Overview: Over the past week, unexpected weakness in the manufacturing data was favorable for mortgage rates. Increased trade tensions also were positive, and rates ended the week lower.

The trade conflict between the U.S. and China has reduced exports around the world, which has hurt the manufacturing industries in many countries this year. The latest data released on Tuesday revealed that the slowdown in the U.S. manufacturing sector was even greater than expected. The Institute for Supply Management (ISM) Manufacturing Index dropped to just 47.8, which was well below the consensus forecast, and the lowest level since June 2009. Readings below 50 indicate a contraction in the manufacturing sector. Investors became more concerned that the weakness will spread to the labor market and to other areas of the economy, and the potential for slower economic growth was good for mortgage rates.

On Friday, it was reported that the Trump administration has been exploring options to curb U.S. investments in China. Following a friendlier tone from trade officials on both sides in recent weeks, the increased hostility caught investors by surprise. Since tariffs and investment restrictions slow the outlook for economic activity, this news is positive for mortgage rates.

Week Ahead

October 3 — ISM Services Index

October 4 — Employment Report

October 10 — Consumer Price Index

In addition, news about the impeachment inquiry or the trade negotiations could influence mortgage rates.