American Invest Hub
  • Politics
  • Investing
  • Business
  • Latest News

American Invest Hub

  • Politics
  • Investing
  • Business
  • Latest News
Business

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

by admin May 26, 2024
May 26, 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
It wasn’t the endless shrimp that pinched Red Lobster. How private equity rolled the seafood chain.

Related Posts

ServiceNow stock is expensive; does it have a...

October 30, 2024

Thailand embarks on $14 billion digital wallet scheme...

September 25, 2024

Asia-Pacific markets mixed as Japan inflation data, Trump...

February 21, 2025

Europe markets open: stocks poised higher; central banks,...

May 8, 2025

Nasdaq Composite index forms a risky pattern, pointing...

November 1, 2024

Here’s why the Russell 2000 (IWM) ETF slumped...

December 19, 2024

Applied Materials stock: will AMAT shares hit $200...

May 14, 2025

Long KVYO: Klaviyo Inc. Breaks New Highs, Strong...

December 17, 2024

Trump blames ‘globalists’ for stock market sell-off: ‘There’ll...

March 7, 2025

Is it safe to buy the dip in...

April 21, 2025

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


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

    Latest News

    • Interview: Strategic location gives Brazil Potash cost advantage in domestic fertiliser market, says CEO Matt Simpson

      June 1, 2025
    • Canada’s Q1 GDP expands by 2.2%, driven by exports spike ahead of potential US tariffs

      June 1, 2025
    • President Trump to host farewell for Elon Musk as DOGE leader steps away

      June 1, 2025
    • UK’s digital banks face divergent fortunes: Starling stumbles, Monzo and Revolut soars

      June 1, 2025
    • Trump wants Apple to shift iPhone production from India to the US: here’s what it means

      May 18, 2025

    Categories

    • Business (3,022)
    • Investing (2,459)
    • Latest News (1,994)
    • Politics (1,530)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: americaninvesthub.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 americaninvesthub.com | All Rights Reserved