The Relationship between Economic Data and Mortgage Rates

The U.S. federal government releases a plethora of economic data on a daily, weekly, monthly and/or quarterly basis through its various agencies. These data sets provide measurements for evaluating the health of our economy. While it is important for Realtors to keep a pulse on the economy, it is not practical to pore through these massive volumes of dry and boring data. However, an understanding of the following top 10 economic indicators is all it takes to get an accurate picture of the relationship between economic data and mortgage rates.

1. Real GDP (Gross Domestic Product)

The real GDP is the market value of all goods and services produced in the nation during a specific time period. The real GDP is a way to gauge the health and well-being of the economy. This quarterly index indicates how fast profits may grow and the expected return on capital.

2. M2 (Money Supply)

M2 money supply which is released weekly, represents the aggregate total of all money (physical currency, assets, etc.) a country has in circulation. The feds and economists use this weekly and monthly data to predict cyclical economic recessions and recoveries and expected changes in stock prices.

3. Consumer Price Index (CPI)

The CPI measures changes in the prices paid for goods and services across 200 item categories by consumers for the specified month. It is the best indicator of inflation.

4. Producer Price Index (PPI)

The PPI is the business-side equivalent to the CPI. It is a group of indexes that measures monthly changes in the selling price of goods and services received by U.S. producers. It is the first inflation measure available in the month.

5. Consumer Confidence Survey

This index which is released on the last Tuesday of each month gauges the public’s confidence about the health of the U.S. economy that reflects the public’s optimism/pessimism and the nation’s mood.

6. Current Employment Statistics (CES)

CES provides monthly data on national employment/unemployment, and wages and earnings data across all non-agricultural industries.

7. Retail Trade Sales and Food Services Sales

This data tracks monthly U.S. retail and food service sales. The data is based on a random sampling of 5,000 retail and food service firms. This index measures consumers’ personal consumption across retail industries.

8. Housing Starts (formally known as New Residential Construction)

This data indicates how many homes were issued building permits, how many housing construction projects were initiated and how many home construction projects were completed in a month. Housing starts are highly sensitive to changes in mortgage rates.

9. Manufacturing and Trade Inventories and Sales

This data set is the primary source of information on the state of business inventories and business sales. Inventory rates often provide clues about the growth or contraction of the economy.

10. Standard & Poor’s 500 Stock Index (the S&P 500)

The S&P Index is a market-value-weighted index of 500 publicly owned stocks that are combined into one equity basket. It has become the industry standard and benchmark for the overall performance of the U.S. equity markets.