2023-12-22 15:13:56
Inflation fell sharply in November in the United States, to 2.6% over one year, thus getting closer to the objective of 2%, according to the PCE index, a gauge favored by the Fed, published Friday by the department Trade.
And October’s downward revision showed that inflation had actually already fallen below 3.0% year-on-year, to 2.9%.
Federal Reserve officials emphasized, on December 13 at the end of their meeting, that “inflation has slowed over the past year but remains high.”
They now see it slowing down a little faster than they expected in September. It should fall to 2.4% over one year at the end of 2024, compared to 2.5% previously anticipated. But we will have to wait until 2026 to see it return to the desired level of 2.0%.
Another measure of inflation, the CPI index, published earlier in the month and on which pensions are indexed, showed a slight drop in November compared to October, at 3.1% over one year compared to 3. 2%.
As for consumer spending, it increased in November, the start of the end-of-year holiday season, by 0.2% compared to October (compared to 0.1% in October compared to September).
Household income increased by 0.4%, compared to 0.3% the previous month.
“Incomes are up, spending is up, and inflation is down. Even the savings rate has increased slightly. This report is the best economic news in a long time, and comes just in time for the holiday season,” commented Robert Frick, economist at Navy Federal Credit Union.
Rebound in orders for durable goods
Faced with inflation, the Fed has raised its rates by five percentage points since March 2022. This increases the cost of credit for households and businesses, and discourages consumption and investment, which, ultimately, allows to ease the pressure on prices.
Rates are in the range of 5.25 to 5.50%, the highest in 22 years, since July. The Fed left them at this level during its last three meetings, so as not to weigh too heavily on economic activity, and to avoid recession.
Because the full effects of rate increases take time to be fully felt in the real economy.
Fed officials now see rates starting to be lowered in 2024, and are mostly considering three or four cuts next year, bringing them to 4.6% at the end of 2024.
Furthermore, orders for durable goods rebounded strongly and much more than expected in November, thanks in particular to new aircraft orders, following a fall in October, according to data published Friday by the Ministry of Commerce.
The total amount of orders amounted to $295.4 billion, an increase of 5.4% compared to October, the fall of which was also revised to -5.1%, a little less sharp than ‘initially announced. Analysts were expecting an increase for November of only 2.0%, according to the Market Watch consensus.
Goods considered durable are those used for three years or more, such as cars and household appliances or electronics.
They are considered a good indicator of the health of the American economy.
Economic growth, which was still surprising with its strength in the third quarter, might however have already started to slow down.
“Recent indicators suggest that growth in economic activity has slowed since its solid pace in the third quarter,” the Fed commented on December 13.
Figures on the evolution of American GDP on the 4the quarter will be published on January 25.
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