With the release of the CPI and PPI data, much of the broader market has been anticipating the potential cooling of inflation numbers month-to-month and those expectations have been met. There’s a consistent trend of inflation slowing down which brings a greater potential for the end of any rate hikes from the Federal Reserve, signaling a soft-landing for the economy which has been touted by Jerome Powell. With a soft landing, it does also signal a strong potential for the Federal Reserve to begin lowering rates in the coming future.
Consumer Price Index
Despite the report beating inflation expectations and leading to optimistic outcomes for a future soft-landing for the economy, there is still plenty to be cautious about with the reports also signaling the largest reduction was due to the price of gasoline declining significantly from the prior month. The overall cost of living has remained stable and not increased, but there is still plenty to look out for with the coming reports.
- The consumer price index was flat in October from the previous month but increased 3.2% from a year ago.
- Excluding volatile food and energy prices, the core CPI rose 0.2% and 4%, against the forecast of 0.3% and 4.1%. The annual rate was the smallest increase since September 2021.
- The flat reading on the headline CPI came as energy prices declined 2.5% for the month, offsetting a 0.3% increase in the food index.
Producer Price Index
The Producer Price Index for final demand fell 0.5 percent in October, seasonally adjusted, after advancing 0.4 percent in September, the U.S. Bureau of Labor Statistics reported today. (See Table A). The October decline is the largest decrease in final demand prices since a 1.2-percent drop in April 2020. On an unadjusted basis, the index for final demand rose 1.3 percent for the 12 months ended in October.
Primary Mortgage Market Survey Index
The last 3 weeks have seen a week-to-week decline in rates.
- 15-Yr FRM rates seeing a week-to-week decrease by -0.05% with the current rate at 6.76%.
- 30-Yr FRM rates seeing a week-to-week decrease by -0.06% with the current rate at 7.44%
MND Rate Index
- 30-Yr FHA rates increased week to week seeing a -0.21% increase for this week. Current rates at 6.70%
- 30-Yr VA rates increased week to week seeing a -0.02% increase for this week. Current rates at 6.72%
Jobless Claims
Weekly jobless claims have exceeded expectations this week, with it showing a slight uptrend. Initial Claims have increased to 231,000 compared to the expected claims of 220,000. The prior week was 218,000.
What’s Ahead
Thanksgiving week, being next week will see a reduction in the data release schedule. The largest ones will be U.S. leading economic indicator reports, with the usual initial jobless claims, and lastly the final consumer sentiment report for the quarter.
The week following the FOMC rate decision meetings are typically very light, with the two most influential releases being the University of Michigan Consumer Sentiment and the weekly Job Claims reports. The more positive news is mortgage lending rates have been on the decline in the last two weeks.