2024-03-02 00:14:49
On Friday, the Federal Reserve – America’s central bank – issued a monetary policy report measuring internal economic developments, which showed inflation continuing to rise on an annual basis, with its relative slowdown during 2023 as a reflection of the decline in energy prices.
The report addresses many economic aspects, including inflation, gross domestic product, consumer spending, and labor market conditions – including unemployment, the number of workers, and wages.
Below are the most important points addressed in the report.
Slowing inflation
Although the inflation rate continues to exceed the target of 2 percent, it has shown a slowdown in recent months.
The report showed that the inflation rate rose to 2.4 percent during 2023 on an annual basis, but it is still lower than the record levels recorded during 2021 and 2022 when it jumped to 7.1 percent.
It also showed that core inflation – which excludes food and energy and is considered the most accurate measure of inflation – rose to 2.8 percent during the 12 months ending January 2024.
Low energy and food prices
Oil prices remained around $80 per barrel during the first half of last year before they rose relatively once more in late last summer, reaching regarding $83 per barrel, but they did not reach the same levels in 2022, and consumer energy prices fell by regarding 4.9 percent.
The report attributed the slowdown in oil prices to weak global economic activity and abundant supplies as a result of the increased oil production of the United States and non-OPEC member countries, pointing out that the Red Sea tensions and changing shipping routes led to halting the decline in prices.
In terms of foodstuffs, they decreased by regarding 1.4 percent on an annual basis, which is considered a significant slowdown compared to the increase recorded in 2022 when they rose by 11 percent. Food prices represent great importance to the consumer, especially low-income families, for whom these necessities constitute a large share. Of its expenses.
High GDP
The report indicates that gross domestic product grew by 4 percent during the second half of last year compared to 2.2 percent during the first half, which means an increase during the entire year by 3.1 percent.
American growth comes despite the many financial restrictions imposed by the United States to combat inflation, most notably the long series of interest hikes that the Federal Reserve has begun since 2022.
The report indicated that the level of consumer spending and real estate investments has begun to improve, while business investments have slowed.
Consumer spending recorded an increase of 2.7 percent during 2023, supported by a strong labor market and an increase in basic income.
Slowing demand in the labor market
Demand for work has continued to slow over the past year but remains strong, with nearly nine million job opportunities at the end of 2023, regarding three million fewer than the record level recorded during March 2022, and regarding two million more than pre-2020 levels. The pandemic.
The labor force participation rate – which measures the proportion of people working or seeking work – continued to rise over the past year, although it recorded a relative decline in recent months.
The report attributed one of the reasons for the abundance of labor to population growth over the past year. According to data from the Census Bureau, the population increased by regarding 1.7 million people (0.5 percent), pointing out that 70 percent of this increase comes from immigration.
Slowing wage growth
Wage growth will slow in 2023, although it will remain generally high.
The report showed an increase in hourly wages by regarding 4.2 percent during the 12 months ending last December, compared to 5.1 percent during 2022.
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