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5 ETFs to Ride on Highest Core U.S. Inflation Rate in a Year

Sanghamitra Saha

The core inflation rate, which excludes items like food and energy, rose to 2.4% in August (after recording a 2.2% climb in July). The latest reading was the maximum since Jul 2018 and above a market consensus of 2.3%. Sequentially, core CPI (consumer price index) inched up 0.3% for three months in a row. Economists polled by Reuters had forecast the core CPI rising 0.2% in August. The same benefited from a surge in “healthcare costs and increases in prices for airline tickets, recreation and used cars and trucks.”

However, overall annual consumer price inflation rate dropped to 1.7% in August 2019 from the previous month’s reading as well as the market consensus of 1.8%. On a monthly basis, consumer prices grew 0.1% in August after a 0.3% ascent in July and in-line market forecasts. Increases in shelter and medical care prices went a long way in protecting a decline in energy cost.

Below we highlight a few areas and their related ETFs that gained from this inflation report.

Medical Care Commodities — iShares U.S. Medical Devices ETF (IHI)

Medical care commodities saw a price gain of 0.1% in August on an annual basis after a dip of 0.4% in July. This calls for a look at this healthcare ETF.

Medical Care Services — iShares U.S. Healthcare Providers ETF IHF

Medical care services logged 4.3% gains in August compared with a 3.3% advancement in July. The underlying Dow Jones U.S. Select HealthCare Providers Index of the fund measures the performance of health care providers’ sub-sector of the U.S. equity market. It includes health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes plus rehabilitation & retirement centers (read: 3 ETF Areas That Are Beneficiaries of Higher U.S. Inflation).

Real Estate— iShares U.S. Real Estate ETF IYR

Shelter costs were up 3.4% in August post 3.5% gains in July. Investors should note that the domestic economy is on decent footing with a tightening labor market and higher consumer spending, thus brightening the prospects of the real estate sector. This is because buoyancy in the economy translates to greater demand for real estate, higher occupancy levels and a spurt in rent growth. Per a report by JLL, effective rental growth in the second quarter remained above 4% on a year-over-year basis in the United States, well above the inflation rate.

Auto First Trust NASDAQ Global Auto Index Fund (CARZ)

Price rises were noticed for new vehicles (0.2% vs 0.3%) and used cars and trucks (2.1% vs 1.5%). This makes it important for investors to take a look at the auto ETF (read: Mixed Q2 Earnings Results Put Automotive ETFs in Focus).

Apparel — SPDR S&P Retail ETF (XRT)

Price rise of 1% was seen in the apparel segment in August compared with a slip of 0.5% in July. Since the fund XRT invests about 22.79% of its weight in the apparel segments, it could benefit from the trend.

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iShares U.S. Medical Devices ETF (IHI): ETF Research Reports
 
SPDR S&P Retail ETF (XRT): ETF Research Reports
 
iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports
 
iShares U.S. Real Estate ETF (IYR): ETF Research Reports
 
First Trust NASDAQ Global Auto Index Fund (CARZ): ETF Research Reports
 
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