Mortgage rates continue to ramble around in a narrow range. Fortunately, that range continues to bring very low and affordable rates to mortgage shoppers.
The national average 30-year fixed rate mortgage, as measured by HSH’s Fixed-Rate Mortgage Indicator (FRMI), fell to 5.43%, a five-basis-point drop that reflects the meanderings of the economy in general. The FRMI averages the prices of conforming, jumbo and expanded conforming products. The FRMI’s 5/1 Hybrid companion averaged 5.06% this week, just a few basis points above the conforming 30-year FRM.
As noted last week, some market observers declare that they’re seeing some signs of economic recovery. At least some of the economic data out this week seems to confirm that glimpse.
Retail Sales weren’t as strong as was expected in April, disappointing expectations of a small increase. Sales fell 0.4% from March to April, and are off 11.4% on a year-over-year basis. It may be that, even with stimulus checks and tax rebates arriving in the mail, glum economic news kept people out of the stores. However, that money had to go somewhere, and in fact, the nation’s savings rate rose to above 4% — a nice rebound from the zero-percent range that it was in until relatively recently. Households continue to reduce spending and devote more cash to shoring up their savings and retirement accounts, and that trend will likely continue for years. While saving is good, the flip side is that consumer spending — the primary driver of our economy — will not spur as as rapid, or as powerful, a recovery as we might hope.
When sales aren’t as robust as expected, businesses don’t have to keep a lot of goods on hand. Thus it was that business inventories for March fell 1%, just as expected. This made the seventh consecutive month of decreases. The inventory report actually comprises three categories, and we discussed wholesale inventories in last week’s Market Trends. The newly-released component this week is retail inventories, which fell 0.7% in March. Car dealers and sellers of building materials weren’t able to unload as much inventory as appliance and home-furnishing retailers. Still, as inventories shrink, retailers will need to replace them, resulting in a pickup in factory orders down the road.
We did see some improvement in the Industrial Production report released Friday. Though IP did fall in April, it was only by a scant 0.5%, its best showing in many months, and a distinct improvement from the minus-1.7% drop in March. Most of the drop was attributed to the mining sector. The IP report also covers the manufacture of goods, including those sold at retail stores, and here we only saw a drop of 0.2%, a nice improvement from March’s big 2.1% decline. This shows the beginning of stability in the manufacturing sector, which in turn suggests that the nation’s retailers will enjoy a better quarter than they have recently. We’ll find out in due course. HSH
