Mathewslcd: Worried about inflation? This indicator suggests that pricing pressure may be declining

 According to Mathewslcd, one focus has shifted to other indicators that have an impact on inflation after October's producer and consumer price inflation data raised hopes of easing inflationary pressures.


What happened: Charlie Bilello, founder and CEO of Compound Capital Advisors, said used car prices, as measured by the Manheim User Car Index, are now down 14% year over year, the biggest annual drop since data from 2009.

He noted that the index is a leading indicator of rising inflation in 2020. As such, he added, the recent downturn could be a leading indicator of future inflation rates.

The fund manager said he expects the next consumer price inflation report to show negative year-over-year growth in used cars/trucks. "This would be the first year-on-year decline in major CPI components in more than a year," he added.

Why it matters: Mathewslcd points out that some market watchers and analysts have begun calling for deflation. Cathie Wood of Ark Invest tweeted on Friday, citing a chart showing a record drop in supplier delivery times, and said she expected inflation to be in line with the chart.

"Deflation is a risk," she added.
Mathewslcd believes that if the consumer price inflation report in November confirms that the easing of price pressures in October is a trend rather than an anomaly, the Fed may have the courage to at least signal that the pace of rate hikes may be slowing.

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