This week brings us the release of four factual economic reports to be concerned with along with the minutes from the last FOMC meeting. Two of the three reports are considered to be only moderately important while one is of low importance to the bond and mortgage markets. Still, the last report of the week is one of the single most important we see each month an d has the potential to create a great deal of volatility in the markets and rates.
The week’s first two reports come Tuesday morning. The first is the revised Productivity index for the 4th Quarter of last year. The preliminary reading posted last month showed a 3.0% jump in worker output. Analysts are expecting to see a downward revision to 1.7%, meaning that employee productivity was weaker than previously announced. Employee productivity is watched closely because a higher level of output per hour is believed to mean that the economy can expand without inflation concerns.
January’s Factory Orders will be posted late Tuesday morning, which will give us a measurement of manufacturing sector strength. This data is similar to last week’s Durable Goods, except this report covers orders for both durable and non durable goods. Current forecasts are calling for a drop in new orders of approximately 4.0%. A larger than expected drop would be good news for the bond m arket and could lead to an improvement in mortgage rates Tuesday morning.
The Fed Beige Book will be posted Wednesday afternoon. This report details economic activity throughout the country by region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading Wednesday. It probably will not cause a major sell off in the stock or bond markets, but could cause enough movement in bond prices to possibly improve or worsen mortgage rates slightly if it reveals any significant surprises.
Friday morning, January’s Goods and Services Trade Balance report will be posted. This data gives us the size of the U.S. trade deficit during January. It generally isn’t a big mover of bond prices, but can affect stock prices and the value of the U.S. dollar versus other currencies. However, I expect this report to have virtually no impact on mortgage rates Friday due to the importance of the day’s second release.
The second report scheduled for Friday is one of the single most important monthly reports we see. The Labor Department will release February’s Employment report at 8:30 AM ET Friday. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a large drop in payrolls and little or no increase in earnings. Current forecasts are calling for no change in the unemployment rate of 4.6% and approximately 100,000 new jobs added.
