The level of daily volatility in mortgage rates was low last week, even with the release of several important reports. The impact of the Fed statement was small, but the Employment Cost Index, which came in lower than expectations, was favorable for mortgage rates.
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The Employment Cost Index, which measures total employee compensation costs, including wages and salaries, as well as benefits, rose only 0.2 percent in the second quarter. The gain is far below expectations and the lowest result in the 33-year history of the report.
The Fed took no action on rates at their July meeting and saw no change in the pace of economic growth, which they described as "moderate". The Fed cited a small upgrade for the labor market and a declining unemployment rate.
A negative for the summer housing market outlook was a downgrade in pending sales of existing homes in June. Sales fell sharply 1.8 percent in June, while the low-end Econoday forecast was a gain of 0.4 percent. The year-over-year rate fell from double digits to plus 8.2 percent, which is still respectable but lower than the trend for final sales of existing homes.
Last week in the economy:
- Mortgage rates (the national average) fell 0.05% (5 basis points).
- After weeks of volatility, the purchase index of MBA Mortgage Applications saw little change again last week, up 0.1 percent, but continues to trend much higher year-over-year (up 18 percent).
- Consumer Confidence weakened substantially in July, falling to 90.9 (6 points below Econoday's low-end estimate). Weakness was focused in the expectations component and reflects falling optimism in the jobs outlook.
- Initial Jobless Claims remain extremely low. The 4-week average is down 3,750 to 274,750, which is the lowest since mid-June.
- The GDP came in on the lower end of expectations in the second quarter, only up 2.3 percent (versus the Econoday consensus for 2.9 percent gain).
- Consumer Sentiment softened in July, as well, down to 93.1 against 96.1 in Jue, which was near the recovery high.
What's on the economic calendar for the week of August 3, 2015:
Wednesday: MBA Mortgage Applications will be updated.
Thursday: Jobless Claims and Bloomberg's Consumer Confidence will be released.
Friday: Employment Situation will be updated.
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