The U.S. Bureau of Labor Statistics released the latest report on the Consumer Price Index for February 2023. CPI increased by 0.4 percent in February, following a 0.5 percent increase in January, on a seasonally adjusted basis. The all-items index increased by 6.0 percent over the last 12 months before seasonal adjustment.
Inflation: What is it?
Inflation is a general increase in prices and a fall in money’s purchasing value. It is often measured by the CPI, which tracks the price change of a basket of goods and services commonly purchased by consumers. CPI is widely used to measure inflation, as it is a recognized indicator of economic price changes. Inflation has become a driving force of volatility in the stock market this year. Many of the most popular stocks in the market have succumbed to bearish selling pressures, including Tesla (NASDAQ: TSLA), Goldman Sachs (NYSE: GS), General Motors (NYSE: GM), and others.
Meanwhile, this volatility has made it an opportune ecosystem for things like penny stocks. On any given day, you’re sure to find at least a handful exploding to new highs. In the stock market today, some of the most active and talked about penny stocks included companies like Paxmedica (NASDAQ: PXMD), Genius Group Ltd. (NYSEAMERICAN: GNS), Ainos, Inc. (NASDAQ: AIMD), and Euda Health Holdings (NASDAQ: EUDA). But, with the latest CPI report for February, a lot more data has emerged for the market to digest. Here’s a recap of what was reported in the stock market today.
CPI Report for February 2023
The CPI increased by 0.4 percent in February 2023, indicating that the overall inflation rate is still high. The rise in the CPI can be attributed to several factors. These include the increase in the price of shelter, food, recreation, household furnishings and operations, and airline fares. The food index increased by 0.4 percent over the month, with the food at home index rising 0.3 percent. The index of meats, poultry, fish, and eggs fell 0.1 percent over the month. Meanwhile, the food away from home index rose by 0.6 percent, as it did in January.
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The energy index decreased by 0.6 percent in February, following a 2.0 percent increase in January. The natural gas index fell 8.0 percent over the month. Additionally, the gasoline index rose 1.0 percent in February, following a 2.4 percent increase in the previous month. The energy index increased by 5.2 percent over the past 12 months. Fuel oil rose 9.2 percent over the last 12 months, and the index for electricity increased 12.9 percent.
The Shelter Index: A Major Contributor to the Increase
The shelter index was the most significant contributor to the monthly all-items increase. It accounted for over 70 percent of the increase. The index continued to grow, rising 0.8 percent over the month, with the index for rent increasing 0.8 percent in February—also, the index for owners’ equivalent rent increased by 0.7 percent over the month. The shelter index was the dominant factor in the monthly increase in the index for all items, less food, and energy. It rose by 8.1 percent over the last year.
The increase in the shelter index can be attributed to several factors. These include a shortage of affordable housing, low-interest rates, and the increased demand for housing. The high cost of housing can also be attributed to the rising cost of building materials and labor.
The Food Index: Mixed Results
The food index had mixed results in February 2023. It increased by 0.4 percent over the month. The food at home index rose 0.3 percent, while the food away from home index rose by 0.6 percent. The index of meats, poultry, fish, and eggs fell 0.1 percent over the month. The food index increased by 9.5 percent over the last year. In addition, the food-at-home index rose 10.2 percent over the last 12 months.
The increase in food prices can be attributed to several factors. These include the rising cost of raw materials, transportation, and labor costs. The ongoing supply chain disruptions and labor shortages have also contributed to the rise in food prices.
The Energy Index: Decreased in February
The energy index decreased by 0.6 percent in February, following a 2.0 percent increase in January. The natural gas index fell 8.0 percent over the month, while the gasoline index rose 1.0 percent in February. This followed a 2.4-percent increase in the previous month. The energy index increased by 5.2 percent over the past 12 months, with the fuel oil index rising 9.2 percent over the last 12 months and the index for electricity increasing 12.9 percent.
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The decrease in the energy index can be attributed to the decline in the natural gas and fuel oil indexes. Additionally, the rise in the gasoline index can be attributed to the increase in crude oil prices. The rise in energy prices can be attributed to several factors. These include the increased demand for energy due to economic growth, limited oil supply, and geopolitical tensions affecting the global oil market.
The Shelter Index: The Dominant Factor in the Monthly Increase
The shelter index continued to increase, rising 0.8 percent over the month, with the index for rent rising 0.8 percent in February and the index for owners’ equivalent rent increasing by 0.7 percent over the month. The shelter index was the dominant factor in the monthly increase in the index for all items, less food, and energy, rising by 8.1 percent over the last year.
The increase in the shelter index can be attributed to several factors, including a shortage of affordable housing, low-interest rates, and the increased demand for housing due to population growth. The high cost of housing can also be attributed to the rising cost of building materials and labor and the limited supply of land available for new construction.
Other Indexes with Notable Increases
Other indexes with notable increases over the last year include motor vehicle insurance (+14.5 percent), household furnishings and operations (+6.1 percent), recreation (+5.0 percent), and new vehicles (+5.8 percent). However, the index for used cars and trucks fell by 2.8 percent in February, continuing a recent downward trend. The medical care index fell by 0.5 percent in February after falling 0.4 percent in January, with the index for physicians’ services continuing to decline.
The increase in motor vehicle insurance can be attributed to several factors, including the increased number of accidents and claims, the high cost of vehicle repairs, and the rising cost of medical care. The increase in household furnishings and operations can be attributed to the rising cost of raw materials and transport costs, while the increase in recreation prices can be attributed to the high demand for leisure activities due to the pandemic. The rise in new vehicle prices can be attributed to the limited supply of semiconductor chips in automobile production, which has disrupted global supply chains.
The Implications of High Inflation
High inflation can have several negative implications for the economy and consumers. It can decrease purchasing power, as the prices of goods and services rise faster than wages. This can lead to reduced consumer spending, which can hurt economic growth. High inflation can also lead to a reduction in foreign investment and a decrease in the currency’s value.
The Federal Reserve and Inflation
The Federal Reserve has a mandate to promote maximum employment and stable prices. It has implemented several measures to control inflation in response to the high inflation rate. The most obvious is raising interest rates.
Final Thoughts On CPI Inflation Data From February 2023
February’s CPI report shows that the overall inflation rate is still high, with the CPI increasing by 0.4 percent over the month. The rise in the CPI can be attributed to several factors. These include the increase in the price of shelter, food, recreation, household furnishings and operations, and airline fares.
The food index had mixed results, with the index for food increasing by 0.4 percent over the month. February’s energy index decreased by 0.6 percent in February. The shelter index was the dominant factor in the monthly increase in the index for all items, less food, and energy. It rose by 8.1 percent over the last year.
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The high inflation rate can have several negative implications for the economy and consumers, including a decrease in purchasing power and a negative impact on economic growth. The Federal Reserve has implemented several measures to control inflation, including raising interest rates and reducing the money supply.
In light of these developments, consumers must be mindful of their spending and budgeting habits. Consumers should also consider the impact of inflation on their investments and retirement plans. It is also important for policymakers to address the root causes of inflation, such as supply chain disruptions, labor shortages, and geopolitical tensions driving up prices.
