US President Joe Biden on January 18, 2024 in Raleigh, North Carolina (AFP/SAUL LOEB)
Will Joe Biden, as he hopes, be able to reap the benefits of the good health of the American economy? American consumer morale is in fact at its highest for more than two years, among both Democratic and Republican voters.
The Democratic president has so far failed to convince voters that the dynamism of the American economy is linked to his economic policy, nicknamed “Bidenomics”.
But the situation could turn around in its favor, as the fall in inflation, which now seems sustainable, pushed the confidence index up in January, for the second month in a row.
This barometer of household morale is now 78.8 points, or 13% more than in December, and much higher than expected, according to the preliminary estimate published Friday by the University of Michigan.
This shows “that President Biden’s economic plan is delivering results that more Americans feel,” welcomed the chairman of the White House Council of Economic Advisers (CEA), Jared Bernstein, in a press release.
“We still have work to do, but we are on the right track (…) and people are starting to feel it,” he stressed.
The improvement concerns all age groups, incomes, levels of education as well as all geographic regions. And “both Democrats and Republicans posted their most favorable results since the summer of 2021,” specifies the director of the survey, Joanne Hsu, quoted in the press release.
These figures are good news for the Democratic camp, while former Republican President Donald Trump, favorite to win his camp’s nomination for the presidential election in November, regularly highlights his economic record when he was at home -White.
– Gasoline prices –
This rebound in confidence “shows that Americans are feeling the effects of lower inflation,” commented Robert Frick, economist at Navy Federal Credit Union.
In a clothing store in New York, November 24, 2023 (AFP/Archives/Yuki IWAMURA)
He notably mentioned “the prices (of gasoline) at the pump, which have fallen since September”, as well as “the salary increases (which) have exceeded the rate of inflation”, and specified that “a market of “Solid employment also strongly influences America’s view of the economy in general.”
The unemployment rate, at 3.7% in December, is in fact still close to its level before the Covid-19 crisis.
However, a surge in unemployment was anticipated, due to the key rate increases carried out by the American central bank (Fed) to curb high inflation.
These increases have the effect of slowing down economic activity. But despite this, growth remained vigorous in 2023. The figures for the last quarter and the whole year will be known on Thursday.
The Fed is ready to lower rates in 2024, which will make credit more accessible to households and should further strengthen their morale.
“The Fed now appears to have accepted that it is not necessary for the unemployment rate to increase for inflation to reach the target,” said Ian Shepherdson, chief economist for Pantheon Macroeconomics.
– “Positive momentum” –
Consumer confidence improved for the second month in a row and, in total, in December and January, “climbed 29%, the largest two-month increase since 1991, as a recession ended.” also noted Joanne Hsu.
The index “is now almost 60% higher than its historic low measured in June 2022”, which “is likely to give a positive boost to the economy”, she further points out.
Inflation in the United States (AFP/Jonathan WALTER, Laurence SAUBADU, Samuel BARBOSA)
As for inflation expectations for the coming year, they are at the “lowest since December 2020”.
The PCE price development index, a measure of inflation favored by the American central bank (Fed), which wants to reduce it to 2%, will be published on January 26 for December. In November, it fell to its lowest since the start of 2021, to 2.6% over one year.
For its part, the CPI inflation index, to which pensions are indexed in the United States, started to rise again in December, to 3.4% over one year.
Since July, Fed rates have been in a range of 5.25 to 5.50%, their highest level in more than 20 years. The next meeting will take place on January 30 and 31.
© 2024 AFP
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