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Faster Decline For Used Car Prices But Broader Supply Chain Recovery Pauses

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  • Core CPI inflation is expected to moderate in October with a median 0.5% M/M following the 0.58% in September, with analysts expecting much of this stepdown to come from a faster decline in used cars plus a mechanical driver from health insurance within medical care services.
  • Used car prices have been a specific story of the pandemic, which despite starting to cool slowly are still 50% above pre-pandemic levels in the CPI measure.
  • Easing of specific supply chain pressures have already pushed auction prices lower, which are beginning to filter to CPI used cars (see first chart below) as some analysts look for a ~2% decline after the 1.1% in September.
  • Broader supply chain pressures have also seen a trend easing over the past year, helping non-vehicle core goods inflation moderate, but most recently the NY Fed’s GSCPI measure has levelled off at 1 standard deviation above its average value (second chart).

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  • Core CPI inflation is expected to moderate in October with a median 0.5% M/M following the 0.58% in September, with analysts expecting much of this stepdown to come from a faster decline in used cars plus a mechanical driver from health insurance within medical care services.
  • Used car prices have been a specific story of the pandemic, which despite starting to cool slowly are still 50% above pre-pandemic levels in the CPI measure.
  • Easing of specific supply chain pressures have already pushed auction prices lower, which are beginning to filter to CPI used cars (see first chart below) as some analysts look for a ~2% decline after the 1.1% in September.
  • Broader supply chain pressures have also seen a trend easing over the past year, helping non-vehicle core goods inflation moderate, but most recently the NY Fed’s GSCPI measure has levelled off at 1 standard deviation above its average value (second chart).