Morning Report: Inflation at the consumer level increases moderately 11/15/17

Vital Statistics:

Last Change
S&P Futures 2567.0 -11.0
Eurostoxx Index 380.9 -3.0
Oil (WTI) 55.1 -0.6
US dollar index 87.0 -0.4
10 Year Govt Bond Yield 2.32%
Current Coupon Fannie Mae TBA 102.688
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 3.87

Stocks are lower this morning as a risk-off feel is dominating the markets. Bonds and MBS are up.

As stocks swoon, we should continue to see mortgage rates tick lower, at least at the margin. We came close to positive reprices yesterday.

Mortgage Applications increased 3.1% last week purchases increased 0.4% and refis increased 6%. There was no adjustment for the Veteran’s Day holiday, and the 30 year fixed rate mortgage was unchanged at 4.12%.

While inflation may be picking up at the wholesale level, it hasn’t translated to the consumer level, at least not yet. The consumer price index rose 0.1% MOM and is up 2% YOY. Ex-food and energy, it was up 0.2% MOM and 1.8% YOY. The Fed is targeting 2% inflation, so they still have more work to do there. It probably won’t change much in the way of the Fed’s thinking, which is still on a gentle path of increasing interest rates. The Fed Funds futures are currently predicting a 100% chance of a hike in December, with 92% predicting a 25 basis point hike and 8% predicting a 50 basis point hike.

Retail sales moderated in October after spiking in September on strong gasoline sales. Retail sales increased 0.2%, while sales less autos and gasoline rose 0.3%. The control group was also up 0.3%. Separately, Target forecasted moderate holiday spending growth, although that could be specific to that company, which is locked in a price war with Wal-Mart and Amazon.

Manufacturing in New York State decelerated last month but is still historically strong according to the Empire State Manufacturing Survey put out by the New York Fed. Employment continue to expand, albeit at a slower pace than last month.

Household debt balances increased in the third quarter, according to the latest Fed data. Overall debt rose to just under $13 trillion, which eclipses the high set in 2006. Mortgage debt is still lower than the peak levels, however, while non-housing debt is higher. We are seeing an increase in the share of auto debt, as well as student loan debt. If you look at the historical charts, you can see just how dramatically credit scores have improved for mortgage debt.

The Senate has added a twist to tax reform. In order to come within the statutory limits for the national debt, they have added a wrinkle to save money: eliminating the individual mandate for Obamacare. This supposedly increases savings by some $300 billion. Some of those savings may be used for additional tax cuts. This will make tax reform an easier push legally, but will probably push some of the more liberal Republicans away from it. The Republican majority in the Senate will probably get even narrower, with the special election in Alabama looking like a D pickup.

15 Responses

  1. I find it hilarious the left is now solemnly donning the sexual politics hairshirt and throwing Bill Clinton under the bus now that he is politically useless to them….

    Liked by 1 person

    • The Virtue signal is strong. In all fairness, this universal hatred of powerful horndogs seems to be a new development. A new mass mind virus (not necessarily a bad thing just a sudden cultural shift). I think he might be thrown under the bus even if useful now, if the stories were fresh -now-. That is, he’s still useful and some other Whitehouse intern stepped forward to tell her harrowing tale. It’s getting too risky to protect the horndogs.


  2. Click to access Obamacare%20Poverty%20Tax%202015.pdf

    Liked by 1 person

  3. Juicers gonna juice.


    • Focking Internet. People can look up stuff you said a long time ago! It’s not fair!


      • Interesting Williamson column:

        But the Democrats did learn something from the Lewinsky scandal: Americans blew off the cattle-futures shenanigans, the apple-stealing travel-office stuff, the illegal Chinese donations, and a dozen other Clinton scandals, but they seized on the intern-diddling. Most Americans don’t understand futures trading, but most of them understand sex. They’re throwing everything they have at Trump — the ridiculous emoluments stuff, the monkey business with the Russians — and Trump has done his part to help them out, but none of that is going to be enough to drive him from office. (You try explaining the emoluments clause to an actual American voter.) But there’s plenty of sexual material to use against Trump, who is dumb enough to have put many of his exploits in writing under his own name, available at a bookstore near you, and to have gone on record, sometimes accidentally, about others. If Senator Franken ends up being collateral damage in the war on Trump — well, Minnesota has plenty of Democrats waiting to take his place. Just don’t let them fool you into believing that this is moral calculus. It’s political calculus — today, just like it was in 1998.


  4. I would vote for Trump in 2020 if he nominated Angelo Mozillo to run the CFPB just to give the left conniptions…


  5. Another reminder that shows that people will say anything to achieve power.

    It doesn’t differentiate parties.

    Liked by 1 person

  6. Weird.

    Liked by 1 person

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