Overview: With little news from geopolitical events or global central bankers, the main influence on mortgage rates over the past week was the recently released economic data. The data was mixed, however, and mortgage rates ended with little change.
The primary good news for mortgage rates in the recently released economic data is that inflation has been trending lower in recent months. In August, the core Personal Consumption Expenditures (PCE) Price Index was just 1.3% higher than a year ago, down from an annual rate of 1.4% in July and from 1.9% in February. This period of declining inflation has been one major factor contributing to current low mortgage rates.
Offsetting the tame PCE data, a couple of other important reports contained signs that were indicative of rising inflation in coming months. The Institute of Supply Management (ISM) conducts two surveys each month, which are viewed as key leading indicators of future economic activity and pricing pressures. The first measures the manufacturing sector, and Monday’s reading was the highest since May 2004. Similarly, Wednesday’s reading for the services sector was the highest since August 2005. This data caused investors to raise their outlook for future inflation, which was mildly negative for mortgage rates.
Looking ahead, the important monthly Employment Report will be released on Friday. This data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. The Retail Sales report and the Consumer Price Index (CPI) will be released on October 13. Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. CPI is a widely followed monthly inflation report that looks at the price change for goods and services that are purchased by consumers.