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The mortgage market has calmed down somewhat since last week’s Fed meeting, which caused a negative reaction for mortgage rates. Neither the Bank of Japan meeting early this week nor the recent economic data had much impact. Mortgage rates ended the week lower.
Although they did not affect mortgage rates much, a couple of economic reports released over the past week were notable. On the surface, Thursday’s report on orders for durable goods appeared to reflect weakness in the economy. Durable goods are products which are expected to last more than three years. The overall figure revealed that orders for durable goods in November declined 4.6% from October. The decline was mostly due to a drop in volatile aircraft orders, however. Investors also like to look at a core indicator of business investment called nondefense capital goods excluding aircraft, and this component showed a nice increase of 0.9% from October.
The core PCE price index is the inflation indicator favored by the Fed. Core PCE excludes the volatile food and energy components. November’s data released Thursday contained a couple of offsetting surprises. First, October’s results were revised higher to an annual rate of 1.8%, which was the highest reading since October 2012. By contrast, November’s data showed that core PCE inflation unexpectedly was just 1.6% higher than a year ago. While the average of the last two months matched the expected level of 1.7%, this report leaves investors wondering if inflation is trending lower.
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