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Stocks Fall, Rates Improve
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Concern about the pace of global economic growth was bad for stocks and good for mortgage rates over the past week. Weaker than expected U.S. economic data also was positive for mortgage rates, which ended the week lower.
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Investors have grown more concerned that economic growth, particularly in China, will slow more rapidly than expected. In recent years, China has been responsible for a significant share of global economic growth, and changes in China's performance are felt in many countries. As a result, stock markets around the world posted another week of large declines. For mortgage rates, slower growth is positive since it reduces the outlook for inflation.
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Weaker than expected U.S. retail sales data released on Friday also was positive for mortgage rates. In December, retail sales, excluding the volatile auto component, posted a slight decline from November. The consensus forecast was for a modest increase. Consumer spending accounts for about 70% of economic activity, making the retail sales data one of the most important reports each month.
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While the shortfall in retail sales as compared to the consensus was good news for mortgage rates, the fact that retail sales have been somewhat low in recent months is not totally due to slowing economic activity. To some degree, the retail sales figures are simply the result of a nice decline in the cost that consumers have to pay for the items they purchase.
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Looking ahead, the NAHB Housing confidence index will be released on Tuesday. Housing Starts and CPI will come out on Wednesday. The Consumer Price Index (CPI) is the most closely watched monthly inflation report, and it looks at the price change for finished goods which are sold to consumers. Existing Home Sales will be released on Friday. Mortgage markets will be closed on Monday in observance of MLK Day.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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