Thrifty Banker
  • Politics
  • Business
  • World
  • Investing
  • Politics
  • Business
  • World
  • Investing

Thrifty Banker

Business

Auto insurance rates are jumping the most since the 1970s, but there could be relief soon

by May 25, 2024
May 25, 2024
Auto insurance rates are jumping the most since the 1970s, but there could be relief soon

Soaring auto insurance costs have been a principle driver behind inflation over the past year, but there could be relief on the way, according to Bank of America.

The bank’s economists see several driving factors behind the run-up in costs to ease in the months ahead, possibly taking some of the heat off a category that has pushed the Federal Reserve to keep up its inflation fight.

“The turbocharged increases in motor vehicle insurance premiums are a response to underwriting losses in the industry. Insurers saw losses,” BofA economist Stephen Juneau said in a note. However, he added, “There are signs that many insurers are getting back to profitability.”

Primarily, the hit to insurers, which has been passed on to consumers, arose from three sources: higher vehicle prices, increased costs for repairs and “more accidents as driving trends returned to normal,” Juneau said.

There’s some good news on that front.

Sales prices for new and used vehicles have been trending lower in recent months and are down 0.4% and 6.9%, respectively, on a 12-month basis, according to Bureau of Labor Statistics data through April. Also, repair and maintenance services costs were flat in April though still up 7.6% from a year ago.

Motor vehicle insurance costs, though, continued to soar.

The category rose 1.8% in April on a monthly basis and was up 22.6% from a year ago, the largest annual increase since 1979, according to Bank of America.

In the CPI calculation, auto insurance has a weighting of nearly 3%, so it’s a significant component.

The recent trends probably do not “mean that your premium will fall, but we think the rate of increase should slow,” Juneau said.

That has been the general story with inflation: prices are not falling, but the rate of increase is well off the pace of mid-2022 when inflation hit its highest level in more than 40 years. Overall CPI inflation ran at a 3.4% annual rate in April.

There’s one other tidbit of good news when it comes to Fed policy.

The central bank’s primary inflation barometer is the Commerce Department’s measure of personal consumption expenditures, not the consumer price index from the BLS. In the PCE gauge, auto insurance has a smaller weighting, meaning it is less of an inflation driver.

If the BofA forecast for insurance disinflation is accurate, it could at least give the Fed more confidence to start cutting rates later this year. Current market pricing is indicating an expected first cut in September, with one more possible before the end of the year.

“We think further improvement in this aggregate is one key for the Fed to become more confident in the disinflationary process and start its cutting cycle,” Juneau said. “Until then, we expect the Fed to keep rates in park.”

This post appeared first on NBC NEWS
0
FacebookTwitterGoogle +Pinterest
previous post
Tesla CEO Elon Musk says he favors ‘no tariffs’ on Chinese EVs
next post
Advertisers boost spending at retailers such as Walmart and Amazon as TV shrinks

Related Posts

Orange juice prices are going through the roof...

May 31, 2024

T-Mobile sued after employee stole nude images from...

November 19, 2023

New inflation data to reveal consumer strength amid...

October 12, 2023

How ESPN executives plan to survive the decline...

March 25, 2024

Warner Bros. Discovery and ESPN strike 5-year deal...

May 23, 2024

TGI Fridays-branded chicken bites sold at grocery stores...

December 21, 2023

Doritos severs ties with transgender influencer in Spain...

March 8, 2024

Western craze boosts sales of Levi denim dresses...

June 29, 2024

Nearly 10,000 people have offered to change their...

August 9, 2023

Trader Joe’s-branded cashews sold in 16 states recalled...

March 19, 2024

    Sign up for our newsletter to receive the latest insights, updates, and exclusive content straight to your inbox! Whether it's industry news, expert advice, or inspiring stories, we bring you valuable information that you won't find anywhere else. Stay connected with us!


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Popular

    • 1

      Top 10 Countries for Natural Gas Production (Updated 2024)

      April 6, 2024
    • 2

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 3

      Top 10 Uranium-producing Countries (Updated 2024)

      April 18, 2024
    • 4

      A GOP operative accused a monastery of voter fraud. Nuns fought back.

      January 3, 2025
    • 5

      Top 9 Nickel-producing Countries (Updated 2024)

      April 23, 2024
    • 6

      Australian abolitionist, Grace Forrest, receives coveted ‘Freedom from Fear’ award

      April 13, 2024
    • 7

      LME Sanctions on Russian Metal Push Copper, Nickel and Aluminum Prices Higher

      April 17, 2024

    Categories

    • Business (1,028)
    • Investing (2,046)
    • Politics (2,977)
    • Uncategorized (20)
    • World (3,347)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: thriftybanker.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 thriftybanker.com | All Rights Reserved