“Are you optimistic ’bout the way things are going?” (Chicago) Tame consumer prices in April helped eased fears of rising inflation.
The Consumer Price Index (CPI) rose 0.2 percent in April, just below expectations, the Bureau of Labor Statistics reported. This was down from the 2018 high of 0.5 percent recorded in January. The numbers revealed an uptick in energy and food prices which was offset by a decline in demand for used cars and trucks. The Core CPI, which strips out volatile food and energy prices, rose 0.1 percent, also below expectations.
Inflation at the wholesale level was also tame in April as the Producer Price Index (PPI) rose 0.1 percent. Core PPI rose 0.2 percent, as expected.
Tame inflation is typically good for mortgage bonds, as well as the home loan rates tied to them, because inflation reduces the value of fixed investments like bonds. Mortgage bonds were boosted by the tame inflation data in the latest week.
It’s also important to remember that many factors impact both stocks and bonds. Strong economic news can benefit stocks (sometimes at the expense of bonds), while geopolitical turmoil can have the opposite effect. Stocks received a boost in the latest week when energy stocks lifted the entire market, as oil prices spiked after President Trump announced his decision to withdraw from the Iran nuclear deal. The release of prisoners from North Korea and the scheduling of a meeting between President Trump and Kim Jong-un also lifted some uncertainty and helped the recent rise in stock prices.
Investors will be watching headlines from the Middle East and Korea closely in the coming weeks as they decide where to put their investing dollars.
For now, though, home loan rates have trended higher this year, they remain attractive and near historically low levels.
Did the rebound seen in March retail sales continue in April? Are builders making a dent in inventory shortages around the country? This week’s reports may provide some answers.
- Look for Retail Sales data on Tuesday.
- Manufacturing data from the Empire State Index and Philadelphia Fed Index will be released Tuesday and Thursday, respectively.
- The NAHB Housing Market Index will be delivered on Tuesday, followed by Housing Starts and Building Permits on Wednesday.
- As usual, weekly Initial Jobless Claims will be released on Thursday.
If you or someone you know has any questions about home loans, please contact me. I’d be happy to help.