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Retail Sales Fall Short

On the heels of last Friday’s strong labor market report, mortgage rates drifted higher during the first half of the week. They reversed direction on Thursday due to a shortfall in the Retail Sales data and ended the week just slightly higher.

Retail Sales, which account for about 70% of US economic activity, fell in January due to the large decline in gas prices. Economists had correctly predicted this, but they overestimated how much consumers would increase their spending in other areas, so the overall decline in Retail Sales was much larger than expected.

Whether they spend the money they are no longer paying for gas, or they add to their savings or pay down debt, consumers are big beneficiaries of lower gas prices.

Investors paid significant attention this week to the negotiations over Greek bailout funds and the talks to end the conflict in Ukraine. Both situations moved closer to a positive resolution, but a great deal of uncertainty remains in both cases. The degree of investor confidence that these two situations will reach the desired outcome continues to influence mortgage rates.

Next week, the NAHB Housing confidence index will be released on Tuesday. Wednesday will be the big day with Industrial Production, PPI, Housing Starts, and the Fed Minutes. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products. The detailed FOMC Minutes from the January 28 Fed meeting will provide additional insight into the debate between Fed officials. Mortgage markets will be closed on Monday in observance of Presidents day. 

This week’s article from MBS QuoteLine.

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