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Oakworth Consumer Price Index

What is the Oakworth Consumer Price Index?

The Oakworth Consumer Price Index (OCPI) is a comparison between two separate baskets of groceries. One basket contains items one might use/consume when preparing a celebratory dinner at home. This is the cost of living it up basket. The other contains more common household necessities for which there might be more inelastic demand. This is the cost of living basket.

Please find a summary of the July 2022 OCPI results and full PDF report below.

1 Month0.77July 2022
3 Month3.81July 2022
YTD7.66July 2022

July 2022

The Oakworth Consumer Price Index (OCPI) increased 0.77% during July. Over the past three months, the index has increased at a non-annualized 3.81% rate and is up 7.66% for the year to date through the end of July. This works out to a 13.48% annualized equivalent.

After a slight decrease during June, the OCPI increased 0.77% during July to 115.66. However, there wasn’t much movement in many of the underlying components. We hope this might imply prices are beginning to moderate across the broader economy.

As has been the case for much of 2022, the Cost of Living (CoL) sub-index increased at a faster pace than the Cost of Living it Up (CoLU). This suggests recent price increases have had a disproportionate impact on the lower income brackets. Unfortunately, this is normally the case during inflationary periods. This is due to the greater availability of alternatives for “elastic” goods when compared to “inelastic” ones.

Moving forward, lower energy and commodity prices, a slowing money supply, tighter money, and a strong U.S. dollar should cause inflation to moderate. This will likely be more pronounced during Q4.

View Full Report Here: OCPI – July 2022

Additional Reports

The Cost of Living vs The Cost of Living it Up

The OCPI – Cost of Living It Up (CoLU) basket was up 0.56% during July. Over the past three months, the index has increased at a non-annualized 2.87% rate and is up 7.03% for the year to date through the end of July. This works out to a 12.35% annualized equivalent.

The OCPI – Cost of Living (CoL) basket was down 0.98% during July. Over the past three months, the index has increased at a non-annualized 4.54% rate and is up 7.97% for the year to date through the end of July. This works out to a 14.04% annualized equivalent.

Additional Reports

Next Release

August 2022 OCPI data is scheduled to be released on September 14, 2022

About the OCPI

WHAT IT IS
The Oakworth Capital Price Index (OCPI) is a comparison between two separate baskets of groceries. One basket contains items one might use/consume when preparing a celebratory dinner at home. This is the cost of living it up basket. The other contains more common household necessities for which there might be more inelastic demand. This is the cost of living basket.

WHY
The government’s official Consumer Price Index (CPI) contains a variety of different products of services, many of which might not be in every consumer’s budget each month. For instance, most households don’t purchase a major appliance, furniture, or a new car every month. Further, it uses variable costs for what are usually fixed expenses, such as cable television and ISP services. Essentially, while it is a useful tool, the CPI doesn’t always tell the story consumers are actually experiencing.

However, everyone has to eat, do laundry, bathe, and clean. These are things which people have to do, the cost of living, with no exceptions. Conversely, there are items which we would like to purchase, in this instance at the grocery, which might not always fit into the monthly budget. This is the cost of living it up.

The purpose the OCPI is to try to determine which is hitting the US consumer’s budget the hardest: the day to day necessities of life OR the simple luxuries.

METHODOLOGY
Members of Oakworth Capital’s Investment Committee will price two different baskets of groceries twice a month: as close to the middle and the end of the month as is possible. The table below lists the items in each basket, the amount measured, and the source of the pricing information. Each item is incorporated into the index as is, without any predetermined weightings.

The aggregate OCPI is a combination of the two baskets, each containing a 50% weighting within the larger index. Due to the nature of the products in each basket, the dollar amount in the Living it Up basket was roughly 228% that of the Cost of Living basket at inception. As a result, the 50/50 weighting reflects how the average consumer would spend more than double on essentials relative to “luxuries.”

The inception date for the index was 9/15/2021 with a value of 100.00.

Contact the Authors of the OCPI Research

John Norris

Managing Director and Chief Economist

Contact John

Sam Clement

Portfolio Manager

Contact Sam

Disclaimer

Oakworth constructs and presents the OCPI in good faith from sources it deems to be accurate. It is intended to be for informational and entertainment use only. There is no guarantee the prices it reports will be the same as other consumers will experience at times other than when Oakworth collected them or in other stores. Prices can and will fluctuate based on local market and economic conditions.

Please note, nothing in this release should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. Finally, the opinions expressed herein are not necessarily those of the rest of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself, but are solely a description of the findings of our analysis.

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