Shutdown Delays Data
- Mortgage Returns
- Oct 8
- 2 min read
Overview: The government shutdown left investors without some major economic reports over the past week, leaving mortgage markets relatively quiet. The latest economic data collected by private companies caused little reaction. As a result, mortgage rates ended the week down slightly, near their lowest levels of the year.
Historically, government shutdowns have had little lasting impact on mortgage markets. One obvious short-term effect is the delay in the release of economic reports from government agencies, such as closely watched labor market and inflation indicators. Not surprisingly, the decrease in economic news has resulted in reduced volatility in mortgage rates, since most market movement occurs in response to the release of data. The government has also stopped collecting data, which may cause some investors to question the accuracy of the delayed reports for October. In the meantime, private companies provide a decent amount of labor market data, but they offer little guidance about inflation.
The one significant economic report released this week by the Institute for Supply Management (ISM) fell short of expectations. The ISM Services Index fell to 50, well below the consensus forecast of 52, reaching the lowest level since May. Readings above 50 indicate an expansion in the sector, and readings below 50 indicate a contraction. Since services account for over three-quarters of U.S. economic activity, this reading at the neutral level is a concerning sign for future economic growth.
At the last meeting on September 17, the Federal Reserve reduced the federal funds rate by 25 basis points, as expected. The detailed minutes from that meeting released on Wednesday revealed that nearly all officials were strongly inclined to ease monetary policy due to weakness in the labor market. The primary area of disagreement concerned how many additional rate cuts to make this year, with officials almost evenly split between one or two. Likewise, investors are now nearly certain that there will be at least one additional 25 basis-point rate cut, but only about half anticipate a second one before the end of the year.
ISM Services Index
Week Ahead
Investors will continue to monitor comments from government and Fed officials about tariffs and monetary policy changes. For economic reports, the government shutdown means that it will likely be a very light week with no major economic data.
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