MARKET COMMENT
Mortgage bond prices finished the week near unchanged which kept rates flat. There were very few economic releases early in the week. The Fed Beige Book indicated, “economic growth downshifted slightly to a moderate pace in early July through August. All Districts continued to report rising employment overall, and inflation was reported to be steady at an elevated pace, as half of the Districts characterized the pace of price increases as strong, while half described it as moderate. Several Districts indicated that businesses anticipate significant hikes in their selling prices in the months ahead.” Weekly jobless claims were 310K vs 337K. Producer prices rose 0.7% vs 0.6%. The core, which excludes food and energy prices, rose 0.6% vs 0.5%. Mortgage interest rates finished the week with discount points almost unchanged.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Consumer Price Index | Tuesday, Sept. 14, 8:30 am, et | Up 0.4%, Core up 0.3% | Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates. |
| Industrial Production | Wednesday, Sept. 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, Sept. 15, 9:15 am, et | 76.3% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Sept. 16, 8:30 am, et | 345K | Important. An indication of employment. Higher claims may result in lower rates. |
| Philadelphia Fed Survey | Thursday, Sept. 16, 8:30 am, et | 33.1 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Retail Sales | Thursday, Sept. 16, 8:30 am, et | Down 0.7% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| U of Michigan Consumer Sentiment | Friday, Sept. 17, 10:00 am, et | 70.2 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
CONSUMER PRICE INDEX
The Consumer Price Index is widely accepted as the most important measure of inflation. The CPI is a measure of prices at the consumer level for a fixed basket of goods and services. The National Statistics Office and the Bureau of Agricultural Statistics of the Department of Agriculture collect price data for the computation of the CPI. Since it is an index number, it compares the level of prices to a base period. By comparing the level of the index at two different points in time, analysts can determine how much prices have risen in that period.
Unlike other measures of inflation, which only factor domestically produced goods; the CPI takes into account imported goods as well. This is important due to the ever-increasing reliance of the US economy upon imported goods. Analysts primarily focus on the core rate of theCPI which factors out the more volatile food and energy prices. Oil prices are always a concern from an inflation perspective. Inflation, real or perceived, erodes the value of fixed income securities such as mortgage bonds.
