New orders for durable goods dropped for the second consecutive month, with May’s -1.1% decline following April’s -0.9% drop. A steep drop in aircraft orders weakened the transportation component, and new orders excluding transportation were up +0.1%. However, core capital goods orders, which exclude both defense and transportation and are a measure of business investment, were down for the first time this year by -0.2%.

The third estimate of Q1 GDP was +1.4%, up from the previous estimate of +1.2% and the initial estimate of +0.7%. The GDP upward revision was based on increased estimates for exports (from +5.8% to +7.0) and consumer spending (from +0.6% to +1.1%), with a small negative effect from an increase in imports (from +3.8% to +4.0%). Corporate after tax profits, adjusted for inventory valuation and capital consumption, fell at an annual rate of -2.7%, compared to a +2.3% increase for the previous quarter.

Personal income was up +0.4% in May, but the bulk of the added income was spent on savings, which increased to 5.5% of disposable income. Spending was up for services by +0.2%, but down for goods by -0.6%, largely due to a -3.0% drop in energy spending. The Personal Consumption Expenditures (PCE) core index, which strips out the more volatile food and energy components, was up +0.1%, and yearly PCE core inflation dropped to +1.4% from a revised +1.5% for April. The PCE core index is the Federal Reserve's preferred measure of inflation, and has dropped to its lowest rate since December 2015, slipping even further from the Fed’s target 2.0% rate.