What's going on?
Okay, we could do with changing the record right about now: data out on Thursday showed that US consumer prices rose the most since 1982 last month.
What does this mean?
Even for a financial newsletter, we’re using the word “inflation” a lot these days. So here’s an idea: instead of saying “inflation”, let’s use the word “cookies”. Supply shortages and demand for just about everything continued to push up prices last month, with used cars and energy – which cost about 41% and 27% more than they did in January 2020 – accounting for a big chunk of the gains. Rent, clothing, and food were up too: 4%, 5%, and 7% respectively. That drove cookies to a higher-than-expected 7.5% – a 40-year record. See? We’re having more fun already.
Why should I care?
The bigger picture: Too little, too late?
The Federal Reserve (the Fed) has already said it’s on track to raise interest rates next month, and data like this will give the central bank more confidence that it’s making the right decision. But some economists think it’ll up the ante and raise rates by 0.5% – rather than the more typical bump of 0.25% – for the first time since 2000. That’d be tantamount to an admission from the Fed that it’s been slow to act and needs to play catch-up.
Zooming out: PepsiCo gets cocky.
One of the reasons food costs are going up is because consumer staples are charging more for their products, and feel confident about doing so because customers need what they’re selling. And it’s clearly paying off, with PepsiCo – which posted quarterly earnings on Thursday – growing its revenue by a better-than-expected 12% last quarter versus the same time in 2020. And even though its outlook for this year wasn’t as strong as expected, investors – who might’ve wanted a piece of that so-called “pricing power” – still initially sent its stock up.