Posted by: cfigueira | August 27, 2010

Mortgage Industry News – Refinance TODAY!

8:30: GDP for Q2 (second estimate)…a big mark-down. We expect the Commerce Department to cut its initial estamte that the economy grew at a 2.4% annual rate last quarter in half. Two-thirds of this change should show up in a reduced pace of inventory accumlation; the other third should show up in a deeper trade deficit. Within final sales to domestic purchasers, we look for a larger gain in business uotlays for equipment to be offest by less business spending on structures. Most other components of final demand should change little. While price indexes can change, we have no particular information on which to guess the direction or magnitude. The price report should also confir, that profits were up substantially from year-earlier levels.
On GDP, median forecast (of 81): +1.4%, ranging from +0.5% to +2.2%; last (Q2 prelim) +2.4%.
On the GDP price index, median forecast (of 36): +1.8%, ranging from +1.4% to +2.0%; last +1.8%.
On the PCE core index, median forecat (of 18): +1.1%, ranging from +1.1% to +1.1%; last +1.1%.

10:00: Reuters/University of Michigan consumer sentiment for August (final)…no change? The preliminary results for August showed a slight increase after July’s sharp setback. Normally, the final index does not move much from the preliminary, and this is reflected in the median forecast. The median expectation for inflation five to ten year ahead dropped back to 2.7% in the preliminary report from 2.9% in July.
Median forecast (of 65): 69.9, ranging from 65.7 to 72; last 69.6 (Aug prelim).

Advice:

Downward revision a bit smaller than expected
Real GDP revisied down a bit less than expected, with the main high side surprises in consumption and inventory accumlation, offset to some degree by an even deeper trade deficit than expected. Report suggest increased vulnerability in Q3 if demand slows, as it appears to be doing. Price indexes close to original estimates. Profits post firm (+25.3%) year-to-year gain after taxes, but second-quarter sequential gain is only half as firm.

Key Numbers:
Real GDP growth revised down 0.8 points to +1.6% in Q2 (qoq, annualized, +3.0% yoy) vs. medan forecast +1.4%.
GDP price index revised up 0.1 point to +1.9% in Q2 (qoq, annualized, +0.8% yoy) vs. median forecast +1.8%.
PCE core price index unchanged at +1.1% in Q2 (qoq, annulized, +1.5% yoy) vs. median forecast +1.1%.

With GDP close to expectations, and consumer sentiment expected to be unchanged. The only reason I can see for MBS pricing to worsen today will be profit taking.

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