QUICK QUILL — There was something for hawks and doves in the assessments of core inflation from the CPI and PPI reports. Deeper dives into interest-rate-sensitive sectors indicated the Goldilocks run for house prices was given a reprieve. That said, the loss of pricing power for the retail auto space is advertising rising job losses in the sector. Corroborating the signal, the sharply curtailed expansion in employment service inflation points to additional downside in wage pressure. The trap door to 3% on the 10-year is highly visible. Position with long duration to take advantage of these themes.
TAKEAWAYS
- The MBA’s average home purchase loan size continues to expand, up 2.0% YoY, while Redfin’s median sales price rose to 4.7% YoY to start December; however, the goldilocks run for home prices will face pressure from rising supply and the Fed’s steady MBS sell-off
- At -13.1% YoY in November, PPI for Used Vehicles has been negative for a record 19 months, while PPI for New Vehicles is down at a record -37.4% YoY; the loss in pricing power risks a reversal in the recent upward trends in nonfarm payrolls for auto retailers
- Since peaking at 7.2% YoY in March 2022, PPI for Employment Services has printed near and even below zero in the last few months; prior negative prints occurred after 2001 and 2007-09, and the current trend flags further downside for average hourly earnings growth