USA: Sharp rise in consumer prices unlikely to last long

Consumer prices in the USA are rising more strongly again. The inflation rate reached the 1% mark in July – only two months after the rate of inflation had fallen almost to zero. Petrol prices again made a major contribution to the significant rise in the price level: They rose by more than 5 per cent over the previous month, even though they had already risen sharply in June. However, industrial goods and services also began to rise more strongly again. The only exception was food, which actually became slightly cheaper than in the previous month.

The rapid rise in prices is likely to be primarily a recovery trend: For many goods and services, which are now becoming noticeably more expensive, there were strong discounts in the spring due to the crisis. Gasoline prices, for example, are still almost 20 percent below their pre-crisis level. By contrast, food prices are recovering in the opposite direction. What is surprising, therefore, is not that prices as a whole are picking up again more significantly, but that inflation is apparently recovering quite quickly.

There are many reasons against this, the most important being that the US economy is recovering, but the corona crisis is not yet over. For example, the unemployment rate is still above 10 percent, the consumer climate is still stuck in the trough, and recently the negotiations in Congress on a new economic stimulus package were declared to be terminated without result. In such an environment, companies are likely to soon reach their limits if they want to push through higher prices. Finally, there has been little movement in the world market price of crude oil in recent weeks, and high inventories are keeping it low.

We therefore expect the upward price trend to ease somewhat in the coming months. The average inflation rate in 2020 is likely to be just above the 1 percent mark and will only rise more significantly next year.

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