The Commerce Department gave us July's Retail Sales data at 8:30 AM ET this morning. They announced a 0.5% rise in retail-level sales last month, exceeding forecasts of up 0.1%. The headline number indicates consumers spent much more than many had thought, making the data bad news for bonds and mortgage rates. Even a secondary reading that excludes more volatile and costly auto transactions came in well above forecasts (+0.6% vs 0.3%). However, a bit of good news came from noticeable downward revisions to both readings for June. Still, this is not a favorable report for bonds and mortgage rates. Fortunately, the stock selling and global concerns are taking centerstage this morning instead of this data.
Employee Productivity and Costs data for the second quarter gave us much more favorable results. It showed a 2.9% jump in worker productivity rate when analysts were expecting to see 2.0%. In this reading, the higher the number the better the news it is for mortgage rates because strong levels of productivity allow the economy to grow with less fear of inflation rapidly rising also. The other reading showed even better results with a 0.9% decline in labor costs. Forecasts were calling for a 0.5% increase, meaning there is a wide variance between forecasts and actual readings. The indication that labor costs dropped during the quarter is very good news for bonds and mortgage pricing.
The final release of the day was July's Industrial Production report at 9:15 AM ET. It showed a 0.1% increase in output at U.S. factories, mines and utilities. Since forecasts were calling for a 0.4% rise in production, we can consider this data to be good news for bonds and mortgage rates also.
Tomorrow has two more economic releases, but neither are considered to be highly important. July's Housing Starts will be post at 8:30 AM ET, giving us an indication of housing sector strength and future mortgage credit demand. It usually doesn't cause much movement in mortgage rates unless it varies greatly from forecasts. Tomorrow's release is expected to show an increase in construction starts of new homes last month. The lower the number of starts, the better the news for the bond market, as it would indicate a weaker than expected new home portion of the housing sector.
The second release of the day will be last week's unemployment update, also with an early post time. It is expected to show that 217,000 new claims for unemployment benefits were filed last week, up from 213,000 of the previous week. Rising claims is a sign of a weakening employment sector, so good news will be a sizable jump in new filings. It is worth noting though, this report is only a weekly snapshot. Therefore, it takes a significant surprise for it to directly influence mortgage rates.
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