Cheaper Energy Drives Consumer Prices Below Expectations

The economy finally got some good news today as the Consumer Price Index (-CPI) fell by 0.2% in June, undercutting expectations of a 0.2% rise in prices for the month. Over the past 12 months the total index has still increased 3.6% before seasonal adjustment. The drop in overall prices in June was driven largely by falling gasoline prices (NYSE:UGA), which declined by 6.8 percent in the month. Lower overall household energy (NYSE:XLE) costs also contributed to lower prices, dropping 1.2% in June. Among goods with the largest cost increases in June were in apparel (NYSE:XRT) (up 1.6%), medical care (NYSE:XLV) commodities (up 1.4%), and new vehicles (up .6%).

Food: 

The food index (NYSE:RJA) rose .2% in June after rising .4% in each of the prior two months. The index for meats, poultry, fish, and eggs turned down in June, falling .4% after increasing more than one percent in each of the previous four months. The fruits and vegetables index declined for the third month in a row in June, falling .4% as the fresh vegetables index continued to decline. In contrast, other major grocery store food groups increased. The index for cereals and bakery products rose .6% in June, and the dairy and related products advanced .5%, as did the index for other food at home. The index for nonalcoholic beverages increased .3% as the coffee index continued to rise. The index for food at home has risen 4.7% over the last 12 months, with all the major groups increasing 3.2% or more. The index for food away from home rose .3% in June after rising .2% in May.

Energy

The energy index (NYSE:XLE), which fell 1.0 percent in May, declined 4.4 percent in June, the largest decline since December 2008. The gasoline index, which fell 2.0 percent in May, declined 6.8 percent in June. (Before seasonal adjustment, gasoline prices fell 5.8 percent in June.) Despite the recent declines, the gasoline index has increased 35.6 percent over the past 12 months. The index for household energy also decreased in June, falling 1.2 percent after rising 0.5 percent in May. The index for natural gas (NYSE:UNG) rose 0.4 percent, but the electricity index declined 1.6 percent and the index for fuel oil fell 2.2 percent. The household energy index has risen 2.8 percent over the last 12 months, with the fuel oil index up 37.3 percent and the electricity index up 1.5 percent but the index for natural gas down 0.8 percent.