“Never worry about the price of gas.” (Luke Bryan) Retail sales dropped in August while higher fuel prices revved up consumer inflation.

Retail Sales

Families may have pulled back on back-to-school shopping, but Hurricane Harvey played a role too. The Commerce Department reported that a drop in car sales, due in part to Hurricane Harvey, resulted in low consumer spending numbers. ) Retail sales fell 0.2 percent versus the 0.1 percent increase expected, while July’s sales figures were revised lower to 0.3 percent from 0.6 percent. Retailers have been suffering a bit with in-store traffic, but sales at online retailers declined 1.1 percent in August too, the biggest drop since April 2014.

On the inflation front, the Consumer Price Index (CPI) had its largest month-over-month increase in seven months, rising 0.4 percent from July to August. But one month does not make a trend; the increase was due in part to a spike in gasoline prices that posted the biggest jump since January. Core CPI, which excludes volatile energy and food prices, was in line with expectations at 0.2 percent. The Producer Price Index (PPI), which measures wholesale inflation, came in just below expectations in August. On an annual basis, PPI rose 2.4 percent after increasing 1.9 percent in July.

Any signs of ongoing inflationary pressure are bad for fixed investments, like mortgage bonds, so inflation is an important metric to watch. When mortgage bond prices worsen, the home loan rates tied to them can worsen as well.

At this time, home loan rates remain near historic lows.

Fed Chair Janet Yellen and the Fed’s monetary policy statement will capture attention midweek.

  • Housing Starts and Building Permits will be released on Tuesday, followed by Existing Home Sales on Wednesday.
  • The Fed’s monetary policy statement also will be released Wednesday, and it could be a market mover.
  • Thursday brings weekly Initial Jobless Claims and regional manufacturing data in the Philadelphia Fed Index.

If you or someone you know has questions about home financing or home loan rates, please contact me. I’d be happy to help.

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