US household auto policy inflation at 18.9%, passing claims costs

US average automotive policy costs advanced 1.2% in September, just slow enough to allow a light decrease in the annual inflation to 18.9% from its prior month all-time high, the latest monthly inflation reading from the US Bureau of Labor Statistics (BLS) has indicated.

The 1.2% monthly advance is the lowest monthly gain since April, allowing for only the third decline in the annual rate since policy inflation turned double digit a year ago.

Auto policy inflation is now well ahead of current inflation for key cost categories and, with some claims costs easing, is quickly closing the gap to pre-pandemic margins.

Motor vehicle repair inflation has dropped nearly 5 points in three months, now down to a 14.9% annual rate, below the rate of auto policy inflation for only the second moth running.

Parts and equipment have veered into annual price declines of 0.3%, following the reversal previously seen for once-red hot used vehicle prices, now down 8.0% year on year.

Measured against pre-pandemic pricing levels, the 29.5% cumulative gain in auto policy costs still lightly lags the cost increase for used vehicles, body work and vehicle repair.

Against a simple equal-weighted average of four key cost categories (used vehicles, parts, body work, repair), the gap in policy cost increases has been cut to 3 percentage points, down from a double digit gap just two months ago.

For the broader consumer price inflation reading, a headline rate of 3.7% was flat from the prior month and the third reading above a local low, suggesting the long-run of disinflation had petered out.

The index for shelter was the largest contributor to the monthly increase, BLS said. Gasoline was also a major contributor.

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