The Mortgage Press Gauge: May 2008 Part IMortgagePress.comIndustry Statistics, Market Watch, Consumer Habits, Industry Trends
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A reading of "1" has the lowest impact on rates, while "10" has
the highest. Although carefully verified, data are not guaranteed
as to accuracy or completeness. BestInfo Inc. cannot be held
responsible for any direct or incidental loss or liability incurred
by applying any of the information or opinions in this feature.
May 2
April Employment
Rate Impact: 10
In the wake of the dramatic 80,000 decline in March non-farm
payrolls reported on April 4, along with the rise in the
unemployment rate to 5.1 percent, traders will be focused on
whether or not the job-loss process accelerated in April or
reversed direction. Put another way, is the widely presumed
recession about to intensify? There's a camp which says things will
get better for awhile and then reverse once again, creating the
first "double-dip" recession since the early 1980s. The one piece
of good news in the first half of April was the fact a steep rise
in first-time claims for weekly state unemployment benefits
reversed itself. The question is if the weekly claims data are in
synch with the monthly employer and household surveys. Of secondary
importance to the Federal Reserve in today's release will be the
average hourly wage. It has remained contained as employees find it
challenging to ask for a raise despite the current inflationary
environment.
May 5
April Services
Rate Impact: 8
The service side of the economy is 80 percent of the total. In
early April, we were informed the sector was hovering near the "50"
dividing line between economic expansion and contraction during
March with a result almost identical to the one in February. The
low point occurred in January with a plunge to 44 from December's
53. Thus, there is hope the Federal Reserve will have been correct
(in retrospect) when it says the economy was weak during the first
half of this year with a recovery in the second half. In fact, the
entire financial system is banking on such a prediction coming true
because to believe otherwise would indicate a protracted downturn
with more nasty surprises for Wall Street as well as Main Street,
not to mention the U.S. Treasury and taxpayers.
May 13
April Retail Sales
Rate Impact: 9
Analysts were somewhat surprised when the March results were
slightly above unchanged. Many had been expecting a flat to
negative reading. But an early Easter helped as did the resilience
of the American consumer in the face of the daunting rise in food
and energy prices. Also assisting was foreign buying of U.S. goods
during tourist shopping sprees to both the East and West coasts as
well as the northern border states. After all, it only took 63 euro
cents recently to purchase one American dollar, thereby creating an
"instant" 37 percent off discount. The currency mismatch helped
many high-end retailers enjoy brisk sales results. And it also
appeared to assist our stock and bond markets thanks to continued
foreign investment. Of course, the big problem is the price of oil
and how that translates into higher consumer fuel prices. But since
sales results are denominated in dollars rather than volume, higher
inflation can make the figures look better than may actually be the
case for many retailers.
May 14
April Consumer Prices
Rate Impact: 7
The Federal Reserve has been so preoccupied with rescuing the
national economy from the abyss that it spent a lot of time during
the first three months of this year dismissing inflation as an
afterthought. The idea was that if the problem were ignored, it
would simply go away due to a decelerating gross domestic product.
When the overall rate of inflation rose, the Fed said it was
important to concentrate on the core rate excluding food and
energy. When the core rate rose, the Fed said it was transitory and
would subside. When the core rate kept rising, the Fed said the
safety and soundness of the financial system was paramount.
However, there have been hints from Federal Open Market Committee
meeting minutes that when the credit crunch eases, the FOMC may
move aggressively to hike rates back toward the previous level of
5.25 percent. That will come as welcome news to savers (including
retirees) who have been punished by precipitous interest rate
declines. But before the Fed reverses course, it is more important
than ever for those with adjustable-rate mortgages to consider
their next move carefully. The FOMC gave them a window of
opportunity to switch to a fixed-rate mortgage. And that window may
slam shut at any moment.
