Inflation slows in October in the United States, consumption still solid

UPGRADE DAY

Inflation slowed in October in the United States, according to the index favored by the American Central Bank, while Americans continued to spend, benefiting from also rising incomes and dipping into their savings, but the recession still looms.

Consumer price inflation rose to 6.0% year on year in October from 6.3% in September, according to the PCE index released Thursday by the Commerce Department.

About only one month, inflation is stable, at 0.3%, surprising analysts who expected a slight acceleration and forecast +0.4%.

US President Joe Biden, at the when he welcomed his French counterpart Emmanuel Macron to the White House, assured in a press release that “we are seeing the first signs of progress in the fight against inflation”.

He warned, however, that “it will take time to bring inflation back to normal – and there could be setbacks along the way.”

Inflation, at low levels unprecedented over the last twelve months since the beginning of the 1980s, is the priority of the Fed. The latter raises its rates to slow down consumption, and ease this pressure on prices.

The PCE inflation index is the one she favors, and wishes to bring it down to 2%, a level considered healthy for the economy.

Another measure, the CPI index, used for the indexation of pensions also showed a slowdown in October, to 7.7% over one year against 8.2% in September, the lowest since January 2022.

Savings are reduced

Furthermore , households saw their income increase in October by 0.7% over one month, according to the government, a higher increase than that of September (0.4%), thanks to increases in wages and social benefits.

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Expenditures increased, up 0.8% (against +0.6% in September). In particular, Americans bought gasoline and cars, and paid more for food and housing.

They had to dip into their savings, however: the savings ratio compared to income available fell to 2.3%, a 17-year low. In April 2020, under the effect of federal government aid in the face of the pandemic, this rate had risen to 33.8%, an unprecedented level.

“Solid income growth is keeping consumers in a spendthrift mindset, even as soaring inflation and high interest rates depress them about the economic environment,” said Oren Klachkin, economist for Oxford Economics. .

“Looking ahead, we expect the jobs machine to slow down and then stall as the economy slips into a recession in 2023,” he warns.

US growth rebounded in the second quarter after contracting in the first half.

The holiday season kicked off with a bang, with the promotion days of Black Friday and Cyber ​​Monday. Sales over the whole season should increase by 6 to 8% compared to last year, anticipates the National Federation of Distribution NRF.

But the risk of recession still hangs over the American economy. Manufacturing activity fell in November, for the first time since May 2020, according to the ISM index also published on Thursday.