The stock market is up today because the US consumer prices rose in August. The higher costs for products were caused by increased demand, which signals a positive sign of a continued market rebound. The higher cost shows firmer inflation as demand for goods. We see a greater demand in economic terms, which should continue to push prices and the economy up.
Why Should Investors and Traders Care About The CPI?
In today’s consumer-driven economy, the consumer price index (CPI) is one indicator of the economy as a whole. The index measures what consumers pay for everyday items, including electricity, groceries, and clothing. The DOL said that indexed increased 0.4% in August. This is the third straight month of gains for consumer prices after sharp declines at the pandemic’s onset. The Wall Street Journal polled economists, and they were projecting a 0.3% increase, so the growth was actually higher than expected.
Actionable Take-Aways From A Higher CPI
The primary takeaway of a higher CPI is that the US economy is bouncing back. Several of the States have reopened their economies, and America is going back to work. The glut of supplies is diminishing, and prices as a whole are coming back. Consumers are returning to their former spending habits.
Some things, like used-car prices, continue to increase because of the limited supply. Used car prices were up 5.4% in August. As factories reopen, we expect this number to go down. The prices of shelter, gas, and clothes continue to increase.
The Fed stated that inflation has mostly remained below its 2% target for several years, recently changed its policy to no longer pre-emptively lift interest rates to prevent higher inflation.
Best Higher CPI Stock Picks
We recommend investors take a look at buying consumer staple stocks. Although they are not the “sexiest” for growth, they should provide some safety in these up and downtimes. Our two consumer stock picks would be Johnson & Johnson (NYSE: JNJ); Procter & Gamble (NYSE: PG).