It’s a great time of year, but it feels like every year I’m trying to get everything done leading up to a big break. I’m not the only one racing toward deadlines. The U.S. and China were running up against a deadline of their own last week.
More on that in a minute, but for now let’s take a look at some of the economic data that was out.
MBA Mortgage Applications
Mortgage applications were up 3.8% overall last week. Refinance applications were up 9% from the week prior and more than 146% from the same time a year ago. On the purchase side, these were down 0.4% on an adjusted basis, but up 35% on the week and rising 5% overall from the same time a year ago.
The average interest rate on a 30-year fixed conforming mortgage was up one basis point to 3.98% with 0.33 points paid and a 20% down payment. Still, most people were looking to refinance as this made up 62.4% of all applications.
Consumer Price Index (CPI)
On the consumer side, prices were up 0.3% in November on a seasonally-adjusted basis. Overall, prices are up 2.1% on the year, which matches the Federal Reserve target. When food and energy were taken out, prices were up 0.2% and 2.3% on the year.
Digging into the categories a little bit, gas prices were up 1.1% contributing to an energy price increase. Despite this, energy prices are down 0.6% over the last 12 months. The food index was up 0.1%, but it’s risen 2% year-over-year.
The categories seeing an increase included shelter, the cost of which was up 0.3% and 3.3% on the year. Meanwhile, the cost of medical care rose 0.3% as the cost of hospital care was up 0.3% and doctor fees were up 0.1%. The cost of prescription drugs did fall 0.1%. Medical care costs are up 4.2% on the year. Recreation costs were up 0.4% in November as were the cost of used cars and trucks, up 0.6%.
New vehicle costs were actually down 0.1% as where airline fares which fell 0.9%. Household furniture prices were flat for the month.
Normally, this report is kind of ho-hum with some fluctuations occasionally, but nothing like this. Initial jobless claims were up 49,000 last week to 252,000 overall. This is the highest it’s been since the end of September 2017. I’m no economist, but that’s slightly worrisome. The 4-week average was up 6,250 to come in at 224,000.
On the continuing claims side, these were down 31,000 on the week to 1.667 million. Meanwhile, the 4-week average was down 6,250 to come in at 1.676 million.
Producer Price Index (PPI)
Producer prices were flat in November. A 0.3% increase in the price of goods was offset by an equal decrease in services prices. Overall, prices are up 1.1% on the year. When trade services were taken out, prices were up 1.3% on the month. This is the smallest increase since September 2016.
Meat prices were up 3.9% while a variety of other foods, gas and fuel were also higher. Meanwhile, the cost for residential electric power was down 0.6% and industrial chemicals also saw decreases.
On the services side, these were down 0.3% in November. Trade services prices were down 0.6% for wholesalers and retailers. Wholesale prices in particular were down 5%. Meanwhile, hospital outpatient care, machinery and vehicle sales and airfares were all lower, as were prices for brokerage and investment advice. Travel accommodation prices were up 2.6% and the prices for machinery and equipment parts and supplies and long-distance car travel were up.
Retail sales were up 0.2% in the month of November and up 3.3% from a year ago. Additionally, in revisions for October, sales were shown to be up 0.4% on the month from an initial estimate of 0.3%.
Breaking down some key categories, retail trade sales were up 0.3% and 3.1% from last year. Meanwhile, a category made up mostly of e-commerce retailers was up 11.5% compared to last year while restaurant sales were up 5.1% from the year prior.
Key categories seeing monthly increases included motor vehicle and parts dealers, which were up 0.5% and electronic appliance stores, which were up 0.7%. Food and beverage stores were up 0.3%. Gas prices were up 0.7%. Nonstore retailers saw monthly sales rise 0.8%.
Restaurant sales were down 0.3%. Gains in e-commerce sales have come at the expense of other things, and sales at department stores were down 0.6% which meant that general merchandise stores sales were up only 0.1%. Meanwhile, a category including sporting goods, hobby and bookstores was down 0.5%. There was also a 0.6% downturn in sales at clothing stores, while health and personal care stores saw a downturn of 1.1% on the month.
Mortgage rates were up slightly last week. There was market optimism over a trade deal with China. In fact, a preliminary deal has finally been struck. Good feelings push money into the riskier but higher-yield market for stocks as opposed to the safer, but smaller returns for bonds, which tends to push up mortgage rates.
However, the Federal Reserve also gave the mortgage market a bit of a gift last week. The Federal Open Market Committee signaled in its projections that it believes short-term interest rates will remain unchanged in 2020, barring major movement one way or another in inflation levels and other key data it looks at.
Mortgage rates are still very low. If you’re in the market, it remains a great time to consider locking your rate.
The average interest rate on a 30-year fixed mortgage with 0.7 points paid in fees was up five basis points to 3.73% on the week. This is down from 4.63% a year ago.
Looking at shorter terms, the average interest rate on a 15-year fixed mortgage with 0.7 points paid was 3.19%, up five basis points last week, but down from 4.07% last year.
Finally, the average interest rate on a 5-year treasury indexed, hybrid adjustable rate mortgage (ARM) fell three basis points to 3.36% with 0.4 points paid, down from 4.04% a year ago.
Stocks were pretty flat to end the week. However, they had significant gains the rest of the week as there was a surge of optimism culminating with the U.S. and China finally completing Phase I of a trade deal. Although it has yet to be signed, planned tariff increases that were supposed to go into effect yesterday were canceled. Some particulars still need to be parsed around agricultural purchases, but for now, it’s a good thing.
The Dow Jones Industrial Average was up 0.43% on the week after rising 3.33 points Friday to close at 28,135.38. Meanwhile, the S&P 500 was up just 0.23 points to end the week at 3,168.8, an increase of 0.73% for the week. Finally, the Nasdaq finished the week at 8,734.88, a 17.56-point rise to finish the week and a 5-day increase of 0.91%.
The Week Ahead
Monday, December 16
Housing Market Index (10:00 a.m. ET) – The National Association of Home Builders (NAHB®) 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 6 months and traffic of prospective buyers in new homes.
Tuesday, December 17
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.
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.
Wednesday, December 18
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.
Thursday, December 19
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 4-week moving average of new claims smooths out weekly volatility.
Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops that were sold during the month. Existing homes (also known as “home resales”) account for a larger share of the market than new homes and indicate housing market trends.
Friday, December 20
Gross Domestic Product (GDP) (8:30 a.m. ET) – This release measures the monetary value of all final goods and services produced within the U.S. This report is released on a monthly basis with estimates on the growth in the previous quarter.
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.
Personal Income and Outlays (10:00 a.m. ET) – This is a measurement of how much consumers are taking in as well as their corresponding spending. This also gives insight into how much is being saved.
A few reports that would be normally released later in the month are coming early this week in anticipation of the holidays. We’ll have all that covered for you in next Monday’s Market Update!
We get that the movements of the markets and mortgage rates are probably the furthest thing from the minds of most of you at this time of year. Not to worry, we have plenty more home, money and lifestyle content where this came from if you subscribe to our email list. This week, let’s take a look at 12 ideas for your holiday party in 2019. Have a great week!
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