The Fed’s preferred indicator was lifted by energy and food prices.
Inflation in the United States accelerated once more in June, following remaining stable in May, according to the PCE index, one of the indicators of inflation and that favored by the Fed, published Friday by the Commerce Department .
Prices climbed 6.8% from June 2021 and 1.0% from May, driven by energy and food.
Excluding energy and food prices, which have risen sharply since the start of the war in Ukraine, so-called core inflation also accelerated, to 0.6% over one month and 4.8 % over one year.
The other inflation indicator, the CPI index, published by the Department of Labor and used in particular for calculating pensions, showed a price increase of 9.1% over one year in June.
Household spending also rose in June (+1.1%), driven by energy, housing and health.
The increase in their income was stable compared to May (+0.6%), mainly reflecting, underlines the Department of Commerce, “the increases in remuneration”, in particular within private companies, and “in the income of owners”, rents having soared since the start of the Covid-19 crisis.
Labor costs for private employers rose 1.3% over the April-June period from the January-March period, according to separate data released by the Labor Department also on Friday. The increase is 5.1% over the last 12 months.
Less savings
The savings ratio to disposable income continues to decline, to 5.1%. It had jumped during the pandemic, under the effect of lower spending on travel or restaurants, and government aid, reaching, in April 2020, the unprecedented level of 33.8%.
These savings had supported consumption, but in the face of disruptions in the supply chain, these expenditures fueled the acceleration of inflation, causing the economy to “overheat”.
The US economy, however, is starting to slow down, a prerequisite for prices to stop climbing. The central bank (Fed), to achieve this, raises its key rates, so that credit is more expensive, which encourages less consumption and investment, and therefore relieves pressure on prices.
The gross domestic product (GDP) of the United States contracted once more in the second quarter, by 0.9% at an annualized rate, following having already fallen by 1.6% in the first quarter.
The battle is now on to find out whether the “classic” definition of recession – two consecutive quarters of decline in GDP – applies in this case to the United States, because the unemployment rate, in particular, is very low, according to the administration of Joe Biden, and many economists.
And if American consumers regained some confidence in July, the general level remains very close to the historic low reached in June, at 51.5 points, according to the University of Michigan index published on Friday.
