This week’s most significant data offered preliminary numbers for manufacturing and services PMI (Purchasing Managers Index). Both can serve as a forward indicator for the economy while providing insight into the current state of the cost of living for the service industry. While manufacturing met an expected rise for the end of October, services saw a contraction, falling to 46.6 from 49.3. Readings below 50.0 can be a sign of a downturn for the economy, particularly given the time of the year.

Mortgage Applications & Rates Indices
MBA Mortgage Applications Index saw a reduction of -1.0% in applications for the week, with rates once again increasing again week over week.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a week-to-week increase by 0.11% with the current rate at 03%.
• 30-Yr FRM rates are seeing a week-to-week increase by 0.16% with the current rate at 79%

MND Rate Index

• 30-Yr FHA rates increased week to week with a -0.08% decrease for this week. Current rates at 32%
• 30-Yr VA rates increased week to week with a -0.11% decrease for this week. Current rates at 33%

Personal Income & Spending

Personal income increased $77.8 billion (0.3 percent at a monthly rate) in September, according to estimates released today by the Bureau of Economic Analysis (table 2 and table 3). Disposable personal income (DPI), which is personal income less personal current taxes, increased $56.1 billion (0.3 percent), and personal consumption expenditures (PCE) increased $138.7 billion (0.7 percent).

• The PCE price index increased 0.4 percent.
• Excluding food and energy, the PCE price index increased 0.3 percent.

Key point: Personal income increased in September and spending accordingly rose, moving into October. This increase in income and spending is expected moving into the Holiday season. This is a strong sign for the Advanced GDP numbers for the remainder of the year.

Job Claims
Those who applied for unemployment benefits last week fell to a nine-month low of 188,000, subverting expectations that layoffs would rise as the U.S. interest rates continued to increase.
Initial Claims were 210,000 compared to the expected claims of 210,000. The prior week was at 211,000.

What’s Ahead
This week’s scheduled economic reports include ISM manufacturing data, S&P U.S. Manufacturing PMI, and Job Openings. The stronger data points of U.S. non-farm payrolls are coming at the end of the week on Friday.

Last week’s scheduled economic reporting was limited due to the U.S. Labor Day holiday on Monday. The Federal Reserve released its Beige Book report and weekly readings on mortgage rates and jobless claims were also published.

Federal Reserve Releases Beige Book Report

The Beige Book report is a summary of information supplied to Federal Reserve policymakers by their business and professional contacts. Highlights of September’s Beige Book report included:

• Accelerated leisure spending by consumers boosted economic growth during July and August.

• Non-essential retail sales slowed, but the economy was boosted by a final stage of post-COVID-19 pent-up demand.

• Prices for consumer goods fell faster than in many other sectors.

• Auto sales rose due to better inventories available to consumers but increased sales were not connected with rising consumer demand for vehicles.

• Rising business costs reduced profit margins.

The Beige Book report is published eight times a year before scheduled meetings of the Federal Reserve’s Federal Open Market Committee.

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported lower mortgage rates last week; rates for 30-year fixed-rate mortgages averaged 7.12 percent and were six basis points lower than in the previous week. Rates for 15-year fixed-rate mortgages were three basis points lower and averaged 6.52 percent.

Initial jobless claims were lower with 216,000 first-time claims filed as compared to the prior week’s reading of 229,000 initial jobless claims filed. Analysts expected a reading of 230,000 new jobless claims filed.

What’s Ahead

This week’s scheduled economic reports include readings on inflation, U.S. retail sales, and the preliminary monthly report on consumer sentiment. Weekly readings on mortgage rates and initial jobless claims will also be released.

Last week’s economic reporting included readings on inflation, consumer sentiment, and weekly readings on mortgage rates and jobless claims.

Inflation Rate Holds Steady in July

Month-to-month inflation rose at a pace of 0.20 percent in July and met analysts’ expectations. There was no change in the pace of month-to-month inflation from June’s reading of 0.20 percent growth. The Consumer Price Index also reported that year-over-year inflation reached 9.10 percent, which was the highest reading since reaching a 40-year high in mid-2022.

Core inflation, which excludes volatile food and fuel prices, was unchanged from June’s month-to-month pace of 0.20 percent growth. July’s month-to-month reading matched analysts’ expectations. Year-over-year core inflation dipped slightly to 4.70 percent in July as compared to June’s reading of 4.80 percent year-over-year inflation.

Federal Reserve leaders said that they would continue monitoring domestic and global economic developments along with financial and economic data before determining whether or not to raise the Fed’s key interest rate range.

Mortgage Rates, Jobless Claims Rise

Freddie Mac reported higher mortgage rates for the third consecutive week. The average rate for a 30-year fixed-rate mortgage approached seven percent and rose by six basis points to 6.96 percent. Rates for 15-year fixed-rate mortgages rose by nine basis points to 6.34 percent.

248,000 initial jobless claims were filed last week, which surpassed expectations of 231,000 new claims filed and the previous week’s reading of 227,000 first-tine jobless claims filed.

University of Michigan Consumer Sentiment Survey

In other news, the University of Michigan released its monthly preliminary reading on U.S. consumer sentiment.

Consumer sentiment rose to an index reading of 72.0 in August as compared to the July reading of 71.6.  The majority of.consumers surveyed indicated that the economy improved in the three months leading up to the survey., Component readings included consumer sentiment index readings for current economic conditions and economic conditions within the next six months. The survey reading for consumer sentiment about economic conditions over the next six months fell to an index reading of  67.3 from the July reading of 68.3 Readings over 50 indicate that most consumers are confident about current economic conditions.

Joanne Hsu, the University of Michigan’s director of consumer surveys, said: “…In general, consumers perceived few differences in the economic environment from last month, but they saw substantial improvement relative to just three months ago.”

What’s Ahead

This week’s scheduled economic reporting includes reading on housing starts and building permits issued, the minutes of the Federal Reserve’s recent meeting of its Federal Open Market Committee, and weekly readings on mortgage rates and jobless claims. 

Last week’s economic reporting included readings on the Fed’s interest rate decision, S&P Case-Shiller’s Home Price Indices, sales of new homes, and pending home sales. Weekly readings on mortgage rates and jobless claims were also released.

The Federal Reserve raised its target interest rate range to 5.25 to 5.50 percent; this announcement signaled that rates for home loans and unsecured credit would also rise.

S&P Case-Shiller Reports Slower Home Price Growth  in May

Average  U.S. home prices fell in May according to the S&P Case-Shiller 20-City Home Price Index. Home prices were -1.70 percent lower as compared to an expected dip of -1.90 percent and April’s reading of -1.70 percent. The top three cities reporting the highest pace of year-over-year home price growth were Chicago, Illinois with home price growth of 4.60 percent; Cleveland Ohio, where home prices grew by 3.90 percent, and New York City, where home prices rose by 3.50 percent.

Sales of previously owned homes fell due to high demand and slim supplies of homes for sale. Homeowners stayed on the sidelines while waiting for lower mortgage rates, but prospective buyers didn’t seem discouraged by rising rates, which recently approached 7 percent.

Craig J. Lazzara, managing director at S&P Case-Shiller Indices, said that the rally in U.S. home prices continued in May.

New home sales fell to a seasonally adjusted annual pace of 697,000 sales in June. Analysts estimated a pace of 725,000 sales and May’s reading showed a pace of 715,000 new home sales. Higher home prices in popular metro areas and rising mortgage rates created affordability challenges for first-time and moderate-income home buyers.

In related news, the FHFA Home Price Index reported that home price growth for homes owned and sold by Fannie Mae and Freddie Mac rose by 0.70 percent in May and was unchanged from April’s pace of home price growth. The FHFA reported year-over-year home price growth of 2.80 percent.

Mortgage Rates Rise as Jobless Claims Fall

Freddie Mac reported higher mortgage rates for the fourth consecutive week as the average rate for 30-year fixed-rate mortgages rose by three basis points to 6.81 percent. The average rate for 15-year fixed-rate mortgages was five basis points higher at 6.11 percent.

First-time jobless claims fell to 221,000 claims as compared to the previous week’s reading of 228,000 claims filed.

What’s Ahead

This week’s scheduled economic reporting includes readings on construction spending,  public and private-sector payrolls, and the national unemployment rate. Weekly readings on mortgage rates and first-time jobless claims will also be released.

Last week’s scheduled economic reporting included readings on construction spending, June’s FOMC meeting minutes, and reports on jobs and the national unemployment rate. Weekly readings on mortgage rates and jobless claims were also released.

Construction Spending Increased in May

The Commerce Department reported spending for construction rose to 0.90 percent in May as compared to a month-to-month increase of 0.40 percent posted in April. The year-over-year reading showed $1.93 trillion in construction spending in May. April’s data was revised downward from the original reading of 1.20 percent growth to 0.40 percent growth in construction spending.

Readings for construction spending include all phases of government and private construction projects. When construction spending increases. It indicates overall growth in the economy. Year-over-year construction spending was 2.40 percent higher in May.

Private-Sector Job Growth Exceeds Expectations in June

The Commerce  Department reported the largest increase in private-sector job growth since July 2022. 497,000 jobs were added in June 2023, which surpassed analyst expectations of 220,000 jobs added. 267,000 jobs were reported in May’s reading. The increase in available jobs countered forecasts that the Federal Reserve’s recent series of interest rate hikes would slow inflation and dampen economic growth.

The national unemployment rate fell from 3.60 percent from 3.70 percent in May to 3.60 percent in June. In related news, weekly jobless claims rose to 248,000 claims from the previous week’s reading of 236,000 jobless claims filed. Analysts expected a reading of 220,000 claims filed.

Minutes of Federal Reserve Meeting: Fed Holds Federal Rate Range Steady in June

Members of the Federal Reserve’s Federal Open Market Committee voted to hold the Fed’s interest rate range at 5.00 percent to 5.25 percent. Committee members cited the tight labor market and current economic conditions that exceeded expectations. Fed Chair Jerome Powell said that the Fed would likely raise its rate range two more times during 2023. 

Freddie Mac reported higher average mortgage rates last week’s the rate for 30-year fixed-rate mortgages rose by 10 basis points to 6.81 percent. Rates for 15-year fixed-rate mortgages averaged 6.24 percent and 18 basis points higher.

What’s Ahead

This week’s scheduled economic reports include month-to-month and year-over-year readings on consumer inflation; the final monthly reading on consumer sentiment will be released along with weekly readings on mortgage rates and jobless claims.

Last week’s scheduled economic reports included readings on housing starts, existing home sales, and Federal  Reserve Chair Jerome Powell’s congressional testimony. Weekly readings on mortgage rates and jobless claims were also released.

National Home Builders Association Releases June Housing Market Index

U.S.  home builder confidence rose by five points to an index reading of 55 in June according to the National Association of Home Builders Housing Market Index. The June reading surpassed the expected reading of 51 and May’s housing market index reading of 50. Component readings for the Housing Market Index also rose as builder confidence in current market conditions rose five points and confidence in market conditions for the next six months rose six points.

NAHB said that a shortage of previously-owned homes for sale is driving sales of new homes and rising builder confidence. Many current homeowners refinanced to very low rates available during and immediately after the pandemic and are not inclined to refinance or buy new homes at current higher interest rates.

Mr. Robert Dietz, the chief economist for the NAHB, said: “A  bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year.” Mr. Dietz also noted that “with the Federal Reserve nearing the end of its tightening cycle, it’s good news for future market conditions in terms of mortgage rates and the cost of builder and developer loans.”

June’s reading was the sixth consecutive month showing increasing home builder confidence and the 11^th month since builder sentiment moved into positive territory.

Mortgage Rates Fall

Freddie Mac reported lower average mortgage rates last week as rates for 30-year fixed-rate mortgages fell by two basis points to 6.67 percent and rates for 15-year fixed-rate mortgages fell by seven basis points to an average rate of 6.03 percent.

Sales of previously-owned homes rose to a seasonally-adjusted annual rate of 4.30 million sales as compared to the expected reading of 4.25 million sales and April’s reading of April’  reading of 4.29 million sales.

What’s Ahead

This week’s scheduled economic reporting includes readings from S&P Case-Shiller Indices, new and pending home sales, and inflation. Weekly readings on mortgage rates and jobless claims will also be released.