(Washington) The strength of the US recovery is confirmed, fueled by consumption that is growing despite high inflation, and jobless claims have even fallen to their lowest level since 1969, a welcome improvement for Joe Biden on the eve of the Thanksgiving.
American households continued to consume in October, the Commerce Department said on Wednesday.
Their spending rose 1.3% from September, but was inflated by inflation to the highest in 31 years. Without taking inflation into account, spending rose 0.7%, compared with 0.3% in September.
Consumer prices have, in fact, jumped in October by 5% over one year, their largest increase since 1990, according to the PCE index of the Commerce Department, confirming the acceleration observed ten days ago during the publication of another measure of inflation, the CPI index.
Energy prices alone have soared by 30.2% compared to October 2020.
The high prices of gasoline are all the more sensitive on the eve of Thanksgiving, for which the Americans will travel hundreds, even thousands of kilometers by car, to taste the traditional turkey with the family.
Joe Biden recently assured that his “top priority” was to “reverse the trend of inflation”, which “hurts the wallet of Americans”.
Many companies have raised the prices of their products, and even the popular chain of stores Dollar Tree has just announced that the price of its items will no longer be $ 1, but $ 1.25.
Low morale, high consumption
This inflation weighed down consumer sentiment, according to the final estimate from the University of Michigan also released on Wednesday.
The investigation highlighted fears related to inflation “combined with the absence of federal policies that would” correct the situation.
“Look at what consumers buy, rather than what they say,” quipped Mahir Rasheed, economist for Oxford Economics.
Thus, he points out, “households have expressed a strong desire to spend for the holiday season despite high inflationary pressures and renewed fears related to COVID-19”.
Households have also dipped into their savings, which continues to decline. In October, it represented 7.3% of disposable income, a far cry from the 26.6% in March 2021, after the payment of stimulus checks by the federal government.
Consumption, the engine of the US economy, should be able to count on the end-of-year shopping season, which begins on Friday with the Black Friday commercial operation.
It could also be supported, despite this inflationary storm, by household income, which is also increasing. In October, they were 0.5% higher than in September, which had suffered from the expiration of exceptional unemployment benefits paid during the pandemic.
This increase in income “mainly reflects increases in employee compensation”, but also the increase in income from assets, including stock market, said the Department of Commerce in its press release.
Employers are still struggling to recruit, especially for the lowest paid positions, and companies are playing the auction to attract candidates, offering higher wages and better conditions.
Slow progress in procurement
The labor market, as well, continues to improve. In mid-November, weekly jobless claims even fell to their lowest level in more than half a century, with 199,000 new registrants, the Labor Department said.
A decline certainly positive, but which, however, could be “exaggerated by factors of seasonal adjustment”, underlines Gregory Daco, economist for Oxford Economics, warning of a possible “rebound in the weeks to come”.
A total of 2.4 million Americans were still receiving unemployment benefit in early November, all programs combined, according to the most recent data.
However, economic activity remains disrupted by global supply difficulties, which are only beginning to subside.
Durable goods orders fell 0.5% in October, for the second month in a row, weighed down by falling aircraft orders. The good news, however, is that orders have rebounded in the automotive sector, which has been hit hard by semiconductor shortages.
Thus, excluding transport, the trend is positive, since new orders increased by 0.5%. Excluding defense, the increase is 0.8%.