Mortgage Market News for the week of Dec. 6, 2013

Mortgage Market News for the week of Dec. 6, 2013
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Patrick Gardner
Mortgage Loan Officer
NMLS ID: 378888
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A wide range of major economic data released this week revealed an unexpectedly strong level of improvement in the labor market and other areas. This is good news for the economy, but it is negative for mortgage rates. As a result, mortgage rates ended the week higher.

The data released earlier in the week hinted at healthy improvement in the labor market, and Friday’s Employment report confirmed the gains. Against a consensus forecast of 180K, the economy added 203K jobs in November. The Unemployment Rate declined from 7.3% to 7.0%, the lowest level since November 2008. The economy has added an average of 193K jobs over the past three months. Several Fed officials have suggested that they would like to see sustainable job gains around 200K per month to confirm that the labor market is back on more stable ground before scaling back on monetary stimulus. This data brings the Fed closer to tapering its bond purchase program.

This week’s economic data revealed that the strength in the labor market is consistent with improvement in the overall economy as well. Third quarter GDP was revised substantially higher to 3.6% from 2.8%, well above the consensus of 3.0%. This was the fastest pace of growth since the first quarter of 2012. The ISM national manufacturing index rose to the highest level since April 2011. October New Home Sales increased 25%, but this was from a somewhat depressed level in September. Finally, Consumer Sentiment jumped to the highest level since July.

Core PCE inflation was just 1.1% higher than one year ago
Weekly Jobless Claims declined below the 300K level
The European Central Bank made no change in rates
Gold prices declined to the lowest level since July

The most significant economic data next week will be the Retail Sales data and the PPI inflation report. Retail Sales account for about 70% of economic activity and will be released on Thursday. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Friday. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. The next Fed meeting will take place on December 18.

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