Investors were concerned with the CPI inflation report in a week that bore little fruit for data about the economy. There was little to no change for these numbers as well as mortgage rates had little movement this past week.
The Consumer Price Index (CPI) is one of many inflation indicators that are checked often to gauge the price of goods. This index leaves out energy data and food data which are both quite volatile in comparison. July saw the CPI rise 0.3% compared to the June data. The May to June CPI data showed a 0.9% increase between those two months. July showed a dip in many items including used cars which slowed the CPI increase overall. The Core CPI showed a 4.3% increase from where it was one year ago. The Core CPI in June showed a 4.5% increase year-over-year which was the highest it’s been since 1991.
Investors were mindful of the historically high CPI rate, but most of the focus was directed to the lower rates this month in comparison to the previous month. Fed Chair Powell has often attributed the high inflation numbers were directly correlated to supply disruptions caused by the ongoing pandemic and that these disruptions would be “transitory” and that inflation numbers would come back down to normal as economic recovery slowly transpires over the next few months. If this current trend continues down the current path, Powell will be proven correct. If the inflation numbers stay high, the Federal Reserve Board may contract rates sooner than expected. The current bond inflation is negative for bonds which will highly influence mortgage rates should the Fed lower rates across the board.
The latest numbers from the JOLTS (Job Openings & Labor Turnover) report show that there has been a tightening of the job market. In June, there were over 10 million job openings which broke the previous record high. There are three million more job openings than pre-pandemic numbers in January 2020. These elevated numbers indicate a bullish job market as the demand for labor grows for companies who are struggling to keep up with the demand. There were many employees who left their jobs in June as well. This fact keeps in line with the strong job market as employees who leave jobs expect to find better employment elsewhere.
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