“Year-End Cheer: Inflation Data Proves to be a Holiday Blessing!
Heading into this year-end, the inflation data is giving many investors much-needed holiday cheer. Inflation, as measured by the consumer price index, rose 0.3% in November which was the highest percentage increase since August. This brings the year-to-date inflation rate to 2.1%, which is in line with the Federal Reserve’s target of 2%.
The increase in inflation is largely due to increases in the prices of goods as well as services. On the goods side, food prices rose 1.2% and gas prices rose 2%. Clothing prices fell 0.7%, however. On the services side, health care and transportation prices were the primary drivers, rising 0.7% and 1.5%, respectively. In addition, rent and education costs were flat.
The news that inflation stayed in the target range cheered investors as it may signal a stronger-than-expected economy. Since companies are able to raise their prices in response to inflation, it suggests that the demand for products is robust and that consumer demand is on the rise.
In addition to inflation, the unemployment rate also fell to the lowest rate in 29 years to just 3.5%, raising more holiday cheer to investors. For businesses, hiring more workers will help boost revenue, and this could further drive up the demand for goods.
It’s possible that inflation will rise further in the coming months, as the holiday season is typically marked by increased spending. With more consumers out there spending, prices on goods and services tend to go up, furthering inflation.
In any case, an economy that sustains a healthy rate of inflation and a low unemployment rate is something to be grateful for this holiday season. Investors and consumers alike can look forward to cheerier economic forecasts for the new year.
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