A Week of Economic Insights: October 23, 2023

As we look back on the week of October 23, 2023, the economic landscape revealed a mix of promising developments and areas of concern. From declining inflation to a surge in new home sales, the financial world continued to evolve. Here's a detailed breakdown of the noteworthy events:

Inflation Inching Lower

• In September, the Consumer Price Index (CPI) showed that headline inflation increased by a modest 0.4%, keeping the year-over-year reading steady at 3.4%.

• Core PCE, the preferred inflation gauge of the Federal Reserve, rose by 0.3% in September, with the year-over-year reading easing from 3.8% to 3.7%, reaching its lowest level in two years.

What It Means: The consistent downtrend in inflation is a positive sign, with both headline and core inflation rates gradually declining from their peak levels last year. As inflation moderates, it could potentially influence the Federal Reserve's rate hike decisions, although this remains uncertain.

External Reference: Bureau of Labor Statistics - CPI

Pending Home Sales Perk Up in September

• In a surprising turn of events, pending home sales increased by 1.1% from August to September, surpassing expectations. However, they remained 11% lower compared to the previous year.

What It Means: The housing market has displayed resilience despite elevated mortgage rates. Nevertheless, the persistently low levels of available housing inventory continue to challenge potential buyers. Increased supply is essential to propel the housing market forward.

External Reference: National Association of Realtors - Pending Home Sales

Big Rebound in New Home Sales

• New home sales saw a substantial rebound, surging by 12.3% from August to September, reaching a 759,000-unit annualized pace. This exceeded expectations and marked the highest level in a year.

What It Means: The surge in new home sales reflects the growing interest of homebuyers in new construction options amid a limited supply of existing homes. However, the challenge remains to meet the demand with an adequate supply of completed new homes.

External Reference: U.S. Census Bureau - New Residential Sales

Third Quarter GDP Better Than Expected

Key Indicator: Gross Domestic Product (GDP)

• The initial reading of third-quarter 2023 GDP indicated that the U.S. economy expanded by 4.9%, surpassing expectations. This growth was driven by increased consumer spending, inventories, and government expenditures. Note that this data is subject to revision in subsequent readings.

What It Means: GDP serves as a crucial indicator of economic health. While the robust third-quarter GDP figure appears promising, concerns arise about the sustainability of increased spending, which could affect GDP growth in the fourth quarter.

External Reference: U.S. Bureau of Economic Analysis - GDP

Jobless Claims Suggest Slowdown in Hiring

Key Indicator: Initial Jobless Claims

• Initial Jobless Claims experienced a weekly increase of 10,000, with 210,000 individuals filing for unemployment benefits for the first time. However, this number remains close to the lowest levels observed this year.

• Of greater significance are Continuing Claims, which rose by 63,000, indicating that 1.79 million people continue to receive benefits after their initial claims.

What It Means: The steady number of initial jobless claims suggests employers are striving to retain workers. Conversely, the ongoing increase in Continuing Claims suggests potential challenges in finding new employment, signaling a potential slowdown in hiring.

External Reference: U.S. Department of Labor - Unemployment Insurance Weekly Claims

Mortgage Rate Outlook: Expected Stability

Amid these economic developments, the mortgage rate outlook suggests stability. While various factors influence mortgage rates, including inflation, supply and demand in the housing market, and the Federal Reserve's actions, the immediate impact on mortgage rates appears limited.

Key Points for Mortgage Rate Outlook:

• Market Dynamics: Mortgage rates remain relatively stable despite fluctuations in other economic indicators.

• Economic Factors: Broader economic indicators, such as inflation and GDP growth, continue to impact mortgage rates.

• Fed Policy: The Federal Reserve's intentions to raise the Fed Funds Rate don't necessarily translate to an immediate increase in mortgage rates.

• Supply and Demand: The balance of housing supply and demand influences mortgage rates.

• Stay Informed: Monitoring reputable sources and consulting with mortgage lenders or financial professionals for personalized advice is essential to stay