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August 14, 2013

Purchase Applications Decline. PPI Flat.

August 14, 2013

Purchase Applications Decline. PPI Flat.

MBA Mortgage Applications (Week ended 8/9/2013)

– Purchase Index Week/Week -5.0%. Previous weeks were +1.0%,-3.0%, -2.0%, +1.0%, 3.0%, -3.0%, +2.0%, and -3.0%.

– Refinance Index Week/Week -4.0%. Previous weeks were +0.0%, -4.0%, +1.0%, -4.0%, -4.0%,-16.0%, -5.0%, and -3.0%.

– Composite Index Week/Week -4.7%. Previous weeks were +0.2%, -3.7%, -1.2%, -2.6%, -4.0%, -11.7%, -3.0%, and 3.3%.

It is getting nearly impossible to deny that higher interest rates combined with higher prices have negatively impacted the housing market.  Home sales have also been impacted by fewer cash buyers for distressed sales.  Underperforming A-List fundamentals of GDP and Jobs are providing fewer qualified first-time buyers.

Producer Price Index (July 2013)

– PPI Month/Month +0.0%. Previous was +0.8%

– PPI Year/Year change +2.1%. Previous was +2.5%.

– PPI core (less food & energy) Month/Month +0.1%. Previous was +0.2%

– PPI core (less food & energy) Year/Year +1.2%. Previous was +1.6%.

The soft headline was due, in part, to lower energy costs.  This could be due to softer worldwide demand as the economies of the U.S. and the EU nations show very slow growth and growth is decreasing in Asia.  The EU announced today that 2ndQ2013 GDP growth was +0.3% as opposed to -0.3% in the 1stQ2013.  I don’t know if this is good news or simply less worse news.

The soft PPI numbers give the Federal Reserve the ability to continue expanding money supply. Higher inflation would indicate that money supply had expanded too much.  In my view, the Fed is painting itself into a corner as it continues to expand money supply without achieving any increase in GDP or jobs growth.