Wholesale used car prices rise, indicating higher inflation

One of Wall Street’s most watched leading inflation indicators has hit an all-time high, a sign that the upward pressure on prices could...


One of Wall Street’s most watched leading inflation indicators has hit an all-time high, a sign that the upward pressure on prices could last for months.

The prices dealers pay for used cars in the wholesale market jumped 5.3% from August to September, according to Manheim used vehicle value index. It is up 27.1% from last year.

Used car prices have skyrocketed since the pandemic hit, when production growls among automakers reduced the supply of new vehicles as many Americans moved from urban centers to the suburbs, increasing demand for personal vehicles.

While used car prices are normally a tiny contributor to the overall movement of the Consumer Price Index, a general measure of inflation, they have become a key influence on the direction of prices.

Analysts hoping to get a good read on the direction of inflation have taken note of the predictive power of the Manheim Index. As a wholesale price index, it offers a snapshot of the price changes that consumers will see around two months later, once the resellers pass their costs on to the buyers of the lot.

The movement of the Manheim index this summer suggested that consumer prices for used cars will cool, which could mean that overall price increases will be moderate. But the latest reading suggested that demand and prices for used cars had rebounded as problems with the production of computer chips continued to hamper the production of new cars. Recent storms, which potentially flooded hundreds of thousands of cars, have also contributed to demand.

“The problem of new vehicle production got worse instead of better in the third quarter,” wrote Jonathan Smoke, chief economist of Beetle Automotive, the company that produces the index. “The used inventory problems were further exacerbated by the damage to vehicles caused by Hurricane Ida in late August, putting pressure on an already historically strained market.”

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Newsrust - US Top News: Wholesale used car prices rise, indicating higher inflation
Wholesale used car prices rise, indicating higher inflation
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