Weekly Economy & Market News #0
Today, the most significant event impacting the housing market is the collapse of Silicon Valley Bank (SVB), despite the release of a wealth of anticipated data on the labor market.
The failure of SVB has fueled concerns among investors of a potential banking crisis, sparking uncertainty about what ripple effects or parallels may unfold. While the Dodd-Frank Act has implemented new rules for banks and regulatory oversight that should limit the impact of the situation, there is still uncertainty surrounding what will happen next.
Financial and economic risks are a fundamental driver of long-term bond yields, which is why mortgage rates have tanked this week. According to Mortgage News Daily, mortgage rates have fallen nearly 0.3% since Wednesday. However, mortgage rates are still elevated at 6.76%, which is well above the 5.99% from 6 weeks earlier.
In the fourth quarter of 2022, the US economy grew at an annualized rate of 2.9%, which was lower than the previous quarter’s 3.2% growth but exceeded expectations of 2.6%. Consumer spending increased by 2.1%, with spending on goods rising by 1.1% and spending on services slowing down.
Private inventories added 1.46 percentage points to growth, while net trade’s contribution decreased. Residential investment continued to decline. In December 2022, personal income rose by 0.2%, primarily due to an increase in compensation and proprietors’ income. However, personal spending dropped by 0.2% month-over-month, mainly due to high-interest rates and inflation levels. Inflation, as measured by the core PCE annual rate, fell to 4.4% in December 2022. The University of Michigan consumer sentiment index was revised higher to 64.9 in January 2023, and inflation expectations were revised lower.