BNP Paribas analysts assess that in the United States (USD), demand remains the main driver of inflation, though its contribution has eased from post‑Covid peaks. Using (Bureau of Economic Analysis) and San Francisco Fed methodology, they find supply factors are again relevant, similar to 2018–19 levels, with tariffs, higher input prices and longer delivery times likely to keep supply‑side inflation pressures elevated.

Demand-led inflation shows signs of cooling

"In the United States, demand plays a more significant role in inflation, but less so than in 2022 In the absence of a survey similar to that conducted by the European Commission, we use a different method to compare the impact of supply and demand: we examine the direct contributions of supply and demand to inflation dynamics based on a breakdown between these two factors, as provided by the Bureau of Economic Analysis (using a methodology developed by A. Shapiro from the San Francisco Fed)."

"Although significantly lower than in 2022, the contribution of supply to inflation is not negligible and plays roughly the same role as in 2018–19."

"These constraints even appear to have increased slightly since the Trump administration’s tariff hikes and are likely to rise further with the recent rebound in input prices and delivery times."

"The contribution of demand to inflation continues to be more substantial, reflecting the resilience of consumption (and its post-Covid outperformance)."

"However, this momentum has been moderating in recent months, against a backdrop of a deteriorating labour market."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)