US inflation remains sticky as consumer demand beats expectations

Durable goods orders for July came in at $339.3 billion, rising 1.1% month-over-month and handily beating analyst expectations.

The numbers tell a complicated story

July’s Consumer Price Index came in at 0.2% month-over-month and 2.5% year-over-year. Those figures landed roughly in line with expectations.

Core CPI showed the same 0.2% monthly increase.

The Personal Consumption Expenditures price index, which the Fed actually prefers over CPI as its inflation gauge, was projected to show a year-over-year core reading of approximately 3.3%.

Meanwhile, retail and food services sales dipped 0.6% month-over-month to $763.6 billion in July. That figure still represents a 5.0% increase compared to the same month a year earlier.

Durable goods tell a different story entirely

New orders for manufactured goods with a lifespan of three years or more climbed 1.1% to $339.3 billion. Transportation equipment orders drove much of the increase, surging 2.3% in July.

What the Fed does next

The probability of a Fed rate hike in September dropped to around 35% as of mid-August, down from higher levels earlier in the summer.

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