January 11th, 2009 7:10 PM by Lehel Szucs
This week brings us the release of five pieces of economic data to digest. There is no relevant data scheduled for release tomorrow or Tuesday, but there is very important data scheduled for release each of the three remaining days.
December's Retail Sales data is the first important data and it comes early Wednesday morning. This Commerce Department report measures consumer spending by tracking sales at retail establishments in the U.S. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts are calling for a decline in sales of approximately 1.1%. A larger drop would be good news for bonds and mortgage rates.
The second report of the week will be released by the Labor Department early Thursday morning. They will post the Producer Price Index (PPI) then, which helps us measure inflationary pressures at the producer level of the economy. Rapidly rising prices raises inflation concerns and leads to mortgage rate increases. If it reveals weaker than expected readings, especially in the core data that excludes more volatile food and energy prices, the bond market should fair well. Current expectations are calling for a 1.9% drop in the overall reading and a 0.1% increase in the core data.
There are three relevant reports on the agenda for Friday. The first is December's Consumer Price Index (CPI). This is also one of the most important monthly reports that we see since it measures inflationary pressures at the consumer level of the economy. It is very similar to Thursday's Producer Price Index (PPI), but is considered to be of higher importance since it tracks consumer prices. The overall index is expected to fall 1.0% while the core data is expected to increase 0.1%. Weaker than expected readings should lead to bond improvements and lower mortgage rates Friday.
December's Industrial Production report is the second report to be posted Friday. It will be released at 9:15 AM ET and measures output at U.S. factories, mines and utilities. This gives us a good indication of manufacturing sector strength or weakness. Current forecasts are calling for a decline of 0.8% from November's production. A larger than expected drop would be good news and should lead to lower mortgage rates Friday as long as the CPI doesn't reveal any surprises.
The final report of the week is January's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates. Good news would be if it shows a reading weaker than the 60.0 that is expected. However, it is the week's least important of the five releases and probably will have little impact on Friday's mortgage rates due to the importance of the CPI and production reports.
Overall, Wedn esday, Thursday or Friday may end up being the most important day of the week. The single most important report is the CPI, but the PPI and Retail Sales reports are also considered to be of high importance and can heavily influence the markets. Therefore, I strongly recommend maintaining contact with your mortgage professional, especially the latter part of the week.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
©Mortgage Commentary 2009