Inflation slowed more than expected in the United States in November, even falling to its lowest level in almost three years, while consumption held up, a development welcomed by Joe Biden, campaigning for his re-election .
The increase in consumer prices was 2.6% year-on-year in November, according to the PCE index, a gauge favored by the American central bank (Fed), and published Friday by the Commerce Department.
Inflation is now below 3.0%. But a downward revision of the October figures showed that it was already, then, below, at 2.9% instead of 3.1% initially announced.
“The progress is remarkable,” noted US President Joe Biden in a press release.
“But make no mistake: Even if my economic plan gets us back on track, our work is far from done. Prices are still too high for too many Americans,” added the Democratic official, who hopes to be re-elected to the White House in November 2024.
Another measure of inflation, the CPI index, published earlier in the month and on which pensions are indexed, showed a slight drop in November, to 3.1% over one year compared to 3.2% in October. .
Fed officials stressed, on December 13 after their meeting, that “inflation has slowed over the past year but remains high.”
They see it falling to 2.4% over one year at the end of 2024. But warned that it will be necessary to wait until 2026 to see it return to the desired level of 2.0%.
“There is no reason to assume that the last stage of disinflation will be the most difficult,” said Lydia Boussour, economist for EY.
She highlights that “five key elements have already materialized and will constitute the perfect combination for disinflation in 2024: lower growth in consumer demand, lower rent increases, narrower profit margins, lower growth moderate wages and a restrictive monetary policy.
Consumer confidence rises
Consumer spending increased in November, the start of the holiday season, by 0.2% compared to October, the Commerce Department also indicated. Household income increased by 0.4%.
“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.
American consumers are also optimistic about the evolution of inflation. it even pushed their confidence level in December to the highest level since July, after four consecutive months of decline, according to the final estimate released Friday by the University of Michigan.
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.
But it has chosen not to touch it since July, 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 are now thinking of bringing them back down, and are considering several cuts in 2024.
And if orders for durable goods rebounded in November, by 5.4%, this is due in particular to new aircraft orders, according to data published Friday by the Ministry of Commerce.
Goods considered durable are those used for three years or more, such as cars and appliances, and their progress is considered a good indicator of the health of the U.S. economy.
“Recent indicators suggest that growth in economic activity has slowed since its solid pace in the third quarter,” the Fed commented on December 13.
The figures on the evolution of American GDP in the 4th quarter will be published on January 25.
