Federal Reserve Outlook Shifts as U.S. Consumer Confidence Falls, Mortgage Refinance Applications Surge, and Inflation Eases: Portafolio Capital Markets Recap for Week Ending 9/27/2024
U.S. Consumer Confidence Plummets to Three-Year Low Amid Growing Job and Inflation Worries
U.S. consumer confidence saw its sharpest drop in over three years, falling to 98.7 in September from 105.6 in August, according to the Conference Board. The decline, driven by rising concerns over jobs and business conditions, missed the Dow Jones forecast of 104. Confidence was particularly shaken among those aged 35-54 and earning under $50,000. The expectations index fell to 81.7, nearing recessionary levels, while the present situation index dropped 10.3 points. Respondents cited fewer job opportunities and a deteriorating labor market as primary concerns, alongside a rising 12-month inflation outlook of 5.2%. The Federal Reserve’s recent rate cut, its first in four years, was approved shortly after the survey ended, as the central bank sought to counteract these negative trends.
The press release by The Conference Board can be found here.
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Mortgage Refinance Applications Surge as Rates Hit Two-Year Lows
Homeowners are rushing to refinance as mortgage rates hit two-year lows, driving a 20% spike in refinance applications last week, according to the Mortgage Bankers Association. The demand is 175% higher than a year ago, fueled by a drop in the 30-year fixed-rate mortgage to 6.13%. However, the overall refinance activity remains modest compared to past trends. While home purchase applications rose slightly, high prices and limited inventory continue to weigh on buyer demand. Average loan sizes for both purchases and refinances hit a record high of $413,100.
The full press release by the Mortgage Bankers Association (MBA) can be found here.
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Inflation Slows to Lowest Level Since 2021, Paving the Way for Potential Further Fed Rate Cuts
Inflation eased in August, with the personal consumption expenditures (PCE) price index rising just 0.1% month-over-month, bringing the annual rate down to 2.2%, the lowest since February 2021. Core PCE, excluding food and energy, increased 0.1% monthly and 2.7% annually, in line with expectations. Lower inflation, combined with weaker-than-expected personal spending and income data, could support further Federal Reserve rate cuts this year.
The full press release by the Bureau of Economic Analysis (BLS) can be found here.
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U.S. Weekly Jobless Claims Fall Slightly, Insured Unemployment Remains Steady
The Department of Labor reported that initial unemployment claims decreased by 4,000 to a seasonally adjusted 218,000 for the week ending September 21. The previous week's level was revised upward to 222,000, while the four-week moving average fell to 224,750. Meanwhile, insured unemployment rose by 13,000 to 1.83 million for the week ending September 14, maintaining an insured unemployment rate of 1.2%. Despite the slight dip in new claims, states like Texas and New York saw notable increases in filings due to layoffs in manufacturing and health care. Conversely, Massachusetts experienced the largest decrease, dropping by 1,969 claims. The overall trend indicates a relatively stable labor market, though certain industries are showing signs of strain.
The full press release by the Department of Labor can be found here.
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