Posted on 09/19/2021 9:47:40 AM PDT by blam
In the past month, a feud has broken out between the so-called “team transitory”, comprising mostly of pro-Fed, pro-Biden commentators, who urge the public to ignore the “transitory” hyperinflation that by now is painfully obvious to everyone (see today’s UMich report for the gruesome details), and not to blame either the Fed or the administration for the collapse in the dollar’s purchasing power. Then there are the realists who see a much more ominous trend in deglobalization – you know, the same trend that allowed inflation to decline along with interest rates since the early 1980s – and warn that even when the currently supply chain logjam ends some time in 2022, inflation will still be far higher than in the past few decades.
The latest CPI print was viewed as a victory for “team transitory” because some of the prices that had spiked during the pandemic eased, led by used cars, whose prices this year soared amid supply chain disruptions and a rebounding economy has been a major contributor to the jump in U.S. inflation.
This was enough for TT to declare victory and proclaim that it’s all downhill from there.
There is just one problem: real-time data is now showing that used car prices are once again on the rise after the summer slippage, confirming what we said moments after the CPI report was published this week.
Used car prices drop just in time for the next supply chain congestion wave pic.twitter.com/Ej0B3SAtj7
— zerohedge (@zerohedge) September 14, 2021
The Manheim U.S. Used Vehicle Value Index, a measure of wholesale used cars, increased 3.6% in the first 15 days of September compared with the same period last month, and is again back near all time highs. That’s the first month-over-month rise in the index since May; in total the index has risen by more than 50% since the COVID lows in early 2020.
The index jumped 24.9% from the same period a year ago through the middle of the month, indicating that not only has the drop in used car prices ended but that higher prices are coming, and with them more humiliation for team transitory, as the spike in the Mannheim index assures a sharp jump in the CPI print either next month or in November.
“The latest trends in the key indicators suggest wholesale used vehicle values will likely see further gains in the days ahead,” according to the Manheim report.
“Wholesale used vehicle prices rose rather significantly in the first half of September compared to the first half of August,” Michelle Krebs, an executive analyst at Cox Automotive, told Bloomberg. “Dealers appear to be stocking up on used vehicles, which have seen supply stabilize somewhat, to have something to sell because new vehicle inventory remains low.”
Elevated used car prices have primarily been due to snarled supply chains and a shortage of materials (such as semiconductors) for new car production, which pushed dealer inventories to all time lows…
… and forced consumers to buy on the secondary market.
“The main pressure continues to come from new car supply shortages. With the increase of delta variant, many manufacturers have significantly cut their production,” said Brian Benstock, general manager and vice president of Paragon Honda and Acura, a dealership in Woodside, Queens, in New York City. “A story about used cars cannot leave out the story about new cars.”
Incidentally new car prices are now also surging, and will likely continue to rise as carmakers have said production of new vehicles this fall will continue to be constrained by a chip shortage and the spread of Covid-19 in Southeast Asia. IHS Markit slashed its vehicle production forecast for this year by 6.2%, or 5.02 million vehicles, the biggest decrease to the outlook since the chip shortage emerged. In the latest sign of fallout, on Thursday, General Motors said Thursday it is cutting production at six North American assembly plants.
Finally, even ignoring used car prices, a more ominous increase is emerging in such core inflation as shelter costs and Owner Equivalent Rent. Commenting on whether core inflation slowed or sped up in August, Bank of America economists said that the traditional measure of core CPI inflation rose just 0.1% mom in August, below the consensus (0.3%), BofA said the following:
◾The weakness was due to a bigger than expected reversal of the reopening spikes in a number of components.
◾Stripping the most volatile components of the CPI leaves a modest upward trend in “true” core inflation.
As BofA concludes, when it asks rhetorically “Is it time to break out the champagne” for team transitory, the bank responds “We don’t think so.”
The other major problem with CPI is the “homeowners rental equiv” which is 1/3 of the index has rents up just 2% y/y when in reality rents are up 15-20% y/y. Typical homeowner is simply asked what they think their place would rent for - the answer is they typically have no idea - especially in the current market. In reality, CPI is ~10% once you adjust for that.
Consumers need to ignore the “experts” and stock up on durable goods like crazy...
I was just at a fall festival where the Cadillac/Buick dealer usually displays some sharp new cars. Instead, all they had was a weird colored Buick and a used truck that was $60K. Sad.
The real story here is that our government continues to lie to us.
If we let it slide, we are doomed.
Biden murdered 13 troops with his hasty and chaotic withdrawal from Kabul. He lies by saying the intel was wrong and/or there was no other option.
Biden ordered the military to shoot anything that moves in Kabul and murders a family and a US-contracted aid worker. Biden lies and says they were ISIS-K terrorists and got what they deserved.
Hundreds of US citizens and green card holders are trapped and now being hunted down in Taliban-run Afghanistan. Biden lies and says no one was left behind and the Taliban are cooperative and professional.
Tens of thousands of illegals are showing up at and sneaking across our souther border, creating an unprecedented humanitarian crisis. Biden lies and says there’s no crisis and everyone is being treated well.
Inflation is at the highest levels in over a decade and will likely continue or worsen when the government passes a $3.5 pork-laden budget. Biden lies and says the inflation is transitory.
A few hundred Patriots gather to commemorate the murder of unarmed Ashley Babbitt on January 6 in an entirely orderly and peaceful gathering. Biden lies and says they are hordes of white supremacists hellbent on destroying the capital and overthrowing the government.
The White House sics the Justice Department on Texas for its reasonable heartbeat abortion law. Biden lies and says he is a devout Catholic.
They are lying to us every goddamn day, people.
I have three scions that I bought new (an FR-S, iA and xB first gen) as well as a 2004 silverado Z71 I bought used (I have a hilly 32 acres and need the truck). The FRS was my commuter and has 186k miles. The box has 225k miles, and the iA has 114k miles. the chevy has 115k miles.
I was going to sell the FRS because I don’t need it, but it is ridiculously reliable and it seems to have hit that point in its life that it only increases in value with each passing year. I retired three months ago and worked from home since 5/2020 so I rarely drive it. I think it’s gotten maybe 1,000 miles on it since then. It costs almost nothing to insure.
Bottom line is that it appears that we are in a time of stocking up on durable goods and using them for their intended use or as an investment for the future.
It’s getting like the old Soviet Union, where used cars are more valuable than new cars - because they actually exist.
Last fall I went into “fiddling while Rome burns” mode.
I believe in choosing my battles. The american people, as a whole, have made it very clear where they stand. I’m just along for the ride, and I’ve pretty much gotten off.
My trust is in the Lord.
Nice lineup. I’m squatting on my ‘does most everything well’ 2008 Nissan Frontier 4WD crew cab long bed bought new in 2009, has 133k.
Only thing it lacks is an extra 150 horsepower.
Heh. You got a Nissan before they became crap. Most of them, anyway... :)
I like to tell people I have three Scions: A Toyota, a Subaru and a Mazda. Those are the ACTUAL makers of the cars I have.
One of the auto manufactuers' main issues with the chip shortage is the lack of the chips used in the braking systems.
So, go back to the old way, where there were no chips? No, not those dunces.
Tesla dealt with the worldwide chip shortage first, by a software update to bypass chips that were unavailable, second, by completing all other assembly processes and waiting on the chips' arrival, and third, by making their own chips.
Yep, I’d call that a valuable fleet.
You just said what I have been trying to say.
Stolen!
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