Prices continue to rise in the United States and 12-month inflation reaches 5.4%

Americans faced a major price hike in September, which revives concerns about inflation at a time when the world suffers from supply problems.

After moderating for two months, inflation rose again in September, 0.4% compared to August, when it had marked a decrease to 0.3%, according to the CPI consumer price index published this Wednesday by the Department of Job.

More than half of this increase is due to food and housing. An important part also comes from energy, with prices that do not stop rising (+1.3% in one month).

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This inflationary rebound is particularly visible in the 12-month measurement, which marks a 5.4% price increase. In August the figure was 5.3%.

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The effect of the delta variant of the coronavirus, which dampened growth in the United States in the last summer, is being felt. Retail food prices, and not in restaurants, were the ones that increased the most (+1.2% in one month). Instead, the prices of airfare, clothing and used cars fell.

Transient?

This rally revives concerns about a longer-than-expected price spike, as the return to 2% annual inflation, the Federal Reserve's target, recedes month after month.

In the medium term, however, the rise in prices will moderate, with "faster productivity growth," said Shepherdson, an economist at Pantheon Economics. Meanwhile, he warns, the data "will appear to threaten, or really threaten the" transitory "aspect of inflation.

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The IMF anticipates that energy prices will subside by the first quarter of 2022 and, globally, expects a peak in inflation in 2021, before stabilizing by the middle of next year.

Meanwhile, households see their purchasing power decline, and policy makers try to reassure them. "I think it is transitory, but I do not mean that these pressures (on prices) will disappear in a month or two," Treasury Secretary Janet Yellen said Tuesday.

So far, the Fed has insisted that high inflation rates would be temporary. White House spokeswoman Jen Psaki insisted today that the current rise in prices is part of a "transitional" period and that the administration of US President Joe Biden expects inflation to slow down in 2022.

"We knew that as the economy recovered we would see some of these transitory effects," said Psaki in his daily press conference.

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Delays and shortages

Global sourcing difficulties, which have caused delivery delays and shortages for months, largely explain these price increases, particularly for new cars and furniture.

"The price increases caused by bottlenecks (...) in a context of strong demand, will keep inflation at a high level, since the imbalances between supply and demand will only be resolved progressively," said Kathy Bostjancic, economist at Oxford Economics, for whom annual inflation will be above 3% until mid-2022. These shocks are holding back world growth, the IMF warned on Tuesday.

On the contrary, according to the president of the bank JPMorgan Chase, Jamie Dimon, "you can have good growth and inflation."

Dimon deplores "too much attention" to the rise in prices and the supply chain, when, according to him, there are "very good chances" that all this will be remembered within a year.

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The issue is central to the G7 Finance meeting in Washington. For example, the White House announced an extension of night and weekend work at the port of Los Angeles to reduce waiting lines that delay the delivery of many products.

In the ports of Los Angeles and Long Beach, where 40% of the containers arrive in the United States, “about 100 ships (are) moored outside” the port “waiting to unload merchandise,” Yellen detailed Tuesday. The supply of goods is, however, "abundant", he explained.

But a Fed official, Mary Daly, president of the San Francisco Federal Reserve, was not so sure on Sunday: "People buy now and they often tell them they won't get the products on time."

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