QUICK QUILL — The wholesale trade report signaled sustained elevated prices for energy and flagged downside in food prices in today’s CPI. Average home purchase loan sizes and core goods deflating in sync ups conviction for a forced Fed rate cut in coming months. Continued declines in still-overpriced used auto prices further builds the case.
TAKEAWAYS
- The wholesale inventory/sales ratio for groceries continues to rise, diverging with CPI: Food at Home with which it’s historically moved in lockstep; the trend in the wholesale I/S ratio, alongside an uptick in discounting, suggest the CPI for food at home is headed south
- May 2024 saw YoY rates for the MBA’s average home purchase loan size and CPI core goods both print negative; there are only 12 other precedents of simultaneous declines in data back to 1991, a left-tail event suggesting the Fed may soon be forced to start cutting
- Manheim’s Used Vehicle Value Index is down -8.9% YoY to a three-year low but is still 25% above its long-run average in data back to 1997; while days’ supply is at its best post-COVID read yet at a -0.27 z-score, there remains plenty of runway for used auto prices to fall further