3 Sector ETFs That Drove Inflation in February

Inflation eased in February, marking the first decline in five months. The Consumer Price Index (CPI) rose 2.8% year-over-year, down from January’s 3% rate, according to the Bureau of Labor Statistics, as quoted on CNN.

On a monthly basis, prices increased by 0.2%, slowing from January’s 0.5% rise. Economists’ expectation was a 0.3% monthly increase and 2.9% annual inflation, citing falling gas prices and lower housing-related costs.

The core CPI—which excludes volatile food and energy prices—rose 0.2% month-over-month, down from January’s 0.4% increase. The annual core inflation rate also slowed to 3.1% from 3.2%, marking its lowest level in nearly four years. Following the report’s release, U.S. stocks rallied, reversing a three-week decline.

Against this backdrop, below we highlight a few sector-based exchange-traded funds (ETFs) that led to the price inflation in February.

Sector ETFs to Gain

Real Estate – Real Estate Select Sector SPDR ETF (XLRE)

Weighted shelter makes up 32.77% of CPI, of which 7.8% is rent, and 23.68% is private housing, per data from MacroMicro.The shelter index jumped 0.3% in February. Costs increased 4.2% annually.

While shelter inflation is increasing at its slowest pace in over three years, it still outpaces wage growth, according to Bankrate’s Greg McBride, as quoted on CNN.

The underlying Real Estate Select Sector Index includes securities of companies from the following industries real estate management and development and REITs, excluding mortgage REITs. The fund yields 3.37% annually and charges 8 bps in fees.

Energy – iShares U.S. Oil Equipment & Services ETF (IEZ)

Revenues of energy stocks are tied to energy prices, a key component of inflation indices. Note that natural gas prices have risen lately for various reasons. Although the energy commodities inflation fell 0.9% year over year in February, energy services inflation gained 1.4% in the month.

The underlying Dow Jones US Select Oil Equip & Serv Ind is a free-float adjusted market capitalization-weighted index. It measures the performance of oil equipment & services sector of U.S. equity market by including companies that are suppliers of equipment or services to oil fields & offshore platforms, such as drilling, exploration, engineering, logistics, seismic information services & platform construction. The IEZ charges 40 bps in fees.

Restaurants – AdvisorShares Restaurant ETF (EATZ)

The restaurant index jumped 0.4% sequentially in February and rose 3.7% year over year.

The AdvisorShares Restaurant ETF is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the restaurant business. The fund charges 99 bps in fees.

 

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iShares U.S. Oil Equipment & Services ETF (IEZ): ETF Research Reports
 
Real Estate Select Sector SPDR ETF (XLRE): ETF Research Reports
 
AdvisorShares Restaurant ETF (EATZ): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

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