WKRE Blog

Straight Stats

A run of good economic data continued this week, maintaining the upward pressure on long-term interest rates that began in November.
The National Association of Realtors reported a 3.5% increase in pending sales in November, although still 9% below 2009. New claims for unemployment insurance fell to the best level since 2008, a little more than 400,000 weekly. The Chicago purchasing managers’ survey of manufacturing (“ISM”) jumped in December, possibly indicating growing strength in the national numbers due on Monday. On the weak side: the leading measure of consumer confidence slid in December, and the October Case/Shiller report of home prices was weaker than any expected.

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Straight Stats

Mortgage interest rates increased again this past week as economic data was mostly better than expected. Reports stronger than expected included November Retail Sales, the December Empire State Manufacturing Index, November Industrial Production and Capacity Utilization, weekly jobless claims, and the Philadelphia Fed Business Index. The November Producer Price Index (PPI), a measure of wholesale prices, increased more than expected, up 0.8% on expectations of an increase of 0.5%. The November Consumer Price Index (CPI) increased 0.1%, slightly less than expected. Housing data, though, did not meet expectations. November Housing Starts were up 3.9% on expectations that starts would be up 4.8%. November Building Permits were down 4.0% on expectations that they would be up 2.5%.

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Straight Stats

Mortgage interest rates increased this past week as the market expects inflation to increase as a result of QE2. The Fed will purchase $600 billion in mostly intermediate term Treasury notes over the next several months as a result of QE2. Initially, markets thought that the Fed intended to keep rates low as a result of these purchases but markets increasingly believe that the Fed intends to stimulate inflation, which erodes the value of fixed income investments such as mortgages. Economic data was mixed. Economic data stronger than expected included October Retail Sales, the November Philadelphia Fed Business Index, and weekly jobless claims. Economic data weaker than expected included the New York Empire State Manufacturing Index, October Industrial Production, October Housing Starts, and October Building Permits. Inflation data continues to be tame. The October Consumer Price Index was up just 0.2%. Year over year, CPI increased just 1.2%, the lowest increase on record.

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