The U.S. cost of living was little changed in July, a sign subdued inflationary pressures will give Federal Reserve policy makers reason to keep interest rates low.
It was the first time in five months the consumer-price index failed to advance and followed a 0.2 percent gain in June, Labor Department figures showed Tuesday in Washington. Excluding food and energy, prices rose 0.1 percent, less than projected.
Inflation continues to tread below the Fed’s goal as U.S. companies remain challenged by frugal consumers and competition from cheap goods made overseas. With price pressures elusive, central bankers will be less willing to raise borrowing costs.
“The Fed still has plenty of time before raising rates,” Scott Brown, St. Petersburg, Florida-based chief economist for Raymond James Financial Inc., said before the report. “The belief was that disinflationary pressures will go down and then inflation will move to the Fed’s goal, but it seems that may take longer.”
Also Tuesday, a Commerce Department report showed housing starts unexpectedly climbed in July to the second-highest pace of the economic expansion, indicating the housing industry remains an area of strength for the economy.
The reading on the consumer-price index matched the median forecast in a Bloomberg survey of 82 economists. Estimates ranged from a decline of 0.1 percent to a gain of 0.2 percent.
Prices increased 0.8 percent in the 12 months ended in July, after rising 1 percent in the year through June.
The increase in the core CPI measure, which excludes volatile food and fuel costs, was the smallest since March and fell short of the 0.2 percent gain projected in the Bloomberg survey. The gauge was up 2.2 percent from July 2015, following a 2.3 percent advance in the year ended June.
Energy costs fell 1.6 percent from a month earlier, the first drop in five months, while food prices were little changed.
The biggest slump in hotel room rates in eight years and the largest drop in airline fares since July 2015, offset continued rent increases, which had been propping up core consumer prices. Medical care costs rose 0.5 percent, the biggest gain since February.
The Fed’s preferred gauge of inflation, which is the Commerce Department’s personal consumption expenditures measure, hasn’t matched the central bank’s 2 percent goal since 2012.
The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60 percent of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.
The steady cost of living boosted paychecks in July, a separate report from the Labor Department showed Tuesday. Hourly earnings adjusted for inflation rose 0.4 percent in July from the prior month, the biggest gain since January, and were up 1.7 percent over the past 12 months.
The Drop in US Crude Oil Inventories Boosted Oil Prices on Wednesday
Crude oil prices rose on Wednesday following a decline in US crude inventories last week.
The American Petroleum Institute (API) had reported that United States crude oil inventories declined by 5.3 million barrels in the week ended January 22, 2021, more than a reduction of 430,000 barrels predicted by a Reuters poll.
The unexpected decline, coupled with slowing new COVID-19 cases in China, the world’s largest importer of crude oil, boosted oil prices on Wednesday.
Brent crude, against which Nigerian crude oil is measured, rose by 41 cents or 0.7 percent to $56.32 per barrel.
The U.S. West Texas Intermediate (WTI) crude oil also gained 56 cents or 1 percent to $53.17 a barrel.
“WTI is slightly firmer on the back of a larger-than-expected draw in US crude inventories reported by the API, which is offset by builds in gasoline and distillates,” said Vandana Hari, oil market analyst at Vanda Insights.
The data, however, showed petrol inventories grew by 3.1 million barrels in the week, more than experts projected.
Similarly, API data revealed that distillate fuel inventories that include diesel and heating oil, jumped by 1.4 million barrels, far higher than the 361,000 barrels decline predicted. However, refinery runs declined by 76,000 barrels per day.
“Market participants are now in ‘wait and see’ mode, wanting to see how lockdowns evolve in the coming weeks and months, and how successful countries are in rolling out Covid-19 vaccines,” ING economics said in a note.
COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020
Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.
This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.
In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.
The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.
Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.
She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.
She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.
Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.
“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.
Crude Oil, Other Commodities Closing Price for Monday
Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.
Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.
The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.
Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.
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