The Consumer Price Index tracks the cost of living by measuring the changes in the price paid by consumers for goods and services. CPI is important because it tracks changes in purchasing trends and it shows inflation on the consumer level in the last month.
With the economic volatility associated with rising price levels, the Fed often will raise interest rates to check inflation, given a high growth economic environment. On the other hand, low or falling CPI is indicative of declining prices, and may suggest an economic slowdown.
Below is a list of today's headline reading compared to analyst estimates:
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- Core CPI MoM 0.2% vs 0.2% Est; Prior 0.2%
- CPI YoY 2.3% vs 2.3% Est; Prior 2.7%
- Core CPI YoY 2.3% vs 2.3% Est; Prior 2.3%
ACTION ITEMS:
Bullish:
Traders who believe that CPI is a leading indicator for the US economy, you might want to consider the following trades:
Traders who believe that CPI is not a leading indicator for the US economy, you might want to consider the following trades:
Bullish:
Traders who believe that CPI is a leading indicator for the US economy, you might want to consider the following trades:
- Long currencies opposite of the US dollar, like the GBP or AUD. Since the Fed promised to keep rates low until 2014, this lower than expected reading in core CPI inflation should calm investors' fears of a rate increase as inflation remains in check.
- Also, long pharmaceutical companies like Pfizer PFE or Mylan MYL as demand generally is inelastic with drugs.
Traders who believe that CPI is not a leading indicator for the US economy, you might want to consider the following trades:
- Long Consumer Staple companies like Procter & Gamble PG and Colgate CL because even if inflation is higher, they still need to buy staple products like shampoo and toothpaste.
- Also, short big-ticket appliance makers like Whirlpool WHR as demand is more elastic.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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