Monthly personal consumption expenditures (PCE) rose 0.2% in July after a 0.1% decline in June, keeping the annual rate at 3.7% for the 65th consecutive month and above the Federal Reserve’s 2% target.

The Commerce Department’s Bureau of Economic Analysis reported that consumer spending grew 3.4% in the second quarter, revised up from 3.2%, while personal incomes increased faster than inflation, suggesting potential for higher consumption later in the year.

Orders for durable goods, led by transportation equipment, rebounded in July, indicating continued brisk business investment, particularly in artificial intelligence‑related sectors. Corporate profits rose $400.9 billion in the quarter, the second‑fastest increase on record, a trend partially attributed to the recent corporate tax overhaul.

The estimate for annualized gross domestic product growth in the second quarter remained at 1.5%, but gross domestic income rose 2.2%, pushing the combined measure of economic activity to a 1.8% growth rate. Economists project Q3 GDP growth of at least 3%, double the Q2 pace.

Fed funds futures indicate roughly a 40% probability of a rate hike at the September 15‑16 meeting, up from about 36% before the data release. While the majority of the Federal Open Market Committee left the benchmark rate unchanged at 3.50%‑3.75% in July, some policymakers argue tighter policy is needed as inflation has remained above target since February 2021.

The upcoming Jackson Hole economic symposium, where Fed Chair will speak, will be closely watched for clues on the Fed’s next move amid persistent inflation and a strengthening economic outlook.