By Jonnelle Marte
Consumer prices rose again in September, but at a slower pace than previous months. Could investor portfolios see a boost?
According to data released this morning by the U.S. Department of Labor, consumer prices rose 0.3% from August, thanks largely to increases in energy and food prices. It was the third straight monthly increase: prices were up by a monthly 0.4% and 0.5% in August and July, respectively. Over the past year, prices increased 3.9%, according to the report.
Investing experts say the slower growth rate could lead to higher consumer spending and stronger corporate earnings — two things that boost stock performance, says T. Doug Dale, a financial adviser in Jackson, Miss. It could also give the Federal Reserve more freedom to take actions to spur economic growth, he says, such as doing another round of quantitative easing, the bond buying program intended to keep interest rates low.
But the pros caution against celebrating just yet. Prices are still increasing, and if that accelerates, the Fed may have fewer options for tackling both inflation and the slower economy, says Scott Kubie, chief strategist for CLS Investments in Omaha, Neb. And monthly consumer price figures can change drastically from month to month, often providing little guidance of any longer-term trend. For instance, after falling by 0.2% in June, CPI shot up 0.5% in July, according to the Labor Department.
On top of that, markets don’t always react as expected, say analysts. And investors itchy for guidance have been trading on all kinds of short-lived news the past couple months. Indeed, today stocks inched higher as investors weighed the consumer prices news with mixed third-quarter earnings results from companies.