Three major data points hit the tape this morning, and together they paint a picture the Fed won't love. Core PCE held at 3.3% year-over-year in July, in line with expectations but still nowhere near the Fed's 2% target. Headline PCE actually ran hot at 3.7%, above the 3.6% consensus, a reminder that Chair Warsh's Fed isn't getting the disinflation trend it needs heading into tomorrow's Jackson Hole symposium.
Growth, meanwhile, is moving the opposite direction. The second estimate of Q2 GDP confirmed 1.5% annualized growth, unchanged from the advance read but a clear step down from Q1's 2.1%. Consumer spending and exports did the work, government spending didn't help, and the deceleration is now official rather than preliminary.
Durable goods orders added a wrinkle. Headline orders jumped 1.1% in July, well above the 0.5% expected, but that strength doesn't hold up under the hood. Core capital goods orders, the cleaner read on actual business investment, rose just 0.2%, far short of the 0.9% forecast. Transportation orders drove the headline beat, not underlying demand from businesses.
Line all three up and you get sticky inflation sitting next to slowing growth and softening business investment, the exact combination that makes the Fed's job harder, not easier. It also lands at an inconvenient moment, one day before policymakers gather in Jackson Hole.
Sources: BEA, CNBC, Fox Business, RTTNews
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