Subscribe to Entrepreneur for $5
Subscribe

CPI +0.5%: Growing but a Welcome Cool-Off

+0.5% last month is solid: pricing continues northward, but not spiraling out of control.

By
This story originally appeared on Zacks

Wednesday, January 12, 2022

This morning, a fresh look at the Consumer Price Index (CPI) for December is released, with +0.5% on the headline coming in slightly ahead of expectations. It’s also down from the unrevised +0.8% in November. This metric, along with its companion Producer Price Index (PPI) out tomorrow, is an important diagnostic for inflation in the economy.

As such, +0.5% last month is solid: pricing continues northward, but not spiraling out of control. We had seen +0.9% in October of 2021, so coming down 40 basis points in two months represents a welcome cooling off. That October read was the highest we’d seen in 13 years: since the initial bounce-back from the Great Recession.

When we strip out volatile food and energy costs, known as the “core” read, we see this figure bump up to +0.6%. This suggests a bit more blanket inflation across markets; often we will see a +0.5% headline and get a core number lower, which suggests near-term volatility in food and fuel prices are driving the numbers here. Not so much in December’s case.

By the way, that +0.9% we saw for October was matched in both April and June of last year — back when the Great Reopening was gathering momentum, and before supply chain headwinds and the Delta variant of the Covid pandemic threw a wet blanket over proceedings. They amounted to 40-year highs, which has a way of spooking market participants with a sense of history: 40 years ago was the last time extreme inflation held back the domestic economy in a meaningful way.

Year over year, headline CPI is +7.0% — and that is the highest in 40 years. Year over year core comes in at +5.5%, which is the biggest number we’ve seen here since February 1991 — more than 30 years ago. So the market has been right to proceed cautiously, especially in terms of overvaluing growth stocks. It’s this reason more than any other that the tech-heavy Nasdaq is still roughly 7% off its all-time highs reached late last year.

Yet markets are taking this morning’s CPI headline in stride: the Dow, which had been +140 points prior to the CPI release, cuts back a bit to +115. The Nasdaq, on the other hand, gained points — from +65 ahead of the report to +110 at this hour. The S&P 500 has barely budged, remaining roughly +20 a half-hour ahead of the opening bell.

Questions or comments about this article and/or its author? Click here>>

- Zacks


Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.

See these 7 breakthrough stocks now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 

Invesco QQQ (QQQ): ETF Research Reports

 

SPDR S&P 500 ETF (SPY): ETF Research Reports

 

SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports

 

To read this article on Zacks.com click here.