Inflation in the United States gives the economy a break by falling to 8.5%

Inflation in the United States gives the economy a break by falling to 8.5%

After reaching its highest rate in four decades in June, inflation in the United States stood at 8.5% in July, six tenths less, and thus gave a break to the world’s main economy, which continues its struggle for continue to contain prices.

According to data published this Wednesday by the Bureau of Labor Statistics (BLS), the year-on-year drop comes after consumer prices have remained stable (0%) this month, thanks mainly to the drop in gasoline prices, which was 7.7% in July.

The drop in the inflation rate gives a little respite to the US economy, which at the end of July entered what experts consider a technical recession by chaining two quarters of falls in gross domestic product (GDP).

A diagnosis that, however, is not shared by the government headed by Joe Biden, who does not believe that the country is in a recession scenario given the robustness of its economy, especially its labor market, with an unemployment rate of 3 ,5%.

The BLS noted that as a whole, energy prices fell 4.6% last month, and while gasoline and gas (3.6%) fell, the price of electricity increased 1.6%. .

In the last twelve months, energy prices have increased by 32.9%, with gasoline rising by 44% year-on-year.

Faced with the drop in energy prices, food prices continued to rise, 1.1% in one month. This was the seventh consecutive monthly increase above 0.9%.

In year-on-year terms, food prices have risen 10.9% in the last twelve months. Eating at home has become 13.1% more expensive, while eating away from home is 7.6% more expensive than a year ago.

Core inflation, which measures the rise in consumer prices excluding those of food and energy -the most volatile- stood at a year-on-year rate of 5.9%, with a monthly rise of 0.3.

The year-on-year rise in transport of 9.2% stands out, although this month prices fell by half a point.

The prices of new vehicles continued to rise, by 0.6%, and accumulate an annual increase of 10.4%.

This morning, US President Joe Biden made a slight allusion to consumer prices in a message on social networks when he noted that “a third of core inflation was due to high car prices due to the shortage of semiconductors” and assured that with the microchip law approved yesterday, the United States will once again “lead the way”.

The law contemplates investments to encourage the manufacture of these components in the United States to reduce dependence on those made abroad, especially in China, a measure with which the Biden administration also hopes to help reduce consumer prices.

And it is that high inflation continues to be the main concern of the Biden government, with three months to go before the mid-term elections.

Also from the Federal Reserve, which on July 27 raised interest rates again, which are now in a range of between 2.25 and 2.5%.

In the opinion of the economist at the Atlantic Council think tank, Charles Lichfield, “inflation is slowing down due to lower gasoline prices, not to the adjustment policy of the Federal Reserve,” he told Efe.

“This is good news, as it can increase consumer confidence,” said this expert, who however warned that with continued supply chain problems and tight labor markets, “inflation will not fall as fast, and this may not protect us from a recession.”

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