(Courtesy of Joe Massey, Castle & Cooke)
The economy appears to have mostly ignored the recent government shut down and continues to slowly build momentum, with mortgage rates working their way upward. Nearly every economic data point came in better than expected. The week started with the ISM Manufacturing Index powering upward, when a retraction was expected. GDP followed by leaping upward to 3.5%, a half percent more than expected. While much of the increase was driven by business inventory accumulation, orders are up and businesses seem to be more optimistic. The labor market has had a strong showing this week also, with new claims for unemployment dropping below 300K. Monthly numbers were also strong with 203K new jobs and the unemployment rate dropping to 7.0%.
Markets are likely to spend significant energy trying to figure out whether the Fed will taper next week, and will be trying to sort out just how much the economy may be accelerating. The more the market believes the economy is powering ahead, the more likely rates are to move upward.