Activity remains robust and the decline in inflation continues. The American situation is in every respect better than that of Europe.
The American economy has what it takes to arouse envy, especially when viewed from Europe. In its latest report published on July 26, the IMF revised its annual growth forecast for the United States slightly upwards, from 1.6 to 1.8%, compared to 2.1% in 2022.
The euro zone looks gray in comparison, since growth should fall to 0.9% this year, after 3.5% in 2022, weighed down in particular by the recession in Germany (see Income n°1743).
US GDP growth even accelerated in the second quarter, to 2.4% on an annual basis, compared to 2% in the first quarter, driven by consumption, investment and state and local government spending. Even though there was a slowdown in activity last month, particularly in services, the composite PMI index is still trending favourably.
With consumption holding up better at the start of the summer and the drop in jobless claims in July, the momentum remains positive at the start of this second half. Finally, the latest US household surveys show that confidence rebounded last month. This is consistent with the persistent resistance of the labor market.
The Fed acts again
This still robust economic situation has not prevented inflation from falling: the PCE consumer price index (the indicator favored by the Fed) fell in June to 3% on an annual basis. Excluding energy and food, it stood at 4.1%. But as Fed Chairman Jerome Powell pointed out during his July 26 press conference, there is “a long way to go” before inflation returns to its 2% target.
Unsurprisingly, the Federal Reserve therefore decided, at the last meeting of its Monetary Policy Committee, to carry out its 11th monetary tightening since last year. Its key rates were raised by 25 basis points, that of «fed funds» now in the 5.25-5.50% range, its highest level since January 2001. The next day, the European Central Bank followed suit, raising its deposit rate from 3.50 to 3.75 % (read p.3).
But the ECB is paying for its ignition delay even more than the Fed, some experts believe. Inflation in the eurozone indeed remains high, with an annual rate of 5.3% last month (5.5% for core inflation, i.e. excluding energy, food, alcohol and tobacco).
Wage boom
As Patrick Artus, economic adviser at Natixis bank, points out, the action of central banks on inflation proves to be all the more effective when its resurgence is anticipated early, given the long timeframe for policy action. monetary on prices.
But when the Fed started to raise its rates, inflation was at 7% (5.5% excluding energy and food). The ECB lost even more time, since at the time of its first tightening, inflation had reached 8%.
Result: wages have had time to get out of control, because GDP growth in the absence of productivity gains – as is the case today – stretches the labor market and creates jobs. A runaway that today concerns the euro zone even more than the United States. This makes the fight against inflation particularly difficult to lead.
2023-08-05 04:23:18
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