With a focus on the upcoming inflation data reports with CPI and PPI this week, the previous week was very light on data. The only relevant reports released were the non-farm payroll and U.S. trade balance data releases.

Job reports are showing robust hiring numbers and the trade balance remains within expectations. There appears to be to not much to fear coming from this next round of inflation data. Lending partners are reflecting this sentiment as they continue to cut rates.

Non-farm Payrolls

The economy created a greater-than-expected 275,000 new jobs in February, in a seemingly bullish display that could complicate the Federal Reserve’s decision on when to cut U.S. interest rates. Economists surveyed by the Wall Street Journal had predicted a 198,000 increase in new jobs last month.

U.S. Trade Balance

The U.S. international trade deficit widened 5.1% in January to $67.4 billion, the Commerce Department said Thursday. It is the largest trade gap since April 2023; the widening was larger than expected. Economists surveyed by The Wall Street Journal had predicted the deficit would widen to a seasonally adjusted $63.4 billion from the initial estimate of a deficit of $62.2 billion in June.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease by -0.04% with the current rate at 6.22%
• 30-Yr FRM rates saw a decrease by -0.06% with the current rate at 6.88%

MND Rate Index

• 30-Yr FHA rates are seeing a -0.19% decrease for this week. Current rates at 6.38%
• 30-Yr VA rates are seeing a -0.17% decrease for this week. Current rates at 6.40%

Jobless Claims

Initial Claims were reported to be 217,000 which was right in line with expectations. The prior week landed at 217,000.

What’s Ahead

Upcoming we have the Consumer Price Index and Producer Price Index releases for next week; there will not be many other releases.

A number of important consumer related data reports were released last week, giving us a clearer picture on inflation impacts and the state of the economy on a broader scale. First up, looking at the First Revision of GDP numbers, we are seeing they had fallen slightly below expectations, but still showing the economy has not deflated at all as of the result of the prior years’ repeated rate hikes.

With inflation trending down, this makes for a convincing argument that rate cuts are due this year. This also sets the stage for the official consumer confidence reports, revealing mounting anxiety regarding the political climate of the nation, marking the first decline in four months.

Next up, PCE and Personal Income spending has shown that in a number of areas, inflation is still impacting a number of factors for the consumer and general cost of living. Personal spending was expected to slow, but the slowing has been more impactful than anticipated. Despite this, across lending partners and markets alike, there is a consensus that rate cuts are highly likely.

GDP (First Revision)

The growth rate of the U.S. economy in the fourth quarter was downgraded slightly to a 3.2% annual pace, but the economy continues to grow swiftly and is showing few signs of slowing down. Originally, the government said gross domestic product had expanded at a 3.3% rate in the final three months of 2023. The figure is adjusted for inflation.

Consumer Confidence

Consumer confidence retreated in February from a six-month high, partly due to the angst surrounding the U.S. presidential election. The closely followed index fell to 106.7 from a revised 110.9 in January, the Conference Board said Tuesday. It was the first decline in three months.

PCE Index

Inflation rose in January at the fastest pace in four months, based on the Federal Reserve’s preferred PCE gauge, in a sign price pressures might not return to low pre-pandemic levels as quickly as hoped.

The PCE index rose 0.3% last month, the government said Wednesday. That matched the forecast of economists polled by The Wall Street Journal.

Consumer Spending

Consumer spending in the U.S. got off to a slow start in the new year, perhaps a hangover from a big holiday shopping season. Household outlays increased by a mere 0.2% last month, the government said Thursday. It was the smallest increase in three months.

Pending Home Sales Report

Pending home sales fell 4.9% in January as rising mortgage rates pushed buyers out of the housing market, according to the monthly index released Thursday by the National Association of Realtors (NAR).

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.03% with the current rate at 6.26%
• 30-Yr FRM rates are seeing an increase by 0.04% with the current rate at 6.94%

MND Rate Index

• 30-Yr FHA rates are seeing a -0.07% decrease for this week. Current rates at 6.57%
• 30-Yr VA rates are seeing a -0.10% decrease for this week. Current rates at 6.57%

Jobless Claims

Initial Claims were reported to be 215,000 compared to the expected claims of 210,000. The prior week landed at 202,000.

What’s Ahead

This upcoming week, we have the non-farm payrolls which indicates how much payroll increases have kept up with inflation. Along with that is the Federal Reserve’s Beige Book and U.S. Trade Balance, which has been in a deficit for some time; although the broader impact on the economy has not yet been determined by this.

A government holiday followed by an extremely light release schedule has led to a limited amount of data, with the FOMC Minutes being the only impactful report for the prior week. The Federal Reserve had stated they will continue to maintain their current stance in light of the most recent inflation data. With rates holding into the year, as a result, lending partners have started back tracking some of their recent rate cuts. Lastly, Unemployment Numbers are seen to be well within expectations.

FOMC Minutes

“Most” officials noted the risks of moving too quickly to cut rates and wanted to carefully assess the data for more progress on inflation, the minutes said.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase by 0.17% with the current rate at 6.29%
• 30-Yr FRM rates saw an increase by 0.13% with the current rate at 6.90%

MND Rate Index

• 30-Yr FHA rates are seeing a -0.01% decrease for this week. Current rates at 6.64%
• 30-Yr VA rates are seeing a -0.03% decrease for this week. Current rates at 6.67%

Jobless Claims

Initial Claims were reported to be 201,000 compared to the expected claims of 216,000. The prior week landed at 213,000.

What’s Ahead

There is a slate of quarterly reports due next week, which will help understand the current conditions. With the Federal Reserve’s current stance on cutting rates any time soon, it seems unlikely many of those reports will have any significant impact. We should expect Consumer Confidence reports, first revision of GDP numbers, and PCE along with PMI numbers that will let us know the current state of manufacturing and trade deficits.

Last week’s release of CPI and PPI resulted in slightly higher than expected inflation rates which led to speculation that the Federal Reserve’s decision to cut rates will likely come much further in the year than anticipated. There was some suspicion that if inflation rates would continue to exceed predictions, it could result in another rate hike. Lending partners have responded in kind with the first significant increase in lending rates since the end of November. However, The Federal Reserve will likely maintain its current stance. 

Other reports such as US Retail Sales are showing a drop, but this is contrasted by the Consumer Sentiment reports which show an opposite effect — with the economic landscape showing an overall declining inflation rate and strong job market.

Consumer Price Index

Consumer prices rose a sharper-than-expected 0.3% in January and the rate of inflation remained stuck above 3% — a small but possibly temporary setback in the Federal Reserve’s fight against inflation.

The consumer price index was forecast to rise 0.2% by economists polled by The Wall Street Journal. The yearly rate of inflation slipped to 3.1% from 3.4% in the prior month. It hasn’t been below 3% since March 2021.

Producer Price Index

Wholesale costs rose in January at the fastest pace in five months, possibly another sign that inflation won’t slow toward the Federal Reserve’s 2% target as fast as hoped.

The producer-price index rose 0.3% last month, a considerably stronger increase than the 0.1% forecast from economists polled by the Wall Street Journal.

Consumer Sentiment Report

The numbers: Consumer sentiment crept up in early February to a 31-month high, fueled by slowing inflation and a strong job market. The first of two readings of the sentiment survey this month rose to 79.6 from 79.0 in January, the University of Michigan said Friday. That’s the highest reading since July 2021.

U.S. Retail Sales

Sales at retailers fell 0.8% in January to mark the biggest drop in 10 months, indicating that Americans took a timeout after a flush of spending during the holiday season.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase by 0.22% with the current rate at 6.12%
• 30-Yr FRM rates saw an increase by 0.13% with the current rate at 6.77%

MND Rate Index

• 30-Yr FHA rates are seeing a 0.36% increase for this week. Current rates at 6.65%
• 30-Yr VA rates are seeing a 0.41% increase for this week. Current rates at 6.70%

Jobless Claims

Initial Claims were reported to be 212,000 compared to the expected claims of 220,000. The prior week landed at 220,000.

What’s Ahead

Next week we should be expecting a number of speakers from the Federal Reserve discussing the current state of the economy, PCE Index data releases being the largest releases with minor releases in Advanced Retail Inventory numbers which should indicate the state of consumer spending.

This week is the release of Core CPI and PPI numbers for January. The only data release of note is the trade deficit and the usual unemployment reports for the prior week. The current trade deficit for the U.S. is operating precisely within expectations and correlating GDP numbers. This current week will provide further guidance for the Federal Reserve as the next release of inflation data is released.

U.S. Trade Deficit

The U.S. trade deficit rose slightly in December, but the annual gap still fell to the lowest level in three years and added to the economy’s strong performance in 2023.

Record deficits in 2021 and 2022, by contrast, acted as a big drag on gross domestic product, the official scorecard of the U.S. economy.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease by -0.04% with the current rate at 5.90%
• 30-Yr FRM rates saw a decrease by 0.01% with the current rate at 6.64%

MND Rate Index

• 30-Yr FHA rates are seeing a -0.05% decrease for this week. Current rates at 6.22%
• 30-Yr VA rates are seeing a -0.06% decrease for this week. Current rates at 6.24%

Jobless Claims

Initial Claims were reported to be 218,000 compared to the expected claims of 220,000. The prior week landed at 227,000.

What’s Ahead

Core CPI and Core PPI numbers are the primary reports being released this week. Given the Federal Reserve hesitation to move on any pending rate cuts, each release of inflation data that goes well, further adds conviction the Federal Reserve will soon be looking to cut rates after a satisfactory period.

It was an uneventful week for the data reports, as the majority of the interest waits for the Federal Reserve’s rate decision heading into the following week. One of the most notable reports is for New Home Sales, which had managed to greatly exceed the projections for the end of the year moving into January. It is an early sign that there is a surge in response to the week-to-week rate cuts we have been observing over the last two weeks.

The second largest data reports come from the PCE Index and preliminary projections for the Q1 GDP statistics. It is expected that the Federal Reserve’s decision to hold the current rate will hold true, but there is some optimism that a small rate cut may be a possibility.

Pending Home Sales

U.S. pending home sales shot up in December as falling mortgage rates brought buyers back into the market.

Pending home sales rose 8.3% in December from the previous month, according to the monthly index released Friday by the National Association of REALTORS®.

GDP (Prelim)

The U.S. grew at a robust 3.3% annual pace in the fourth quarter, showcasing the economy’s remarkable vigor despite high interest rates and still-elevated inflation. The Forecast of Growth was projected to be 2.0%.

Although growth slowed from the third-quarter’s surprising 4.9% clip, the back-to-back readings were the strongest since 2014, if the sharp recovery after the pandemic is set aside.

PCE Index

The rate of U.S. inflation — based on the Federal Reserve’s preferred PCE gauge — rose a mild 0.2% in December and pointed to smaller price increases in 2024.

Inflation picked up a bit at year end after declining in November, but there’s little evidence of emerging trouble. The increase in prices in the 12 months ended in December was unchanged at 2.6%.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.20%, with the current rate at 5.96%
• 30-Yr FRM rates are seeing an increase by 0.09%, with the current rate at 6.69%

MND Rate Index

• 30-Yr FHA rates are seeing a 0.05% increase for this week. Current rates at 6.20%
• 30-Yr VA  rates are seeing a 0.08% increase for this week. Current rates at 6.25%

Jobless Claims

Initial Claims were reported to be 214,000 compared to the expected claims of 200,000. The prior week landed at 189,000.

What’s Ahead

All sights are set for the Federal Reserve’s rate decision coming next week. There are other notable reports alongside the rate decision including Non-farm Payroll statistics, Consumer Reports (Univ. Michigan), PMI numbers, and Shiller Price Home Index statistics, first reports of the year.

The following week of CPI and PPI reports are typically lighter, with this week showing the same trend. There are a number of interesting interim reports that are worth noting however, including the Federal Reserve’s Beige Book which indicates the labor market has been cooling across most of the country. Following up is the Consumer Sentiment Reports, which is an excellent indicator for how the average consumer feels about their buying power, reflecting on the current economic conditions. Slower inflation, cheaper gas and a healthy economy have boosted optimism. Lastly, retail sales reports showing activity in December.

Consumer Sentiment Report

The numbers: Consumer sentiment jumped in January to the highest level since the summer of 2021, reflecting fresh optimism about the economy as inflation slows and incomes rise.
The preliminary reading of the sentiment survey shot up to 78.8 from 69.7 in December, the University of Michigan said Friday. Two straight strong increases pushed the index to its highest level since July 2021.

Retail Sales

The numbers: Sales at retailers jumped 0.6% in December to cap off a fairly robust holiday-shopping season and underscore the resilience of a still-growing U.S. economy.
Economists polled by The Wall Street Journal had forecast a 0.4% increase.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease by -0.11% with the current rate at 5.76% 
• 30-Yr FRM rates saw a decrease by -0.06% with the current rate at 6.60%

MND Rate Index

• 30-Yr FHA rates seeing a 0.15% increase for this week. Current rates at 6.15% 
• 30-Yr VA rates seeing a 0.16% increase for this week. Current rates at 6.17%

Jobless Claims

Initial Claims declined to 187,000 compared to the expected claims of 208,000. The prior week’s count was 203,000.

What’s Ahead

Next week boasts a number of larger employment rates which come at a quarterly pace. There is also the very large Fed Rate Decision for the first quarter which strongly determines how most lending partners and markets as a whole will view things going forward. There is a lot of optimism for rate cuts this year.

With the release of the CPI and PPI we received a clearer picture of what’s ahead. With the inflation numbers for CPI (Consumer Price Index) arriving a bit warmer than expected, there was some speculation that it could cause some hesitation from the Federal Reserve on reducing rates for this year.

We also were able to see the Year-over-Year CPI inflation rates with those as well coming in at slightly higher than expected. The projected outlook for the first quarter is likely that the Federal Reserve will hold its position and continue with maintaining interest rates as they have.

Although lending rates have drastically come down, much of it will depend on where the Federal Reserve moves this quarter or the next.

Consumer Price Index

Consumer prices rose somewhat faster at the end of 2023 and interrupted a slowdown in inflation, but the recent evidence still points to a further deceleration in the months ahead. The consumer price index rose 0.3% in December to mark the biggest gain in three months.

The rate of inflation over the past year also moved up to 3.4% from 3.1% in the prior month.

Producer Price Index

U.S. wholesale prices fell in December for the third month in a row, pointing to decelerating inflation in the months ahead.

The wholesale report might keep those hopes alive, especially since a weak PPI often portends a mild reading in the PCE index. That’s the Fed’s preferred measure of inflation.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease by -0.02% with the current rate at 5.87%
• 30-Yr FRM rates saw an increase by 0.04% with the current rate at 6.66%

MND Rate Index

• 30-Yr FHA rates saw a -0.16% decrease for this week. Current rates at 6.00%
• 30-Yr VA rates saw a -0.15% decrease for this week. Current rates at 6.01%

Jobless Claims

Initial Claims were reported to be 202,000 compared to the expected claims of 210,000. The prior week was 202,000.

What’s Ahead

After the FOMC minutes for this week, next week should be a light release week with one major report being the Consumer Price Index and Producer Price Index which will show the inflation rates over December.

With the first FOMC minutes of the year, it sets the tone of the potential moves the Federal Reserve will make, with them remaining firm in their current stance of not employing any rate cuts, however given the more recent end of year reports, there is a likelihood that rate cuts will start this year. The last change in rates was in July of last year. The second most important report also being the final PMI (Manufacturing) numbers, which has largely met expectations without any irregularities.

S&P Global US Manufacturing PMI

Manufacturing PMI was revised lower to 47.9 in December 2023 from a preliminary of 48.2, and compared to 49.4 in November, pointing to a bigger deterioration in manufacturing conditions.

FOMC Minutes

According to the minutes, several officials said that the Fed might have to hold its benchmark rate steady “for longer than they currently anticipated,” while a number of officials pushed for some easing.

The dovish officials “highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained, and pointed to the downside risks to the economy that would be associated with an overly restrictive stance,” according to the minutes.

Non-farm Payrolls

The unemployment rate was unchanged at 3.7% in December, the government said Friday, keeping it near a half century low.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates seeing a week-to-week decrease by -0.04% with the current rate at 5.89%
• 30-Yr FRM rates seeing a week-to-week increase by 0.01% with the current rate at 6.62%

MND Rate Index

• 30-Yr FHA rates saw a 0.08% increase for this week. Current rates at 6.16%
• 30-Yr VA rates saw a 0.08% increase for this week. Current rates at 6.16%

Jobless Claims

Initial Claims were reported to be 202,000 compared to the expected claims of 220,000. The prior week was 216,000.

What’s Ahead

After the FOMC minutes for this week, next week will primarily be a light release week with one major report being the Consumer Price Index and Producer Price Index which will show the inflation rates over December.