Sandwiched between recent major economic events and several more later in the month, there was little significant economic news this week, and mortgage rates ended slightly lower.
Investors were mostly focused on bigger picture economic conditions this week, and their primary questions concerned the outlook for global growth. While the forecast for U.S. gross domestic product (GDP) growth in 2019 has held relatively steady around 2.5%, many other regions have been downgraded recently, particularly in Europe. This week, the primary governing body for the European Union (EU) reduced its forecast for 2019 GDP growth in the EU from 1.9% to 1.3%. Germany was cut from 1.8% to 1.1% and the UK from 1.7% to 1.2%.
Two geopolitical issues also will remain on the radar of investors in coming weeks. First, the trade negotiations between the U.S. and China appear to be progressing very slowly. U.S. tariffs are set to be increased again on March 1 if no deal is reached, and the latest report from the Wall Street Journal says that the two sides are “far from an agreement.” Second, the British exit from the EU (Brexit) is scheduled to occur on March 31. The terms of the departure have not yet been decided, and a high level of uncertainty remains about what the effects will be after the deadline.
The most significant economic report released this week was the national services index from the Institute of Supply Management (ISM). The index declined to 56.7, slightly below the consensus of 57.0, and there was little reaction to the data. Readings above 50 indicate an expansion in the sector.
Looking ahead, the JOLTS report, which measures job openings and labor turnover rates, will be released on Tuesday. Fed officials value this data to help round out their view of the strength of the labor market. The Consumer Price Index (CPI) will come out on Wednesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales is scheduled to be released on Thursday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth.
The government shutdown which began on December 22 and ended on January 25 has caused delays in the release of some economic reports produced by government agencies and likely will continue to do so until the affected agencies get caught up. It is generally not known when the postponed data will be ready to be released.