Rising Covid case counts, particularly in Europe, outweighed stronger than expected consumer spending data this past week, and mortgage rates ended a little lower.
To help reduce the spread of Covid, Austria announced on Friday that it will impose a national lockdown again beginning on Monday. This raised investor concerns about slower global economic growth, which would reduce future inflationary pressures and thus was positive for mortgage rates. The question is whether other countries will take similar measures.
Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key indicator of growth. In October, retail sales jumped 1.7% from September, which was above the consensus forecast and an impressive 16% higher than a year ago. Particular strength was seen in sales of electronics and appliances. Despite shortages of many products, consumers have shown few signs of slowing their spending any time soon.
With the ongoing severe need for a larger inventory of homes for sale in many regions, the monthly report on housing starts has gained in importance, and the latest results were mixed. In October, overall housing starts fell short of expectations with a modest decline from September. Single-family starts fell 4% from the prior month to the lowest level since August 2020, while multi-family starts rose 7%. On a brighter note, building permits, a leading indicator, posted solid gains for both single-family and multi-family units. Rising prices and shortages for materials, land, and skilled labor continued to present challenges to builders.
Looking ahead, investors will be seeking hints from Fed officials about the timing for future rate hikes and will closely watch Covid case counts around the world. Beyond that, Existing Home Sales will be released on Monday and New Home Sales on Wednesday. The core PCE price index, the inflation indicator favored by the Fed, also will come out on Wednesday. Mortgage markets will be closed on Thursday and will close early at 2:00 et on Friday for Thanksgiving.