It's a common misconception that if you are gaining or maintaining at the beginning of a diet/exercise regimen, it's because you're "gaining muscle and losing fat." True, you are gaining strength, but the weight is usually water. When you stress your body with exercise, it starts to store more fuel in its muscle cells so it can easily power your workouts. The process of storing glucose for fuel and converting it into ATP for energy uses a lot of water, and so your muscles store this as well. This is why though you've lost an inch off your belly, the scale still reads the same. Don't fear that you'll be forever bloated or rush off to buy some OTC diuretics, the extra water retention will stop once your body has adjusted to the increased activity load. You ARE losing fat at this time, and gaining strength and efficient fueling in your muscle cells. It just takes longer for the scale to notice than your waistband.