In the United States, inflation fell a little, but gained services

When the inflation figure for the month of April was published on Wednesday 11 May, attention was logically drawn to the main figure: an annual increase of 8.3%, down slightly by 0.2 points compared to the previous month, the peak of inflation might have been reached. But immediately, economists warned about this figure considered misleading. “Don’t be fooled by today’s annual price index figure. The monthly increase was stronger than expected, with widespread price increases”tweets Steven Rattner, former team of Barack Obama.

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“Underlying inflation [hors alimentation et énergie] was very high in April, above its annual rate. This is the big news of the new inflation figure, even though the overall figure has fallen”, adds Jason Furman, economist at Harvard and former economic adviser to Obama. Over one year, core inflation, excluding energy and food, also fell to 6.2%, against 6.5% in March. But to find out if the trend is really down, economists look at the month-to-month trend, and it’s not very encouraging.

In detail, prices rose by 0.3 points compared to the previous month, against 1.2 points in March. But that’s because energy fell by 2.7% in one month, especially the price of gasoline, which fell by 6%. Excluding energy and food, the increase was 0.6 points in one month, double the previous month. Prices are now soaring in services (0.7 point month-to-month), especially transport: plane tickets jumped 18% in one month, an unprecedented record, with the resorption of the pandemic which had deflationary effects on services.

Markets are puzzled

“This is the subject to worry about: inflation for basic services has increased for four consecutive months”, notes Mr. Furman, who recalls that this sector weighs five times more than goods. Housing, in particular, represents a third of the basket and is now on a roll that makes a rapid decline in inflation unlikely (0.5 point increase month-to-month, 5.1% year-on-year).

The financial markets, which dreamed of a day with a bang, were perplexed, not knowing whether this figure, worse than expectations including in its main component, would lead to a tightening of credit conditions stronger than expected by the US Federal Reserve. Ten-year yields jumped from 2.91% to 3.08% when the figure was released before falling back to around 2.97% as the stock market swung from red to green.

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