Traders this week will receive another batch of economic data focused on inflation, helping to show whether price pressures have continued further during the economic recovery. Separately, some travel restrictions are set to lift for those coming into the U.S. this week, offering a potential boost to a host of travel-related companies.
Wall Street has been closely monitoring the incoming data on inflation during the reopening. Companies have struggled to meet a surge in demand as consumer mobility picked up, leading to shortages and a slew of supply-chain related disruptions, which have in turn contributed to rising prices.
The Bureau of Labor Statistics’ Consumer Price Index (CPI) due for release on Wednesday is expected to show that elevated inflation continued into October, with a variety of goods and services for consumers posting ongoing price increases.
Consensus economists expect that the CPI rose 5.8% in October over last year, accelerating from September’s 5.4% annual rate to reach the fastest rise since 1990. And on a month-over-month basis, the CPI likely rose 0.5% in October to pick up from September’s 0.4% rate.
“We will be watching for signs that the inflation problem is peaking,” wrote David Donabedian, chief investment officer of CIBC Private Wealth U.S., in an email on Friday. “But our expectation is for continued elevated readings, and we expect to be talking about high inflation six months from now. It is not going away.”
Excluding more volatile food and energy prices, consensus economists are also expecting a pick-up in core categories. Over last year, the core CPI likely picked up to a 4.3% rate in October, up from September’s 4.0% year-on-year increase. That would come in just below July’s 4.5% year-over-year increase, which had been the biggest rise in the core rate since 1991.
Some of the reopening-related categories that had seen a surge in prices earlier in the summer had cooled slightly in September, with the latest Delta variant wave of the pandemic dampening consumer demand for travel and related activities. But expect to see a rebound in October, some economists said.
“The acceleration in core CPI is likely to be led by services, with real activity starting to turn higher amid easing COVID concerns. Airline fares were still down nearly 25% from pre-pandemic levels in the September report, and we believe there will be scope for a sharp rebound this month,” wrote Bank of America economist Michelle Meyer in a note. “Transportation services should also be supported by a rebound in car and truck rental prices, and a modest increase in motor vehicle insurance prices. Lodging will be another beneficiary of the increase in travel.”
In terms of goods, however, Meyer noted that housing and furnishing, apparel and other supplies retailers may have cut prices in October to help pull forward holiday shopping, which could lead to softer overall gains in prices for these categories in Wednesday’s CPI report.
Still, inflationary pressures have remained much more pronounced and longer-lasting than some economists had anticipated. Supply chain shortages and rising commodities costs have led a variety of individual companies to announce price increases. Mondelez (MDLZ), the maker of Oreo cookies and Ritz Crackers, said it was implementing 7% price increases in the U.S. in order to offset rising costs. Clorox (CLX) said during its earnings call last week it was going to hike prices across 70% of its portfolio of cleaning and housing supplies by the end of the fiscal year. And the CEOs from a broad range of companies, from cosmetics company E.L.F Beauty (ELF) to outdoor recreational supplies company Vista Outdoor (VSTO), have recently discussed increasing price across their products in interviews on Yahoo Finance Live.
For investors, the implications of these sustained inflationary pressures could mean tighter monetary policy and higher rates down the line. Federal Reserve officials tweaked their language on inflation in their monetary policy statement last Wednesday to show that they “expected” inflation to be transitory. This marked a departure from their previous assurances over the temporary nature of these price pressures.
“We said that supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases, and we said progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation,” Federal Reserve Chair Jerome Powell said during his post-FOMC meeting press conference last week. “So, we’re trying to explain what we mean and also acknowledging more uncertainty about ‘transitory.'”
US eases travel restrictions for vaccinated travelers
On Monday, the U.S. is set to pare back travel restrictions on international visitors who show proof of vaccination, easing what had been months’ worth of limitations on international tourism and inbound travel into the U.S.
Both air and land border travel will be included in the changes. These restrictions had first been put in place in the early days of the pandemic during the Trump administration in March 2020, and were upheld by the Biden administration since January. Visitors from a plethora of countries had been impacted by these travel restrictions into the U.S. since the start of the pandemic, including from much of Europe and China. Foreign nationals entering the U.S. under the new rules will need to show proof of vaccination, and a negative COVID-19 test taken within three days if they are traveling by air.”
The easing of these restrictions lifts a weight on a number of companies within the airline and lodging industries. And already, a number of CEOs of these companies have underscored the potential pent-up demand that this would unlock.
Airbnb CEO Brian Chesky was one such executive who pointed to the near-immediate reaction among consumers following the initial announcement of the easing restrictions by the White House last month.
“On Oct. 15, I believe it was that date that President Biden announced the reopening of the borders and asked the travelers come to United States. Within one week of that announcement, we saw a 44% spike in nights booked for stays crossing borders coming into United States on Airbnb for stays Nov. 9 and later, which is when the borders were opened,” said Chesky during the company’s earnings call last week.
This could also, however, cause some extended wait times and travel disruptions in the short-term, some executives warned.
“It’s going to be a bit sloppy at first. I can assure you, there will be lines unfortunately… but we’ll get it sorted out,” Ed Bastian, CEO of Delta, reportedly said at a travel event last month.
Data from the Transportation Security Administration (TSA) has showed a pick-up in the number of travelers checked in at U.S. airports over the past several months, pointing to a further jump in demand. On Nov. 4, traveler throughput was at more than 1.9 million, rising sharply from the 867,105 on the comparable day in 2020, but still coming in below the more than 2.5 million travelers counted on the comparable day of 2019.
Economic calendar
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Monday: No notable reports scheduled for release
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Tuesday: NFIB Small Business Optimism index, October (99.3 expected, 99.1 in September); PPI Final Demand, month over month, October (0.6% expected, 0.5% in September); PPI excluding food and energy, month over month, October (0.5% expected, 0.2% in September); PPI Final Demand, year over year, October (8.6% expected, 8.6% in September), PPI excluding food and energy, year over year, October (6.8% expected, 6.8% in September)
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Wednesday: MBA Mortgage Applications, week ended Nov. 5 (-3.3% during prior week); Initial jobless claims, week ended Nov. 6 (265,000 expected, 269,000 during prior week); Continuing claims, week ended Oct. 30 (2.105 million during prior week); Consumer Price Index, month over month, October (0.4% expected, 0.2% in September); Consumer Price Index, year over year, October (5.8% expected, 5.4% in September); Consumer Price Index excluding food and energy, year over year, October (4.3%. expected, 4.0% in September); Wholesale Inventories, month over month, September final (1.1% expected, 1.1% in prior print); Monthly budget statement, October (-$61.5 billion in September)
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Thursday: No notable reports scheduled for release
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Friday: JOLTS Job Openings, September (10.439 million in August); University of Michigan Sentiment, November preliminary (72.4 expected, 71.7 in October)
Earnings calendar
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Monday: Coty Inc. (COTY) before market open; Clover Health Investment Corp. (CLOV), The RealReal (REAL), Lemonade (LMND), Roblox (RBLX), PayPal (PYPL), Virgin Galactic Holdings (SPCE), TripAdvisors (TRIP), SmileDirectClub (SDC), AMC Entertainment Holdings (AMC), Zynga (ZNGA) after market close
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Tuesday: Blue Apron (APRN), Workhorse Group (WKHS), Palantir (PLTR) before market open; DoorDash (DASH), Poshmark (POSH), Coinbase (COIN), Vroom Inc. (VRM), fuboTV (FUBO), Plug Power (PLUG), Wynn Resorts (WYNN), Nio (NIO) after market close
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Wednesday: Disney (DIS), Opendoor Technologies (OPEN), Compass (COMP), Bumble (BMBL), Wish (WISH), Affirm Holdings (AFRM), Green Thumb Industries (GTII), SoFi Technologies (SOFI), Beyond Meat (BYND), Figs (FIGS), 23andMe Holdings (ME) after market close
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Thursday: Tapestry (TPR), Yeti Holdings (YETI), Organon & Co. (OGN) before market open; Blink Charging Co. (BLNK) after market close
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Friday: Bakkt Holdings (BKKT), Warby Parker (WRBY) before market open
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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