Inflation: Energy prices tick up in June, fall year-over-year

According to June's inflation print, energy prices are showing a mixed picture after rising in the past month, but declining year-over-year. Yahoo Finance Markets Reporter Ines Ferre joins the Live show to discuss inflation's effect on gas prices and oil demand forecasts.

Video transcript

- Well, inflation data this morning showing further signs of cooling as investors look for hints of what's to come from the Fed's July meeting. What did the data tell us specifically about the state of energy prices? Yahoo Finance's Ines Ferre joins us now with the details. People always watch gasoline very closely as a sort of proxy for consumer prices, but it is more complex than that.

INES FERRE: Yeah, that's right. And so we have seen that energy last month was up 0.6%, the energy index. And now that includes all things like gasoline, like fuel oil. Now remember that in the previous month, energy had fallen 3.6%. So you are seeing a little bit of volatility month to month. But year over year, energy is down 18.6%. In fact, out of all the categories, it's the one that's down the most. What a difference a year makes because energy was so volatile last year, and it made up so much of the CPI last year.

Now, if we take a look under the hood why you saw energy going up 0.6% in June, well, gasoline, as Julie was mentioning, that increased 1% in June. But remember the prior month, it had decreased 5.6%. So some volatility there. Electricity increased 0.9% in June after falling in the prior three months. Year over year, electricity is up 5.4%. So if you did see your electricity bill go higher this year, well, you're not alone.

The natural gas index, that has been on a decline. That decreased 1.7% in June, the 5th consecutive month of a decrease. And fuel oil, that declined 0.4% in June. Year over year, fuel oil is down 36.6%.

Now, remember that the energy index really impacts so many other things because it impacts jet fuel, for example. And we saw that the airlines had come down as well. Airfares. So really, you are seeing a downward trend when it comes to oil, and oil had been trading right now, it's been trading at a 10-week high. We are seeing the dollar weaken a little bit, so that is helping boost oil prices a bit today as well.

- OK, so what should investors be keeping in mind, even as inflation, kind of paired with the energy data, that we're continuing to track too, that's going to have at least some outsized weight on where they're kind of placing their portfolio bets coming off of this news.

INES FERRE: Yeah, and it all really depends on where you think oil will be heading for the second half of the year. Look, there is still a lot of bullishness when it comes to demand coming out of China, that demand for oil in China. You are seeing the EIA that just came up with its demand forecast for 2023. You have the supply cuts that are coming out of Saudi Arabia as well. So that should impact oil going into the second half of the year.

But of course, the big red herring is, what happens with a recession in case of a recession? And what happens with demand if there is a recession? And how severe it would be.

- Great stuff. Yahoo Finance's own, Ines Ferre. Ines, thanks so much for breaking that down for us.