Apprehension about the global economy, primarily China, caused stocks and mortgage rates to drop over the past week. Some weak U.S. economic data was also a factor in the decline of mortgage rates.
Image courtesy of renjith krishnan at FreeDigitalPhotos.net
While Bloomberg’s Consumer Comfort Index has been showing strength the past five weeks, U.S. retails sales came in lower than expected, down 0.1 percent. Retail sales excluding the auto component fell after a forecasted gain for the month of December.
Consumer spending accounts for more than two-thirds of the economy and is one of the most highly-watched monthly reports. December’s report did contain some positives, including strong gains for the restaurant and furniture & home furnishings components.
Though retails sales have been lower in the past few months, this is attributed to cost declines rather than slowing economic growth. Nonetheless, December’s decline was good for mortgage rates this week.
Last week in the economy:
- Mortgage rates (the national average) fell by 0.07% (7 basis points).
- The purchase index of MBA Mortgage Applications surged 18 percent in the January 8 week with the refinancing index up 24 percent. The increase in activity is attributed to strength in the job market and low rates.
- Initial Jobless Claims were up in the January 9 week by 7,000 to a level of 284,000. Initial claims have not been this high since July 2015.
- The Bloomberg Consumer Comfort Index was not bothered by the volatility in the financial markets. The index increased 2-tenths to 44.4 for a fifth straight gain.
- Consumer Sentiment showed the first indication of China’s effect. Though the index did rise 0.7 points from December, the current conditions component fell 3 points.
What's on the economic calendar for the week of January 18, 2016:
Monday: Martin Luther King Jr. Day – Markets Closed
Tuesday: Housing Market Index
Wednesday: MBA Mortgage Applications, Consumer Price Index and Housing Starts
Thursday: Jobless Claims and Consumer Comfort Index
Friday: Existing Home Sales