In the minutes for their May 2-3, 2017 meeting, the Federal Open Market Committee (FOMC) outlined reasons why they considered the Q1 economic slowdown to be transitory and affirmed that additional rate hikes were planned pending evidence of stronger economic growth. The minutes also detailed the FOMC’s plan to taper their $4.5 trillion in holdings by setting “caps” on maturing securities that would not be reinvested, and gradually raising the caps every 3 months until the size of the balance sheet was normalized.

April’s new orders for durable goods were down -0.7% to a 5 month low in the Advance Report on Manufacturers’ Shipments, Inventories and Orders, but March’s new orders were revised upwards from +0.7% to +2.3%. Core capital goods orders, stripping out transportation and defense, were flat at 0.0% M/M and up +2.9% Y/Y. Orders for nondefense aircraft were down -9.2%, with additional dropoffs for electrical equipment and appliances (-1.7%), fabricated metal products (-0.9%), and machinery (-0.8%). Orders were up for defense aircraft (+7.1%), computers (+5.0%), and communications equipment (+4.2%).

The second estimate for Q1 GDP revised personal consumer spending upward from +0.3% to +0.6% and fixed business investment upward from +10.4% to +11.9%, both of which helped to pull Q1 GDP from +0.7% to +1.2%. However, Q1 corporate profits fell -1.9% M/M, with Y/Y profit growth at +3.7%.