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Energy Prices and Inflation Fell in September: Market Impact

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Inflation fell to -0.2% in September

With a fall in energy by 4.7% in September, the US consumer price index fell -0.2% as against -0.1% in August 2015. Over the past year, inflation remained unchanged in September after posting a 0.2% rise in August 2015. The Energy Select Sector SPDR Fund (XLE) fell by 16.4% from a year ago as of October 15. Also, the energy companies Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX) fell 10.7% and 18.9%, respectively, over the same period.

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Restaurant stocks rise with index of food away from home

A sharp drop in gasoline prices by 9.0% in September kept the inflation negative. The food index rose by 0.4% while the index for all items less food and energy rose by 0.2 % in September. Because the two indexes were accelerating, there was less overall impact on inflation.

The index for food away from home rose 0.5% in September and rose 2.9% over the past 12 months. Consumer discretionary stocks McDonald’s (MCD) and Starbucks (SBUX) gained 13.9% and 62.3%, respectively, over the past year as of October 15.

The index for household furnishings, personal care, and alcoholic beverages rose. Meanwhile, the index for airline fares, vehicles, and apparel fell. Auto stocks General Motors (GM) and Ford Motor Company (F) fell by 4.6% and 1.8%, respectively, year-to-date as of October 15.

A fall in inflation could indicate sluggish outlook

A fall in inflation might indicate weaker consumer sentiment in the economy and a sluggish business outlook. However, with oil prices getting stabilized in the second half of this year, inflation is expected to pick up going ahead.

While inflationary pressure is low in the United States, it remains high in emerging economies (EEM). Let’s take a look how high inflation is impacting the industrial production data for Russia in the next article.

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