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Brenda Wild

Branch Partner

Caliber Home Loans, Inc.

NMLS #40542

Direct (309) 781-6274Fax: (309) 786-3189

www.brendawild.net

3514 46th Avenue

Rock Island, IL 61201

 
 

GDP Revised Lower

 

It was a volatile holiday-shortened week. Mixed US economic data was roughly neutral for mortgage rates. Anticipation of additional stimulus from the European Central Bank (ECB) was favorable, however, and mortgage rates ended the week a little lower.

 

In the big picture, mortgage rates are primarily being driven by indications about the pace of global economic growth and the resulting implications for central bank policy. In the US, investors are still sorting out the negative impact of unusually severe winter weather, but they expect the US economy to show moderate growth in coming years. The outlook in Europe is less optimistic, however. ECB officials have indicated that conditions in the euro zone warrant additional monetary stimulus to boost the economies in the region. Investors expect the ECB to signal new measures as soon as next week. One possible action could be a bond purchase program, and the potential added demand from the ECB has driven bond yields around the world lower in recent weeks. 

 

The report on Gross Domestic Product (GDP) is the broadest measure of economic activity. As such, the data is revised multiple times. Investors anticipated that the first revision to first quarter US GDP would change the slight increase of 0.1% seen in the first reading to a decline of about -0.5%. This week's report showed that the decline was an even larger -1.0% during the first quarter. 

 

Investors were not worried by the shortfall, however, since it was due to an unexpectedly large decline in inventories. If inventories drop in one quarter, it means that production, and thus GDP growth, will be higher in future quarters. Current estimates are for second quarter GDP growth of around 3.5%, which would mean an average of roughly 2.0% growth over the first six months of this year. 

 
 

There will be two major economic events next week. The ECB meeting will take place on Thursday. Investors will be looking for news about additional stimulus measures. The important monthly Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Earlier in the week, ISM Manufacturing will come out on Monday and ISM Services will be released on Wednesday. Construction Spending, Factory Orders, the Trade Balance, and Productivity will round out the schedule. 

 
 

All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.

 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 
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