Inflation Drops

It was another quiet week for mortgage markets. The latest inflation data was right on target and caused little reaction. Similarly, the other major economic reports had just a minor impact, and mortgage rates ended the week nearly unchanged. 

Another significant economic report released this week from the Institute of Supply Management revealed unexpected weakness, highlighting the recent struggles in the manufacturing sector. The ISM national manufacturing index fell to 47.8, well below the consensus forecast. Readings under 50 indicate a contraction in the sector, and this was the sixteenth straight month below 50, the longest streak in about 15 years.

After shooting higher to start the year, mortgage applications have stalled in the face of rising rates, according to the latest data from the Mortgage Bankers Association (MBA). Applications to refinance dropped 7% from last week and were slightly lower than one year ago. Purchase applications fell 5% from the prior week and were down 12% from last year at this time. One interesting note was that mortgage demand from buyers looking at newly built homes was 19% higher than a year ago, emphasizing the increased interest in new homes due to the lack of inventory of existing homes on the market. 

Investors will continue to watch for Fed officials to elaborate on their plans for future monetary policy. For economic reports, the ISM national services sector index will come out on Tuesday and the JOLTS data on job openings on Wednesday. The key Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation will be some of the most highly anticipated economic data of the month. In addition, the next European Central Bank meeting will take place on Thursday.