Announced this morning, the Consumer Price Index increased 0.8% in April, much higher than expected, and is 4.2% higher on annual basis. Prices of Used Cars and Trucks were 10% higher in the month, while Energy prices fell. The core rate, which excludes prices for food and energy, increased 0.9% in April, also much higher than estimates, and is up 3.0% on an annual basis. Overall, today’s report verifies that inflationary pressures are starting to show up in economic data points, partially due to base effects, fiscal stimulus, and the economic re-opening. As we discussed yesterday during our Equity Strategy workgroup meeting, individual companies will be impacted by higher inflation, regardless of whether these pressures prove transitory or longer lasting. Reviewing the ability for each organization to absorb these costs or if they pass along higher prices to their customers will be key for margins going forward. The Federal Reserve will likely keep their accommodative stance in place until they are certain these pressures persist. In all, bond yields ticked higher following the release of the data and equity markets are lower as we head into the market open.
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