The Institute for Supply Management's (ISM) manufacturing index will be posted late Monday morning. This highly important index measures manufacturer sentiment. One reason why it is considered so important is the fact that it is the first piece of economic data posted every month that covers the preceding month. In other words, it is the first look into the previous month’s economic conditions. That differs from many reports that aren’t released until mid or late month. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are expecting to see a 50.9 reading in this month's release, meaning that sentiment rose slightly during May. A smaller reading will be good news for the bond market and mortgage shoppers while an unexpected increase could contribute to higher mortgage rates tomorrow.
Tuesday’s only data is April's Goods and Services Trade Balance report. It gives us the size of the U.S. trade deficit and will be released at 8:30 AM ET. It isn't likely to cause much movement in the markets or mortgage rates, but nevertheless forecasters are expecting to see a $41.1 billion trade deficit. It will take a wide variance from this projection for the data to influence mortgage rates.
The revised 1st Quarter Productivity and Costs data is the first of three reports that will be released Wednesday. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. It is believed that the economy can grow with low inflationary pressures when productivity is high. Last month's preliminary reading revealed a 0.7% increase in productivity and a 0.5% increase in labor costs. Wednesday’s update is predicted to show 0.6% increases in both readings. I don't think this piece of data will have much of an impact on the bond market or mortgage pricing either unless it varies greatly from expectations.
The second release of the day will come from the Commerce Department, who will post April's Factory Orders data during late morning trading. This manufacturing sector report is similar to last week's Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn't expected to cause much of a change in rates this month. Current forecasts are calling for an increase in orders of 1.5%.
Wednesday’s final relevant report is the Federal Reserve's Beige Book, which is named simply after the color of its cover. This report details economic conditions throughout the U.S. by Federal Reserve region. It is relied upon heavily by the Fed to determine monetary policy during their FOMC meetings. If it shows surprisingly softer economic activity since the last report, the bond market may thrive and mortgage rates could drop shortly after the 2:00 PM ET release. If it reveals signs of inflation growing or rapidly expanding economic activity in many regions, we could see mortgage rates revise higher Wednesday afternoon.
Thursday doesn’t have any monthly or quarterly economic data for us to be concerned with, but there are a couple of foreign central bank announcements that are similar to our FOMC meetings. The Bank of England (BOE) and the European Central Bank (ECB) will both make monetary policy announcements before our markets open Thursday morning. The world markets, including ours, will be watching for any changes or updates about economic and financial conditions in their respective regions. Of particular interest will be the ECB announcement that is more likely to disrupt the global markets. It is difficult to predict not only what will be said but also what kind of reaction we can expect. We simply will have to wait and see what happens. They could be a non-factor or cause global volatility, so they are on my calendar.
Friday's sole report is arguably the single most important report that we see each month. The Labor Department will post May's Employment data early Friday morning. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate remain unchanged at 7.5% with approximately 164,000 jobs added to the economy during the month. A higher than expected unemployment rate and a much smaller number than the 164,000 new payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday. However, stronger than expected numbers may lead to another spike in mortgage rates.
Overall, it appears that Friday is the key day of the week with regards to mortgage rate movement. However, Monday or Wednesday could also be active days for mortgage pricing. Tuesday will probably be the lightest day unless something totally unexpected happens with stocks. Although, as we have seen many times over the past couple weeks, we don’t have to have an event or economic report released for the bond market and mortgage rates to become volatile.
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