Seeing slower inflation is one thing, keeping it slow is another

We know goods prices have been where most of the disinflation has taken place to the point where they are flattish y/o/y, the pace at which they were seen in the decades leading into Covid. Staying down though is the key. With used cars specifically you've heard me many times talk about the below trend amount of inventory because five years after Covid, new car sales are still trending below 2019. In case you didn't see this article in yesterday's WSJ titled "Why There is No Relief Ahead for High Used Car Prices" they said "Used-vehicle shoppers are finding stubbornly high prices at the dealership lot - if they can find a car at all...The number of vehicles coming back to dealers with expiring three year leases will drop 23% this year, to a decade low, according to Cox Automotive. It isn't expected to bounce back until 2027, forecasts show." https://www.wsj.com/business/autos/why-there-is-no-relief-ahead-for-high-used-car-prices-8d7617be?mod=itp_wsj. We are not yet in the inflation clear when looking out the next few years, and as I highlighted yesterday too with rents that are moderating still now but should shift higher again late this year and in 2026.

Also on the pricing front that caught my eye was in chemicals. This was from the Huntsman conference call yesterday:

After talking about the potential tariffs and how they are planning on managing through them, "The second shift we are seeing is around recent price announcements in many of our products...I think Huntsman remained incredibly disciplined with respect to pricing. We previously announced lost volume due to this. We've stated on past calls that demand needs to return before pricing picks up. As we have reported in the past few quarters we've seen volumes improve as de-inventorying has ceased and demand has tepidly returned. I believe that we're seeing some early signs of recovery in pricing and margins return."

"As of today, we are seeing publicly reported polymeric MDI prices in China at a three year high. Huntsman has also announced a series of price increases in North America as well. Again, as publicly reported, we have seen others pushing for similar actions. It is challenging to say if these actions will be successful and how soon and to what segments they will stick. However, as we sit here today, it is fair to say that there are more positive than negative movements in the MDI industry. My personal feeling is that MDI was one of the first major chemical chains to drop and may well be among those that show signs of recovery earlier than other chains."

According to Google Gemini, "Methylene diphenyl diisocyanate (MDI) is a highly reactive chemical used to make polyurethane materials."