USA: inflation slows, households moderate their spending

The surge in prices slowed in the United States in April, according to one of the main inflation indices in the country published on Friday, while households moderated their spending, but less than expected.

Inflation rose to 6.3% year on year in April, from 6.6% in March, according to the Commerce Department’s PCE index. Over one month, the slowdown is even more marked at 0.2%, against 0.9% last month.

This indicator, the preferred measure of the American Central Bank (Fed) to gauge inflation, had reached a 40-year high in March.

The other inflation indicator, the CPI index, published by the Department of Labor and used in particular for calculating pensions, also slowed down a little in April to 8.3% over one year, after reaching in March 8.5%, its highest level since 1982.

Excluding food and energy, so-called core inflation was stable over one month, at 0.3%, and slowed over one year to 4.9% (against 5.2% last month).

As for revenues, they rose by 0.4%, slightly less than in March (0.5%).

More careful with spending

Affected by inflation, Americans have slowed down their spending compared to the previous month. These rose 0.9%, when they had climbed 1.4% in March, according to upwardly revised data. Analysts, however, expected a stronger slowdown, and forecast +0.6%.

They have increased their spending on services, including dining out and paying rent. They also bought cars and spare parts.

Inflation is squeezing Americans’ purchasing power and threatening economic growth, and is a serious thorn in the side of US President Joe Biden. The opposition accuses him of having an inflationary economic policy and this soaring price weighs heavily on his popularity rating.

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He had assured that bringing the rise in prices back to a normal pace was his priority.

The American central bank, the Fed, is on the front line, and has assured that it will do everything to bring inflation back into line. Even if this slows down the growth of economic activity for a while, and causes unemployment to rise a little.

It has thus begun to vigorously raise its key rates, and should continue.

This has the effect of increasing the interest rates on loans contracted by individuals and professionals with commercial banks. However, when credit is more expensive, less is borrowed, which slows down demand, and therefore pressure on prices.

/ATS

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