Inflation slows down a bit in the United States, but remains very high

Inflation slowed a little in the United States in April, which gives hope that the worst is over, but brings only a slight relief, as the rise in prices remains strong and affects the purchasing power of Americans as well as the popularity of Joe Biden.

Inflation slows down a bit in the United States, but remains very high

Inflation slowed a little in the United States in April, which gives hope that the worst is over, but brings only a slight relief, as the rise in prices remains strong and affects the purchasing power of Americans as well as the popularity of Joe Biden.

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The slowdown is indeed tenuous: in April, year on year, inflation stood at 8.3%, which is more than expected, against 8.5% in March, according to the consumer price index ( CPI) released Wednesday by the Labor Department.

And the price rise remains close to the 40-year high it recorded last month. Food prices, in particular, experienced their strongest increase over one year since April 1981 (9.4%).

“The fire of inflation remains out of control and there is little policymakers can do to stop it short of massively slowing growth,” commented economist Joel Naroff.

These figures added to the volatility of the New York Stock Exchange, which fell again on Wednesday.

The good news, however, is that this slowdown is the first in eight months and could mark the start of a slow decline in inflation, after peaking in March when price inflation was at its highest since December 1981.

“Inflation may have peaked, but the slowdown through the end of the year will be anything but rapid,” warns Gregory Daco, chief economist at EY-Parthenon, however.

“Unacceptable level”

This high inflation is not only weighing on consumer purchasing power, but also on Joe Biden's popularity as the midterm elections approach. He has been trying, since the beginning of the week, to convince the Americans of his action.

“While it is heartening to see that annual inflation moderated in April, the fact remains that inflation is at an unacceptable level. As I said yesterday, (...) reducing it is my main economic priority”, he commented in a press release.

Visiting a farm near Chicago (northern United States) on Wednesday, the Democratic president denounced what he calls "(Vladimir) Putin's price hike", and unveiled a series of measures to try to calm somewhat soaring food prices.

"My administration has worked to bring down costs for farmers ... and prices for consumers," he told reporters.

The Republican opposition does not fail to recall that prices had started to climb long before the war in Ukraine.

Over one month alone, the slowdown in inflation is much more marked than over one year, it fell to 0.3%, against 1.2% in March compared to February. Main reason: gasoline prices, which had soared in March due to the war in Ukraine, fell in April by 6.1%.

As for the prices of used cars, which had largely contributed to high inflation due to the shortage of semiconductors, they fell again in April (-0.4%), for the third month in a row.

“A risk persists”

Gasoline prices at the pump, however, have already started to rise again, hitting new records this week, averaging $4.40 a gallon (3.78 litres) on Wednesday, the highest since 2000, the year where the American Automobile Association started collecting this data.

Excluding energy and food prices, so-called core inflation accelerated over one month, to 0.6% against 0.3% in March. But it slowed down over one year, to 6.2% against 6.5%.

“There are too many uncertainties” to estimate that the peak has been reached, “given the ongoing war in Ukraine and the ripple effects that confinements in China could still have on supply chains”, pointed out Diane Swonk, economist at Grant Tronton.

Also on the front line to slow down this rise in prices, the American central bank, the Fed, has started to raise its key rates to curb consumption and investment.

Several of its officials on Tuesday said they were in favor of a rapid rise in rates in the coming months. Even if it weighs a little, temporarily, on the job market and pushes up the unemployment rate.

CPI inflation is one of the two measures used in the United States, and the one on which pensions are indexed in particular. The PCE index, the other barometer and favored by the Fed, will be published on May 27.


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