Sunday, October 1, 2023

Inflation rises again in August in the United States

Inflation rises again in August in the United States L’inflation is accélérée en août aux États-Unis, pour le deuxième mois d’affilée, tirée notamment par la hausse des prix de l’essence à la pompe, une mauvaise nouvelle pour Joe Biden qui brigue un second mandat à la White House.

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The consumer price index rose to 3.7% year-on-year, compared to 3.2% in July, according to the CPI index published on Wednesday by the Department of Labor. And 0.6% in one month, compared to 0.2% in July.

Prices had continued to slow for a year, after hitting a high of 9.1%. But they began to rise again, for the second consecutive month, driven by gasoline prices, which represent “more than half of the increase” in the monthly index, details the Department of Labor.

Joe Biden, who hopes to be re-elected in 2024, is trying to convince that it is his economic policy that allowed the rise in prices to stop last year and that this rebound cannot be his responsibility.

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“Inflation has fallen significantly over the past year, but I know that the increase in gasoline prices last month has put pressure on household budgets,” he said in a statement.

“That’s why I remain focused on reducing energy costs, including investing in clean energy to strengthen our energy security,” the Democratic president added.

But behind this new increase in inflation lies a more encouraging figure: that of the so-called core inflation, which excludes energy and food prices. Certainly, it accelerates slightly in a month, to 0.3% compared to 0.2%, but it decelerates in a year, to 4.3% compared to 4.7% in July.

Despite the gasoline price increase in August, energy prices have fallen since August 2022, falling 3.6%.

Egg prices, whose increase had been one of the symbols of these years of inflation, fell 18.2% in one year. Those of used cars, 6.6%, and those of smartphones, 17.2%. Airline ticket prices have fallen by 13.3%.

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And inflation should resume its downward trajectory in the coming months, anticipates Nancy Vanden Houten, an economist at Oxford Economics.

“A slowdown in the economy, more flexible conditions in the labor market, and moderate wage growth will encourage a further slowdown in inflation,” he said in a note.

Especially since millions of American households will see their budgets even tighter starting in October, as they will have to start paying their student loans again, after more than three years of pause due to the COVID-19 crisis.

These figures will be followed very closely by officials of the American Central Bank (FED), who will meet next Tuesday and Wednesday. They will have to decide between raising rates again, in the hope of causing a lasting slowdown in inflation, or keeping them at their current level, so as not to slow economic activity too much.

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And “these data support (…) the maintenance of rates,” according to Rubeela Farooqi, economist at High Frequency Economics.

The main key rate is now in a range of 5.25 to 5.50%, its highest level in 22 years, after being raised 11 times since March 2022.

The Federal Reserve, however, favors another measure of inflation, the PCE index, which also rose to 3.3% year-on-year in July, and wants to return it to around 2.00%.

Consumers saw their purchasing power fall last year. Inflation caused real incomes to fall 2.3% in the United States in 2022, although wages rose very sharply, the Census Bureau announced Tuesday.

In fact, the United States is experiencing a severe labor shortage, which has driven up wages, helping to fuel inflation.

However, an influx of new workers in August raised the unemployment rate to 3.8%, a sign that the situation is rebalancing after two years of labor shortages, a development that is likely to calm inflation.

Times of National
Times of National
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