![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week higher which put downward pressure on rates. Trading was positive most of the week with the only weakness occurring around the producer price index release at the end of the week. Strong improvements followed the weak CPI figures Thursday. Fed Chair Powell delivered his semi-annual testimony to Congress and indicated inflation was moving toward the Fed’s 2% goal while the labor market remained solid. He stated that the risks to the economy are “better balanced” and warned that pivoting too soon could reignite inflationary pressures. He would not speculate on when the Fed will pivot. Mortgage interest rates finished the week better by approximately 3/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
|---|---|---|---|
| Retail Sales | Tuesday, July 16, 8:30 am, et | Unchanged | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Business Inventories | Tuesday, July 16, 10:00 am, et | Up 0.3% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
| NAHB Housing Index | Tuesday, July 16, 10:00 am, et | 44 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Wednesday, July 17, 8:30 am, et | 1.31M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Industrial Production | Wednesday, July 17, 9:15 am, et | Up 0.3% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization | Wednesday, July 17, 9:15 am, et | 78.6% | Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. |
| Fed “Beige Book” | Wednesday, July 17, 2:00 pm, et | None | Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, July 18, 10:00 am, et | 12.1 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Leading Economic Indicators | Thursday, July 18, 10:00 am, et | Down 0.3% | Important. An indication of future economic activity. Weakness may lead to lower rates. |
Mixed Inflation
The Consumer and Producer Price Indices showed divergent snapshots of inflation last week. The CPI release was weaker than expected while the PPI figure was higher than expected. CPI fell 0.1% vs the expected 0.1% increase. Core CPI rose 0.1% vs 0.2%. In contrast, PPI rose 0.2% vs 0.1% and the core rose 0.4% vs 0.2%. Core readings factor out volatile food and energy prices. The data always has the potential to vary since the CPI numbers factor in a service component while the PPI numbers do not.
PPI can be a leading indicator of upcoming CPI price increases. However, sometimes producers absorb the higher costs for some time before passing the increases to consumers. The varied reports leave us with uncertainty heading into the week ahead. The Fed needs continued indications that inflation is subdued before they will pivot toward lower rates.
