Not Moving Yet: July 27 – 31

The Fed decided not to adjust the short-term interest rate target. Here are five things we learned from U.S. economic data released during the week ending July 31. 

The Fed stayed put, but there was less agreement to do so. The policy statement released after this past week’s Federal Open Market Committee (FOMC) meeting noted that the U.S. economy was “expanding at a solid pace” even as the Middle East conflict created “elevated uncertainty.” Job creation had “kept pace with the workforce,” while productivity and capital investment remained “strong.” Only nine of the 12 voting members agreed to keep the fed funds target rate at 3.50 percent to 3.75 percent. Three members (Hammack, Kashkari, and Logan) favored a quarter-point increase (presumably due to inflationary concerns). 

Economic growth slowed in Q2. The Bureau of Economic Analysis’s first estimate of second-quarter 2026 Gross Domestic Product (GDP) shows the U.S. economy expanding 1.5 percent on a seasonally adjusted annualized basis, down from Q1’s 2.1 percent advance. Consumer spending and fixed nonresidential investment (i.e., business investment) were the primary contributors to Q2’s GDP growth, adding 212 and 115 basis points, respectively. State/local government spending (+12 basis points) and fixed residential investment (i.e., housing, +5 basis points) also made modest contributions. Drags on the U.S. economy included net exports (-101 basis points), the change in private inventory accumulation (-67 basis points), and federal government spending (-26 basis points). The BEA will update its Q2 GDP estimate twice over the next two months.

Consumer spending increased while inflation held steady in June. Real Personal Consumption Expenditures (PCE) grew 0.4 percent on a seasonally adjusted basis, down from its 0.9 percent May gain. Durable goods spending rose 0.7 percent, with gains for both durables (+1.5 percent) and nondurables (+0.3 percent). Services expenditures increased 0.3 percent. Without inflation adjustments, nominal PCE grew 0.3 percent, funded by matching 0.2 percent increases in nominal personal income and disposable income. Real disposable income grew 0.3 percent. The savings rate continues to fall, slipping 0.1 percentage point to +2.7 percent. Over the past year, real PCE has risen 2.5 percent as real disposable income has grown 0.5 percent. The same Bureau of Economic Analysis report notes that the PCE Price Index (an inflation measure watched by the Fed) declined 0.1 percent in June, while the core measure (net of food and energy) was up 0.1 percent. The headline price index has swelled 3.7 percent over the past year, with the core index up 3.3 percent.

One measure of consumer sentiment slipped in July. The Conference Board’s Consumer Confidence Index fell 1.4 points to a seasonally adjusted 90.8 (1985=100). The index was at 98.7 one year ago. The present conditions index declined for the third straight month, down 3.6 points to 114.9, while the expectations index held steady at 74.7. 18.9 percent of respondents said business conditions were “good,” just above the 17.8 percent who viewed them as “bad.” 24.6 percent of consumers indicated that jobs were “plentiful,” ahead of the 21.5 percent who said they were “hard to find.” 

…while another experienced a rebound. The Index of Consumer Sentiment rose 5.7 points in July to a seasonally adjusted 55.2 (1966Q2=100). The University of Michigan measure remained 10.5 percent below its year-ago level. Both the current (+7.1 points to 54.8) and expected conditions measures improved from June. The two measures were down 19.4 percent and 4.0 percent, respectively, from a year earlier. The press release noted that July’s gains were “across all groups by income, education, wealth, age, and political party.”

Other U.S. economic data released over the past week:

• Jobless Claims (Week ending July 25, 2026, First-Time Claims, seasonally adjusted): 197,000 (+9,000 vs. the previous week, -22,000 vs. the same week a year earlier). 4-week moving average: 202,750 (-8.5% vs. the same week a year earlier).
• Durable Goods (June 2026, New Orders for Manufactured Durable Goods, seasonally adjusted): $334.8 billion (+0.3% vs. May 2026).
• Bankruptcy Filings (12-Month Period Ending June 30, 2026): 608,511 (+12.2% vs. 12-month period ending June 30, 2025).
• FHFA House Price Index (May 2026, Purchase-Only Index, seasonally adjusted): +0.3% vs. April 2026; +2.2% vs. May 2025.
• S&P/Case-Shiller Home Price Index (May 2026, National Index, seasonally adjusted): -0.1% vs. April 2026; +1.1% vs. May 2025.

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