Overview: Economic data released over the past week had little impact, taking a back seat to negotiations on trade deals with Mexico and Canada, which put pressure on mortgage rates. As a result, rates ended the week a little higher.
Having previously declared an intention to terminate the North American Free Trade Agreement (NAFTA), the Trump administration announced on Monday that a new trade agreement had been reached, but only with Mexico. Negotiations are still underway with Canada. These countries are two of the top three trading partners with the U.S. In recent months, concerns about an escalation in tensions that could lead to a full-blown trade war caused investors to shift to relatively safer assets, including U.S. mortgage-backed securities. The news about renegotiating NAFTA with Mexico and Canada resulted in a partial reversal of this trend, which was negative for mortgage rates.
In other news, consumer confidence reached its highest level since 2000, according to data released Tuesday by The Conference Board. The monthly Consumer Confidence Index is based on a survey that measures sentiment on current economic conditions and prospects for the next six months, and Tuesday’s report revealed that consumer confidence jumped far more than expected over the past month. It appears that a strong job market, a healthy economy, and a stock market near record highs outweighed concerns about trade policy. This data provides a solid reason to be optimistic that consumer spending will remain strong in coming months.
The one glaring fault in an otherwise solid economic expansion remains the housing market. The data released over the past week showed unexpected declines in July in contracts signed to purchase both existing and new homes. However, nearly all economists agree that a lack of inventory, particularly at the lower end of the market where demand is the greatest, is the primary cause for slowing home sales this year.
Looking ahead, the core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will be released on Thursday. The Institute for Supply Management (ISM) Manufacturing Index will come out on September 4, followed by the ISM Services Index on September 6. The next key Employment Report will be released on September 7. In addition, news about trade deals could influence mortgage rates.