Inflation is slower than expected in August in the United States – 09/13/2022 at 18:19

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

Inflation slowed slightly in August in the United States, thanks to lower gas prices, but prices for rent and even food continued to rise, constituting a thorn in Joe Biden’s side two months from midterm elections.

Consumer prices rose 8.3% annually in August, up from 8.5% in July, according to the CPI index released Tuesday by the Labor Department. However, inflation remained higher than the 8% expected by analysts.

“It will take a lot of time and energy to bring inflation down,” Biden said in a statement.

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

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

However, the American president accepted the slowdown, which he said showed “progress”.

The Republican opposition has often accused him of having, through his policy, greatly contributed to this inflationary explosion.

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 did to push the Congress in August.

– “Stubborn” inflation –

Behind this slight slowdown hides the continued 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 in more than a month, prices started again, at + 0.1% compared to July, while a slight decrease is expected, and inflation became zero between June and July.


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

Service station filling is definitely lower than in July (-10.1%). A welcome break in a country where the car has always been important, and big, and when fuel prices have skyrocketed since the start of the war in Ukraine.

Prices also fell for airline tickets and used cars.

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

The price of natural gas and electricity 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.

The so-called underlying inflation, calculated for all prices except those of food and energy, therefore accelerated, to +6.3% for a year (against +5.9% in July), and + 0.6% for a month ( against +0.3% in July ).

Food prices even, over a year, recorded their strongest increase since 1979 (+11.4%).

For a year and a half, prices have been rising in the United States, undermining household purchasing power. Inflation reached its highest level in more than 40 years in June, before easing in July.

– “Hurry up” –

This continued inflation spooked Wall Street on Tuesday morning, and the New York Stock Exchange opened lower.

The dollar jumped as investors revised 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)

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

China is in charge of the fight against inflation, and these data should indeed convince it to continue tightening monetary policy with a firm grip.

The increase in key rates pushes commercial banks to raise interest rates on loans offered to individuals and businesses, which then are less inclined to consume and invest, allowing the pressure on prices to be eased.

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

This deliberate slowing down of economic activity, however, can drive up unemployment. But the good health of the labor market, which is still experiencing a shortage of workers, gives them room, despite the small unemployment rate in August, up to 3.7%.

“With a labor market still very 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 goal is to return inflation to 2%, favored another measure, the PCE index, whose growth slowed in July (+ 6.3% for a year).

Leave a Reply

Your email address will not be published.