Inflation slowed more than expected in July in the United States, driven by lower gasoline prices at the pump. Although still very high, the announcement brings a breath of fresh air to Joe Biden a few months before the crucial midterm elections.
The American president welcomed, from the White House, “signs that inflation could begin to moderate”.
Consumer prices rose 8.5% in July year on year, according to the Consumer Price Index (CPI) released Wednesday by the Labor Department.
This is less than the 9.1% in June – a record for 40 years – but also than the 8.7% anticipated by analysts.
But the figure that surprised the most is that of inflation over one month: 0.0%. Against all expectations, prices did not increase at all compared to June (against a rise of 1.3% last month).
“Today we learned that our economy had 0% inflation in July,” said Joe Biden.
“Our economy had zero percent inflation in July. ZERO PERCENT. For sure there is still work to do, but we are on the right track,” White House economics spokeswoman Emilie Simons said in a tweet.
This slowdown is welcome, because for the past year and a half, rising prices have eroded household purchasing power. And by extension, the popularity rating of the Democratic president.
His opponents accuse him of having an inflationary economic policy, due in particular to his generous stimulus plan in March 2021, just after his arrival at the White House.
They revived their criticisms on Sunday, with the adoption in the Senate of the “Inflation Reduction Act” on climate and health, which they accuse on the contrary of generating unnecessary public spending.
” Too high “
Despite this slowdown, “prices remain too high”, nuance Rubeela Farooqi, economist for HFE.
American motorists have certainly been able to breathe: gasoline prices have fallen by 7.7% compared to June, good news in a country where the vast majority of trips are made by car, aboard often gas-guzzling models. fuel. Over one year, however, they climbed 44%.
And the prices of hotel nights and plane tickets have also fallen.
But Americans continued to tighten their belts to find accommodation and buy food, food prices having experienced, over one year, their strongest increase since 1979 (+ 10.9%).
Core inflation, which excludes energy and food prices, however slowed to 0.3% over one month and 5.9% over one year, surprising analysts who expected an acceleration .
These figures delighted Wall Street, which opened sharply higher on Wednesday. The dollar, on the other hand, fell.
Sharp rate hike in sight
The question now is whether it will be possible to bring inflation down sustainably, without plunging the world’s largest economy into recession, after already two quarters of GDP contraction.
The Fed, which is on the move, is seeking to provoke a voluntary slowdown in consumption, to ease the pressure on prices.
To do this, it is raising its key rates, now between 2.25 and 2.50%. This encourages commercial banks to offer more expensive loans to their retail and business customers.
“Combined with the strength of employment and wage growth, the data [de l’inflation] confirm the hypothesis of another aggressive rate hike in September,” underlines Rubeela Farooqi.
The CPI index is a reference in particular for indexing pensions. Another measure of inflation, the PCE index, favored by the Fed, had shown an acceleration in June, to 6.8% over one year.
Inflation was struggling, however, before the pandemic, to reach the 2% considered healthy for the economy. But it accelerated with global supply chain disruption and labor shortages in the United States, as American households consumed frantically.
Added to this was the war in Ukraine, which sent fuel and food prices soaring.
The American labor market, for its part, returned to its excellent pre-pandemic health in July, with an unemployment rate falling to 3.5%. There are still, however, nearly two vacancies for every available worker, pushing wages up and contributing to inflation.