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By Myriam LEMETAYER Inflation, growth, real estate.
By Myriam LEMETAYER
Inflation, growth, real estate… The data published on Thursday in the United States show that the world’s largest economy is less roaring than what Donald Trump regularly boasts.
In just a few hours, several official statistics painted a gloomy picture a few months before the midterm elections, which the presidential majority is approaching with a certain nervousness.Gross domestic product (GDP) growth in the first quarter was significantly revised down: 1.6% on an annualized basis, compared to the previously estimated 2%.
This implies that the bar is high if the White House still counts on growth of 4% to 6% by the end of the year, as suggested by a recent forecast from Donald Trump’s economic advisor, Kevin Hassett.The United States emphasizes the annualized rate, which projects the change observed over three months over the entire year.
Consumer spending and first-quarter investments had previously been overestimated, explains the BEA statistical service.
It simultaneously published one of the two American inflation indices, the PCE, which confirms that prices rose in April at a rate not seen in almost three years (3.8% year-on-year).
This is largely due to the surge in gasoline prices linked to the war against Iran triggered by the United States and Israel on February 28, which has spread across the Middle East.
The Trump administration has been repeating for weeks that the impact on Americans’ wallets will be temporary.
“I am confident that we will overcome this delicate period,” Treasury Secretary Scott Bessent said Thursday at a press briefing at the White House.He said he believes in an upcoming “significant disinflation” and emphasized that unemployment is “still low” (at 4.3%).
“Under pressure”
The BEA report also shows that Americans’ disposable income is declining.
In plain language: their cash inflows are not increasing as fast as prices. The household savings rate has sharply dropped to 2.6%, compared with 3.2% in March.
“Ouch,” commented Heather Long, an economist at the American bank Navy Federal Credit Union, on X.
“This shows how much Americans’ finances are currently under pressure,” she added, stating that the situation is “unsustainable.”
No relief comes from the labor market side, where hiring and wage increases are slowing down, notes EY economist Gregory Daco in a briefing.
According to him, the economy is held up by “three narrow pillars”: wealthy consumers, investments in artificial intelligence, and the appreciation of financial assets.
“These pillars mask the fact that the foundations of the economy are increasingly unstable,” continues Gregory Daco. He notably cites the softness of growth “in large segments of consumption” and the real estate market.As such, according to another piece of data published on Thursday, new home sales dropped sharply in April, far from the recovery hoped for by the White House.
“Potential buyers are facing both rising real estate prices, increasing borrowing rates, and a decline in their purchasing power,” notes Yelena Maleyev, economist at KPMG.30-year loans, the most popular in the United States, now come with an average rate of 6.53%, reports the refinancing agency Freddie Mac on Thursday.
They had fallen below the symbolic 6% on February 26, just before the United States and Israel triggered the war against Iran.
The conflict is driving up prices and therefore prompting lenders to demand higher compensation so that inflation does not erode their gains.
Donald Trump was re-elected notably by promising to improve purchasing power and reduce borrowing costs.
