The two big economic reports this week were released on Friday. Investors placed more weight on tame inflation data than on strong retail sales figures, causing mortgage rates to improve. Wednesday’s minutes from the September 20 Fed meeting contained little new information and the reaction was small. As a result, mortgage rates ended the week a little lower.
In September, the Consumer Price Index (CPI), a widely followed monthly inflation indicator, posted its largest monthly increase since June 2009. This was mostly due to a hurricane-related 13% increase in gas prices during the month.
However, most investors prefer to look at core CPI for a clearer indication of the underlying trend. Core CPI, which excludes food and energy, rose less than expected in September. While several other recent indicators have pointed to rising inflation, core CPI has held steady at an annual rate of 1.7% for five straight months. The tame core inflation data was good for mortgage rates.
Retail sales posted better than expected results in September, rising 1.6% from August. Car sales, in particular, were strong as people replaced vehicles lost in the hurricanes. Overall, though, it was difficult to determine the impact of the hurricanes. According to the Commerce Department, companies reported that “the hurricanes had both positive and negative effects on their sales data.” Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator, so this report was good news for the economy.
Looking ahead, it will be a light week for economic data. The housing sector reports will be featured. Housing Starts will be released on Wednesday and Existing Home Sales on Friday. Beyond that, Industrial Production will be released on Tuesday.
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