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Europe and China Worry Investors
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Concerns about the pace of global economic growth were positive for mortgage rates over the past week. Friday's key employment data caused some volatility, but had little net effect. Mortgage rates ended the week lower.
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The news released over the past week caused investors to reduce their outlook for economic growth in Europe and China. On Tuesday, the European Commission, the executive body of the European Union, cut its growth forecast for the eurozone for 2016 and 2017. The data from China released on Tuesday also was disappointing. China's PMI manufacturing index fell more than expected to a level which suggests that the sector is contracting. When global economic growth slows, it reduces the outlook for future inflation, which is positive for mortgage rates.
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The most highly anticipated economic report of the month contained just minor surprises. Against a consensus forecast of 200K, the economy added 160K jobs in April, which was the lowest level since September 2015. Downward revisions to prior months subtracted 19K. Strength was seen in health
care, while the retail sector was weak.
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The unemployment rate remained at 5.0%. Average hourly earnings, an indicator of wage growth, were 2.5% higher than a year ago. The weakness in job gains was offset by the strength in the wage data, and the report caused little change in mortgage rates.
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Looking ahead, additional labor market data in the JOLTS report will be released on Tuesday. JOLTS measures job openings and labor turnover rates. The report on retail sales will be released on Friday. Consumer spending accounts for about 70% of economic output in the U.S., and the retail sales data is a key indicator. The producer price index (PPI) inflation data also will come out on Friday. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.
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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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