In the U.S., inflation remains a priority

In effect, in the United States, inflation remains a menace, although oil just moved away from recent highs, and productivity is slowing, but is overall strong. In the second quarter of the year, non-farm business productivity rose 1.8% annualized, up from the 0.7% gain registered in the first quarter, but below the expected 2% rise. Unit labor costs, an indicator of inflationary trends, increased instead 2.1% from April to June, following a 3% move in the first quarter, previously reported at 1.8%. In the first six months of the year, they were up 4.5% from a year ago, the strongest move since the third quarter of 2000. Compensations are nonetheless improving. Non-farm sector hourly compensation increased 3.9% in the second quarter, compared to the jumped of 3.7% shown in the first quarter, but it declined 2% when adjusted for inflation. With inflation pushing higher, the Federal Reserve decision to leave rates unchanged at 5.25% was not a surprise. In the conclusive speech, the committee anticipated a milder growth and still sees inflation as the predominant concern. Risk to the economic activity in the U.S. is increasing due to housing, financial instability and credit tightening. In a few words, the Fed has left the door open for another intervention by the end of 2007, if economic conditions will be favourable.