Although still very high, inflation slowed in the United States last month thanks to lower gasoline prices, but not only.
At its highest level in more than 40 years in June, 12-month growth in consumer prices fell slightly last month, from 9.1% to 8.5% in July, the US Department of Health reported on Wednesday. Work. This is even less than the slowdown expected by analysts (8.7%).
This slowdown is mainly the result of the fall, in July, in energy prices (-4.6%), especially gasoline (-7.7%), while those of food (+ 1.1%) or housing (+0.5%) increased again.
What surprised forecasters the most was the small increase in prices outside of the more volatile factors like energy and food. The growth rate of this “core CPI” in fact fell by half in July, dropping from a monthly average of 0.6% since the start of the year to 0.3% last month, for annual inflation of 5.9%.
All in all, the price of all the goods and services included in the measurement of the consumer price index (CPI) in the United States remained unchanged during the month of July, with a rate of 0% monthly inflation.
Good news
The news brought great pleasure to the US president, who has been accused for months of fueling an inflationary surge with his generous stimulus packages last year and who sees midterm elections fast approaching in November.
“Today we learned that our economy had 0% inflation in July,” said Joe Biden. “Zero percent, hammered its spokesperson in charge of the economy, Emilie Simons, in a tweet. Certainly there is still work to be done, but we are on the right track. »
The New York Stock Exchange (+2.13%) also welcomed the announcement of the stronger than expected slowdown in inflation, seeing it as a sign that the US Federal Reserve may not have to raise its interest rates as much as feared in order to calm the ardor of consumers and businesses in an attempt to bring inflation back to its target of 2%.
“The decline in inflation is certainly good news, but it will not prevent the Federal Reserve from continuing to raise interest rates in the months to come,” warned Desjardins Group economist Benoit P. Durocher, in a brief analysis on Wednesday. “Not only is there still a long way to go to bring inflation back to a satisfactory level, but the risks remain on the upside. »
Instead of a third straight interest rate hike of 0.75 percentage points at its next meeting in September, the Fed should settle for 0.50 points, its CIBC colleague now predicts. Karyne Charbonneau. To which should then be added another 0.50 points before the end of the year.
Annual inflation rose to 8.1% in June in Canada. The measurement for last month is to be made public next week. Believing that it had started late in its race against inflation, the Bank of Canada struck a blow last month by raising its key rate from 1.5% to 2.5%.
Inflation and profits
These repeated hikes in the cost of money are supposed to calm the overheating economy and soaring prices while inflation is largely the result of external factors — world energy prices and the impact of war in Ukraine and natural disasters on the price of foodstuffs, among others — recalls the Institute for Socioeconomic Research and Information (IRIS) in an analysis which was to be unveiled today.
However, the Bank of Canada’s interest rate hike not only has no influence on these factors, but it will end up curbing growth and employment, impoverishing at the same time the very people who see their power purchases have been declining for months, denounces IRIS. During this time, inflation has enabled businesses to increase their profit margins in Canada, in particular by $14 billion in the sales sector, including $3.6 billion only in food stores, or by $21 billion in the financial sector.
“Unlike households whose wages are stagnating, companies seem to have largely taken advantage of the context of inflation to raise their prices. This maneuver would have allowed them to reap record profits while contributing to the acceleration of inflation,” lamented in a press release one of the co-authors of the analysis, Guillaume Hébert.
Consumer Rebellion
The statistics released on Wednesday, however, suggest that American consumers “have begun to rebel against the increase in prices”, explained Sal Guatieri.
The economist at the Bank of Mont-réal sees this in particular in the recent drop in prices for air transport, hotels and car rentals, which he attributes to households who feel increasingly squeezed by the rise in interest rates and which are now forcing companies to lower their prices.
With Agence France-Press