October 11, 2012 by Leave a comment

Mortgage rates today are ticking higher as investors and traders react to better than expected jobless claims numbers.  Also contributing to the increase however is data that suggests that inflation may be increasing as well.

Analysts and economists had been expecting 370,000 new applications for unemployment benefits but the total reported fell to a four year low of 339,000. But as I remind readers of this blog weekly it’s never this week’s reported number that matters but the revision to last week’s number that counts.  And once again, keeping their 99% streak intact, last week’s number was revised higher than what was reported a week ago.  Consequently, there is very little reason to expect anything different next week.  On top of that a government official was quoted as saying that this week’s preliminary drop was primarily based on results from one large state.

Those that question the economic data that is issued by this administration have taken a beating over the past week.  Yet when you combine the almost universal misreporting of the weekly jobless claims number, it is not an illogical leap to believe the results of the monthly job creation report to be dubious as well.

Perhaps more concerning relative to mortgage rates today, is the report of significantly higher import prices.  Expectations were for import prices to rise by .7%.  The actual reported increase was substantially higher however at 1.1%.  While we have not witnesses previous increases in import prices to impact overall inflation in the US in the recent past, it is only a matter of time before those higher prices simply have to be passed along to users and buyers in the US.  Rising inflation is the kiss of death for low mortgage rates and would severely compromise the ability of the Federal Reserve to continue its aggressive stimulus through mortgage-backed securities purchases.

Next week we will get the latest reports of producer and consumer prices.  These reports will be crucial to the return of mortgage rates to record lows.

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