Worried About Inflation? This indicator suggests that pricing pressure may ease

After the October producer and consumer price inflation prints raised hopes of easing inflation pressures, the focus shifted to other indicators that have implications for inflation.

What happened: Used car prices as measured by Mannheim User Car Index, It has now declined by 14% year-on-year, the biggest annual decline since 2009 figures, charlie bilello, said the founder and CEO of Compound Capital Advisors.

He said the index serves as a leading indicator of higher inflation rates in 2020. The recent slowdown, therefore, is likely to be a leading indicator of inflation rates to come, he added.

In a separate tweet, Bilello highlighted the CarGurus Used Car Index, which was trading at a 52-week low.

The fund manager said that he expects the next consumer price inflation report for used cars/trucks to show a negative year-over-year print. “This would be the first year-over-year decline in a major CPI component in over a year,” he added.

Why this is important: Some market watchers and analysts have begun calling for deflation. Arch Invest Cathy Wood On Friday quote-tweeted a graphic showing a record drop in supplier delivery times and said he expected inflation to fall in line with the charts.

“Deflation is the risk,” she said.

If November’s consumer price inflation report confirms that the easing of pricing pressures in October signals a trend, not a divergence, the Fed may be encouraged to at least telegraph that a rate hike is imminent. Recession could be in the cards.

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