MARKET COMMENT
Mortgage bond prices finished the week higher which helped rates improve. We started the week on a positive note Monday only to see the market reverse course Tuesday morning. Producer prices remained unchanged and the core value, which excludes the volatile food and energy costs, rose 0.1%. Economists expected PPI to rise 0.3% and 0.2% respectively. The “cool” reading on PPI supports the Fed raising rates at a gradual pace. Weekly jobless claims were lower than expected. Consumer prices rose 0.2% as expected. Mortgage interest rates finished the week lower by approximately 1/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Retail Sales | Wednesday, Aug. 15, 8:30 am, et | Up 1.1% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| Preliminary Q2 Productivity | Wednesday, Aug. 15, 8:30 am, et | Up 0.4% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Industrial Production | Wednesday, Aug. 15, 9:15 am, et | Up 0.4% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Wednesday, Aug. 15, 9:15 am, et | 78% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Housing Starts | Thursday, Aug. 16, 8:30 am, et | 1180K | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Aug. 16, 8:30 am, et | 215K | Important. An indication of employment. Higher claims may result in lower rates. |
| Philadelphia Fed Survey | Thursday, Aug. 16, 10:00 am, et | 26 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Leading Economic Indicators | Friday, Aug. 17, 10:00 am, et | Up 0.4% | Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, Aug. 17, 10:00 am, et | 98 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
PRODUCTIVITY
Productivity is the rate at which goods or services are produced. It is most commonly defined in terms of labor, which is the contribution of people to the process. Labor costs represent about two thirds of the value of the output produced. The Bureau of Labor Statistics of the US Department of Labor releases the most widely cited productivity statistics quarterly and annually. Increased productivity is often credited for economic growth with little signs of inflation. Productivity is significant in that as it increases, businesses can produce more with the same or less input. This wealth building effect is vital to the US economy. As productivity increases, the US economy generally performs better. As productivity decreases, the economy generally performs better. As productivity decreases, the economy generally suffers. While the bond market generally favors signs of weakness in the economy, bonds tolerate growth as long as the economic environment shows little or no inflationary pressures.
