Over the last 4 months oil has shed over 30%! That results in lower costs at the pump, fatter wallets, and busier buyers… Just in time for the holiday season. Today we will review what has been happening with oil, housing, and inflation.
Oil
Not too long ago oil, and energy in general, were feeling the benefits of last winter’s harshness, as well as threats of a cut off to supply out of the Middle East. Well, with lower demand, the warmth of summer, and supply threats moderating, energy prices have waned.
What ever will we do with the extra money we did not have to put into our gas tanks? Additional discretionary income should cause consumption to improve just in time for the holiday buying season. As of late, reports of retail sales have shown a relative weakness in consumption; so price moderation in oil could not come at a better time.
Housing
Recent reports have shown a moderation in home buying/building, however we should see good, seasonally adjusted, performance out of this area during the fourth quarter. Interest rates have come back down and government agencies are considering lowering the down payment requirements. Both of these factors should make borrowing/buying more appealing.
A healthy buyer provides us:
- Home price appreciation
- Stronger employment
- Stronger consumption
- Stronger housing market, which represents 3% of gross domestic product.
Inflation
Over the last week we have seen the markets take strong hits and one of the reasons related to this was moderating inflation. The concern stems from dis-inflationary/deflationary problems that China, Japan, and Europe are all battling. The sentiment is that the issue was now threading its way to the United States.
While always possible in today’s global economy, the reason this month’s report should not raise this concern is… Oil.
The Consumer Price Index (CPI) fell on reduced fuel costs. Core CPI, which excludes fuel and groceries, remained unchanged. When fuel, a volatile statistic, was removed from the equation, inflation was not impacted. The fall in oil prices led to the softening in recent inflation statistics.
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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.
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