In the US, August inflation data was released this week. Publications did not satisfy the market, the S & P500 lost more than 4% in the process. Total inflation (8.3% over one year) is down compared to July (8.5% over one year). Core inflation (which excludes energy and food) started to rise again, reaching 6.3% in one year (compared to 5.9% the previous month). The peak of core inflation generally follows the peak of headline inflation with a delay of a few months.
In one month, the rise in headline inflation was 0.1%, while analyst consensus expected a 0.1% decline. More boring, core inflation rose 0.6% in one month, while the consensus counted on a smaller 0.3% rise. Players in the various sub-categories continue to pass the rising costs onto their selling price. The increase is widespread and few segments show a decrease in the space of a month. The following categories are particularly affected by this increase: groceries (+ 0.8% over a month), housing (0.7%), medical care (0.8%) and new cars (+ 0.8%). Energy-related services, that is the prices of gas (+ 3.5%) and electricity (+ 1.5%) continue their upward phase. On the contrary, the prices of fuel (-10.6%) and used cars (-0.1%) for example are lower than in the previous month.
Retail sales rose 0.3% in August. Excluding petrol, this figure is even higher and stands at an increase of 0.8%. The month of July recorded a drop of 0.4% after the revision. Of the 13 product categories analyzed in retail sales, 8 increased. Adjusted retail sales of automobiles, gasoline, building materials and food services remained unchanged month over month. This figure, which gives a better idea of the underlying trend of American consumer behavior, is all the more disappointing as it is used in the calculation of GDP.
Given the inflation data, analysts expect the Central Bank of the United States (the Fed) to raise interest rates for the third in a row by 75 basis points, bringing interest rates to 3.25%. Some economists even announce a 100 basis point increase. Through this monetary policy tightening mechanism, the Fed hopes to lower demand and thereby reduce inflation. The decline in demand should translate into an increase in the unemployment rate. The Fed therefore aims to orchestrate a controlled economic slowdown without causing a deep recession.
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