Financial Report

With the FOMC Minutes coming precisely within expectations, there is once again a lot of optimism that the Federal Reserve may cut rates this year. Much of the Q2 data reports show favorable amounts of reduction in inflation as well as a more stable economic outlook for the rest of the year. With the larger reports in PMI Manufacturing numbers and Non-farm Payroll figures, the overall outlook seems to align with the rest of the data points, justifying the more recent optimism about potential rate cuts. This week should give the final results on Q2 inflation results with the new releases of CPI and PPI data reports.

Global US Manufacturing PMI

A key barometer of U.S. factories fell in June for the third month in a row, signaling that an ongoing slump in the industrial side of the economy shows no sign of ending. The Institute for Supply Management’s manufacturing index slipped to 48.5% in June from 48.7% in the prior month. Numbers below 50% signal that the manufacturing sector is shrinking.

U.S. Hourly Wages

Wage growth for the last 12 months ending in June slowed to 3.9% from 4.1%, marking the smallest increase seen since August 2021. At one point, yearly wages were rising as fast as 5.9%. A shortage of labor prompted millions to change jobs in pursuit of better pay, particularly to cope with significant inflation.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.09% with the current rate at 6.25%
• 30-Yr FRM rates are seeing an increase by 0.09% with the current rate at 6.95%

MND Rate Index

• 30-Yr FHA rates are seeing a decrease by -0.01% for this week. Current rates at 6.50%
• 30-Yr VA rates are seeing no change for this week. Current rates at 6.52%

Jobless Claims

Initial Claims were reported to be 238,000 compared to the expected claims of 233,000. The prior week landed at 234,000.

What’s Ahead

CPI and PPI are the most relevant reports coming up, with the rest of the week having an extremely light release schedule. 

Following the release of key data such as the FOMC rate decision and CPI and PPI inflation reports, only the PCE Index reports remained to set the course, which are coming in well within expectations. The Consumer Confidence Report is also a significant concern since it influences broader economic decisions when consumers hesitate to spend, usually due to rising living costs.

Consumer Confidence Report

Consumers were slightly more optimistic about the economy at the end of June, but the effects of high inflation in the past few years still weighed on their minds. The final reading of the consumer sentiment index rose to 68.2 in June from a preliminary 65.6 earlier in the month, but it’s still the lowest level in seven months. The index also stands well below a prepandemic peak of 101. Although Americans think inflation will ease, they say high inflation and slower income growth have worried them more about their finances, according to the University of Michigan survey.

PCE Index

The Federal Reserve’s preferred PCE index was unchanged last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a flat reading. If inflation continues to recede in the next few months, the Fed could lay the groundwork to cut U.S. interest rates in the fall. The increase in inflation in the past 12 months slipped to 2.6% from 2.7%. The Fed is aiming to bring inflation down to 2% a year.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.03% with the current rate at 6.16%
• 30-Yr FRM rates are seeing a decrease by -0.01% with the current rate at 6.86%

MND Rate Index

• 30-Yr FHA rates are seeing an increase by 0.02% for this week. Current rates at 6.51%
• 30-Yr VA rates are seeing an increase by 0.02% for this week. Current rates at 6.52%

Jobless Claims

Initial Claims were reported to be 233,000 compared to the expected claims of 235,000. The prior week was landed at 239,000.

What’s Ahead

Next week, we anticipate ISM Manufacturing data, U.S. trade deficits, and overall U.S. unemployment figures to provide further insights into the direction of the economy. Despite being less comprehensive reports, they often serve as early indicators of inflation trends which are a crucial focus for all stakeholders.

Currently, the Retail Sales Report is the sole report that has weight. With the passage of more optimistic inflation data reports, retail sales coming in slightly under expectations will have little to no bearing on the overall outlook. Given the last major reports indicating the economy’s health and state of inflation, there is more optimism toward a potential rate cut this year. Lending partners have still been quick to continue cutting rates.

Consumer Price Index

Sales at U.S. retailers barely rose in May, suggesting Americans are feeling the weight of lingering inflation and high interest rates. Sales edged up 0.1% last month. They had been forecast to rise 0.2%, based on a Wall Street Journal poll of economists.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.04% with the current rate at 6.13%
• 30-Yr FRM rates are seeing a decrease by -0.08% with the current rate at 6.87%

MND Rate Index

• 30-Yr FHA rates are seeing an increase by 0.05% for this week. Current rates at 6.49%
• 30-Yr VA rates are seeing an increase by 0.05% for this week. Current rates at 6.50%

Jobless Claims

Initial Claims were reported to be 238,000 compared to the expected claims of 235,000. The prior week landed at 243,000.

What’s Ahead

One of the Federal Reserve’s preferred inflation data points will be released next week in the PCE Prices Report, followed closely by the Chicago PMI and the Univ. Michigan Consumer Sentiment reports.