CPI gains despite oil slide in the United States
The continued slide in oil prices after a slight rebound during the second quarter has failed to deter the CPI (consumer price index) inflation rate in the United States (SPY)(IVV), which has definitely reversed its falling trend.
Gasoline costs fell further in July. Crude oil (USO) was trading at around $45 per barrel in mid-March this year. Crude oil largely remained in the range of $58 to $62 in June, but continued its slide in July and is now down to about $42. The fall in fuel costs is certainly bad news for energy companies (XLE) such as Marathon Oil (MRO), Anadarko Petroleum (APC), and Apache (APA), which fell by 7.15%, 5.56%, and 4.70%, respectively, on August 19.
US consumer price index inflation rose 0.2% in July
According to a Bureau of Labor Statistics report dated August 19, 2015, overall US consumer price index inflation dipped to 0.1% in July compared to a 0.3% rise in June. However, on a YoY (year-over-year) basis, the headline CPI fared well in July 2015. The YoY figure stood at 0.2% in July versus June’s 0.1%.
Core CPI inflation excluded volatile food and energy prices. In July 2015, it rose by 0.1% over the previous month and by 1.8% over the same month last year. The core CPI gained from June’s figures on a YoY basis. The difference between the core and headline numbers highlights energy prices’ economic role in affecting consumer prices. The SPDR S&P 500 ETF Trust (SPY) was down 0.79% on the news at the close of trade on August 19. So far, SPY has returned 1.33% this year.
Services were expensive and fuel was cheaper in July
At a component level, shelter costs rose 3.1% in July. Medical services costs were also up 2.3%, while transportation services rose by 2.1% in July. Food costs increased at a slower pace than June, while fuel continues to be the key driver weighing down the headline index.
Housing is another key factor influencing the CPI readings. The Mortgage Bankers’ Association’s weekly report on mortgage applications is a good gauge of the mortgage market in the US, as we’ll discuss in our next article.