I hope everyone enjoyed Mother’s Day! The family was in town, so mine was pretty good. We had dinner and really just hung out.

There wasn’t as much economic data last week, but the twists and turns of trade talks with China dominated market attention. Before we get there, though, we did get some key inflation data among other reports.

Headline News

MBA Mortgage Applications

Mortgage applications were up 2.7% overall last week as applications to purchase were up 4%, and there were 1% more people looking to refinance. Meanwhile, mortgage rates were pretty much unchanged, down a single basis point to an average of 4.41% for a 30-year fixed loan.

International Trade

Helped by a narrowing of the trade deficit with China, the nation’s overall trade deficit was only up by $600 million in March to come in at $50 billion.

When compared to this time a year ago, the 2019 year-to-date trade deficit with China is at $80 billion, vs. $91.1 billion in 2018. As trade talks wear on, this will be something to keep an eye on. We’ll have more on this later.

Exports were up 1% to $212 billion. Exports of goods were up 1.4% on the month as oil prices rose quite a bit. There was a $1.8 billion increase in industrial supply exports reflecting this. Food exports also increased by $800 million. Civilian aircraft exports were down, but they’d been strong the month before. It’ll be interesting to see if Boeing’s 737 Max problems begin to affect these numbers substantially in the upcoming months. Meanwhile, exports of services were only up 0.1%.

On the import side, these were up 1.1% to $262 billion. Here, crude oil and other industrial supplies also rose in price and contributed to the increase. Meanwhile, imports of vehicles were up a bit, while imported consumer goods fell by $700 million in a rare decrease.

Jobless Claims

Initial jobless claims were down 2,000 last week to come in at 228,000. However, in the last few weeks, claims have pivoted higher, so the four-week average was up 7,750 at 220,250.

Meanwhile, on the continuing claims end of things, these were up 13,000 to 1.671 million. However, the four-week average was down 8,000 to come in at about 1.666 million.

Producer Price Index (PPI)

Prices for producers of goods and services were up 0.2% in April, below expectations for a 0.3% increase. On the year, prices were up 2.2%. Meanwhile, when food and energy were removed, prices only rose 0.1% and were up 2.4% on the year. Finally, when the wholesale trade services are taken out, prices were up 0.4% in April and 2.2% on the year.

Digging slightly deeper into the numbers, personal consumption prices were only up 0.1% while the core of personal consumption, taking out food and energy, was unchanged.

One thing that might help this index make the move upward is a rise in fees for portfolio management services. Although we don’t often talk about it here, businesses do have to pay something in order to have their investments managed for both the core business as well as employee retirement.

Consumer Price Index (CPI)

On the consumer side, prices were up 0.3% in the month of April, but the real picture is a little more nuanced. When food and energy were taken out, prices were only up 0.1%. On an annual basis, prices were only up 2% overall and 2.1% in core categories.

Gas prices were up 5.7%, which helped spike overall energy costs. Offsetting this a bit is the fact that  food prices were down 0.1% in March.

Looking at categories outside food and energy, apparel prices were down 0.8% in April after falling 1.9% in March. They’ve now fallen 3% on the year. Housing and medical care were both up 0.3%. In housing, rent was up 0.4%, while the cost for homeowners to rent an equivalent space went up 0.3%. Hospital service costs in April were down 0.5% and have fallen 1.2% on the year. However, the cost of physician services was up 0.2%.

While the cost of new cars was up 0.1%, the cost for used vehicles fell 1.3% in April.

Mortgage Rates

Mortgage rates have fallen slightly again over the last couple weeks. Freddie Mac attributes this to concerns over the state of the economy, which has pushed investors into the bond market, traditionally considered safer.

This may not sound great for your 401(k), but if you’re looking to buy or refinance a home, you should be taking advantage of the current environment and use it to your benefit. It’s a great time to lock your interest rate.

The average rate on a 30-year fixed mortgage was down four basis points to 4.1% with 0.5 points paid in fees last week. This is down from 4.55% a year ago.

Looking at shorter terms, the average rate for a 15-year fixed mortgage with 0.4 points fell 3 basis points to 3.57%. This is down from 4.04% last year.

Finally, the average rate for a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) with 0.4 points paid was 3.63%, down five basis points on the week, falling from 3.77% from the same time last year.

Stock Market

It was a long week for the stock market and just this morning China said it would raise tariffs on $60 billion of U.S. goods starting June 1. This is the latest escalation in a spat that most recently flared up last weekend on the president’s Twitter feed, where he claimed China was backing away from previous promises in ongoing trade negotiations, a claim the Chinese deny. Prior to this, the administration said it would increase tariffs on $200 billion worth of Chinese products.

Stock investors had been hopeful of the deal between the two world powers to end discord that could damage the global economy. The renewed tensions last week put a damper on enthusiasm. Major U.S. stock indexes opened down about 2% this morning on news of the Chinese tariffs. This is definitely something worth keeping an eye on.

The Dow Jones Industrial Average finished Friday up 114.01 points to close at 25,942.37, down 2.12% on the week. Meanwhile, the S&P 500 was down 2.18% on the week despite rising 10.68 points Friday to close at 2,881.4. Finally, the Nasdaq finished at 7,916.9, up 6.35 points on Friday, but down 3.03% on the week.

The Week Ahead

Tuesday, May 14

Quicken Loans Home Price Perception Index (HPPI) (10:00 a.m. ET) – Quicken Loans releases data every month comparing what people think their homes are worth compared to appraisals. Similar opinions of value often make for smoother purchase and refinance transactions.

Quicken Loans Home Value Index (HVI) (10:00 a.m. ET) – Quicken Loans also releases data on home values at both the national and regional levels. Homeowners can gain a perception of whether values are increasing or decreasing and get a better idea of where they stand in terms of equity.

Wednesday, May 15

MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.

Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.

Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.

Housing Market Index (10:00 a.m. ET) – The National Association of Home Builders produces a housing market index based on a survey in which respondents from the organization are asked to rate the general economy and housing market conditions. The index is a weighted average of separate diffusion indexes, including present sales of new homes, sales of new homes expected in the next six months and traffic of prospective buyers in new homes.

Thursday, May 16

Housing Starts (8:30 a.m. ET) – A housing start is registered when the construction of a new residential building begins. The start of construction is defined as the beginning of excavation of the foundation for the building.

Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The four-week moving average of new claims smooths out weekly volatility.

Friday, May 17

Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.

Retail sales and industrial production data is out this week. In addition to that, there’s quite a bit of data out of the housing sector including our own home price data being released tomorrow. We’ll have it all covered in next week’s Market Update!

While the economic and market data is important, I realize that this has all the spice of a monotone college lecture. We’ve got plenty of home, money and lifestyle content to put a little bit of pep in your step. For this week, here’s an article on how to make saving a little more bearable. Have a great week!

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