June ended with a cautiously optimistic tone in financial markets, supported by modest tariff easing, strong corporate earnings expectations, and growing anticipation of Federal Reserve rate cuts. While some tariffs were rolled back, ongoing trade policy uncertainty continues to weigh on business investment. Markets still expect two rate cuts in 2025, but the timing remains uncertain and highly data-dependent, with opinions split between summer and fall cuts as economic indicators evolve.
The Conference Board’s Leading Economic Index (LEI) fell for the sixth consecutive month, dropping -0.1% in May to 99.0, following a revised -1.4% in April. This prolonged decline reinforces cautionary signals, driven by weaker manufacturing orders, rising jobless claims, declining consumer sentiment, and a drop in housing permits. These headwinds continue to cast shades of doubt on the strength of the recovery.
Housing and construction remain areas of concern. Residential investment is projected to subtract about -0.2 percentage points from GDP growth by mid-2025. National housing inventory has improved while home prices have declined roughly 5% in some regions, and both housing starts and permits have fallen – especially in the single-family segment. Elevated mortgage rates and material costs, partially tariff-driven, are putting pressure on builders and limiting new supply. It should be noted that housing data remains very regionally specific.
Looking ahead, key data releases in July will shape the economic outlook. The June PPI report (July 16) and the first Q2 GDP estimate (July 30) will be pivotal. Fed guidance and any tariff developments will remain central to policy direction. Meanwhile, housing permits, consumer confidence, and labor market trends will help shape the future of monetary policy when the Fed meets at the end of July.
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