As predicted yesterday, mortgage rates trend reversal from higher to lower lasted just one day. Analysts forecasted that retail sales figures released this morning would show strength. In fact, preliminary estimates had retail sales rising at their fastest pace in six months. When the figures were released at 8:30 AM this morning, the results were even stronger than expected, indicating the fastest pace of growth in seven months. This is bad news for current mortgage rates as it provides clear evidence of accelerating growth in the US economy.
The second economic report of the day—import prices, also had a surprise in store for analysts. This measure of the relative cost of goods imported from outside the US was expected to show a second consecutive monthly drop, yet rose to a sharp increase, the biggest in five months. While this surprise is quelling the rise in mortgage rates today as a sign that inflation may be a hurdle to further economic growth, it will not likely last in that capacity. Rising inflation generally has the effect of pushing rates higher as well over time.
The third and final economic report of the day—consumer confidence, also contains information that has the tendency to push rates upward. The consumer confidence index rose last month after reaching its lowest level in more than thirty years last month. While still in abysmal territory, consumer confidence is likely to rise further this month as the stock market has rallied, the jobs picture has improved ever so slightly and retail sales have spiked. Can you say retail therapy?
The leaders of the G20 group of most industrialized nations are meeting in Paris today and tomorrow and have plenty to discuss. First on the agenda will be the response of Europe to the debt and banking crisis that starts with Greece but is now firmly impacted by declining economies is Italy and Spain. Adding to the tension will be news that Standard and Poor’s has cut their rating on the debt of Spain by one notch. News from this meeting will likely impact mortgage rates on Monday.
Next week will deliver news from Europe and a great deal of US economic data including inflation, manufacturing and housing figures.
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