Inflation slows in January in the United States, but less than expected

2024-02-13 21:29:55

We will still have to wait to see inflation fall below 3% in the United States, and the January figures were disappointing, while the question of purchasing power is central in the race for the White House.

Consumer price inflation slowed to 3.1% year-on-year in January, compared to 3.4% in December, according to the CPI index released Tuesday by the Labor Department.

This rate, however, disappointed analysts, who hoped to see inflation fall below 3% for the first time since March 2021.

“Inflation has fallen by two-thirds compared to its peak (in June 2022, Editor’s note) but we know that there is still work to bring down costs,” commented President Joe Biden in a press release.

Inflation is one of the main campaign themes in the race for the White House, because soaring prices have sharply reduced the purchasing power of households.

Democratic President Joe Biden, a candidate for re-election, regularly highlights the virtues of his economic policy, nicknamed “Bidenomics”, which, according to him, has allowed the economy to remain strong and favor the less well-off and the class average, while slowing inflation.

However, he is accused of pursuing an inflationary policy by former President Donald Trump, who hopes to return to the White House and is well placed to win the Republican Party nomination.

Spectacular jump in the price of car insurance

Treasury Secretary Janet Yellen praised the “significant progress” already made, but acknowledged that “the costs of some important goods and services for American families remain too high. Resolving this issue is one of our top priorities.”

Joe Biden’s Minister of Economy and Finance, notably, during a speech in Pittsburgh (Pennsylvania), pointed the finger at health care, deploring that “one in ten people say they have stopped taking pills or skipped doses” due to cost.

Over one month alone, inflation stood at 0.3% in January, a little more than in December (0.2%), driven in particular by housing, which represents more than two thirds of this rebound.

As for so-called core inflation, which excludes volatile food and energy prices, it remains stable at 3.9% over one year, and up slightly over one month, at 0.4%. .

The slowdown in inflation, however, does not mean that prices have fallen, but that they have increased on average less quickly.

Certain products, therefore, cost less than a year ago, such as gasoline at the pump, used cars, plane tickets, but also dairy products and eggs.

On the other hand, in addition to housing, there is a problem with car repairs, and especially auto insurance (+20.6% over one year).

Patience at the Fed

Joe Biden’s main economic advisor, Lael Brainard, blamed the “exceptionally high” margins of retailers and distributors.

And “if you look at certain basic products, like eggs or milk, (prices) have fallen, but the brands, instead of really lowering prices, have shrunk their packaging,” she lamented, during from an interview on CNBC.

The inflation figures should also convince the American central bank (Fed) to be patient before beginning its monetary easing.

After raising its rates to curb demand and thus curb high inflation, it now plans to start lowering them in the coming months.

But those responsible for the monetary institution are cautious, because they want to be certain that the slowdown in inflation is lasting before launching the movement.

The Fed favors another measure of inflation, the PCE index. It wants to bring its growth back to +2% – a level considered healthy for the economy – whereas, in December, it remained stable at 2.6% over one year.

In the euro zone, inflation was 2.8% year-on-year in January, although there were strong disparities between countries. France has one of the highest rates, 3.5%.