US inflation for August saw a slight decline, but the rest remained at a high level, at +5.3% compared to August 2020 and 0.3% compared to the previous month. The latter figure is attractive in that it marks a sharp drop in price growth against peaks of a monthly increase of 0.8%-0.9%, which marked spring. However, at more than 4% for five consecutive months, US inflation is worrying.
Once again, the figures show a substantial increase in energy prices (+25% overall and even 41.9% for petrol) and used vehicles (+31.9%). However, as the normalisation of economic activity continues and households have to make more trips, the supply of new cars remains limited by semiconductor supply problems. Temporary factors, therefore, since the price of oil has stabilised and the capacity of semiconductor producers will eventually adapt to demand.
But the fact is that households are suffering, mainly the less fortunate. Over one year, real wages for August fell by 0.5%. The median income of US households fell by 2.9% in 2020. A significant part of the American population is suffering, inequalities are rising sharply, and the gradual end of state aid associated with the pandemic will not likely stimulate household spending.
Let us add to this a Presidency that has left much of its credibility on Kabul airport and sees representatives of its own party vote against the tax increases proposed by Joe Biden. So it is easy to understand that the revolution envisaged the White House would not have probably occurred.
These are all factors that will inevitably weigh on the dynamism of the US economy and that investors cannot afford to ignore, especially when the Fed is preparing for the gradual reduction of its debt buybacks.
We continue to recommend US bond, a refuge of choice in times of turbulence, which retains a place of choice in the neutral portfolio: 15%.
