Overview: Two of the biggest monthly economic reports were released over the past week, but neither caused much reaction in mortgage rates. The latest inflation data was mostly in line with expectations, while the labor market data was a bit weaker than expected overall. As a result, mortgage rates declined a little more, reaching the lowest levels since early 2023.
The Consumer Price Index (CPI) is one of the most widely followed inflation indicators. To reduce short-term volatility and get a better sense of the underlying inflation trend, investors typically look at core CPI, which excludes the food and energy components. In August, core CPI was 3.2% higher than a year ago, which is the same as last month and remains near the lowest annual rate of increase since April 2021.
While this annual rate has fallen from a peak of 6.6% in September 2022, it is still far above the readings around 2% seen early in 2021, which is the stated target level of the Federal Reserve. One big reason is that shelter (housing) costs remain elevated and again were responsible for the largest portion of the increase. By contrast, used vehicle prices dropped 1% from July and were down sharply from a year ago. Other categories that posted declines in July included medical services and apparel.
The nonfarm payrolls report is by far the most highly anticipated labor market data each month, and the latest results were mixed. The economy added just 142,000 jobs in August, below the consensus forecast of 160,000, and the figures for prior months were revised lower by 86,000. Sectors displaying the largest gains included healthcare, construction, and social assistance. The unemployment rate fell from 4.3% to 4.2%, as expected, primarily due to new workers entering the labor force. Average hourly earnings, an indicator of wage growth, were 3.8% higher than a year ago, which was slightly above the consensus forecast.
Core CPI (annual % change)
Week Ahead
Sept. 12
Producer Price Index (PPI)
Sept. 17
Retail Sales report
Sept. 18
U.S. Federal Reserve meeting
New Residential Construction report (also known as Housing Starts)
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