Joe Biden in the new terminal at the airport in Boston (Massachusetts) on September 12, 2022 (AFP / Mandel NGAN)
Inflation slowed down a little in August in the United States, thanks to the drop in gas prices, but the prices of rents and even food continue to rise, which constitutes a thorn in the side of Joe Biden two months from 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 higher than the 8% that analysts had expected.
“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 / )
The American president however welcomed this slowdown, which according to him shows “progress”.
The Republican opposition regularly accuses him of having, through his policy, largely contributed to this inflationary outbreak.
The Democratic president will hold a ceremony at the White House on Tuesday afternoon in honor of his “Inflation Reduction Act”, the plan to fight climate change and to help households cope with medium-term inflation, which he managed to push through Congress in August.
– “Stubbornly persistent” inflation –
Behind this slight slowdown hides a continuous rise in the cost of living in the United States.
“Inflation remains stubbornly persistent,” said Kathy Bostjancic, chief economist for Oxford Economics, in a note.
Because over one month, prices started to rise again, by +0.1% compared to July, whereas a slight drop was expected, and inflation had been zero between June and July.
A “Beat Inflation” advertisement for 99 Cents Only Stores, on the Los Angeles (California) subway at the Redondo Beach (California) station on August 31, 2022 (AFP / Patrick T. FALLON)
Filling up at the service station certainly cost much less than in July (-10.1%). A welcome respite in a country where the car is very often essential, and bulky, and when the price of gasoline had soared since the start of the war in Ukraine.
Prices also fell for airline tickets and used cars.
But that was not enough to offset the 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 climb.
“Ouch. Much larger than expected (price) increases across a wide range of categories,” said Ian Shepherdson, economist for Pantheon Macroeconomics, in a note.
So-called underlying inflation, calculated on all prices except those of food and energy, thus accelerated, to +6.3% over one year (against +5.9% in July), and +0.6% over one month (against +0.3% in July).
Food prices have even, over one year, recorded their strongest increase since 1979 (+11.4%).
For a year and a half, prices have been soaring in the United States, eroding household purchasing power. Inflation had reached its highest level in more than 40 years in June, before slowing down in July.
– “Hurry up” –
This persistent inflation spooked Wall Street on Tuesday morning, and the New York Stock Exchange opened sharply lower.
The dollar jumped as investors revise their expectations for a slowdown in rate hikes from the US central bank (Fed).
A Dollar Store supermarket in Alhambra on August 23, 2022 in California ( AFP / Frederic J. BROWN )
It is the one that is in charge of the fight against inflation, and these data should in fact convince it to continue to tighten its monetary policy with a firm grip.
Raising key rates pushes commercial banks to increase the interest rates on loans offered to individuals and businesses, who are then less inclined to consume and invest, allowing pressure on prices to be eased.
“Time is running out,” Fed Chairman Jerome Powell warned Thursday.
This deliberate slowdown in economic activity will, however, push up unemployment. But the good health of the job market, which is even experiencing a shortage of workers, gives them room, despite an unemployment rate up slightly in August, to 3.7%.
“Together with a labor market that is still so strong, this data seals the deal for another aggressive hike in key rates, by 0.75 percentage points, next week,” at the Fed meeting, according to Rubeela Farooqi. , Chief Economist for HFE.
The CPI index is used to index pensions. The Fed, whose objective is to bring inflation back to around 2%, favors another measure, the PCE index, whose growth slowed in July (+6.3% over one year).