Causes and trend of inflation in America

The data that strikes me the most undoubtedly relates to the total inflation rate in America year on year, which goes from 4.9% in April to 4.0% in May. Normally the reference figure is the ‘core’ because it excludes the cost of food and energy products due to their typical volatility. In this case, however, the price of oil, expected to fall for the rest of 2023, seems to eliminate an element of volatility, making the figure relating to total inflation more significant.

From the ExportUSA observatory they are confident that the inflation rate in America will continue to fall in the coming months. Indeed, we believe that: The price of oil will continue to fall The prices of new cars will begin to fall. We say this because in May, the price of used cars continued to fall, and this usually precedes a movement of the same sign in the new market by a few months; Rents in America have already dropped for a few months and are continuing to drop. The level of rent is an important factor in calculating the inflation rate. However, the monthly US inflation figure includes the prevailing rent level six months earlier. We, therefore, believe that in the coming months, the monthly inflation reading will start to track the decline in rents helping to push down the US inflation reading.

Energy prices fall by 3.5% The data showed that while inflation is still well above the Fed’s target, it is at least showing continued signs of decelerating. Central bankers aim for inflation of around 2% as a healthy and sustainable level. A 3.5% drop in energy costs and an unchanged food index helped keep headline inflation in check.

Used vehicle prices, which contributed significantly to the initial surge in inflation in 2021, are now down another 0.9%, which represents an 11.2% year-on-year decline. The 0.6% increase in housing costs (shelter cost) was the smallest increase ever recorded since last November. Despite this, the monthly increase still led to an 8.2% year-on-year increase in house prices. The shelter index makes up about a third of the CPI weighting and is closely monitored by Federal Reserve officials.