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Biden’s Inflation Reached 8.3% in April

Inflación en abril

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Annual inflation stood at 8.3 %, marking a slowdown in the upward trend in prices from that recorded in March, according to data from the Bureau of Labor Statistics. On a monthly basis, the CPI increased by a seasonally adjusted 0.3%.

In March, the annual inflation rate was 8.5 %, beating a record not seen in 40 years. The Covid-19 pandemic, supply chain disruptions, and the massive amounts of money pumped into the economy have the country experiencing historic levels of inflation.

Although the country already had a major monetary expansion and two stimulus plans to contain the downturn in the economy due to the pandemic, the Biden administration passed a third stimulus plan, adding more money and stimulating price increases.

Housing prices, food, airline fares, and new vehicle purchases were the biggest contributors to the price increases in April. The cost of food rose 0.9%, and the cost of housing rose 1%. The cost of energy also grew at a slower pace than in March, rising 1.3 %, compared to a 1.8 % increase the previous month.

inflation
Price increases have not discouraged consumption in the U.S. (Image: EFE)

The cost of gasoline experienced a decrease of 6.1% nationwide. In recent months, American consumers have seen the cost of filling up their cars grow ever higher, making April’s figure comforting to American drivers’ wallets.

The so-called Base Price Index, which excludes the cost of the most volatile goods in the basic basket such as food or gasoline, rose by 0.6 %, which represents an increase over March’s index, which stood at 0.3 %. This increase is explained due to the rise in the price of medical care, recreation, home decoration, and the cost of financial operations.

Inflation is also partially stimulated by the Federal Reserve’s (FED) low-interest rates and government stimulus to contain the Covid-19 crisis. The FED faces the difficult challenge of lowering inflation while maintaining economic growth, which was negative during the last quarter in the United States.

Some economists have pointed out that the U.S. is at risk of falling into stagflation, a process where the economy experiences high inflation and, in turn, growth declines.

Inflation in April eased, but its effects linger in the economy

In April, the economy added 428,000 jobs, marking a year of active job recovery. Some inflationary problems the country is experiencing are partially due to a shortage of workers in sectors that have grown significantly after the pandemic, such as leisure and tourism, warehousing and storage, and trucking.

inflation
The cost of rents has a considerable influence on inflation measurements (Image: EFE).

Businesses are also having trouble keeping their workers, as the supply of jobs has exceeded demand, resulting in 4.5 million resignations in March alone. This has caused employers to raise wages in order to keep their staff. In lower value-added industries, such as fast food, this wage increase is passed on to the consumer via higher prices.

Despite rising prices, U.S. consumption has shown no signs of slowing, and in fact, shoppers appear to be taking on historically high amounts of debt to sustain their consumption.

According to The Wall Street Journal‘s survey of economists, most expect U.S. inflation to decline in the coming months as the FED raises interest rates.

Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica

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