It was a relatively quiet week last week for mortgage rates ahead of the Fed meeting on March 21.The primary surprise was a decline in retail sales, which was positive for mortgage rates, and rates finished last week slightly lower. Consumer spending accounts for about 70% of economic activity in the U.S., making the retail sales data a highly anticipated report each month.
Following the hurricanes last fall, retail sales were very strong for three months, causing most economists to expect that consumer spending would remain strong in 2018. This has not been the case, however. Wednesday’s report revealed that retail sales in February unexpectedly declined for the third straight month. One result of the weaker than expected retail sales data have seen over the last few months is that many leading economists have been lowering their forecasts for the first-quarter gross domestic product (GDP), the broadest measure of economic growth.
Perhaps the most widely followed GPD prediction is put out by the Federal Reserve Bank of Atlanta. At the end of January, the Atlanta Fed forecast for first quarter GDP growth was a shockingly high 5.4%. Since then, it has been declining rapidly, but it still was a solid 2,5% last week, The Atlanta Fed’s most recent reading is just 1.9%, which is the line with the consensus of leading economists. The actual first-quarter GDP data will be released on April 27.
Last Friday’s report on housing starts contained mixed news. In February total housing starts fell 7% from January, dropping well below the expected level. However, this was entirely due to a large decline in highly volatile starts of multi-family units. Single-family starts in February rose 3% from January, and there were 501,000 single-family units under construction, the most since June 2008. This was encouraging news since a lack of inventory has been holding back home sales in many regions.
Major Economic News Due This Week – Looking ahead, the big news will be Wednesday’s Fed meeting. Investors widely expect a 25 basis point increase in the federal funds rate, and they will be seeking guidance about the pace of future rate hikes. In addition, they will be looking for changes at Jerome Powell’s first meeting as Fed Chair. For economic data, Existing Home Sales will be released on Wednesday and new Home Sales on Friday, Durable Orders. An important indicator of economic activity also will come out on Friday.
Fixed rate mortgage interest rates range from 3.625% to 4.5%. Call us if you want to know how these rates affect you.
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