Industry NewsMortgage

Shape of economy gains substance

Long-term mortgage rates float just above 5.5%

Mortgage rates stayed close to rock bottom all week, just above 5.5 percent. New economic data didn't change the rate calculus, but did add substance to impressions about the current shape of the economy. Industrial capacity utilization continued to creep up from last fall's multi-decade low at 74 percent. In January, the in-use fraction rose from 75.8 percent to 76.2 percent. Sub-80 percent capacity figures typify recessions; but, in the 1991-92 downturn, capacity never fell below 78 percent, and was under 80 percent for less than a year. This time, capacity fell below 80 percent three years ago, and has yet to rise as high as 76.5 percent. This persistent excess is a classic sign of our post-bubble predicament. Until we work it off, or dispose of it by obsolescence, the excess will inhibit new investment and prevent businesses from raising prices–unless in some cruel twist the Fed's effort to induce modest reflation succeeds in recreating general inflation. Today's news of a...