Overview: Mortgage markets were somewhat volatile over the past week. The upside and downside surprises in the major economic reports were nearly evenly divided, so they were roughly offsetting. The net effect was that mortgage rates ended the week a little lower.
The battle to bring down inflation has been the primary focus for Federal Reserve officials for the last few years, and the Personal Consumption Expenditures (PCE) Price Index is their favored indicator. In October, core PCE, which excludes food and energy to reduce short-term volatility, rose 0.3% from September, matching expectations. Notably, services prices increased 0.4% from August, while goods prices were flat. Core PCE was 2.8% higher than a year ago, up from an annual rate of increase of 2.7% last month. While far below its peak in early 2022, further progress toward the Fed’s 2% inflation target remains challenging, and this level has not been reached since February 2021.
Two other significant economic reports released this week by the Institute for Supply Management revealed mixed results. The ISM Services Index dropped to 52.1, far below the consensus forecast and the lowest level since February 2023. By contrast, the ISM Manufacturing Index unexpectedly rose to 48.4, but this still was its eighth straight month below 50. Since readings above 50 indicate an expansion in the sector and below 50 indicate a contraction, these reports continue to highlight that service companies have outperformed manufacturers over the last couple of years.
The Job Openings and Labor Turnover Survey (JOLTS) report released Tuesday suggested that conditions in the labor market may be tightening again. At the end of October, there were 7.7 million job openings, well above the consensus forecast of 7.5 million. A higher number of openings suggests that companies face more pressure to raise wages to hire enough workers, so this negative news on inflation was unfavorable for mortgage rates. However, the results were distorted by severe storms in the Southeast and two large labor strikes during the month, reducing the impact of the data.
Core PCE (annual % change)
Week Ahead
Dec. 6
Employment Report
Dec. 11
Consumer Price Index (CPI)
Dec. 12
Producer Price Index (PPI)
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