Financial Reports

With the inflation reports showing their cards, the Consumer Price Index has shown to be in line with expectations, but unexpectedly the Producer Price Index has come in substantially higher than expected.

This may indicate that future core cost increases are headed for consumers, as rising costs are passed through producers and businesses down to the customer level.

This is somewhat offset by Consumer Sentiment having risen, breaking a three-month downward trend. Largely due to the deal with Iran that took place this weekend, there appears to be considerable optimism that fuel prices will return to previous norms. This makes it very unlikely that the Federal Reserve will adjust rates either up or down in the coming week.

Consumer Price Index
The consumer price index rose at a seasonally adjusted 0.5% for the month, putting the annual inflation rate at 4.2%, both in line with expectations. The core CPI accelerated 0.2% for the month and 2.9% from a year ago. While the annual rate was in line with the forecast, the monthly gain was below the 0.3% estimate.

Producer Price Index
The producer price index increased a seasonally adjusted 1.1% in May, putting the 12-month wholesale inflation rate at 6.5%, the highest since November 2022. Excluding food and energy, the so-called core PPI accelerated 0.4%, compared with the consensus view of 0.5%, indicating that rising fuel prices are causing much of the inflationary burden. 

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw an increase of 0.05%, bringing the current rate to 5.84%.
• 30-Year FRM rates saw an increase of 0.04%, bringing the current rate to 6.52%.

MND Rate Index

• 30-Year FHA rates saw a -0.04% decrease, with current rate at 6.14%.
• 30-Year VA rates saw a -0.03% decrease, with current rate at 6.16%.

Jobless Claims
Initial Claims were reported to be 229,000 compared to the expected claims of 220,000. The previous week landed at 225,000.

What’s Ahead
A lighter release week ahead, with only the Federal Reserve Rate Decision on the horizon.

Unemployment data has been released, revealing an interesting trend: different demographic groups are facing varying, and in some cases significantly higher, levels of unemployment.

While the overall unemployment rate has remained steady at 4.3%, some demographics are experiencing substantially higher unemployment within their respective fields. This comes alongside hourly wage reports which have met the expected growth level for this month.

Historically, however, wage growth has been offset by inflation rising at a much faster pace. As a result, many Americans have found the cost of living increasingly difficult to manage as they attempt to economize and cope with rising fuel, energy, and consumer goods costs.

Unemployment Reports
Unemployment rates for every major group: The lowest is 3.2%, the highest 14.7% The U.S. unemployment rate stayed at 4.3% in May for the third month in a row, but different groups face different challenges finding a job or keeping one. 

U.S. Hourly Wages
Inflation surged throughout the U.S. economy in late April and May, forcing Americans to try to quickly adjust to a new phase of reduced spending power, according to the Federal Reserve’s latest report on economic conditions around the country, known as the “beige book.” Affordability pressures due to higher energy prices from the war with Iran led to a widening gap between spending across income groups.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw a decrease of -0.02%, bringing the current rate to 5.79%.
• 30-Year FRM rates saw a decrease of -0.05%, bringing the current rate to 6.48%.

MND Rate Index

• 30-Year FHA rates saw a 0.08% increase, with current rate at 6.18%.
• 30-Year VA rates saw a 0.07% increase, with current rate at 6.19%.

Jobless Claims
Initial Claims were reported to be 225,000 compared to the expected claims of 215,000. The previous week landed at 215,000.

What’s Ahead
Attention now turns to the upcoming CPI and PPI reports, which will offer fresh insight into inflation trends.

The PCE Index inflation data has been released on schedule, and it paints a rather grim outlook for the future. Inflation has reached a three-year high, and given that it is the Federal Reserve’s preferred measure of inflation, it does not bode well for any impending rate cuts and may even raise the possibility of future rate increases.

This is somewhat offset by consumer spending having exceeded expectations, but this appears to be entirely related to high fuel prices, whether consumers want to spend that much or not.

PCE Index
The main inflation barometer preferred by the Federal Reserve rose to a three-year high in April and could rise even higher, posing a stiff challenge for households, businesses and the broader U.S. economy. The personal-consumption price index rose by 0.4% last month, the fifth large increase in a row.

Consumer Spending
Consumer spending rose in April at a seemingly robust rate, but only because of inflation. Americans aren’t getting much bang for their buck these days with gas prices so high. Personal spending increased 0.5% in April, the government said, but inflation also rose 0.4%. Household spending barely rose if inflation is taken into account.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw an increase of 0.02%, bringing the current rate to 5.87%.
• 30-Year FRM rates saw an increase of 0.02%, bringing the current rate to 6.53%.

MND Rate Index

• 30-Year FHA rates saw a -0.08% decrease, with current rate at 6.10%.
• 30-Year VA rates saw a -0.08% decrease, with current rate at 6.12%.

Jobless Claims
Initial Claims were reported to be 215,000 compared to the expected claims of 213,000. The previous week landed at 210,000.

What’s Ahead
U.S. wage and employment reports are due next week, along with consumer credit data and several manufacturing-related releases. The following week will bring the latest CPI and PPI data releases.