Reserve, and officials have stated that their target level for annual inflation is 2%.

The minutes from the June 10 Fed meeting released on Wednesday repeated the message that the Fed will use all its available tools for as long as necessary to help support the economy. According to the minutes, most officials supported the use of asset purchases and “more explicit” forward guidance as the primary tools. The Fed expects that “highly accommodative monetary policy” will remain appropriate for many years..


ISM Manufacturing Index

Week Ahead

July 2 — Employment Report

July 2 — Mortgage markets closing early in observance of July 4

July 3 — Mortgage markets closed in observance of July 4

July 6 — ISM Services Index

bottom of page