Prices continued to rise in July in the United States compared to a year ago, but showed a further sign of moderation from June, as household incomes surged unexpectedly.
Inflation stood at 4.2% over one year in July, against 4% in June, and at 0.4% over one month, as expected, against 0.5% in June, according to the PCE index released Friday by the Commerce Department.
Prices certainly continue to rise compared to last year, but this new slowdown over one month is in line with the hypothesis defended by many economists, who believe that this high inflation is due to temporary pressures, which do not will therefore not lead to a lasting price hike.
For the second quarter as a whole, one-year inflation had reached its fastest pace since 1982, at 6.5%. Excluding volatile food and energy prices, so-called core inflation was even at its highest since 1975, at 6.1%.
PCE inflation is the one used by the US Central Bank (Fed), whose President Jerome Powell is due to deliver a highly anticipated speech on Friday. Another measure, CPI inflation, slowed in July over one month (+ 0.5%) and remained stable over one year (+ 5.4%).
Americans also saw their income jump 1.1%, much more than the 0.2% expected by analysts.
The increase is due to checks sent since the beginning of the summer by the federal government to a large part of families with children, said the Commerce Department. This has made it possible to compensate for the drop in additional unemployment benefits paid since the start of the pandemic, which half of the states have decided to reduce or eliminate as early as this summer.
Spending rose 0.3%, slightly less than expected, as service activities were popular, while purchases of goods fell.
Consumer spending is the engine of the US economy.
In June, the reopening of services thanks to vaccination, especially restaurants and tourism-related activities, led to a rebound in household spending, which had climbed 1%. Their income, on the other hand, was almost stable compared to May (+ 0.1%).
And, while the US economy returned to its pre-crisis level in the second quarter, the Delta variant has already started to slow the recovery over the summer. Events like concerts or conferences have been canceled, and people are less confident about certain activities.
Especially since some employers are struggling to find staff, especially for the lowest paid jobs, and therefore have to reduce their hours.
ats, awp, afp
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