Rates Plunge on Lowest Housing Starts Since Depths of COVID: June 18, 2025

Interest rates are sinking and stocks are advancing ahead of this afternoon’s Fed decision and Chair Powell’s press conference 30 minutes later. The justification for Treasury upside was today’s economic calendar producing the worst housing starts figure since the depths of the pandemic, five years ago. Meanwhile, signs that initial and continuing unemployment claim numbers are lingering at levels much higher than recent averages are also motivating fixed-income players to pick up maturities across the curve with a long-end bias as slowdown worries resurface. Turning to the Middle East, risks continue as Tehran strikes an aggressive tone against Tel Aviv and Washington, but market participants are dismissing those concerns, as the geopolitical premium is reduced today. Indeed, crude oil and gold futures are lower by 2.5% and 0.6%, reflecting quelled worries on a relative basis. Investors are bullish today, and in addition to equities in all sectors ex energy and US government debt across durations; they’re also adding exposure to natural gas and copper commodities, bitcoins and forecast contracts. Conversely, folks are trimming holdings of lumber, silver and volatility protection instruments. 

Housing Starts Drop to Pandemic Level Lows

Housing starts last month plunged to the lowest level since May 2020, when COVID-19 caused construction activity to drop significantly five years ago. For the recent period, the headline figure of 1.256 million seasonally adjusted annualized units (SAAU) missed the median estimate of 1.36 million badly. Additionally, the result reflected a 9.8% month-over-month (m/m) decline from April’s 1.392 million. The weakness was driven by apartment buildings experiencing a m/m drop of 30.4%, while the single-family category recouped some of preceding measurement period’s losses, accelerating by a modest 0.4% m/m. Among regions, the Northeast, South and Midwest weighed the most on performance with m/m contractions of 40%, 10.5% and 10.2%. The West was an exception, climbing 15.1% m/m.  

But Permits Fall Only Modestly

Encouragingly, plans for future projects weren’t nearly as bad with the volume of building permits shrinking only slightly. The headline print of 1.393 million SAAU was beneath the outlook for 1.43 million while slipping 2% m/m from April’s pace of 1.422 million. Performance was increasingly mixed across asset classes and regions unlike starts, with the single-family segment declining 2.7% m/m but apartment buildings growing 1.4%. Across geographies, overall activity declined in the Northeast, West and South by 8.8%, 5.2% and 2.5%, but the Midwest leaped 9.8%. 

Unemployment Claims Roughly In-line with Estimates

Unemployment claims in the past two weeks were unsurprising with both the initial and continuing segments remaining relatively steady while arriving near expectations. The former category’s tally of 245,000 for the week ended June 14 was exactly as projected and near the 250,000 from the prior period. The latter indicator, meanwhile, declined slightly to 1.945 million during the seven-day interval ending on June 7, a little ahead of the median estimate of 1.940 million but below the previous time span’s 1.951 million. Four-week averages moved north on both fronts, from 240,750 and 1.913 million to 245,500 and 1.926 million. 

The Potential Paths to Future Equity Gains

Data on the eve of the Juneteenth holiday pointing to weakening labor conditions and recessionary dynamics in the construction sector could just be a soft patch coinciding with a temporary spell of elevated concerns regarding trade and immigration. But momentum has been to the downside lately with many prints coming in below estimates. The positive news, however, is that a reacceleration can be sourced from a wide variety of avenues. Indeed, we could see strengthening trends if there’s progress on taxation, cross-border commerce deals, a softer stance on migrants, or a rate cut or two. Investors are certainly seeing things from a glass half-full perspective, choosing to position in risk assets despite the possibility of volatility on the horizon. One potential source of instability could come from the Federal Reserve, if the central bank communicates significant vulnerability on the horizon that is weighing on their ability to make monetary policy more accommodative. Slowing conditions and restrictive credit conditions amidst elevated unknowns are not conducive to robust equity gains from here in light of stretched valuations.

International Roundup

Australia Gauge Points to Slowing Economy

The Australian economy is likely to decelerate during the next three to nine months, according to the Westpac–Melbourne Institute Leading Index, which dropped from 0.19% in April to –0.08% in May. In the latest release, the most significant factors contributing to the softness were declines in dwelling approvals, slowing growth in work week hours, and deteriorating consumer expectations. More broadly, domestic factors played a larger role in detracting from overall result than in past months.  

While Country’s Treasurer Outlines Roundtable Goals

Australia Treasury Jim Chalmers says the country’s Labor Party needs an agenda that will boost productivity and that he will seek common ground among participants in an August 19 roundtable on taxation and other policies. At the same time, he acknowledged a need to ease the tax burden on workers and a desire to reform fiscal policy to reward those who are gainfully employed. He also cautioned that the country will need new sources of revenue to prepare for a future lack of fossil fuel profits.

Eurozone Inflation Eases

The eurozone Consumer Price Index (CPI) was flat m/m in May, matching the consensus expectation and falling from the preceding month’s 0.6% northward movement. For the y/y metric, the gauge was up 1.9% as predicted. It descended from the preceding month’s 2.2% result. The Core gauge, which excludes volatile food and energy prices, also sank. After hitting 0.1% m/m in April, it recorded a goose egg for May. Compared to the year-ago period, the Core CPI was higher by 2.3%, in-line with expectations and lower than April’s 2.7% rate.

The UK Also Enjoyed Softer Price Pressure

UK cost increases slowed last month with the CPI including owner occupiers’ housing costs (CPIH) ascending 0.25% m/m and 4% y/y after climbing 0.4% and 4.1% during the fourth month of 2025, according to the Office for National Statistics. The core CPI, similarly, fell from 1.4% m/m to 0.2% matching the economist expectation. For the y/y print, it descended from 3.8% to 3.5%, which is consistent with the outlook for the gauge. Within the CPIH, furniture and household goods, clothing and footwear stickers, restaurants and hotels, and non-alcoholic beverages were up 1.5%, 0.8%, 0.8%, and 0.7% m/m. Transport expenses moved in the other direction, descending 1.8%.