Mortgage Applications (week ended 9/7/2012)
Purchase Index – Week/Week +8.0%
Refinance Index – Week/Week +12.0%
Composite Index – Week/Week +11.1%
This data looks good on the surface but there are two potential factors to consider: Refinancing may have been encouraged last week because the GSE guarantee fees added, in essence, 0.125% to rates this week. Also, correction for the Labor Day holiday may not be appropriate for online refinance applications which run 24/7.
Nonetheless, this is a plus for the economy.
Wholesale Trade (July 2012)
The is the “I” in GDP = C+I+G+(X-M)
Inventories were +0.7% for July. The previous month was -0.1%. The 0.7% increase represents either a) a belief that consumer spending will increase or b) a correction for lower “I” growth in previous quarters. i.e. machinery is now being purchased which would have been purchased in previous quarters if the supply side were more confident.
Import and Export Prices (August 2012)
Export Prices – Month/Month +0.9%
Export Prices – Year/Year -0.9%
Import Prices – Month/Month 0.7%
Import Prices – Year/Year -2.2%
We are seeing increases in commodity prices: export prices are higher because drought has increased the cost of agricultural commodities and the increase in export prices was due, in part, to a 4.1% month/month increase in the price of crude. Both are weather related and, thus, not permanent.
A 2-day FOMC meeting starts today and markets seem to be betting that a QE3 will be announced. Whether QE actually does anything is less important in the short run than perception. Markets are all about perception.