THE BASIS POINT

Rates Even To Open Week. Consumer vs. Business Inflation Debate.

Flat consumer inflation and higher business inflation are canceling each other out this morning, leading to relatively flat mortgage bond trading. The result is rates (on 30yr fixed loans up to $417k) that are holding about 4.875%. We’ll discuss the debate between higher business inflation and flat consumer inflation throughout this week. For now here’s today’s recap.

First business inflation: The February Chicago Purchasing Managers Index is the first of three monthly manufacturing surveys to be released this week, and showed the highest manufacturing activity since July 2008. See p.2 of report for purchasing manager’s comments on higher inflation. And consumer inflation: the Fed’s preferred measure of inflation, the Personal Consumption Expenditures Index, showed inflation was up 0.3% in January and up 1.2% since a year ago. Removing more volatile oil and food prices from the readings, inflation was up 0.1% in January and up 0.8% since a year ago. Personal income jumped 1% in January, and savings was 5.8%—both numbers are rather high. The table below has all consumer income and spending details.