Financial Reports

Recent economic data brought significant relief, with both the CPI and PPI indicating that inflation was running cooler than expected. In the context of the current administration, this was welcome news, helping to ease concerns about potential monetary policy changes. The Federal Reserve has very frequently signaled they will follow the data and this time it was a positive result towards reducing rates further this year. The change in administration, however, still remains unknown and there is a lot of unrest across lending partners and markets alike. This was also followed by a better than expected Retail Sales report which has shown 2025 to start off with some economic momentum. Both reports are critical factors in shaping future rate adjustments. Despite this, lending partners have been raising rates in the last few months, driven largely by uncertainty tied to the transition of administrative positions.

Consumer Price Index

The increase in the core rate in the last 12 months dipped to 3.2% from 3.3%. But that still leaves it well above the Fed’s goal of 2% inflation. Meanwhile, overall consumer prices showed a sharper 0.4% increase largely because of higher food and energy prices. Those prices are expected to taper off in January.

Producer Price Index

Producer-price index rises just half as much as forecast. The producer-price index, where the seeds of inflation are planted, rose a mild 0.2% last month, the government said Tuesday. Wall Street had predicted an increase double that size.

Retail Sales

Retail sales grew steadily in December 2024, rounding out a strong holiday shopping season and signaling that the economy entered the new year with solid momentum. According to government data released Thursday, sales at U.S. retailers rose by a seasonally adjusted 0.4%, slightly below Wall Street’s expectations.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.13% with the current rate at 6.27%
• 30-Yr FRM rates saw an increase of 0.11% with the current rate at 7.04%

MND Rate Index

• 30-Yr FHA rates saw a decrease of -0.08% for this week. Current rates at 6.47%
• 30-Yr VA rates saw a decrease of -0.09% for this week. Current rates at 6.48%

Jobless Claims

Initial Claims were reported to be 217,000 compared to the expected claims of 210,000. The prior week landed at 203,000.

What’s Ahead

We should expect the Manufacturing PMI preliminary this week, as well as the University of Michigan’s Consumer Sentiment report. Given the bank holiday from Martin Luther King, there is a relatively light release schedule otherwise.

In the first FOMC Minutes of the year, the Federal Reserve signaled strongly that while officials remain vigilant for inflation exceeding their expectations, they have no plans to raise interest rates. Much of the apprehension among speculators is the monetary policy which could keep inflation higher than expected for some time. Meanwhile, unemployment reports indicate that the previous year remained stable, consistently staying below the annual high—a positive sign of a stronger job market.  However, this has been somewhat dampened by the recent reports of the Trade Deficit. Compared to the previous year, the trade gap has nearly doubled, potentially clashing with the policies introduced by the Trump Administration.

Unemployment Report

The Federal Reserve’s sharp half-point reduction in a key U.S. interest rate in September was driven in part by the unemployment rate rising to a post-pandemic high of 4.3% in July, from a cycle low of 3.4% a year and a half earlier. As it turns out, the jobless rate peaked at 4.2% in July. The government wiped away the 4.3% reading after annual revisions that incorporate more accurate information.

Trade Deficit

The U.S. trade deficit increased by 6%, reaching nearly $80 billion by late 2024. This marks a gap nearly double the size of what it was when Donald Trump first assumed the presidency eight years ago. For over three decades, high trade deficits have been a persistent challenge for U.S. presidents. Economists believe there is little Trump can do to significantly address the issue early in his second term.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.01% with the current rate at 6.14%
• 30-Yr FRM rates saw an increase of 0.02% with the current rate at 6.93%

MND Rate Index

• 30-Yr FHA rates saw an increase of 0.13% for this week. Current rates at 6.55%
• 30-Yr VA rates saw an increase of 0.12% for this week. Current rates at 6.57%

Jobless Claims

Initial Claims were reported to be 201,000 compared to the expected claims of 215,000. The prior week landed at 211,000.

What’s Ahead

With the Martin Luther King holiday next week, a very light release schedule is planned. The most significant among them are the Consumer Sentiment report and the U.S. Leading Economic Indicators data.

With the holiday season coming to a conclusion, there was little in the way of data releases. Last week, the main reports were the Chicago Business Barometer and the ISM Manufacturing Index, both indicating a slight contraction in the manufacturing sector. This comes as we await the upcoming administration change at the White House. The impact of this is relatively minimal, with lending rates continuing their downward trend. Next week we will be expecting the year-over-year for both the Consumer Price Index (CPI) and Producer Price Index (PPI), wrapping up 2024.

Chicago PMI

The Chicago Business Barometer, also known as the Chicago PMI, dropped further to 36.9 in December 2024, compared to November’s 40.2 and missing market forecasts of 42.5.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.13% with the current rate at 6.13%
• 30-Yr FRM rates saw an increase of 0.06% with the current rate at 6.91%

MND Rate Index

• 30-Yr FHA rates saw a decrease of -0.03% for this week. Current rates at 6.42%
• 30-Yr VA rates saw a decrease of -0.01% for this week. Current rates at 6.45%

Jobless Claims

Initial Claims were reported to be 211,000 compared to the expected claims of 225,000. The prior week landed at 220,000.

What’s Ahead

Both the year-over-year reports for the CPI and PPI as well as the first reports of inflation data for 2025 is on the release schedule.