Tuesday's Market Minute: Why There is No Place To Hide From Inflation

It is no secret prices are on the rise. Crude oil closed Monday trading above $80/barrel for the first time in nearly seven years, which has led to a spike in gas prices at the pump and raised jet fuel costs. Perhaps even more alarming is the surge in natural gas, which many people use to heat and power their homes. Currently, benchmark Henry Hub natural gas prices are more than twice as high as they were last year. The cost of beef, pork, eggs, and chicken surged over the last year, with beef prices alone jumping more than 12 percent.

Other areas of the U.S. economy seeing significantly raised price tags include used cars and trucks, car and truck rentals, dishes and flatware, and women’s apparel. The Labor Department has reported that the consumer price index rose over 5% for the 12-month period ending in August. Although this has fallen from June and July levels, it is still nearing the highest level in 13 years. Despite prices showing signs of normalizing, the question remains: when will inflation finally return to historical levels?

The Federal Reserve said they expect increased inflation for at least three more years in their most recent projections. Fed Chairman Jerome Powell recently warned of the risks associated with inflation continuing, even noting how it’s posing a more significant threat than the Fed had previously anticipated. This, coupled with persistent supply chain headaches, leaves no mystery for why an even wider variety of products are now being hit by inflationary headwinds. For the average citizen, inflation is a panic-inducing term, oftentimes associated with times of economic pitfalls. But the bottom line is – today, there are increasingly less places to hide from inflation.

After a year of turmoil in nearly every sector of the economy, inflation can lead to a pullback in spending (especially without wage increases), which could dampen demand, leading to businesses constraints. Further clarity on recent inflation levels will be provided when CPI releases tomorrow at 8:30am ET. For the month of September, the Labor Department is expecting a 0.3% monthly increase that would put it in-line with August, with annual rates pacing to be unchanged, at 5.3% and 4%. Lots to stay dialed in on as we head into the middle of October, stay nimble.

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