Retail Sales

“Rainy days seem to wind up sunny, long as you got a little spending money.” Jimmy Buffett. Retail Sales were on the damp side in August, rising at their smallest level since February.

Retail Sales disappointed in August, up just 0.1 percent from July. However, July’s figure was revised higher from 0.5 percent to 0.7 percent. Sales were led by non-store retailers and from receipts at gasoline stations, while consumers cut back on spending for cars and clothing. On an annual basis, Retail Sales were up 6.6 percent from August 2017.

Consumer spending is crucial to the U.S. economy. It will be important to see if August’s numbers are just a hiccup and if sales pick up as we approach the holiday shopping season this fall.

Inflation was also in the news, with wholesale inflation tame in August. The Producer Price Index fell 0.1 percent from July, below the 0.2 percent expected due in part to a decline in food prices and a range of services.

The more closely watched Consumer Price Index (CPI) rose 0.2 percent from July to August, as higher costs for gasoline and rents were offset by declining costs for healthcare and apparel. On an annual basis, CPI rose 2.7 percent for the 12 months ending in August, though this was down from the 2.9 percent annual increase in July. Annual Core CPI, which strips out volatile food and energy prices, rose 2.2 percent year over year in August, down from July’s increase of 2.4 percent.

The key takeaway when it comes to inflation is that inflation reduces the value of fixed investments like Mortgage Bonds. Since home loan rates are tied to Mortgage Bonds, tame inflation can help keep Mortgage Bonds and home loan rates from worsening.

For now, despite the tame inflation data, Mortgage Bonds fell in the latest week due in part to the strong Jobs Report for August. Home loan rates remain near historic lows.

Housing reports will provide important updates on continued low inventory many homebuyers have been facing.

  • Manufacturing news kicks off the week on Monday with the Empire State Index, followed by the Philadelphia Fed Index on Thursday.
  • Over in the housing sector, look for the NAHB Housing Market Index Tuesday, Housing Starts and Building Permits Wednesday, and Existing Home Sales Thursday.
  • As usual, weekly Initial Jobless Claims will be released on Thursday.

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

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