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‘Crazy’: how the US car market operates driving prices

Last month it took Carey Cherner, a 36-year-old car dealer in Kensington, Maryland, less than 12 hours to sell a 2001 Ford F-150 truck and 184,000 times. It was $ 7,500 – 50 percent more than usual.

Cherner’s experience was not uncommon in the US used car market, with prices rising sharply. These companies are at the forefront of the global economy – which is why they are so popular with policymakers in Washington.

“There are more people buying cars than they are in the market, which makes it crazy,” Cherner said.

Unusually, regulators are looking at car prices that were used as an indicator of inflation. As prices rise and stabilize and spread to other parts of the economy, America could face a longer period of global warming for many years, causing a major problem of the US Federal Reserve and economist Joe Biden.

The price of used motor vehicles increased by 10% month-on-month in April, and was 21 percent higher than last year, making it one of the largest driving vehicles in the country. 4.2 percent The annual increase in the U.S. Bureau of Labor Statistics The sharpest drop – excluding food and energy prices – hit 3 percent.

Ernie Garcia, founder of Carvana’s online car dealership, said: “Prices are much higher than ever and are definitely moving much faster than I believe.”

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The policymakers insist that the crisis is over, and promote their view that inflation is only temporary. In a statement on Tuesday, Fed Governor Lael Brainard said that although the used vehicles were a waste of money, “it could be beyond the summer months, I hope they can disappear and return to the other side”.

But while economists agree that inflationary pressures should be temporary, they also agree that economic uncertainty is important; as the epidemic subsides in America, consumers also save money and payments to the government while the chains of trouble are disrupted by the crisis.

“We are seeing an incentive that has not been seen in the last 50 years, including other forms of financial support. This is an unknown water and we need to be humble,” said Nathan Sheets, chief financial officer at PGIM Fixed Income and former US Treasury secretary. “How can I be sure that I am right about the economic crisis? Maybe 80 percent, but that’s a very fat tail. ”

Lael Brainard, US ambassador to the US Federal Reserve, says tensions in the used car market should be reduced by the end of this year.

The rise in prices is driven by the decline in the new automotive design due to the disruption and lack of semiconductor.

In addition – surprisingly due to the economic downturn – the number of customers who have lost their car service and have had their car confiscated has dropped, cutting off other retailers such as Cherner.

The demand, meanwhile, has increased. American interests have moved away from the car as a result of the epidemic. Motivational strategies have helped them save money. And car rental companies that sold their ships when the trip crashed last year are now busy rebuilding them with old cars.

“It’s very tight right now: you need more. . . which is aided by economic attraction, which is why it is like a perfect storm. And we see this in prices, “said Laura Rosner, an economist at MacroPolicy Perspectives.

But Jonathan Smoke of Cox Automotive, an automotive consultant, noted that “a number of guidelines on what is happening in our market” suggest that “price appreciation should end”.

The price of US used cars and cars jumped 10% per month in April © Justin Sullivan / Getty

This leads economists and U.S. officials to speculate on how long it will take for prices to rise to close to the 2% target of the Fed, which allows for more shots.

Goldman Sachs predicts that high inflation will reach a peak of 3.6% year-on-year in June, down slightly to 3.5% by the end of the year and a further increase of 2.7% in 2022.

Fed officials are not only looking at head-to-head and high inflation as well as other inflationary pressures.

Consumer price chart (selected subindices, April, annual change for%) showing What is driving US inflation?

Consumer spending – the Fed’s index – rose by 3.1 percent in April, although the Dallas Fed’s cut meant the PCE index had grown by 1.8%.

The Central Bank of the United States has set up a quarter that is expected to keep inflation inflated if it moves away from its target; his next reading will take place in July. Despite these efforts, uncertainty has led to some financial and financial problems.

“All of our economic concerns have not changed, but our commitment to these ideas should be lowered,” said Lynda Schweitzer, chief of the International Monetary Fund at Loomis Sayles. “We need to consider the risks of something that could be strong.”

And in Maryland, Cherner is waiting.

“I do not see the descent into the abyss [in prices] until there will be more things than is needed, ”he said. “They still have to build new cars and give them their chips and take them out. I just think it will be so. ”

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