Today's Report (10/13/2021)

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4% in September on a seasonally adjusted basis after rising 0.3% in August, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.4% before seasonal adjustment.

The indexes for food and shelter rose in September and together contributed more than half of the monthly all items seasonally adjusted increase. The index for food rose 0.9%, with the index for food at home increasing 1.2%. The energy index increased 1.3%, with the gasoline index rising 1.2%.

The index for all items less food and energy rose 0.2% in September, after increasing 0.1% in August. Along with the index for shelter, the indexes for new vehicles, household furnishings and operations, and motor vehicle insurance also rose in September. The indexes for airline fares, apparel, and used cars and trucks all declined over the month.

The all items index rose 5.4% for the 12 months ending September, compared to a 5.3% rise for the period ending August. The index for all items less food and energy rose 4.0% over the last 12 months, the same increase as the period ending August. The energy index rose 24.8 percent over the last 12 months, and the food index increased 4.6% over that period.

Market Reaction

Gold - Following the release there was some movement towards the downside on gold.

S&P500 - Following the release the S&P500 whipsawed.

DXY - Following the release there was some movement towards the upside for the DXY.

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.