Americans spend a lot more on non-durable goods now than they did in 2020. This is because steady job additions and increased wages for quite some time have given U.S. consumers the scope to spend more on discretionary items. To put things into perspective, consumers' personal income went up 0.2% in August and their spending on commodities and services increased 0.8% in the same month, per the Commerce Department, citing a
Wall Street Journal article.
However, an increase in inflation is threatening to hamper consumer spending levels, which may, in turn, disrupt the economic recovery process. According to the Labor Department, the consumer price index jumped 5.4% last month from a year ago and matched the largest increase since 2008, citing a U.S. News article. The article further noted that core inflation that generally excludes the volatile food and energy category increased 4% in September from a year earlier.
There has mainly been a sharp rise in prices of almost every item, including apparel, furniture, hotel rooms, new and used cars, and food and energy. The spread of the contagious Delta variant of the coronavirus compelled many factories, primarily in Asia, to shut down and slowed down operations at U.S. ports. This has led to supply shortages, eventually forcing U.S. consumers to pay more for goods. Shortage of semiconductors and supply chain disruptions, in particular, drove prices of new cars.
By the way, the price of electricity in the United States increased 0.8% last month from August, as mentioned in the U.S. News article. The article further added that furniture cost increased 2.4% in September, the biggest jump since 1988. From the year-ago period, furniture cost has surged 11.2% last month, the maximum since 1951. Similarly, the cost of shoes and meals at full-service restaurants went up last month, while housing costs rose at a steady clip. Moreover, gas prices have leaped 42% from the year-ago level and coal prices continue to hover near-record high.
Meanwhile, crude oil prices continue to remain elevated as the shortage of adequate natural gas has led to more demand for other energy sources, ultimately pushing oil prices higher.
It’s worth pointing out that the Fed’s preferred inflation gauge has already climbed the maximum in three decades yearly. The personal consumption expenditure (PCE) index advanced 0.4% in August from July, quoting a
MarketWatch article. Most importantly, the PCE index rose 4.3% in August from a year ago, its highest rate since 1991 (read more: 3 of the Best Stocks to Buy as Inflation Threat Rises).
From an investment perspective, inflation isn’t beneficial for growth-oriented stocks as it impacts their future cash flows. However, some stocks stand to gain from an increase in inflation. For instance, real estate investment trust (REIT) tends to gain from inflation. In the case of a price increase, the values and rents of real estate tend to rise since leases are linked to inflation. Thus, amid such inflationary pressure, one should consider investing in the following three REITs that boast a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. American Homes 4 Rent ( AMH Quick Quote AMH - Free Report) is an internally managed real estate investment trust. It is focused on acquiring, renovating, leasing, and operating single-family homes as rental properties. The Zacks Consensus Estimate for its current-year earnings has moved up 3.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 14.7%. MidAmerica Apartment Communities, Inc. ( MAA Quick Quote MAA - Free Report) is a residential real estate investment trust (REIT) engaged in owning, acquiring, operating, and developing apartment communities, located primarily in the Southeast, Southwest and Mid-Atlantic regions of the United States. The Zacks Consensus Estimate for its current-year earnings has risen 1.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 5.1%. Apartment Income REIT Corp. ( AIRC Quick Quote AIRC - Free Report) is focused on the ownership and management of apartment communities, principally in the United States. The Zacks Consensus Estimate for its current-year earnings has moved up 2.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 21.4%.