Over the weekend, the recent talks with China and the U.S. about the recent tariffs have been said to be making progress recently in Geneva, leading to restoring some stability across all sectors and markets. The prior week, the FOMC decided not to change the rates and that will likely be the case in the foreseeable future. While having less presence due to the current economic climate, this week’s CPI and PPI inflation data releases remain as important as ever. These reports will offer insight into the recent impact of the trade war and help inform expectations for the near-term economic outlook.

Trade Deficit

The U.S. international trade deficit, including goods and services, widened 14% in March to a record seasonally adjusted $140.5 billion, the Commerce Department said Tuesday, as companies rushed to import foreign products while they were slightly cheaper than they would be with White House tariffs added to the cost. Economists surveyed by The Wall Street Journal had predicted the deficit would widen to $136 billion from $122.7 billion in February.

FOMC Rate Decision

At its May 7, 2025, meeting, the Federal Open Market Committee (FOMC) unanimously decided to keep the federal funds rate unchanged at 4.25% to 4.5%, maintaining the rate at this level since December 2024. The Fed attributed this decision to increasing concerns about rising unemployment and inflation risks.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease of -0.03% for this week, with the current rate at 5.89%
• 30-Yr FRM rates saw no change for this week, with the current rate at 6.76%

MND Rate Index

• 30-Yr FHA rates saw a decrease of -0.03% for this week. Current rates at 6.25%
• 30-Yr VA rates saw a decrease of -0.05% for this week. Current rates at 6.25%

Jobless Claims

Initial Claims were reported to be 228,000 compared to the expected claims of 230,000. The prior week landed at 241,000.

What’s Ahead

Consumer Price Index and the Producer Price Index are set to release next week, highlighting the biggest indicators of the impact of the recent tradewar on the average consumer.

Last week featured a slew of releases, but the most important one as of this writing is the GDP estimates. Both the GDP and GDP deflator data have started to reverse their previous trends, raising serious concerns that the economy may be experiencing deflationary effects.

This is somewhat offset by the Personal Income and Spending reports, which showed favorable numbers, as well as the Non-farm Payroll figures, which have also increased during this period.

The impact of the latest tariffs and trade wars has already appeared in estimates and data releases across numerous markets. There is strong expectation that the Federal Reserve will need to respond with support to ensure market stability, chiefly by reducing interest rates. Additionally, Consumer Confidence reports have shown a consistent downward trend for the fifth month in a row.

Consumer Sentiment

The consumer-confidence index sank in April to the lowest level since the depths of the COVID-19 pandemic, the Conference Board said Tuesday. Confidence fell 7.9 points to 86.0 in April, the fifth straight monthly decline.

Consumer Spending

Consumer spending rose briskly in March, but not because Americans are gung-ho on the economy. Many bought new cars or other items to avoid potential price increases tied to U.S. trade wars. Personal spending rose 0.7% last month, the government said Wednesday, a few ticks above the forecast of economists polled by The Wall Street Journal.

Gross Domestic Product

The U.S. economy contracted in the first quarter of 2025 for the first time in three years, reflecting a surge in imports ahead of President Donald Trump’s tariffs and a slowdown in consumer spending. Gross domestic product, the official report card on the economy, shrank at a 0.3% annual rate from January to March, the government said Wednesday. It’s the first contraction in GDP since early 2022.

Non-Farm Payrolls 

The U.S. added a stronger-than-expected 177,000 new jobs in April, suggesting the labor market was largely unscathed last month by the Trump trade wars, for the time being. The increase in jobs exceeded the 133,000 forecast of economists polled by the Wall Street Journal. Many economists had expected to see signs of damage from the trade wars in the report.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease of -0.02% for this week, with the current rate at 5.92%
• 30-Yr FRM rates saw a decrease of -0.05% for this week, with the current rate at 6.76%

MND Rate Index

• 30-Yr FHA rates saw an increase of 0.03% for this week. Current rates at 6.28%
• 30-Yr VA rates saw an increase of 0.03% for this week. Current rates at 6.30%

Jobless Claims

Initial Claims were reported to be 241,000 compared to the expected claims of 225,000. The prior week landed at 223,000.

What’s Ahead

Historically, it has been less relevant, but the Trade Balance reports will help shed light on some previously unknown data. Next week will also be lighter due to the upcoming FOMC rate decision, although a rate change is not expected.