Q2 GDP was weak coming in at only a plus 1.2 percent annualized rate. However, upon closer look there were positive signs. Consumer spending grew 4.2 percent, more than doubling Q1’s rate of 1.6. A negative in this report but a plus for the economy is slowing inventory accumulation. Lean inventories suggest new accumulation to come which is good for future employment and production. Net imports grew a strong 1.4 percent, reflecting the first gain in exports since Q2 2015. On the negative side, there was a reversal in residential investment, falling at an annualized 6.1 percent, and nonresidential fixed investment, which fell at a 2.2 percent rate. These two weaknesses indicate decreased business confidence and future trouble for productivity growth. Ending on a positive note, final demand came in at double the Q1 rate and low inventories and consumer momentum look good for Q3.

New home sales came in strongly, with a 592,000 annualized rate in June, compared to the revised rate of 572,000 in both May and April. This also represents a 25% improvement Y/Y. All regions were up, but the midwest the strongest with a 44% Y/Y increase. Prices also increased, with a 6.2% jump in the median price M/M, which was actually a slightly higher jump than the Y/Y growth of 6.1%. The supply of new homes for sale is not keeping pace, however, with new homes for sale increasing just 1.2% M/M.

Wednesday’s Federal Open Market Committee (FOMC) meeting revealed that the committee is becoming slightly more hawkish after June’s strong employment report. The committee voted 9 to 1 to keep the federal funds rate between 0.25 and 0.50 (as opposed to last month’s unanimous vote), and left open the possibility for a rate hike in September if job growth and consumer spending remain solid. The statement did not mention Brexit but did say that global developments were being monitored.