UK inflation shot up by 2.1% in May, more than economists were expecting and above the Bank of England’s target of 2%, as the reopening of the economy pushed up the cost of fuel, clothing, and meals out.
The 2.1% year-on-year increase was the biggest since July 2019, the Office for National Statistics said Wednesday, and compared with an increase of 1.5% in April.
Core inflation – which strips out volatile categories like food and energy – climbed 2% year-on-year, the most since August 2018.
The pound rose after the data was released, and traded 0.23% higher against the dollar at $1.411. Britain’s FTSE 100 stock index was up 0.27% in early trading.
The ONS said the rise in inflation in May was led by fuel prices. Part of the increase was due to so-called base effects, given that energy prices fell sharply in May 2020, the comparative month.
But clothing prices also added upward pressure as stores reopened and cut back on discounting. Meals and drinks consumed at pubs and restaurants also became more expensive after they were allowed to resume business in April.
The UK economy is gradually opening up again after the strict coronavirus lockdowns put in place in the winter.
May’s inflation data was collected before the English government loosened restrictions further in the middle of the month, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. That means “we likely will see a further, broader-based recovery in services inflation in June’s data.”
He added: “Looking ahead, we expect [consumer price index] inflation to peak at about 2.8% towards the end of this year.”
Such a rise would be well above the Bank of England’s 2% target, potentially putting pressure on the central bank to pull back on its support for the economy.
Hannah Audino, economist at PwC, said: “We expect the Bank of England to see through the recent rise in inflation and continue to prioritize supporting the recovery with low interest rates, over reducing inflation.”
“It is important to interpret the latest data in the context of the low prices we saw 12 months ago during the pandemic,” Audino said. “This means that so-called ‘base effects’ are driving up the rate of inflation, and will likely do so for a few more months.”
Willem Sels, chief investment officer at HSBC’s private bank, said: “Although UK CPI may now further overshoot the Bank of England’s 2% target, we still think it will come down again to around 2% in 2022.”
Signs that inflationary pressures are building came in the latest readings on UK producer price inflation, also released Wednesday. Prices of manufactured goods increased by 4.6% in May year-on-year, compared with 4% in April, the ONS said. Meanwhile, costs for UK producers jumped 10.7%, the highest rate of growth for input prices since September 2011.
The Labor Department released its monthly Consumer Price Index (CPI) data on Thursday, revealing a 5% jump in headline consumer prices year-over-year in May, the fastest pace of increase since August 2008.
That came in above the consensus economist estimate of 4.7%.
Core CPI, which excludes volatile food and energy prices, rose a more modest 3.8% year-over-year in May but still increased 0.7% month-over-month.
Both figures fanned the flames of an already raging debate among economists and market watchers about the nature of current inflationary trends.
Some, including the Federal Reserve, argue that rising costs are only “transitory” – a result of supply and demand imbalances brought about by the pandemic and rapid reopening.
Others, including Cambridge’s Mohamed El-Erian, claim that inflation could be here to stay and question the Fed’s insistence on maintaining ultra-accommodative policies as the pandemic winds to an end.
From Coca-Cola to Campbell Soup, the majority of these price increases have come from consumer staples companies that are most affected by commodity costs.
Whether or not current price increases will remain over the long-term is clearly up for debate, but for the everyday consumer, the reality is life is now more expensive than it was last year.
Detailed below are 10 companies that have already said they are passing rising costs onto consumers due to inflation.
Campbell Soup Company
On June 9, in Campbell Soup’s third quarter, 2021 conference call, the word “inflation” was mentioned 35 times by execs and analysts.
The company revealed it was “impacted by a rising inflationary environment,” and CEO Mark Clouse said he expects “sustained inflationary pressures through the remainder of the year.”
Campbell’s said it will be raising food prices this summer to offset the rising costs. Although CEO Mark Clouse noted, “we are going to be very thoughtful about it. The last thing we want to do is shut down the growth that we’ve worked fairly hard to have.”
The JM Smucker Company
In JM Smucker’s fourth-quarter, 2021 conference call on June 3, there were 10 mentions of inflation, and CEO Mark Smucker said the company would be raising prices to offset rising costs.
“Broad-based inflation is impacting many of the commodities, packaging materials, and transportation channels that are important to our business. We are mitigating the impacts through a combination of higher pricing inclusive of list price increases, reduced trade and net revenue optimization strategies, as well as continued cost management,” Smucker said.
Stanley Black & Decker
In Stanley Black & Decker’s first quarter 2021 earnings presentation on April 28, in a slide entitled “Commodity Inflation Update,” the company said steel, resin, base metals, electrical components, and batteries have pushed incremental inflation costs up for 2021 by $160 million vs. January guidance.
The slide showed Black & Decker’s plans to increase prices to offset costs.
In an interview with Yahoo Finance in April, Whirlpool’s CFO Jim Peters said the company was seeing price increases and would pass the costs onto consumers.
“We took price increases in every region of the world, that range from 5% to 12%,” Peters said. “Those are driven by commodity cost increases, and it’s something we have done historically.”
The company said in its first-quarter conference call that the price increase actions “will offset the impact of global supply constraints and rising input costs.”
Kimberly-Clark said it would be raising prices on products like Scott toilet paper and Huggies diapers by “mid-to-high single digits” in late March.
Then, in the company’s April 23 first-quarter earnings call, execs said they saw “sharp rises in input costs.”
Michael Hsu, Kimberly-Clark’s chairman and chief executive officer, said the company was “moving rapidly, especially with selling price increases to offset commodity headwinds.”
Honeywell’s CEO Darius Adamczyk announced that “inflation is taking hold” and affecting his business’ bottom line in the company’s first-quarter 2021 conference call on April 23.
The CEO said, “there’s no doubt about it. We knew it. We see it.” Honeywell announced it would be “quickly taking action” on pricing to stay ahead of the problem.
The Clorox Company
Clorox’s VP of Investor relations Lisah Burhan told investors in the company’s third-quarter 2021 results on April 30 that the company has seen “significant resin price inflation.”
In order to “manage those rising costs,” Clorox announced “pricing action” effective in July. “As we’ve mentioned, we’ll manage inflationary pressures holistically using all the tools in our toolbox,” Burhan said.
Procter & Gamble
Procter & Gamble COO Jon Moeller told analysts in an April 20 earnings call that “this is one of the bigger increases in commodity costs that we’ve seen over the period of time that I’ve been involved with this, which is a fairly long period of time.”
The company said it will begin “the process of implementing price increases on its Baby Care, Feminine Care, and Adult Incontinence product categories in the United States to offset a portion of the impact of rising commodity costs,” noting that the “exact amount of the price increase will vary by brand and sub-brand in the range of mid-to-high single-digit percentages and will go into effect in mid-September.”
In mid-April, Coca-Cola’s CEO James Quincey told CNBC’s Sara Eisen on “Squawk on the Street” that the company would be increasing prices to offset rising costs.
“We are well-hedged in ’21, but there’s pressure built up for ’22, and so there will have to be some price increases,” Quincey said.
“We intend to manage those intelligently, thinking through the way we use package sizes and really optimize the price points for consumers,” he added.
Reynolds Consumer Products
Reynolds Consumer Products revealed that a three-step price increase is already underway on some of its most popular products last month.
“Price increases have been implemented, and a second-round is underway, with plans for a third-round to be implemented in the third quarter,” Michael Graham, Reynolds chief financial officer, said during the company’s first-quarter earnings call on May 8.
In Europe, the Stoxx 600 was down 0.08% as the European Central Bank prepared to set monetary policy.
In Asia overnight, China’s CSI 300 rose 0.67% while Japan’s Nikkei 225 climbed 0.34%.
Markets have been subdued for much of the last two weeks, with investors happy to see stocks tick slowly higher as economies reopen. The S&P 500 and the Stoxx 600 have been trading around record highs.
Yet the US consumer price index inflation data, due to be released at 8.30 a.m. ET on Thursday, has the potential to shake markets.
Economists expect CPI to have jumped 4.7% year on year in May from 4.2% in April, which was the highest reading since 2008.
Some investors worry that rising prices could force the Federal Reserve to reduce its support for the economy. Inflation also erodes the real returns on financial assets. Tech stocks, which have soared in an environment of low inflation and low interest rates, are particularly vulnerable.
Markets should be able to digest a consensus rise in inflation, but will start to worry if the Fed begins to shift its position, Alan Ruskin, chief international strategist at Deutsche Bank, said.
“Next week, the [Fed] is going to have a tougher time maintaining exactly the same ultra-dovish posture as the last few meetings, given the inflation overshoot from prior expectations,” he said.
However, Paul Donovan, chief economist at UBS Wealth Management, said he agreed with the Fed’s view that inflation should be transitory.
“The effect of very low prices this time last year and the uncoordinated reopening of the global economy are contributing to reported price increases in specific product markets, but should not last,” he said.
Elsewhere, bitcoin rallied on Thursday as investors moved in to buy the recent dip, after El Salvador’s move to make the crypto asset legal tender restored some positivity to the market.
The cryptocurrency was up 1.4% to $36,900, having fallen to around $31,000 on Tuesday. It remained roughly 43% below April’s record high, but around 25% higher for the year.
Bond yields edged higher on Thursday, with the yield on the key 10-year US Treasury note rising 0.5 basis points to 1.494%. Yields move inversely to prices.
The bond market has, in recent weeks, appeared unfazed by rising inflation. The 10-year yield dropped below 1.5% for the first time in a month on Wednesday. The dollar index climbed 0.15% to 90.26 ahead of the inflation data.
The data highlights that relaxed lockdown measures, stronger demand, and widespread supply shortages converged to boost price growth. More recent headlines, particularly news of a cyberattack crippling a key oil pipeline, suggest inflation will accelerate further in May.
But for many economists, the unexpectedly large April jump isn’t a reason to worry, and those with the greatest influence over inflation seem unperturbed.
The Federal Reserve has said for months that, while reopening will likely accelerate price growth, the pickup will likely be temporary. In February, Fed Chair Jerome Powell noted the decades-long trend of weaker-than-hoped price growth isn’t likely to be permanently overridden by months of reopening.
“Inflation dynamics do change over time, but they don’t change on a dime,” he said, adding stimulus passed during the pandemic is also unlikely to change the predominant trend.
Fed Vice Chair Richard Clarida echoed his colleague’s remarks after Wednesday’s report. The inflation data was a “surprise,” but inflation should still cool and trend near the Fed’s long-term goal of 2% by next year, he said in remarks to the National Association for Business Economics International Symposium.
“We have pent-up demand in the economy. It may take some time for supply to rise up to demand,” Clarida added.
Addressing backlogs and lifting supply should help inflation cool over the summer, JPMorgan economists said in a recent note. Robust economic growth and continued policy support will drive more Americans into the workforce and bottlenecks, by their nature, will fade as businesses rush to service outsize demand, the team led by Bruce Kasman said.
In a separate note published Wednesday, the bank sais “temporary pressures” were lifting inflation, citing “commodity prices, bottlenecks, and price level normalization.” Once the economy returns to its full potential and shortages are alleviated, price growth should slow, the team added.
Even the nature of the inflation bounce suggests the price growth won’t last. One-third of the 0.8% boost was linked to a record-high increase in used vehicle prices as demand ran up against an inventory shortage. The rest of the increase was largely powered by other reopening-related expenses including airline tickets, recreation, and lodging.
It’s logical to expect demand for travel and leisure to normalize after booming through the reopening. Powell illustrated the limitation in March, noting one “can only go out to dinner once per night.” If long-shuttered businesses continue to drive faster price growth, it’s likely inflation will weaken once the country enters a new normal.
And the April report, while surprising, only shows one month of hot inflation. It would likely take a few more stronger-than-expected readings to worry Fed officials, Edward Moya, senior analyst at Oanda, said Wednesday.
“If the inflation numbers continue to surge at the end of the summer, that might be what could force Powell to pivot that pricing pressures might not be transitory.”
US stocks tumbled into the close with the Dow dropping nearly 700 points as investors feared overheating inflation will stifle the nation’s economic recovery. Key inflation data came in significantly higher than expected Wednesday morning. The consumer price index increased 4.2% year over year in April and 0.8% from the prior month. Economists were expecting a 3.6% year over year gain and 0.2% gain from March figures.
Core inflation – which leaves out volatile energy and food prices – rose 0.9%. That’s the largest monthly increase for the core index since 1982.
The higher-than-expected figure stoked further concerns that the Federal Reserve is misreading the inflation story. The US central bank has signaled that inflationary pressures will only be transitory.
“The fact is that when we factor in all the monetary and fiscal stimulus that’s been delivered (or shortly will be), the Covid crisis seems likely to be a net inflationary event, at least in the near term,” said BlackRock’s Rick Rieder.
The chief investment officer of global fixed income and head of the BlackRock global allocation investment team added: “The risk of overheating in multiple places across the financial and real asset arenas is becoming more and more of a realistic challenge for future policy, as some have suggested, and without an evolution of what heretofore has been policy reacting to emergency economic conditions, the risk from this will only grow.”
Here’s where US indexes stood at the 4:00 p.m. ET close on Wednesday:
While there is likely more downside ahead for the stock market as it looks to find support near key technical levels, a bullish backdrop remains for equities, according to Bank of America. The 3% sell-off in the S&P 500 over the past week represents a rotational move into cyclical stocks and out of growth stocks rather than a top formation, the bank said in a Tuesday note.
Fundstrat’s Tom Lee is also bullish. In a Wednesday note he said the recent movements of two market fear signals are setting the stock market up for massive gains ahead.
Cathie Wood sat down for Ark Invest’s monthly mARKet update webinar on Tuesday and said she isn’t concerned about inflation or rising interest rates.
The Ark Invest CEO said she does see inflation, as measured by the Consumer Price Index (CPI), rising to the “3% to 4% range” over the next few months, but argued it won’t last.
Wood also said the Producer Price Index (PPI) will “move to the 6% to 8% range or even higher than that” in the webinar.
Still, despite rising near-term inflation, Wood believes that “innovation-based deflation” will help keep rising costs at bay in the long term.
“The technologies and the innovation around which we have centered all of our research and investing is rife with examples of the deflationary undertones that the global economy is facing… innovation-based deflation is very good deflation. It’s associated with very strong growth,” Wood said.
The Ark Invest chief went on to give multiple examples of how advances in technology act as deflationary forces for the markets.
Wood’s first example was about DNA sequencing and the falling costs associated with innovation in that space.
“For every cumulative doubling of the number of whole human genomes sequenced…costs associated with short-range sequencing go down about 40%. The costs associated with long-range sequencing go down about 20%,” Wood said.
Wood also gave examples of falling costs due to innovation in battery production and robotics, but noted markets aren’t yet feeling the deflationary effects of this innovation because of the relatively low activity of companies in these spaces as of 2021.
“That activity is going to scale exponentially, so these deflationary forces will begin to move the needle in the next three to five years,” Wood said.
Wood went on to explain that current inflationary pressures are a result of monetary and fiscal stimulus combined with supply imbalances brought about by the pandemic.
She said these forces will only affect inflation figures temporarily and that she isn’t worried about a sustained inflationary environment unless there are problems with the US dollar.
Finally, Wood discussed how she believes the bull market has room to run.
The Ark Invest chief said that the “wall of worry” in the markets today is a good sign for market bulls and that rising savings are an example of the “firepower” the consumer has to add to the economy amid the reopening.
An ongoing computer-chip shortage has affected cars, iPads, and dog-washing technology alike. Chipmakers like Intel had already seen production issues pre-pandemic, but as with many industries, COVID-19 brought a variety of new supply-chain issues. The chip shortage is a problem for consumers wanting basically anything with a computerized component, which is much of the economy. Take cars as an example.
The semiconductor shortage has hit automakers the hardest. In January, the consulting firm Alix Partners estimated the automotive industry would lose $61 billion in revenue from the shortage this year. As Insider’s Katie Canales reported, demand for chips has gone up as consumers scrambled to buy cars and other technologies that use them.
But as more cars went into production, chip competition went up. Since then, many carmakers have been forced to shut down plants and prioritize which models they produce, while car prices at dealerships have continued to go up.
Buyers are still looking for vehicles, creating a competitive used-car market. As USA Today reported, used-car prices are on the rise as the aforementioned chip shortages affect new-car production, and buyers have turned to older ones instead, while Axios reported the average price of a used car has hit $17,609.
A UBS note estimated that in April, used cars saw their largest monthly price increase in 68 years of tracking, with prices rising between 8.2% and 9.3%.
If you’re looking to rent, you might also be out of luck: Insider’s Brittany Chang reported on the “perfect storm” hitting rental cars right now, with prices surging and demand increasing. Americans are itching to go on vacation this summer, as more people are vaccinated and some restrictions loosen. That’s leading to far more demand — but rental-car companies had sold off parts of their fleets early into the pandemic, leaving fewer cars to go around.
It’s not all bad news for used-car lovers, though: As USA Today reports, the trade-in market is hot, too, meaning your old car could be worth more right now.
Gas prices have skyrocketed in recent months, jumping 22.5% in March from the previous year, according to the US Bureau of Labor Statistics’ Consumer Price Index. Much of the surge in gas prices started with the extreme Texas freeze, which halted a fifth of the country’s oil-refining capacity in its tracks for weeks at a time.
Plastics and palm oil
The devastating winter storms in Texas also left their mark on the plastics industry. As Insider’s Natasha Dailey reported, the state is a key plastics exporter — and the storms made many plants, which are difficult to reactivate, press pause.
According to the Financial Times, rising plastic prices have led to an increase in packaging costs. Citing data from Mintec, the Financial Times reported that those costs have increased by nearly 40% from the start of 2020, marking “historic highs.”
Palm oil, which is in a majority of those packaged products, also saw its prices climb, according to the Financial Times. That’s due to yet another labor shortage; the industry had already been contending with finding more sustainable production methods.
In September, Insider’s Rachel Premack reported that pay for truck drivers was on the rise, coming in at “record-smashing levels.” But the pay hike — and increased demand — comes after an exodus of drivers in 2019; Premack reported at the time on what some called a “trucking bloodbath,” as trucking companies saw profits fall, with some even going bankrupt.
Now demand is surging, according to The Journal, and if everything continues as is, that gap could deepen.
Homes and vacation houses
The US was facing a shortage of 3.8 million homes as of April, according to Freddie Mac. Home builders have been struggling to keep up with demand as remote work fuels interest in spacious housing, with house prices rising at their fastest pace in 15 years, The Wall Street Journal reported. Lumber prices are also driving the cost of new homes even higher.
Even vacation-home rentals are at an all-time high. A house in the Hamptons rented for $2 million this summer, and 85% of vacation rentals in popular destinations like Cape Cod, the Outer Banks, and the Jersey Shore are booked through August, according to the rental site VRBO.
If you’re wondering why the houses around you are getting more expensive, look to their component parts. No, seriously: Lumber prices have soared, and, as Insider’s Ayelet Sheffey and Libertina Brandt reported, builders are even increasing house prices in an attempt to offset demand.
It’s due to another pandemic disruption, as lumber mills were forced to temporarily close for safety concerns. When they reopened, they couldn’t keep up with a scorching-hot housing market, goosed by a work-from-home economy, record low mortgage rates, and the need for personal space during the pandemic.
According to an April analysis from the National Association of Home Builders, soaring lumber prices added $36,000 to the cost of a new home. Lumber prices “remain stubbornly high,” according to the report, due to mills shutting down, unexpected demand from big-box retail and DIY-ers, and tariffs imposed on Canadian lumber.
Household products like toilet paper and tampons
Many household goods including toilet paper, diapers, and tampons are also facing supply problems.
One of the biggest producers of the pulp used to create toilet paper told Bloomberg that port delays and high shipping costs are causing companies to push delivery dates back months.
The work-from-home lifestyle helped the furniture industry boom but to such an extent that customers are seeing delivery dates that are months out.
In February, La-Z-Boy executives said customers could expect delivery dates that are five to nine months out from their order dates. Other furniture companies like Kasala, a Seattle-based chain, said they don’t expect to get furniture parts until at least December.
The furniture shortage has been exacerbated by a spike in homeownership, as the number of available and unsold homes sits at record lows. In other words, a lot of new homeowners are waiting a long time for their new living-room sets.
Bacon and hot dogs will likely be in short supply this summer.
The pig shortage dates back to the onset of COVID-19 and outbreaks in at least 167 meat-processing plants forcing almost 40 plants to close as of June 2020. As vaccination rates pick up and people prepare for summer vacations and cookouts, analysts told Insider’s Natasha Dailey demand will outstrip supply.
With pork companies still struggling to overcome lower production rates in 2020, the matter only intensified when high instances of disease hit the hog population this past winter.
Some companies are already seeing the impact on their shelves. In March, Costco said its supplies of cheese, seafood, and olive oil were running low.
General Mills said it has been forced to raise prices due to the delays increased shipping costs. Coca-Cola also raised prices to combat the supply-chain crunch. Neither company specified which products would be affected.
Coffee has also been hit by delays, Bloomberg reported in March. Peet’s and JM Smucker, the brands behind Folgers and Dunkin’ coffee, have said they’re facing rising costs. Reuters reported that in February, port delays pushed coffee prices to their highest point in more than a year.
This summer pool owners will see the worst chlorine shortage in US history, according to CNBC.
Supplies of the chemical have been strained since a fire at the chlorine manufacturer BioLab in Louisiana in September. The price for chlorine used in pools has nearly doubled this past year and is expected to rise even more to meet demand this summer.
Corn is a key crop for many products, including fuel and different foods. As supply concerns loom, corn prices are popping off, according to Axios.
There’s a few reasons that demand is so high: After an outbreak of swine fever in China, pig herds were “decimated,” according to Axios, leading to huge corn demand in China. That spike in demand is coupled with corn crops in Brazil and Argentina experiencing both bad weather and pandemic-related labor shortages.
Now corn prices are on a record-setting clip, rising by 16% in April alone.
And, as Fortune reported, there could be a domestic supply issue too. Droughts and a rough winter are both concerning — and if American crops can’t fill in the gaps, prices could rise even more.
Finally, a commodity unlike all the others is in surprisingly short supply: workers.
Major labor shortages are hitting businesses across America. As Insider’s Kate Taylor reported, chains like Dunkin’ and Starbucks are struggling to find workers — leading to reduced hours and hesitance on opening indoor dining back up.
There’s a few possible reasons that unemployed workers are opting not to return, according to Insider’s Ayelet Sheffey. They include workers making more on unemployment benefits than in their prior work as well as continued concerns over COVID-19 and the need to provide childcare at home.
The latest commodity seeing a price squeeze amidst shortages and high demand is used cars.
A note from UBS researchers led by Alan Detmeister found that not only did used-car prices climb in April, but the monthly price increase could be the largest in 68 years of tracking. It looks like prices may have risen by 8.2% to 9.3%.
Used cars have been in high demand due to a few of the factors driving the shortages all over the American economy. The economy is reopening, people are ready to spend money (perhaps from new stimulus checks), and they want cars – especially as more suburban areas boom with wealthy transplants. But new cars are being hit by a computer chip shortage that’s hitting the automotive industry hard.
As Insider’s Grace Kay reported, semiconductor shortages could cost automakers billions, and has already led to lower production rates for new cars. Even Elon Musk has said that Tesla’s suffered from supply chain and semiconductor woes. Cue a used-car boom, with the market heating up and trade-ins fetching higher prices.
According to UBS, prices on used cars may only climb in the coming months, due to a lag in wholesale to retail pricing. New car prices are also likely to pick up, increasing by 1%.
Why there are so many shortages, and which ones may pick up next
It may seem that everywhere you look, a new product is in a shortage. Chicken, diapers, corn, gas, furniture: The list of shortages goes on, and will likely only grow amid economic reopening. That’s due to some of the same factors impacting used and new cars. Supply-chain issues have persisted throughout the pandemic, and factories shuttered for safety reasons need to crank back to life as demand steepens.
The climate crisis also has a role, with several domestic products in the US – such as plastic and gas – impacted by factors including the devastating winter storms in Texas. Droughts are impacting the worldwide corn supply amidst high demand; Insider’s Will Daniel reports that corn prices have jumped 142% in the past year.
UBS projects 12-month headline Consumer Price Index (CPI) inflation rising to 4.3% from 2.6%, “an enormous surge over just the past few months.” Economists’ median estimate for April CPI is 3.6%, per Bloomberg.
UBS projects hotels and airfares will be next to see substantial price increases. Axios reported – in an article aptly titled “Our crazy, booked-up summer” – that summer travel in the US is about to boom, with a particular emphasis on domestic travel.
A recent report from the US Travel Association found 72% of Americans are planning a summer vacation in 2021; that’s compared to 37% last year. That probably won’t help the already intense rental car shortage.
US shares trade mixed on Tuesday as consumer prices surged in March and officials called for a halt in the administration of Johnson & Johnson vaccines.
Consumer prices rose 0.6% in March from February, the Labor Department reported Tuesday, fueled by an economy rebounding from the pandemic recession.
It shot up 2.6% from the same period a year ago – roughly in line with the 2.5% expectation from economists polled by Reuters – when large swathes of the country were in lockdown to curb the spread of the virus
The year-over-year climb is the highest since August 2018. It is also higher than the 1.7% recorded in February.
Among the biggest contributors were gasoline prices, which surged 9.1% in March, and food.
Consumer inflation data aim to capture the cost of buying goods and services, which the Federal Reserve and financial markets watch closely.
“Due to the popularity of GameStop on Reddit chat boards and with Robinhood retail investors, GameStop shares appears to no longer trade on traditional fundamental valuations or metrics, but on retail investors’ sentiment, hope, momentum, and the powers of crowds,” he wrote.
Bitcoin breaks its record for the second straight day, soaring to an all-time high above $63,000 amid excitement ahead of Coinbase’s direct listing on the Nasdaq. The world’s most famous cryptocurrency rose as much as 5.3% to hit $63,179 on Tuesday, well above the last all-time high of just over $61,700 seen in March.
Oil prices edged higher after strong Chinese import data, Reuters reported, shrugging off tensions in the Middle East, which thus far have not affected oil supply. West Texas Intermediate crude climbed 0.92%, to $60.251 per barrel. Brent crude, oil’s international benchmark, rose 1.01% to $63.92 a barrel.
Gold slipped 0.24%, to $1,739.81 per ounce, as the treasury yields weighed on the precious metal’s appeal.
Asian stocks moved broadly higher overnight after data showed Chinese imports and exports rebounded in March. Japan’s Nikkei 225 rose 0.72%, but China’s CSI 300 index slipped 0.16% as a spike in yields on the debt of a major asset manager unnerved investors.
In Europe, the continent-wide Stoxx 600 index rose 0.25%. The UK’s FTSE 100 slipped 0.04% despite data showing the country’s GDP rose 0.4% in February.
Meanwhile, bitcoin soared to an all time high of above $62,000 ahead of crypto exchange Coinbase’s IPO, with renewed institutional interest powering the latest leg higher.
The main event on investors’ radar on Tuesday will be US consumer price index inflation data, due at 8.30 a.m. ET.
Predictions of higher growth and inflation have already caused a spike in bond yields, which have in turn weighed on the fast-growing parts of the stock market like technology shares, which look relatively less attractive when yields rise.
Analysts expect Tuesday’s data to show US CPI inflation rose to 2.5% in March from 1.7% in February.
Inflation “has emerged as a key focal point for markets given the debates surrounding inflation and its implications for monetary policy moving forward,” strategist Jim Reid at Deutsche Bank said.
“Indeed, part of the reason that markets have brought forward their expectations for Fed rate hikes is based around rising inflation expectations that they think the Fed might have to rein in.”
Karen Ward, JPMorgan Asset Management’s chief European strategist, has said she thinks inflation could average 3% over the next 10 years, thanks in part to huge amounts of pent-up savings.
However, Goldman Sachs chief economist Jan Hatzius predicted in a note that underlying US inflation would remain “well below the Fed’s 2% target, consistent with an economy that remains well below full employment.”
Bond yields climbed on Tuesday morning, with the yield on the key 10-year US Treasury note rising 1.5 basis points to 1.691%. Yields move inversely to prices.
Investors will also be keeping an eye on 30-year US Treasury auctions, after 3- and 10-year sales attracted solid demand.
Oil prices edged higher, with Brent crude up 0.4% to $63.54 a barrel and WTI crude 0.3% higher to $59.87 a barrel.