Used Car Prices Pop Up Unexpectedly, Suggesting Inflation Woes Not Over
The unexpected jump in used car prices in January suggests that they are likely to rise further in the future.https://www.theepochtimes.com/t-inflation”>inflation Car buyers are still in trouble
As the Federal Reserve continues to raise interest rates, the news may discredit optimistic predictions of a falling inflation rate.
Used car prices have increasingly become a point of interest for investors and for the Biden administration as a barometer for measuring and easing inflation.
The White House blamed much of the rising inflation rates in the country in the first half of 2022 on the used vehicle market.
The Leading Inflation Indicator is Used Cars
The Consumer Price Index (CPI), which covers 4.5 percent of the survey, uses used car prices to determine the direction of change.
The recent fall in inflation was largely caused by goods. Therefore, central-bank officials have shifted their attention to the service sector.
The latest strong jobs report has led many analysts to reassess their outlook on future inflation.
Fed policymakers are concerned that a tight labor market will continue to put upward pressure on wages, and inflation.
The CPI shows that Prices for used cars have fallen over the last six months, complementing the Fed’s interest rate policy strategy.
Car Market remains volatile since Pandemic
Used vehicle prices have risen since the start of the pandemic, as a combination of lockdowns, and supply chain issues caused the production of new vehicles to drop.
The low supply of new vehicles and record-high purchasing costs, along with resilient demand, pushed consumers into the used vehicle market, leading to a price increase in that sector.
According to the Associated Press, January saw an unexpected rise in vehicle demand. This was responsible for the largest increase in wholesale vehicle costs since late 2021. Cox Automotive February 7.
Meanwhile, the automotive data firm’s Manheim Used Vehicle Value Index The January inflation rate dropped 12.8 percent from the inflated levels of a year ago, but it rose 2.5 percent from December 2022.
The Manheim index tracks the price of used vehicles sold at its U.S. wholesale auctions, which are often a bellwether for the new-car market.
According to Cox the larger-than-expected December 2022 rise was due in part to unseasonably strong demand. This was the largest monthly increase since the 3.9 per cent increase from November 2021 to October 2022.
The index, however, posted a Annual decline of nearly 15% In 2022, buyers resisted purchasing used vehicles because of record-high borrowing rates and rising prices.
Stephen Scherr, CEO of Hertz, said the company witnessed a big jump in prices over the past five weeks, both at auctions and in used cars sold at retail.
“The snap back over the last four weeks has been more pronounced,” Scherr stated in an interview that he noted “there is clear stability and more of an uptick.”
The End of the Year: Expected Fall in Wholesale Car Prices
Partly, the rebound in prices was due to consumers returning to market after prices fell from peak levels.
According to Manheim, used-vehicle sales increased 16 percent over December 2022 and grew 5 percent from one year ago.
Cox reported that the median listed price for a cigarette was a Used vehicle cost $27,143 In December 2022, the rate of decline was almost 4 percent compared to a year ago.
Cox stated that January’s used vehicle market was close to pre-pandemic levels. Inventory levels remained stable, and prices were dipping from record highs.
Changes in wholesale prices are often reflected in retail prices.
According to the Manheim Index, wholesale car prices will fall by 4.3 per cent by the end 2022.
The news might give consumers hope that dealers and carmakers will begin to discount vehicles, which are currently at their highest price in years.
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