The consumer price index (CPI) in the US rose 8.6% in May from the same month a year ago, according to the US Bureau of Labor and Statistics (BLS). In April, it was posted at 8.3% in April, and in March at 8.5%. It has remained at its highest for 40 years. This figure is higher than the consensus of analysts polled by Bloomberg, which expected 8.3%.
On a monthly basis, the CPI increased by 1% in May compared to April which had registered a rise of 0.3% compared to March.
According to the BLS, this price increase affects all products. Thus, core inflation (excluding food and energy prices) increased in May by 6% over one year (0.6% over one month). Food prices increased by 10.1% over one year (1.2% over one month) while energy prices jumped by 34.6% in one year (3.9% over one month ).
The task is complicated for the Fed
Far from calming down, inflation is accelerating, making the task more and more delicate for the Federal Reserve, which will have to accentuate the tightening of its policy. On May 4, the monetary institution has already raised its key rates by half a percentage point. It should decide on a new increase on June 15 during the meeting of its committee, the extent of which remains to be determined. It needs to calm inflation and cool the economy, while avoiding breaking its momentum and tipping it into recession. Indeed, one of the causes of the price increases is the tense situation of the American labor market, with a demand for workers exceeding the supply, and a sharp increase in wages. Employers added 390,000 jobs last month and the jobless rate hovered near its lowest point in half a century. Because, even though more than 6.5 million jobs have been created in the space of a year, fewer Americans are employed as a proportion of the population than before the pandemic.
For the government of Joe Biden, these inflationary pressures reduce the possibility of conducting a stimulus policy as it had planned. Gasoline prices have hit record highs in recent weeks, with the average gallon of regular unleaded currently selling for $4.97, according to the AAA association. According to data from the BLS, the price of gasoline appears in May up 48.7% in May over one year, and 4.1% over one month. More spectacularly, the price of diesel soared by 106.7% over one year, and by 16.9% over one month.
Discontent of American households
Following the announcement of the inflation figure, Brent and WTI prices per barrel were down slightly, hovering above $122 and below $121 respectively.
These increases, which are undermining the purchasing power of American households and fueling discontent, could well cause the Democrats to lose the majority in Congress during the mid-term elections next November. This electoral deadline is crucial, because a large part of the elected officials is renewed.
Treasury Secretary Janet Yellen had already warned yesterday that she saw high gasoline prices persist, while ruling out the entry into recession of the United States economy. Oil prices are supported by the restriction of Russian supply in the markets due to embargoes by Westerners, especially Europe, on Russian oil imports and the inability of OPEC+ to sufficiently increase supply on the market.
The White House takes on ocean freight
A sign of nervousness from the White House, Joe Biden attacked certain maritime freight companies yesterday. “One of the reasons prices have gone up is that a handful of companies that control the market have raised transport prices. (maritime) up to 1,000%. It’s outrageous – and I’m calling on Congress to get tough.”, tweeted the American president on Thursday. The House of Representatives must vote next week on a text, already adopted in March by the Senate, which aims “to reduce costs and relieve supply chains by reforming unfair transport practices”, said Thursday the Democratic leader of the upper house Chuck Schumer, quoted by AFP. The text specifies that the price of a 40-foot container rose from around $1,300 before the pandemic to $11,000 in September 2021. “The American consumer is paying the price”lamented Chuck Schumer.