Mortgage Market in Review from Monte Hill week of 4/30/2007
Market Comment
Mortgage bond prices fell last week pushing interest rates higher. Bonds rallied a bit following weaker than expected consumer confidence data last Tuesday. Unfortunately those improvements were wiped out the rest of the week as durable goods orders were higher than expected and stocks were generally strong. For the week, interest rates on government and conventional loans rose by about 1/4 of a discount point.
The employment report Friday will be the most important event this week. Personal income, outlays, ISM Index, factory orders, and productivity data will also be important.
Looking Ahead |
Economic Indicator | Release Date and Time | Consensus Estimate | Analysis |
Personal Income and Outlays | Monday, April 30, 8:30 am, et | Income up 0.5%. Outlays up 0.5% | Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
Construction Spending | Monday, April 30, 10:00 am, et | Up 0.3% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
ISM Index | Tuesday, May 1, 10:00 am, et | 51.0 | Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates. |
Factory Orders | Wednesday, May 2, 10:00 am, et | Up 1.0% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
Preliminary Q1 Productivity | Thursday, May 3, 8:30 am, et | Up 1.1% | Important. A measure of output per hour. Weakness may lead to lower mortgage rates. |
Employment | Friday, May 4, 8:30 am, et | Unemp. @ 4.5%, Payrolls +100k | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
Productivity
The latest advance gross domestic product data indicated the US economy grew at a 1.3 percent rate in the first quarter. Fed officials remain concerned that inflation is a threat but this data helps alleviate some of those concerns. Increased productivity is often credited for economic growth with little signs of inflation.
Productivity is the rate at which goods or services are produced. It is most commonly defined in terms of labor, which is the contribution of people to the process. Labor costs represent about two thirds of the value of the output produced. The Bureau of Labor Statistics of the US Department of Labor releases the most widely cited productivity statistics quarterly and annually.
Productivity is significant in that as it increases, businesses can produce more with the same or less input. This wealth building effect is vital to the US economy. As productivity increases, the US economy generally performs better. As productivity decreases, the economy generally suffers.