Inflation slows less than expected in August in the United States

Inflation slows less than expected in August in the United States


Joe Biden at the new airport terminal in Boston (Massachusetts) on September 12, 2022 (AFP/Mandel NGAN)

Inflation slowed a bit in the US in August, thanks to falling gas prices, but rent and even food prices continue to rise, a thorn in the side of Joe Biden two months out. the midterm elections.

Consumer prices rose 8.3% year-on-year in August, from 8.5% in July, according to the CPI index released Tuesday by the Labor Department. However, inflation remains above the 8% expected by analysts.

“It will take more time and willpower to bring inflation down,” Biden said in a statement.

Evolution of inflation in the United States since 1948 (AFP / Getty Images)

Evolution of inflation in the United States since 1948 (AFP / Getty Images)

However, the US president welcomed this slowdown which, according to him, shows “progress”.

The Republican opposition regularly accuses him of having contributed greatly, through his politics, to this inflationary explosion.

The Democratic president will hold a White House ceremony Tuesday afternoon in honor of his “Reduce Inflation Act,” the plan to combat climate change and help households cope with inflation in the medium term. which he managed to push through Congress in August. .

– Inflation “stubbornly persistent” –

Behind this slight slowdown is a continuing rise in the cost of living in the United States.

“Inflation remains stubbornly persistent,” said Kathy Bostjancic, chief economist at Oxford Economics, in a note.

Because for a month prices rose again, +0.1% compared to July, when a slight decrease was expected, and inflation had been zero between June and July.

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An advertisement for “Beat Inflation” from 99 Cents Only Stores, in the Los Angeles (California) subway station in Redondo Beach (California) on August 31, 2022 (AFP/Patrick T. FALLON)

It is certain that refueling at the service station cost much less than in July (-10.1%). A welcome reprieve in a country where the car is too often essential and bulky, and where the price of gasoline had skyrocketed since the start of the war in Ukraine.

The prices of airline tickets and used cars also fell.

But that wasn’t enough to offset increases for most other products. Housing, food, medical care, new cars,… The increase has been “generalized”, details the Department of Labor in its press release.

Natural gas and electricity prices also continued to rise.

“Ouch. Much larger-than-expected (price) increases across a wide range of categories,” Ian Shepherdson, an economist at Pantheon Macroeconomics, said in a note.

The so-called core inflation, calculated on all prices except food and energy, thus accelerated to +6.3% per year (compared to +5.9% in July) and +0.6% per month ( compared to +0.3% in July).

Food prices have even registered, for one year, their strongest increase since 1979 (+11.4%).

For a year and a half, prices have skyrocketed in the United States, eroding the purchasing power of households. Inflation had reached its highest level in more than 40 years in June, before slowing in July.

– “Hurry up” –

This persistent inflation spooked Wall Street Tuesday morning, with the New York Stock Exchange opening sharply lower.

The dollar jumped as investors revised their expectations of a slowdown in rate hikes by the US central bank (Fed).

A Dollar Store supermarket in Alhambra on August 23, 2022 in California (AFP/Frederic J. BROWN)

A Dollar Store supermarket in Alhambra on August 23, 2022 in California (AFP/Frederic J. BROWN)

He is the one in charge of fighting inflation, and this data should indeed convince him to continue tightening his monetary policy with firm control.

The rise in key rates pushes commercial banks to raise interest rates on loans offered to individuals and businesses, which are then less inclined to consume and invest, thereby easing pressure on prices.

“Time is running out,” Fed Chairman Jerome Powell warned on Thursday.

This deliberate slowdown in economic activity, however, will increase unemployment. But the good health of the labor market, which is even experiencing a shortage of workers, makes room for them, despite the fact that the unemployment rate rose slightly in August, to 3.7%.

“Coupled with a labor market that remains so strong, this data seals the deal for another aggressive hike in key rates, by 0.75 percentage point, next week,” at the Fed meeting, according to Rubeela Farooqi, an economist. Head of HFE.

The CPI index is used to index pensions. The Fed, whose goal is for inflation to return to around 2%, is betting on another measure, the PCE index, whose growth slowed in July (+6.3% in one year).

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