Inflation Declines
- Mortgage Returns
- Jun 4
- 2 min read
Overview: News about tariffs again caused some volatility in mortgage markets over the past week, but its net effect was relatively small. The major economic data was weaker than expected overall, and mortgage rates ended the week a little lower.
With investors focused on inflation, the Personal Consumption Expenditures (PCE) Price Index — the favored indicator of Federal Reserve officials — carries a lot of weight each month. In April, core PCE was 2.5% higher than a year ago, slightly below expectations, and down from an annual rate of increase of 2.7% last month. This was the lowest reading since March 2021. Progress toward the 2% goal of the Fed remains challenging, and this target level has not been seen since February 2021. While the decline this month was encouraging, investors are watching closely to see if higher tariffs will exert upward pressure on future inflation levels.
Two other significant economic reports released this week by the Institute for Supply Management (ISM) fell short of expectations. The ISM Services Index dropped to 49.9, well below the consensus forecast of 52, and the lowest level since June 2024. The ISM Manufacturing Index declined to 48.5, also below the consensus forecast. Readings above 50 indicate an expansion in the sectors and below 50 indicate a contraction. While weakness was seen in both sectors this month, service companies continued to outperform manufacturers.
The latest Job Openings and Labor Turnover Survey (JOLTS) report, covering the month of April, was consistent with other indicators of labor market strength during that time period. At the end of April, there were 7.4 million job openings, well above the consensus forecast of 7.1 million. The ratio was about 1.03 openings for each available worker, in line with the levels seen prior to the pandemic. A larger number of openings suggests that companies face more pressure to raise wages to hire enough workers.
Core PCE (annual % change)
Week Ahead
June 5
U.S. International Trade in Goods and Services (aka Trade Deficit)
June 6
Employment Report
June 11
Consumer Price Index (CPI)
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