August_US_Inflation

 source: Le Devoir, AFP

author:Julie Chabanas - Agence France-Presse in Washington

translation: GoogleTranslate/doxa-louise

The Economy

Inflation slowed less than expected in August in the United States

Between July and August, gasoline prices fell 10.6%, according to the US Department of Labor.

Inflation slowed a little in August in the United States thanks to the fall in the price of gasoline, but the prices for rents and food continue to rise – which constitutes a thorn in the side of Joe Biden two months before the midterm elections.

Consumer prices rose 8.3% year on year in August, from 8.5% in July, according to the US Department of Labor. However, inflation remains higher than the 8% that analysts had expected.

In response, the New York Stock Exchange ended sharply lower on Tuesday, in a market stunned by this data, suggesting even more brutal monetary tightening to come than expected. The Dow Jones fell 3.9%; the Nasdaq index, 5.2%; the broader S&P 500 index, 4.3%. It was the Nasdaq's worst session since mid-June.

"It will take more time and willpower to bring inflation down," President Biden said in a statement. The American president, however, welcomed this slowdown, which according to him shows “progress”.

The Republican opposition regularly accuses him of having, through his policy, largely contributed to this inflationary outbreak.

Eroded purchasing power

Behind this slight slowdown lies a continuous rise in the cost of living in the United States.

“Inflation remains stubbornly persistent,” Kathy Bostjancic, chief economist for Oxford Economics, commented in a note. Because over one month, prices started to rise again, by +0.1% compared to July, whereas a slight drop was expected and inflation had been zero between June and July.

Admittedly, refueling at the gas station cost much less than in July (-10.1%). A welcome respite in a country where the car is king. But that was not enough to offset the increases for most other products. Housing, food, medical care… The increase was “generalized”, details the Department of Labor in its press release.

So-called underlying inflation, calculated on all prices except those of food and energy, thus accelerated, to +6.3% over one year (against +5.9% in July), and +0.6% over one month (against +0.3% in July).

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

For a year and a half, prices have been soaring in the United States, eroding household purchasing power. Inflation had reached its highest level in more than 40 years in June, before slowing down in July.