Manufacturing in Chicago, Brexit fallout, Weekly Initial Jobless Claims

June 30, 2016

Thursday – June 30

Manufacturing in the Chicago region unexpectedly picked up in June after nearly a year of downward pressure. The Chicago PMI report surged to 56.8 in June, above the 50.8 expected and well above the 49.3 recorded in May. The gains were led by improving production along with an increase in new orders. Readings above 50 indicates improving conditions, below 50, contraction. The new orders index rose to its highest level since October 2014, while the order backlogs were the strongest since March 2011.

The fallout from last week’s Brexit vote sent investors rushing into safe haven assets such as government Bonds and Mortgage Backed Securities. As the prices of such securities rise, interest rates tend to move lower. Freddie Mac reported that the 30-year fixed conventional mortgage rate fell to 3.48% this week with 0.5 added on top in points and fees. The 3.48% is the lowest since May 2013 and just 17 basis points above the all-time low set back in November 2012. Freddie Mac said that extremely low mortgage rates “should support solid home sales.

First-time unemployment benefits increased in the latest week, though still remained well below levels seen as a healthy job market. The Labor Department reported Weekly Initial Jobless Claims rose 10,000 to 268,000, just above 265,000 expected. Claims have remained below the 300,000 threshold for 69 consecutive weeks.. That is the longest consecutive stretch below 300,000 since 1973. The four-week average of claims, which irons out seasonal abnormalities, was unchanged at 266,750 last week.