August defined by mostly steady growth and resilient consumers, but a hawkish Fed

Trend watch

Travel-related data such as air passenger traffic and hotel occupancy continued their descent from peak levels this summer. The weekly air passenger count fell for the fifth consecutive week, slipping to 16.4 million. That’s down just over 3 million passengers from the peak in the last week of June, or almost 16%. That said, it’s off last year’s pace on a year-to-date basis, down 0.3%.

Similarly, hotel occupancy is cooling, although not quite as quickly. It’s down 4.5% from peak levels, but August tends to skew toward leisure more than any other month. However, revenue per available room (RevPAR)―a key hospitality metric―is down nearly 14% from the summer peak.

Our take

The latest batch of economic data paints a mixed picture of the U.S. economy, with signs of softness in housing offset by continued resilience elsewhere. New home sales struggled again in July, extending a recent run of disappointing activity as affordability challenges and elevated borrowing costs continue to weigh on demand. Prices also declined to their lowest level in five years, underscoring the pressure facing builders and buyers alike. While the South remained the largest contributor to new home sales, weakness across the sector suggests housing is still searching for firmer footing.

Aside from home prices, inflation data offered little cause for alarm. The Federal Reserve’s (Fed) preferred inflation gauge ticked modestly higher in July, but underlying price pressures remain relatively contained. While the increase serves as a reminder that inflation has not fully disappeared, the broader trend continues to point toward a more stable price environment than in recent years.

For policymakers, the latest inflation readings appear to have done little to alter the ongoing debate over the appropriate path for monetary policy. To wit, Fed Chairman Kevin Warsh struck a rather hawkish tone in his Jackson Hole Symposium remarks, emphasizing the need to remain vigilant against inflation risks. He noted that policymakers will keep a keen eye on inflation trends, while monitoring the broader economic trends. But Warsh stopped short of advocating for what the Fed should do when it meets in three weeks.

Although backward-looking, second-quarter economic growth held steady. Revisions to second-quarter gross domestic product (GDP) left overall growth unchanged, reinforcing the view that the economy continues to expand at a moderate pace. The most important driver remains the consumer, which accounts for more than two-thirds of economic activity. Despite lingering concerns about interest rates, tariffs, and geopolitical uncertainty, household spending has remained remarkably resilient and continues to provide a critical foundation for economic growth.

Business spending, meanwhile, showed renewed strength. Durable goods orders posted a sharp increase in July, while core capital goods orders, a key proxy for business investment, climbed to a fresh all-time high. The data suggest companies remain willing to invest despite an uncertain backdrop, supported by healthy balance sheets and continued demand. Combined with steady consumer activity, business investment remains an important source of economic momentum.

Consumer attitudes also improved modestly as August sentiment was revised higher, while inflation expectations continued to cool. The improvement suggests households are becoming more comfortable with the economic outlook even as challenges remain.

Bottom Line

The latest batch of data reinforced a familiar theme: the U.S. economy remains uneven but resilient. Housing continues to struggle under the weight of elevated borrowing costs, while consumers and businesses are providing ongoing support to growth. That’s why we continue to say that it feels like “one foot on the gas, and one foot on the brake.”