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Retail Sales Disappoint, Inflation Remains Tame



Last Week in Review: Retail sales disappoint, while inflation remains tame.

Forecast for the Week: Housing data will dominate headlines as investors also count down to the Fed's October 27-28 meeting.



"I've got to admit it's getting better. A little better all the time." The Beatles. The Federal Reserve is looking for signs that our economy is getting better, but recent reports have shown mixed messages.

September Retail Sales rose a scant 0.1 percent after no change in August, likely stifled by low wage growth. The Retail Sales Report is the most timely indicator of consumer spending patterns and is adjusted for seasonal variation, holidays and trading-day differences. 

In the labor market, weekly Initial Jobless Claims fell to the lowest level since 1973 to 255,000. While this sounds like a positive development, it's important to note that this decline is due, in part, to Americans falling off the Unemployment Insurance rolls and exiting the workforce. 

Inflation readings remain tame, and lower fuel prices are driving many of them. Low inflation is typically great for Mortgage Bonds, since inflation reduces the value of fixed investments like Bonds. Home loan rates are tied to Mortgage Bonds, so low inflation could help home loan rates remain attractive. 

These and other economic numbers are on the Fed's radar heading into the Federal Open Market Committee meeting October 27 and 28. Once again, the Fed will discuss changes to its benchmark Federal Funds Rate, which has been near zero for eight years. This is the rate at which banks lend money to each other overnight. While an increase to the Fed Funds Rate is unlikely at the Fed's October meeting due to some weak economic data, this is something to monitor in the months ahead. When the Fed Funds Rate does rise, home loan rates could follow suit, depending on overall market and economic conditions. 

For now, home loan rates are holding steady and remain near historic lows. If you have any questions at all about rates, the mortgage market or housing, please let me know.



Housing data will be plentiful this week.

  • The week begins with the National Association of Home Builders Housing Market Index on Monday.
  • Look for Housing Starts and Building Permits on Tuesday.
  • Existing Home Sales will be released Thursday.
  • Weekly Initial Jobless Claims will also be released Thursday, as usual.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. When you see these Bond prices moving higher, it means home loan rates are improving—and when they are moving lower, home loan rates are getting worse. 


By: Michael Borodinsky

Vice President/Regional Builder Branch Manager | Caliber Home Loans








Call Michael: 732-382-2654

Email Michael:

Follow Michael on Twitter: @mikeborodinsky



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