Driven by falling gasoline prices at the pump, inflation slowed more than expected in July in the United States. Consumer prices rose 8.5% in July year-on-year, according to the Consumer Price Index (CPI) released on Wednesday by the Labor Department.
This is better than expected as inflation was expected to be 8.7% in July, according to MarketWatch consensus. This announcement had an immediate effect on the markets and in particular on the Cac 40. But should we be happy by now?
A guest on the set of the Grand Journal de l’Eco, Alexandre Barradez, chief analyst at IG, reacted to this announcement. “So far we’ve only had bad surprises,” he recalled, taking the example of June. In this month, the annual indicator had reached 9.1%, its highest level since the early 1980s.
“This is good news because inflation is falling below consensus,” he said. But also because “at the beginning of the year, even before the war in Ukraine, rising inflation had set the gunpowder on fire.” “Finally, what caused the stress to start a few months ago becomes what suggests we’re past the hard end in terms of inflation,” he continued.
Salary increases continue
In detail, it is above all the fall in energy prices, and in particular gasoline, which has contributed to this slowdown in inflation. “The category of goods, which is very dynamic in terms of price increases, has also started to slow down for a few months,” said Alexandre Barradez.
As for the latest unemployment figures, published on August 5, they represent “true good news” for the specialist. In July, the US unemployment rate fell 0.1 point and fell again to 3.5%, the same level as in February 2020.
This indicator “has eliminated the prospect of a technical recession but also that of a deep recession,” he estimated. On the other hand, “wages keep going up,” she recalled, which contributes to inflation.
“We can be satisfied with the fact that inflation is stabilizing and slowing down a bit, but the important thing will be the pace of its slowdown,” said Alexandre Barradez. For him, the indicator would have to lose “between 0.6 and 0.8 points” each month, on an annual basis, for this slowdown to mark a true turning point, particularly in the Fed’s strategy.
Source: BFM TV
