Daily Rate Lock Advisory

Indexes Affecting Rate Lock

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Consumer Price Index (CPI)

July's Consumer Price Index (CPI) early Tuesday morning is the first piece of data that we need to be concerned with and it is a major release. The CPI is one of the more important reports for the bond market each month, particularly with inflation such a hot topic at the moment. Forecasts show a 0.2% rise in the overall reading and a 0.3% increase in the more important core data that excludes volatile food and energy prices. Annual readings are expected to rise from June’s pace. Good news for mortgage rates would be weaker than predicted readings. This would also all but guarantee a Fed rate cut next month. However, stronger inflation readings would put the Fed in a more difficult position after July’s Employment report earlier this month showed the other half of their dual mandate (maximum employment) was much softer than thought.

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Fed Talk

Wednesday doesn’t have any relevant economic data scheduled, but there are three Fed-member speeches scheduled during business hours. These speeches are often monotonous, partly because many of them have topics unrelated to mortgage rates such as banking guidelines, technology and community lending. That said, after we saw the FOMC divided by two dissenting votes last month for the first time since 1993, followed by a surprisingly weak Employment report the same week, these speeches will draw more attention than usual as traders look to predict what will happen at September’s FOMC meeting. Even if the listed topic doesn’t appear to be related to monetary policy, answers to questions during their speaking engagements could draw a reaction in the markets. These speeches are happening throughout the week, with some days having more than one scheduled.

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Producer Price Index (PPI)

We get back to the release of highly important data Thursday morning when July's Producer Price Index (PPI) is posted at 8:30 AM ET. It will give us an important measure of inflationary pressures at the wholesale level of the economy instead of the consumer level. As with the CPI, analysts are predicting an increase of 0.2% in the overall index and a rise of 0.3% in the core data for July. Good news for rates should be softer readings both monthly and annually. The markets are expecting the Fed to make a rate cut at their September FOMC meeting. Unexpected strength in this week's inflation numbers could alter that theory and lead to a large increase in mortgage pricing.

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Retail Sales

The week’s calendar closes Friday with three pieces of data, including another major release. The report drawing the most attention Friday will be July's Retail Sales at 8:30 AM ET that tracks consumer spending. This category makes up over two-thirds of the U.S. economy, so analysts pay close attention to related data. Forecasts have sales rising 0.5%, indicating consumers spent more last month than they did in June. Because this category is a key part of the overall economy and bonds tend to thrive in softer economic conditions, weaker sales would be good news for bonds and mortgage rates.

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Industrial Production

Also set for a Friday morning release is July's Industrial Production report that measures output at U.S. factories, mines and utilities. The 9:15 AM ET release is expected to show a 0.1% decline from June's level. A larger decline would be considered good news for bonds and mortgage rates because it would signal manufacturing sector weakness. Broader economic growth is much more difficult when manufacturing activity is slipping.

Medium

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Univ of Mich Consumer Sentiment (Prelim)

The last release of the week will come from the University of Michigan late Friday morning. Their Index of Consumer Sentiment for August will give us an indication of consumer confidence that projects consumer willingness to spend. If consumer confidence in their own financial and employment situations are rising, they are more apt to make large purchases in the near future. On the other hand, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 62.2 that would mean confidence is a little stronger this month than July's level of 61.7. Good news for mortgage rates would be a sizable decline.

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Overall, Tuesday is the most important day for mortgage rates due to the significance consumer inflation data carries in the markets. The calmest day may be Wednesday as long as none of the Fed speeches yield any surprises. We should see noticeable movement in the bond market and mortgage pricing this week, so it would be prudent to proceed cautiously if still floating an interest rate and closing in the near future.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

Consumer Price Index (CPI)

Fed Talk

Producer Price Index (PPI)

Retail Sales

Industrial Production

Univ of Mich Consumer Sentiment (Prelim)

none

Float / Lock Recommendation