Today's Report (11/10/2021)

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9% in October on a seasonally adjusted basis after rising 0.4% in September, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 6.2% before seasonal adjustment.

The monthly all items seasonally adjusted increase was broad-based, with increases in the indexes for energy, shelter, food, used cars and trucks, and new vehicles among the larger contributors. The energy index rose 4.8% over the month, as the gasoline index increased 6.1% and the other major energy component indexes also rose. The food index increased 0.9% as the index for food at home rose 1.0%.

The index for all items less food and energy rose 0.6% in October after increasing 0.2% in September. Most component indexes increased over the month. Along with shelter, used cars and trucks, and new vehicles, the indexes for medical care, for household furnishing and operations, and for recreation all increased in October. The indexes for airline fares and for alcoholic beverages were among the few to decline over the month.

The all items index rose 6.2% for the 12 months ending October, the largest 12-month increase since the period ending November 1990. The index for all items less food and energy rose 4.6% over the last 12 months, the largest 12-month increase since the period ending August 1991. The energy index rose 30.0% over the last 12 months, and the food index increased 5.3%.

Market Reaction

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

The S&P 500 saw a movement towards the downside following the release.

Gold whipsawed with it ticking towards the downside before seeing a strong movement towards the upside after the release.

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.