MARKET COMMENT
Mortgage bond prices finished the week slightly positive which helped rates remain favorable. The Case-Shiller 20-City Index showed housing prices rose 5.7% as expected. Housing has been a bright spot in the economy showing steady gains. Consumer confidence printed at 122.9, better than the expected 120.3 reading. ADP payrolls data was stronger than expected. The US economy grew at a 3% pace in Q2/2017. Economists expected GDP to increase 2.7%. Personal income rose 0.4% as expected. Spending increased 0.3% versus the expected 0.5% increase. Core PCE prices rose 0.1% as expected. Weekly jobless claims were 236K versus the expected 240K. Unemployment was 156K versus the expected 173K with an unemployment rate of 4.4% versus the expected 4.3%.
We ended the week better by approximately 1/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Factory Orders | Tuesday, Sept. 5, 10:00 am, et |
Up 0.8% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Trade Data | Wednesday, Sept. 6, 8:30 am, et |
$43.5B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Fed “Beige Book” | Wednesday, Sept. 6, 2:00 pm, et |
None | Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Sept. 7, 8:30 am, et |
235K | Important. An indication of employment. Higher claims may result in lower rates. |
| Revised Q2 Productivity | Thursday, Sept. 7, 8:30 am, et |
Up 0.8% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| PCE Core Inflation | Thursday, Sept. 7, 3:00 pm, et |
$13B | Low importance. A significantly large increase may lead to lower mortgage interest rates. |
TRADE DATA
In the distant past the US economy tended to be viewed as relatively unaffected by economic activity in other countries. However, increased trades with other countries and an increased reliance on foreign purchases of US debt have generated a market awareness of trade-related issues. The exchange rate of the dollar and foreign trade flows are interrelated. One must buy dollars to purchase US exports, and sell dollars to buy imports. Likewise, foreign investment in US debt requires the purchase of US dollars, and is thus affected by exchange rates.
Each month the Commerce Department gathers an enormous amount of detailed data on exports and imports. The data is broken between goods and services trade. The overall trade balance is the dollar difference between US exports and imports on a seasonally adjusted basis. The report also highlights trade flows between the US and various partners. Since the mid-1970’s, US imports of consumer and capital goods have exceeded exports, so a merchandise trade deficit has existed. The US has always maintained a service trade surplus, and because this surplus is not enough to offset the merchandise trade deficit, a net export deficit has resulted.
Due to the overwhelming amount of data considered, trade is difficult to forecast, and can present surprises. For a variety of reasons, the financial markets will often be unaffected by surprises in trade data. However, the data still has the ability to cause mortgage interest rate volatility.
Rates remain historically very favorable. Now is a great time to take advantage of these levels.
