(Washington) Falling consumption and falling wholesale prices: the US economy seems to be showing the beginnings of a long-awaited slowdown in the fight against inflation, at a time when bank failures are rocking the markets and complicating the task of the central bank.
Retail sales fell in February in the United States, by 0.4% compared to January, according to data released Wednesday by the Commerce Department.
This is, admittedly, bad news for retailers, but it is desired to fight inflation, as it eases pressure on prices in an overheated economy.
“Retail sales fell in February, but not enough to signal a major deterioration in consumers’ propensity to spend,” said Oren Klachkin, chief economist for Oxford Economics.
Over one year, however, sales were up 5.4%. These figures are in fact not adjusted for inflation, which therefore mechanically contributes to increasing the total amount of sales.
However, this rose in February to 6.0% over one year, according to the CPI index which refers. For the same amount, consumers leave with a much less full basket.
Oren Klachkin expects ‘consumer spending to weaken later this year as wage increases falter, savings dwindle, borrowing costs rise and inflation remains high,” he adds, painting a bleak picture for consumers.
Consumers, in fact, have already seen their purchasing power reduced with high inflation, but have continued to consume, as they have accumulated a lot of savings since the start of the COVID-19 pandemic and wages have increased in due to a labor shortage in the country.
Dilemma for the Fed
But the American central bank (Fed) is determined not to let prices continue to climb so much, and has therefore been raising its rates for the past year, which is increasing the cost of credit, thus weakening the ability to consume.
Fed officials will meet on March 21 and 22, and will face a stark dilemma: raise rates in the face of still too high inflation, or take a break, given the uncertainty in financial markets since the bankruptcy of Silicon Valley Bank (SVB), which was precisely pushed by these sharp rate hikes.
Especially since wholesale prices in the United States, published on Wednesday by the Department of Labor and which measure inflation on the producer side, fell by 0.1% in February over one month, due in particular to the drop in gasoline prices.
And over one year, the rise in prices has experienced its weakest evolution since March 2021, at 4.6%, against 5.7% in January.
“Producer prices are far from their peaks, but inflation is still high,” said Rubeela Farooqi, chief economist for HFE, who expects the Fed to hike rates next week by a quarter. percentage point.
However, she does not rule out the possibility of a pause in rate hikes, as “officials will take into account the risks to financial stability”.
“If the markets remain as disordered as they are now, the Fed will not raise its rates next week,” anticipates for his part Kieran Clancy, economist for Pantheon Macroeconomics.
Manufacturing activity in the New York area, considered a good barometer of the evolution of the American economy, contracted again in March, for the fourth month in a row, according to the monthly Empire survey. State, published Wednesday by the New York branch of the American central bank (Fed) and carried out with industrialists in the region.