MIG Market Watch, August 16th, 2021
Market Comment
Mortgage bond prices finished the week lower which put upward pressure on rates. We started on a negative note Monday and Tuesday but recovered some of the earlier losses as the week progressed. Q2 Productivity was 2.3% vs the expected 3.6%. Consumer prices rose 0.5% as expected. The core, which excludes volatile food and energy prices, rose 0.3% vs 0.4%. Producer prices rose 1% vs 0.6%. The core rose 1% vs 0.5%. There is often a divergence between the consumer and producer readings as producers are often able to absorb some price increases prior to passing them on to consumers. Over time though the figures come in line with one another. Consumer sentiment was 70.2 vs 81. This was the lowest level since 2011. Weekly jobless claims were 375K as expected. Mortgage interest rates finished the week worse by 1/8 to 1/4 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Retail Sales | Tuesday, Aug. 17, 8:30 am, et | Down 0.2% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| Industrial Production | Tuesday, Aug. 17, 9:15 am, et | Up 0.4% | Important. A measure of manufacturing sector strength. A lower-than-expected increase may lead to lower rates. |
| Capacity Utilization | Tuesday, Aug. 17, 9:15 am, et | 75.5% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| NAHB Housing Index | Tuesday, Aug. 17, 10:00 am, et | Up 1.4% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Housing Starts | Wednesday, Aug. 18, 8:30 am, et | 1.61M | Important. A measure of housing sector strength. Weakness may lead to lower rates |
| 20-year Treasury Bond Auction | Wednesday, Aug. 18, 1:15 pm, et | None | Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Fed Minutes | Wednesday, Aug. 18, 2:00 pm, et | None | Important. Details of the last Fed meeting will be thoroughly analyzed. |
| Philadelphia Fed Survey | Thursday, Aug. 19, 10:00 am, et | 38 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Leading Economic Indicators | Thursday, Aug. 19, 10:00 am, et | Up 0.7% | Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
Hurricane Season
The Federal Reserve is clear that weather plays a significant part in the overall economy. The U.S. enters the heart of hurricane season and the weather is almost certain to make headlines in the months ahead. The U.S. Energy Information Administration indicates that “during major disruptions such as hurricanes or power outages, the Department issues situation reports to provide information about a disruption’s effect on gasoline supply and other energy infrastructure and supply issues.” The National Oceanic and Atmospheric Administration predicts a ”60% chance of an above-normal season” for hurricanes this year.
While a specific area may have no threat of a hurricane or severe weather a single storm can cause financial losses that ripple through the entire economy.
