Updated on July 16, 2019 10:39:52 AM EDT

The Commerce Department gave us today’s big economic news by posting Junes Retail Sales report at 8:30 AM ET. They announced a 0.4% increase in retail-level sales, exceeding forecasts of a 0.4% rise. Even a secondary reading that excludes more volatile and costly auto transactions showed a stronger increase than was predicted. Those increases indicate that consumers spent more last month than many had thought. That is bad news for bonds and mortgage rates because consumer spending makes up almost 70% of the U.S. economy and the stronger spending levels is stronger economic growth.

Junes Industrial Production data was also released this morning but at 9:15 AM ET. It showed an unchanged level of output at U.S. factories, mines and utilities. That was softer than the 0.2% increase that was expected, allowing us to consider the news favorable for mortgage rates. Unfortunately, the Retail Sales report carries much more significance than this report does. Therefore, the markets are reflecting results of the sales data more than this report.

Tomorrow also has two items we will be watching, starting with Junes Housing Starts at 8:30 AM ET. This report will give us an indication of housing sector strength and future mortgage credit demand, but usually doesnt cause much movement in mortgage rates unless it varies greatly from forecasts. It is expected to show little change in the number of construction starts of new homes between May and June. The lower the number of starts, the better the news it is for the bond market as it would indicate a weaker than expected new home portion of the housing sector.

The day’s second release comes during afternoon trading. The Federal Reserve will release its Beige Book report at 2:00 PM ET. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by Fed region throughout the U.S. If there are any significant changes in conditions since the last update, we could see afternoon moves in the markets and mortgage rates. Signs of weakness should translate into bond strength and better mortgage pricing.

 ©Mortgage Commentary 2019