New orders for durable goods were up +2.1% in July for the second consecutive monthly gain after June’s +1.8% increase. Civilian aircraft orders drove gains in both months, with a +$3.4 billion gain in July following June’s +$3.6 billion increase, and removing the transportation component brought new orders down to a -0.4% (-$619 million) drop. New orders for core capital goods, which exclude both defense and aircraft orders and serve as a measure of business investment, were up +0.4% for the month. Within core capital goods orders were up for electrical equipment (+1.1%) and computers (+0.2%), but fell for primary metals (-1.0%), fabricated metal products (-0.9%), and machinery (-0.6%).

The second estimate of GDP for Q2 revised the initial estimate downward from 2.1% to 2.0%, dropping from 3.1% in Q1. While consumer spending estimates were increased by +0.4% to a 4.7% gain, this was offset by downward revisions to government spending (revised -0.5% to +4.5%), exports (revised -0.6% to -5.8%), inventories (revised from -$44.3 billion to -$47 billion), and residential investment (revised -1.4% to -2.9%). Inflation adjusted after tax income was adjusted upward by +$2.9 billion to a seasonally adjusted annual rate of $14,969.6 billion and the savings rate fell from 8.1% to 8.0%. Pre-tax corporate profits were up +5.3% to a seasonally adjusted annual rate of $2,112.6 billion, with profits up +2.7% compared to Q2 2018.

Personal income rose at the slowest rate since September 2018, gaining +0.1% ($23.9 billion), while consumer spending grew +0.6% to $93.1 billion and the savings rate slowed to 7.7% (-0.3%). Consumer spending on goods grew by +0.9%, with nondurable goods up +1.1% and durable goods up +0.6%, but overall consumer spending was held down to +0.6% by a +0.5% increase in service spending. Prices grew +0.2% for the month, with a -0.4% drop in durable goods pricing somewhat offsetting a +0.5% increase for nondurable goods. Core PCE inflation, which excludes food and energy costs and is the Federal Reserve’s preferred measure for inflation, was up +0.2% for the month and remained unchanged from June at a +1.6% yearly rate.