Last week’s economic news included readings on inflation, retail sales, and a speech by Federal Reserve Chair Jerome Powell. The University of Michigan released a preliminary reading of its Consumer Sentiment Survey; weekly readings on mortgage rates and initial jobless claims were also released.
April Inflation and Retail Sales in Negative Territory
Consumer prices fell in April to a negative reading of -0.80 percent and matched expectations. The Core Consumer Price Index, which excludes volatile food and energy sectors, fell to -0.40 percent from -0.10 percent in March. Analysts expected a reading of -0.20 percent. Consumer Price Indices are used for determining inflation rates.
Retail sales also posted negative readings for April. Overall, retail sales fell by -16.40 percent as compared to the March reading of -8.30 percent and April’s expected reading of -12.50 percent. Retail sales excluding autos fell by 17.20 percent; analysts expected a reading of -0.90 percent based on the March reading of -0.40 percent. Retail readings may improve in May as retail establishments and malls start to open.
Fed Chair Expects Slow Economic Recovery
Jerome Powell, Chairman of the Federal Reserve advised business contacts that the economic recovery may be slower than originally expected. In remarks given at the Peterson Institute for International Economics, Mr. Powell said, “The path ahead is both highly uncertain and subject to significant downside risks.” Mr. Powell cautioned that “the passage of time can turn liquidity problems into solvency problem” and suggested that additional government assistance to households and businesses may be worth it to prevent more damage to the economy.
Mortgage Rates Mixed; New Jobless Claims Fall
Freddie Mac reported little change in average mortgage rates last week. Rates for 30-year fixed-fixed rate mortgages averaged two basis points higher at 3.28 percent. Rates for 15-year fixed-rate mortgages dropped by one basis point to 2.72 percent. Rates for 5/1 adjustable rate mortgages averaged one basis point higher at 3.18 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.
New jobless claims were lower than in the prior week but remained far above traditional readings. 2.98 million claims were filed as compared to the prior week’s reading of 3.18 million initial claims filed. Analysts expected a reading of 2.73 million new claims filed.
The University of Michigan released its preliminary Consumer Sentiment Index readings for May. The latest index reading was 73.70 as compared to an expected reading of 69.80 and last month’s reading of 71.80. May’s reading was in line with Chair Powell’s suggestion that consumers are looking ahead to returning to work and shopping as the economy gradually reopens.
What’s Ahead
This week’s economic reporting includes readings from the National Association of Home Builders on housing market conditions along with reports on housing starts and building permits issued. Data on existing home sales and weekly readings on mortgage rates and new jobless claims will also be released.
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About the Author:
Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.