Surge in Used Car Prices Keeps the CPI Positive

Mish

Used car prices jumped in September.

CPI Month-Over-Month Key Points

  • The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in September on a  seasonally adjusted basis after rising 0.4 percent in August, according to the U.S. Bureau of Labor Statistics.
  • The index for used cars and trucks continued to rise sharply and accounted for most of the monthly increase in the seasonally adjusted all items index. The index for used cars and trucks rose 6.7 percent in September, its largest monthly increase since February 1969. 
  • The food index was unchanged, with an increase in 0.8 percent in September.

  • The energy index rose 0.8 percent in September as the index for natural gas increased 4.2 percent.

  • The index for all items less food and energy rose 0.2 percent in September after larger increases in July 

CPI and Core CPI Year-Over-Year 

CPI and Core CPI Year-Over-Year 2020-09

Year-Over-Year Key Details

  • Over the last 12 months, the all items index rose 1.4 percent for the 12 months ending September, a slightly larger increase than the 1.3-percent rise for the 12-month period ending August. 
  • The index for all items less food and energy rose 1.7 percent over the last 12 months, the same increase as the period ending August. 
  • The food index increased 3.9 percent over the last 12 months, while the energy index declined 7.7 percent. 

Poor Measure of Inflation

These indexes supposedly measure inflation.

They do nothing of the kind. The indexes do not include home prices, only rent.

Anyone who buys their own medical insurance will tell you their costs are up more than the reported 4.9%.

Anyone in college has not been pleased with the rising cost of tuition and rent in college towns.

And anyone with an ounce of common sense knows the current stock market bubble is a measure of inflation.

Fed Myopia

The Fed's focus on consumer inflation ignoring housing, while averaging medical costs with those on company plans and Medicare is just plain wrong.

Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

Fed Can Blame Itself

I am not blaming the Fed for the coronavirus.

However, I am blaming the Fed for its erroneous inflationary tactics that blew three of the biggest economic bubble in succession: 2000, 2007, 2020.

The Fed wants more inflation to make up for the lack of it in prior years. They are totally clueless how to measure it.

Mish

Comments (23)
No. 1-7
Jojo
Jojo

But it doesn't matter what brand of administration comes to power. The government wants low inflation numbers and they will get it no matter how they need to manipulate the underlying components.

SS increase this year is a measly 1.3%. No word yet on how much Medicare cost will increase.

AbeFroman
AbeFroman

“ Central banks’ seriously misguided attempts to defeat routine consumer price deflation”

Could it be that asset price inflation was always the objective? That our leaders knew back in the 70s that cheap labor was on the way with Nixon’s China trip and NAFTA and the maquiladoras ready to roll? If labor is around 60% or so of the retail price, that strategy would keep consumer inflation down but leave plenty of room to debase the currency, which can be great for asset prices.

Rocky Raccoon
Rocky Raccoon

We have had our Acura dealer send us letters trying to get us to sell our cars noting they have buyers who are looking for our specific models promising they can get us top dollar. The problem is we don't want to buy new and eat the depreciation combined with used cars apparently are harder to find.

Sechel
Sechel

I take it the Hertz bankruptcy is no longer impacting used car pricing??

Carl_R
Carl_R

Yes, oddly I have noticed that the value of my car has gone up this year, instead of down. That makes no sense.

Jackula
Jackula

Coronavirus has killed public transit in big cities, suddenly millions of folks need cars temporarily

davebarnes2
davebarnes2

"Anyone who buys their own medical insurance will tell you their costs are up more than the reported 4.9%."
My wife's went down in 2020 by 8%. Thanks to the socialists controlling my Colorado state government.
Costs are expected to decline in 2021 by 1% or increase by 2% depending upon which news story you read.