A steep -35.9% drop in new home sales in the West and a smaller -17.6% drop in the Northeast overshadowed sales increases in the South (+4.9%) and the Midwest (+6.3%) to lower new home sales by -7.8% in May to a seasonally adjusted annual rate of 626,000. On a yearly basis sales were down -3.7% with inventory of homes available for sale at the end of May increasing 10.3% to 333,000, or 6.4 months at the current rate of sales. The median sale price was $308,000, down -2.7% Y/Y, with 36% of the market priced in the $200,000 - $299,999 range, up from the 30% market share average for 2017 and 2018.

Consumer spending was revised downward to 0.9% in the third estimate of Q1 2019 GDP from 1.3% in the second estimate, but GDP remained at 3.1% thanks to upward revisions to nonresidential fixed investment (from 2.3% to 4.4%), residential fixed investment (from -3.5% contraction to -2.0% contraction), and government purchases (from 2.5% to 2.8%). Positive contributions to GDP also came from upward revisions to exports (from 4.8% to 5.4%), and downward revisions to imports (from 2.5% to 1.9%). Corporate profits for Q1 were at a $1.942 trillion annual rate, revised upwards to a 2.3% gain from an initial from 1.6% estimate, with after-tax inventory valuation and consumption adjusted profits at $2.012 trillion (+2.4%).

Personal income rose +0.5% in May, matching April’s upwardly revised +0.5% increase, and after tax, inflation adjusted income rose at a +0.3% rate vs +0.1% in April. Gains in personal income were centered on proprietor’s income (+0.8%) and interest/dividend income (+1.6%), while employee compensation rose only +0.2%. Spending on durable goods rose +1.7%, balancing out a -0.1% contraction in nondurable goods spending to bring overall goods spending to +0.5%, with a +0.4% increase in services spending limiting overall consumer expenditures to a +0.4% gain. Inflation rose +0.2% for the month and dropped -0.1% to 1.5% for the year, but core inflation, which excludes food and energy prices, remained steady at +1.6%.