Inflation persists and slows less than expected in August in the United States – 09/14/2022 at 00:19


Joe Biden at the White House, during a speech on his investment plan, the Inflation Reduction Act, September 13, 2022 (AFP / Mandel NGAN)

Inflation slowed slightly in August in the United States, driven by the fall in gasoline prices, while those of rents or food continued to escalate, a thorn in the side of Joe Biden at two months 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, this slowdown disappointed analysts, who saw inflation falling lower, to 8%.

Tuesday afternoon, while Wall Street ended its session in the red because of these figures, Joe Biden had gathered at the White House hundreds of people to celebrate a recently adopted text, and called “Act on the reduction of inflation” or “Inflation Reduction Act”.

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

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

The 79-year-old Democrat, in shirt sleeves and sunglasses on his nose, exclaimed: “With this law, the American people won, and the lobbies lost!”

The “Inflation Reduction Act”, so named to stick to the news but which is in reality a program of environmental and social reforms, “will make a big difference for families of the middle and working classes”, he assured .

Joe Biden also insisted, a few weeks before the legislative elections in November, on the fact that no Republican opposition parliamentarian had supported this text which promises, for example, to lower the exorbitant cost of certain common drugs, like insulin.

– “Stubbornly persistent” inflation –

“Inflation persists stubbornly,” Kathy Bostjancic, chief economist for Oxford Economics, commented 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.

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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 as essential as it is bulky, and when gasoline prices 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 rise.

“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).

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” –

These figures caused the dollar, “safe haven”, to jump against other major currencies on Tuesday, because they should convince the American central bank (Fed), in the maneuver in the fight against inflation, to continue to tighten its grip with a fist. Monetary Policy.

In concrete terms, it is gradually raising its key rates, which is pushing the banks to increase the interest rates on loans offered to individuals and businesses. They are then less inclined to consume and invest, allowing the pressure on prices to be eased.

The Fed could, on September 21, at the end of its next meeting, raise them by three-quarters of a percentage point, as in June and July. It had not previously resorted to such an increase since 1994.

“Time is running out,” warned Thursday its president, Jerome Powell.

This deliberate slowdown in economic activity, however, risks leading to a recession, and should, in any case, push up unemployment, which has already increased a little in August, to 3.7%.

The job market, however, remains in excellent health and faces a shortage of workers, which gives the Fed some leeway.

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).

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