The recent undershooting of CPI used vehicle prices relative to wholesale auction prices appears, at least partly, to reflect a squeeze on dealer margins as demand has cooled. The upshot is that we shouldn’t necessarily expect the CPI measure to catch up over the coming months. More generally, the recent collapse in PPI trade services inflation suggests that the earlier sharp increase in retailer and wholesaler margins, which was a big driver of the initial surge in inflation in 2021, is now going into reverse.
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