Mortgage Rates Benefit from Economic Blues, August 16, 2010

Mortgage Rate Trend Update:     Down

Economic News/Rate Impact:     NY Empire State Index

Key News:                                        US Companies Earnings, Japanes Economic Woes

Summary

The week begins with a hangover in stock markets around the world after last weeks action by the US Federal Reserve bank to take additional efforts to support the economy.  Today, fears of a global economic slowdown are high after a major report from Japan and data on manufacturing is sending US stocks lower in early trading.  Therefore, mortgage rates are expected to open lower at initial pricing this morning.

Impact of economic reports

The first economic report of the week is the NY Empire State Index, a measure of manufacturing activity in the New York area.  The results were higher than those for the previous month, but lower than expected.  This report simply underscores the weakness of the manufacturing sector in the US economy in general. 

Later this week we will get additional data on the housing market,  inflation and the jobs market.  Expectations continue to be for more disappointing news which should keep the pressure in a downward direction on mortgage rates.

Impact of international or political news

Reports out of Japan show that its economy has slowed at an alarming rate and could be poised for a recession.  Export declines were identified as the major change from earlier in the year.  The new data from Japan confirm that Japan has now lost its position as the world's number two economy to China.  The increased dependency of the world market or China is a double eadged sword.  On one hand China has the ability to grow its economy quickly and produce cheap, affordable products that can benefit consumers around the world.  On the other hand, the volatility in the Chinese economy make is vulnerable to problems associated with inflation, real estate, labor, pollution, etc., which can quickly cause disruptions that impact the world economy.