Today's Report (12/10/2021)

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8% in November on a seasonally adjusted basis after rising 0.9% in October, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 6.8% before seasonal adjustment.

The monthly all items seasonally adjusted increase was the result of broad increases in most component indexes, similar to last month. The indexes for gasoline, shelter, food, used cars and trucks, and new vehicles were among the larger contributors. The energy index rose 3.5% in November as the gasoline index increased 6.1% and the other major energy component indexes also rose. The food index increased 0.7% as the index for food at home rose 0.8%.

The index for all items less food and energy rose 0.5% in November following a 0.6% increase in October. Along with shelter, used cars and trucks, and new vehicles, the indexes for household furnishings and operations, apparel, and airline fares were among those that increased. The indexes for motor vehicle insurance, recreation, and communication all declined in November.

The all items index rose 6.8% for the 12 months ending October, the largest 12-month increase since the period ending June 1982. The index for all items less food and energy rose 4.9% over the last 12 months, while the energy index rose 33.3% over the last year, and the food index increased 6.1%. These changes are the largest 12-month increases in at least 13 years in the respective series

Market Reaction

Following the CPI release, the DXY saw a movement towards the downside.

The S&P500 saw a movement towards the upside following the release.

Gold whipsawed with it moving towards the downside before quickly moving towards the upside.

What Is It?

It measures the changes in the price of goods and services; it is viewed as the best measure of the underlying inflation rate by most economists.

How Is It Computed?

US CPI is made up of 8 elements:

Housing - 41%, Food & beverages - 15%, Transportation - 17%, Medical Care - 7%, Apparel - 4%, Recreation - 6%, Education and communication - 7%, Other Goods and services - 3%

US Core CPI - This excludes the unstable components, food, and energy.

What Are The Fundamental Effects?

The Central Bank pays close attention to the figure as its role of maintaining price stability. If goods and services increase over time but the income of consumers does not, consumers will have weaker buying power since the value of their money decreases in comparison.

How Does It Affect The Markets?

CURRENCY - Because the United States imports so much from around the world, prices for many goods rise when the US experiences inflation.

STOCKS - Inflation may actually help equity investors by supporting rising stock prices. However higher prices for goods may lead consumers to forgo some purchases as prices rise, and budgets are constrained. This can harm profits and drive prices lower.

BONDS - As inflation grows, bond investors suffer when their borrowers pay them back in a currency that becomes worthless over time.