Weekly Economic Update

June 27, 2025
 

Inflation Climbs 

 

Despite higher than expected inflation data, investors were more focused this week on hints of weakening in the economy. In particular, consumer confidence badly missed the mark. As a result, mortgage rates ended the week a little lower.  

 

 

Fed officials keep a close eye on inflation, and the PCE price index is their favored indicator. In May, Core PCE was 2.7% higher than a year ago, up from an annual rate of increase of 2.6% last month, and slightly above the consensus forecast. Progress toward the 2.0% target of the Fed has not been easy, and this desired level has not been achieved since February 2021. The big question remains how large an impact higher tariffs will have on future inflation levels.

 

 

The latest report on consumer confidence published by the Conference Board revealed that consumers remain concerned about the impact of higher tariffs. The index dropped sharply in June to 93, far below the consensus forecast of 99, and the decline was seen across nearly all age and income groups. In particular, the outlook for the labor market weakened. The share of consumers viewing jobs as plentiful was the smallest since March 2021, and the number expecting their incomes to increase over the next six months was lower.  

 

In May, sales of existing homes unexpectedly rose slightly from April, but still were at the slowest pace for May since 2009. The median existing-home price of $422,800 was up a slim 1% from last year at this time, but at a record for the month of May. Inventories remain stuck at historically low levels, standing at just a 4.6-month supply nationally, below the roughly 6-month supply typical in a balanced market. However, this was the largest level in five years, and inventories were over 20% higher than a year ago.

 

Sales of new homes displayed much worse performance in May, falling 14% from April, far more than the consensus forecast. The median new-home price of $426,600 was up 3% from last year at this time. The supply of new homes remains near the highest level since 2009. In contrast to existing home sales, which measure actual closing during the month, new home sales are based on contracts signed, making them a leading indicator of future housing market activity. 

 

Investors will continue to look for additional information about tariff policies and monitor the situation in the Middle East. For economic reports, the ISM national manufacturing sector index will be released on Tuesday and the services sector index on Thursday. The key Employment report also will be released on Thursday, and these figures on the number of jobs, the unemployment rate, and wage inflation are always closely watched. Mortgage markets will be closed on July Fourth.

 

 

Weekly Change

10yr Treasury

fell

0.10

Dow

rose

1,400

NASDAQ

rose

800

 

Calendar

Tue

7/1

ISM Manuf.

Thu

7/3

Employment

Thu

7/3

ISM Services

 

 

 
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