Joe Biden’s speech during his visit to a farm in Kankakee, Illinois on May 11, 2022 (AFP/Nicolas Cam)
Inflation slowed slightly in the United States in April, giving hope that the worst is over, but it eased only a little, as the rise in prices remains strong and affects the purchasing power of Americans as well as the popularity of Joe Biden.
The slowdown is already weak: In April, on an annual basis, inflation came in at 8.3%, more than expected, versus 8.5% in March, according to the Consumer Price Index (CPI) released Wednesday by the Labor Department.
The price hike remains close to a 40-year high hit last month. Food prices, in particular, experienced their strongest one-year rise since April 1981 (+9.4%).
“The fires of inflation remain out of control and there is not much policymakers can do to stop it without it slowing growth significantly,” economist Joel Narov commented.
These numbers added to the volatility of the New York Stock Exchange, which fell again on Wednesday.
But the good news is that this slowdown is the first in eight months and could mark the beginning of a slow decline in inflation, having peaked in March when price inflation was at its highest level since December 1981.
“Inflation has peaked, but the slowdown to the end of the year will not be quick at all,” warns Gregory Dako, chief economist at EY-Parthenon.
– ‘Unacceptable level’ –
This high inflation is not only weighing on consumer purchasing power, but also affecting 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 is moderate in April, the fact remains that inflation is at an unacceptable level. As I said yesterday (…) lowering it is my main economic priority,” he said in a statement.
On a visit to a farm near Chicago (Northern US) on Wednesday, the Democratic president denounced what he called “(Vladimir) Putin’s soaring prices”, and unveiled a series of measures to try to cool down food price hikes somewhat.
A graph showing the evolution of the consumer price index in the United States since 1948 (AFP /)
“My administration is working to reduce costs to farmers … and prices to consumers,” he told reporters.
The Republican opposition does not fail to remember that prices began to rise before the war in Ukraine.
In just one month, the slowdown in inflation was more pronounced than over a year ago, as it fell to 0.3%, down from 1.2% in March compared to February. The main reason: Gasoline prices, which rose in March due to the war in Ukraine, fell 6.1% in April.
As for used car prices, which contributed significantly to the rise in inflation due to the shortage of semiconductors, they fell again in April (-0.4%) for the third month in a row.
– ‘Danger continues’ –
However, gasoline prices at the pump have already started to rise again, setting new records this week, averaging $4.40 per gallon (3.78 liters) on Wednesday, the highest level since 2000, the year the American Automobile Association began collect this data.
Excluding energy and food prices, the so-called core inflation accelerated in one month, to 0.6%, compared to 0.3% in March. But it slowed in one year to 6.2% versus 6.5%.
“There are a lot of uncertainties” to estimating that the peak has been reached, said Diane Sonk, an economist at Grant Tronton, “given the ongoing war in Ukraine and the ripple effects that restrictions in China can still have on supply chains.”
A gas station in Washington on March 31, 2022 (AFP/Stefani Reynolds)
Also on the front line to slow this rise in prices, the US central bank, the Federal Reserve, began raising key interest rates to curb consumption and investment.
Several of its officials said Tuesday that they favor a rapid rate hike in the coming months. Even if it has little effect, temporarily, on the labor market and raises the unemployment rate.
CPI inflation is one of the two measures used in the United States, and the benchmark against which pensions in particular are indexed. The personal consumption expenditures index, the other metric favored by the Fed, will be published on May 27.