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House prices in the largest markets have gone nuts amid “extrapolative expectations and speculative behavior,” as the Bank of Canada put it.

The first thing to know about the housing bubble in Canada is what the Bank of Canada has been doing, after its furious bout of QE: In October last year, it tapered purchases of Government of Canada bonds by one notch and also ended buying mortgage-backed securities. In March, it started unwinding its liquidity facilities, citing “moral hazard” as reason. In April, it tapered by another notch its purchases of Government of Canada bonds, citing “signs of extrapolative expectations and speculative behavior” in the housing market.

The assets on its balance sheet have now dropped from C$575 billion in March, to C$478 billion as of May 12:

House prices have truly gone nuts.

In the Greater Toronto Area (GTA), house prices spiked by 3.0% in April from March, and by 12.3% year-over-year, and have nearly tripled over the past 15 years, according to the Teranet-National Bank House Price Index today.

The index tracks prices of single-family houses through “sales pairs,” similar to the Case-Shiller Home Price Index in the US, comparing the price of a house that sold in the current month to the price of the same house when it sold previously, often years earlier. By tracking how many more Canadian dollars it takes to buy the same house over time, the index is a measure of house price inflation.

In Greater Vancouver, house prices jumped by 2.0% in April from March and are up 9.4% year-over-year. The Bank of Canada’s pandemic magic has completely turned around the housing bust that had started in mid-2018. The index has more than tripled in 15 years:

…click on the above link to read the rest of the article…

Spiking Inflation, Rate Hikes, and Debt Defaults in Latin America

May 16, 2021

Spiking Inflation, Rate Hikes, and Debt Defaults in Latin America

Mexico and Brazil, having seen the economic destruction that high inflation can wreak, don’t want to see it again.

Latin America will soon be hit by a wave of business bankruptcies and defaults, according to Jesús Urdangaray López, the CEO of CESCE, Spain’s biggest provider of export finance and insurance. CESCE insures companies, mainly from Spain, against the risk of their customers not paying due to bankruptcy or insolvency. It also manages export credit insurance on behalf of the Spanish State.

CESCE’s biggest clients are large Spanish companies with big operations in Latin America. For many of those companies, including Spain’s two largest banks, Grupo Santander and BBVA, Latin America is its biggest market. CESCE’s three biggest shareholders are the Spanish State and, yes, Spain’s two largest banks, Grupo Santander and BBVA.

BBVA, which is heavily invested in Argentina, warned about the worsening situation in the country. If Argentina’s economy continues its inflationary spiral, it could end up affecting BBVA’s overall performance and financial health, the Spanish bank said.

Argentina’s government is once again trying to restructure its foreign-currency debt with the IMF, having already defaulted on the debt once since the virus crisis began.

Ecuador was first to default on its foreign currency debt, followed by Argentina, then Surinam, Belize, and Surinam twice more — six sovereign defaults so far in 13 months.

Latin America has been hard hit by the virus crisis. But the region’s cash-strapped governments with weak currencies and surging inflation cannot afford to provide the sort of financial support programs being rolled out in more advanced economies. Fiscal response has added just 28 cents of extra deficit spending for every dollar of lost output…

…click on the above link to read the rest of the article…

It’s Getting Serious: Dollar’s Purchasing Power Plunges Most since 2007. But it’s a Lot Worse than it Appears

May 13, 2021

It’s Getting Serious: Dollar’s Purchasing Power Plunges Most since 2007. But it’s a Lot Worse than it Appears

Fed officials, economists “surprised” by surge in CPI inflation, but we’ve seen it for months, including “scary-crazy” inflation in some corners.

The Consumer Price Index jumped 0.8% in April from March, after having jumped 0.6% in March from February – both the sharpest month-to-month jumps since 2009 – and after having jumped 0.4% in February, according to the Bureau of Labor Statistics today. For the three months combined, CPI has jumped by 1.7%, or by 7.0% “annualized.” So that’s what we’re looking at: 7% CPI inflation and accelerating.

Consumer price inflation is the politically correct way of saying the consumer dollar – everything denominated in dollars for consumers, such as their labor – is losing purchasing power. And the purchasing power of the “consumer dollar” plunged by 1.1% in April from March, or 12% “annualized,” according to BLS data. From record low to record low. Over the past three months, the purchasing power of the consumer dollars has plunged by 2.1%, the biggest three-month drop since 2007. “Annualized,” over those three months, the purchasing power of the dollar dropped at an annual rate of 8.4%:

Folks in the business of dealing with inflation, such as economists and Fed officials, such as Fed Vice Chairman Richard Clarida, came out this morning in droves and said they were “surprised” by the red-hot CPI inflation.

There was nothing to be surprised about. We have been documenting red-hot inflation boiling beneath the surface for months, with “scary-crazy inflation” in used vehicles and in commodities, such as lumber, and surging factory input costs that are getting passed on because the entire inflation mindset has now changed.

…click on the above link to read the rest of the article…

Consumers Expect Surging Inflation to Crush the Purchasing Power of their Labor: Fed’s Survey

May 11, 2021

Consumers Expect Surging Inflation to Crush the Purchasing Power of their Labor: Fed’s Survey

And there are some whoppers.

Consumers are picking up on the rise of inflation, and the Fed, which has been trying to heat up inflation, is pleased. The Fed watches “inflation expectations” carefully. The minutes from the March FOMC meeting mention “inflation expectations” 12 times.

The New York Fed’s Survey of Consumer Expectations for April, released today, showed that median inflation expectations for one year from now rose to 3.4%, matching the prior highs in 2013 (the surveys began in June 2013).

But wait… the median earnings growth expectations 12 months from now was only 2.1%, and remains near the low end of the spectrum, a sign that consumers are grappling with consumer price inflation outrunning earnings growth. The whoppers were in the major specific categories.

The whoppers.

So even as consumers expect their earnings to grow by only 2.1% over the next 12 months, and their total household income by only 2.4%, according to the survey, they expect to face these whoppers of price increases:

Home prices: +5.5%, a new high in the data series
Rent: +9.5%, fifth month in a row of increases and new high in the data series
Food prices: +5.8%
Gasoline prices: +9.2%
Healthcare costs: +9.1%
College education: +5.9%.

Sadly, the Fed doesn’t ask consumers about their expectations for new and used vehicle prices, which are now in the process of spiraling into the stratosphere. It would have been amusing to see what consumers expect those prices to do over the next 12 months.

So consumers expect to pay for these price increases with their earnings that they expect to increase at only a fraction of those price increases. In other words, consumers expect that the purchasing power of their labor will be crushed over the next 12 months.

…click on the above link to read the rest of the article…

Bank of England Now 2nd Central Bank to Taper, After Canada, but Denies Tapering is “Tapering,” also Following Canada

May 7, 2021

Bank of England Now 2nd Central Bank to Taper, After Canada, but Denies Tapering is “Tapering,” also Following Canada

The Big Taper starts one central bank at a time. But you gotta keep the markets from swooning with a bit of welcome delusion.

The Bank of England’s Monetary Policy Committee (MPC) today announced that it voted unanimously to maintain its policy rate at 0.1%. But in terms of its asset purchases, it took the trail the Bank of Canada blazed last November and then widened in April: tapering.

The BoE announced that the blistering pace of its asset purchases would be “slowed somewhat” – tapering the bond purchases from £4.4 billion a week to £3.4 billion a week – but that this tapering was an “operational decision” that “should not be interpreted as a change in the stance of monetary policy.”

This “is not a tapering decision,” emphasized BoE governor Andrew Bailey during the press conference. The reason this tapering is not “a tapering decision,” he said, is because the BoE left its target for the final level of QE assets unchanged.

Unlike the Fed, the BoE doesn’t have an open-ended QE, but had set a target of bringing its holdings of UK government bonds to £875 billion and its holdings of corporate bonds to £20 billion, for a combined target of £895 billion. And at the meeting, the BoE didn’t change these “fixed amounts,” as Bailey put it.

Obviously, denying that tapering is tapering was designed to mollify the markets with a welcome dose of delusion, and it worked: the UK’s stock index FTSE 100 rose 0.5% for the day.

However, when the members voted on maintaining the target of £895 billion, it wasn’t unanimous, with eight members voting for maintaining it, and one member, outgoing chief economist Andy Haldane, voting to lower it by £50 billion, to £845 billion.

…click on the above link to read the rest of the article…

Lumber: Scary-Crazy Inflation Now Gets Passed On. But These WTF Price Spikes Cannot Last

May 6, 2021

Lumber: Scary-Crazy Inflation Now Gets Passed On. But These WTF Price Spikes Cannot Last

Irrational behavior by buyers confidently betting on being able to pass on that irrationality to their customers. It works until it doesn’t.

Lumber futures on Chicago Mercantile Exchange currently trade at a record high of $1,610 per thousand board feet, having quadrupled since February 2020, just before the Pandemic, a sign of scary-crazy inflation amid suddenly blistering demand from builders, insufficient supply to meet that sudden surge in demand, growing lead times, and irrational behavior by buyers betting on being able to pass on that irrationality via higher prices to their customers (chart via Trading Economics):

Here’s another boots-on-the-ground observation being passed around about this scary-crazy inflation, triggering irrational behavior by buyers betting on being able to pass on that irrational behavior to their customers.

And these are the pros, not consumers.

A local electrician with a shop in Idaho near Moscow (where the University of Idaho is) was talking with one of the house builders he does work for. And this is the story he passed on to WOLF STREET:

“Moscow Building Supply (MBS) is the big building wholesaler in Latah County – last summer, you could buy a sheet of OSB [Oriented Strand Board, a type of plywood] at about $12 a sheet (4×8). Last week, $50 a sheet.

“A couple days ago, MBS got a truck load of OSB. A big home builder in Spokane drove down to MSB and bought the entire truck load – even before it was unloaded – for $80 a sheet.

“The next load is scheduled in two weeks. MBS is now telling customers to expect to pay $105 a sheet.

“Also plastic piping, such as 3-inch PVC pipe, commonly used by electricians as conduit. Last fall, my son paid 12 cents a foot. Now it is going for $5 a foot.

…click on the above link to read the rest of the article…

Inflation Jumped by 3.8% in Q1, “Real GDP” Rose 1.6%, Dragged Down by Record Trade Deficit and Drop in Inventories

May 1, 2021

Inflation Jumped by 3.8% in Q1, “Real GDP” Rose 1.6%, Dragged Down by Record Trade Deficit and Drop in Inventories

Even the Fed’s repressed inflation measure without food and energy rose 2.3% annual rate in Q1.

The US economy, as measured by inflation-adjusted GDP, grew by 1.6% in the first quarter from Q4 2020, according to the advance estimate of the Bureau of Economic Analysis this morning.

If you read in the headline that it grew by “6.4%,” that sounded impressive, but it was “annualized”; it essentially multiplied the quarterly growth rate (1.6%) by 4. There are not many countries outside the US, if any, that report “annualized” GDP growth rates, because they’re really just misleading for normal people.

GDP inflation jumped by 3.8%, PCE inflation by 3.5%.

The BEA’s broadest inflation measure, the price index that roughly parallels the inflation adjustment to GDP (the “price index for gross domestic purchases”), jumped by 3.8% annual rate in Q1, more than double the rate of 1.7% in Q4.

The BEA’s narrower PCE (“personal consumption expenditure”) price index jumped by 3.5% annual rate in Q1.

And the BEA’s price index that has become the Fed’s measure for inflation, “core PCE” (PCE without food and energy) rose by 2.3% annual rate, tracking above the Fed’s former target of 2.0%. “Former target” because now the Fed is looking for inflation above 2%.

GDP in dollars.

In dollar terms, real GDP in Q1 amounted to a “seasonally adjusted annual rate” of $19.09 trillion. This was still down about 0.9% from the peak in Q4 2019 – catching up:

Consumer spending rose 2.6% from the prior quarter, to an annual rate of $13.3 trillion in “chained 2012 dollars” (to adjust for inflation), a tad below the peak in Q4 2019.

This jump was powered by the $600 stimmies that went out in late December and the first waves of the $1,400 stimmies that went out in the latter part of March. In Q1, consumer spending accounted for 69.7% of GDP:

…click on the above link to read the rest of the article…

The Taper Next Door: Bank of Canada Cuts Bond Purchases by 25%. Total Assets Drop by 13%. Rate Hikes Moved Forward, Possibly July 2022

April 25, 2021

The Taper Next Door: Bank of Canada Cuts Bond Purchases by 25%. Total Assets Drop by 13%. Rate Hikes Moved Forward, Possibly July 2022

Housing craziness is front and center.

The Bank of Canada, which already holds over 40% of all outstanding Government of Canada (GoC) bonds – compared to the Fed, which holds less than 18% of all outstanding US Treasury securities – announced today that it would reduce by one-quarter the amount of GoC bonds it adds to its pile, from C$4 billion per week currently, to C$3 billion per week beginning April 26.

In its statement, it pointed at the craziness in the Canadian housing market – “we are seeing some signs of extrapolative expectations and speculative behavior,” it said.

Back in October, the BoC made the first reduction, tapering purchases of GoC bonds from C$5 billion per week to C$4 billion, and it had stopped adding mortgage-backed securities, of which it had never bought many to begin with.

In March, the BoC announced that it would unwind its liquidity facilities, thereby reducing its total assets by about 17%, from C$575 billion at the time, to C$475 billion by the end of April. And this has progressed as planned.

The BoC cited “moral hazard” associated with this central bank craziness as one of the reasons for the unwinding of its liquidity facilities, what are now mostly repurchase agreements (repos) and short-term Government of Canada Treasury bills. Its total assets dropped by 13% over the past month, to C$501 billion on its most recent balance sheet through the week April 14:

The total amount of the assets has declined because the BoC is unwinding its liquidity facilities. The largest remaining categories are the term repos and the short-term Treasury bills. As they mature, the BoC gets its money back, but doesn’t replace those securities, and the balance declines…

…click on the above link to read the rest of the article…

Get Ready for a Wild “Base Effect”: Highlighted Forcefully when it Suits Them, as with Inflation; Silenced Forcefully When it’s Awkward, as with Corporate Earnings

April 12, 2021

Get Ready for a Wild “Base Effect”: Highlighted Forcefully when it Suits Them, as with Inflation; Silenced Forcefully When it’s Awkward, as with Corporate Earnings

We’re going to be awash in huge and even absurd percentage-growth numbers.

The numbers are starting to crop up everywhere: For example, new vehicle sales in March jumped nearly 60% from March a year ago. But last March was the beginning of the lockdowns. Compared to two years ago, March 2019, new vehicle sales were down 1.2%. In the first quarter, new vehicle sales were up 11% year-over-year, but were down 2.9% from Q1 2019.

Today, the New York Fed released its latest Weekly Economic Index (WEI), one of the high-frequency measures that came out of the crisis. The index is based on ten daily and weekly indicators of real economic activity, compared to the same time last year, and is scaled to line up with year-over-year GDP growth. Last year, it fairly accurately predicted GDP growth, I mean plunge.

In Q1 2020, GDP had dropped sharply, and in Q2 2020, it plunged. The year-over-year growth rate of the upcoming GDP report compares the dollar GDP in Q1 2021 to that of Q1 2020. Given the sharply lower dollar GDP in Q1 2020, and the plunge in Q2 2020, the year-over-year growth rates for Q1 and Q2 this year will be massive, even as GDP in dollars will likely remain below where it had been in Q4 2019. But these are the kinds of year-over-year percentage spikes we’re going to see, even as dollar figures have not reached back to 2019 levels:

Another example, to dip into absurdity: The TSA reports daily checkpoint screenings, a measure of how many people entered into airports. Airlines were essentially shutting down last April and the number of passengers collapsed by over 90%, to just a trickle. Compared to 2019, the current 7-day moving average of daily checkpoint screenings is still down 37%, but compared to a year ago, it spiked by 1,168%.

…click on the above link to read the rest of the article…

Bank of Canada Now Owns 40% of Government of Canada Bonds. Fed a Saint in Comparison. Taper on the Table

April 7, 2021

Bank of Canada Now Owns 40% of Government of Canada Bonds. Fed a Saint in Comparison. Taper on the Table

“Makes you wonder if there’s a potential mid-QE-life crisis taking shape in Ottawa”: strategists at the National Bank of Canada in a note that would be hilarious if it weren’t so serious.

The Economics and Strategy shop at the National Bank of Canada, the country’s sixth largest bank, sent a missive to clients today that would be hilarious if it weren’t pointing at such a serious and massive issue: It celebrated “40,” referencing a 40th birthday, but instead of a birthday, it referred to the Bank of Canada’s ballooning holdings of Government of Canada (GoC) bonds, which will hit a stunning 40% of all GoC bonds outstanding this Friday.

By comparison, the Fed holds 17.6% of all Treasury securities outstanding: It holds $4.94 trillion in Treasury securities, of $28.1 Trillion outstanding. We – that’s the universal “we,” meaning “a few of us” – complain about the Fed’s crazy buying of Treasury securities and all the distortion and craziness this causes. But compared to the Bank of Canada, the Fed looks like a saint.

The Bank of Canada announced a couple of weeks ago, citing “moral hazard” associated with its central bank nuttiness, that it would unwind its crisis liquidity facilities, and that this would reduce its total assets by about C$100 billion, or by about 17%, from C$575 billion at the time, to C$475 billion by the end of April. In October, it had started a mini-tapering of its purchases of GoC bonds and is jabbering about tapering its GoC bond purchases further. And its total assets have started to drop over the past two weeks:

…click on the above link to read the rest of the article…

wolf richter, wolfstreet, bank of canada, liquidity, qe, quantitative easing

Prices Surge Broadly Across the Massive Service Sector and Companies Are Able to Pass On these Higher Prices

April 6, 2021

Prices Surge Broadly Across the Massive Service Sector and Companies Are Able to Pass On these Higher Prices

The entire mindset has changed.

Services are about two-thirds of the economy. During the Pandemic, discretionary services such as travel and entertainment have been hard hit, and consumer spending on services in February was still down 5.2% from a year ago. But the services sector is enormous, ranging from healthcare to tech, and demand has been strong in many segments, and is coming back in others. Amid backlogs and shortages, input prices are soaring and companies are able to pass on those higher prices. The Fed might refuse to acknowledge it, but everyone else is seeing it.

“The biggest concern is inflation, with price gauges hitting new survey highs in March as demand often exceeded supply for a wide variety of goods and services,” reported IHS Markit in its Services PMI today.

“On the price front, input costs soared in March. The rate of inflation accelerated to the fastest since data collection for the services survey began in October 2009,” the report said.

“Subsequently, firms sought to pass on higher costs to clients through a sharper rise in selling prices,” the report said.

“A number of companies also stated that stronger client demand allowed a greater proportion of the hike in costs to be passed through. The resulting rate of charge inflation was the quickest on record,” the report said.

These types of price pressures in the services sector were also reported today by the Institute of Supply Management’s broad ISM Services Report on Business, whose index for prices paid for materials and services increased in March at the steepest rate since 2008.

…click on the above link to read the rest of the article…

wolfstreet, wolf richter, inflation, consumer prices

QE During the “Everything Mania”: Fed’s Assets at $7.7 Trillion, up $3.5 Trillion in 13 months

April 3, 2021

QE During the “Everything Mania”: Fed’s Assets at $7.7 Trillion, up $3.5 Trillion in 13 months

But long-term Treasury yields have surged, to the great consternation of our Wall Street Crybabies.

The Fed has shut down or put on ice nearly the entire alphabet soup of bailout programs designed to prop up the markets during their tantrum a year ago, including the Special Purpose Vehicles (SPVs) that bought corporate bonds, corporate bond ETFs, commercial mortgage-backed securities, asset-backed securities, municipal bonds, etc. Its repos faded into nothing last summer. And foreign central bank dollar swaps have nearly zeroed out.

What the Fed is still buying are large amounts of Treasury securities and residential MBS, though no one can figure out why the Fed is still buying them, given the crazy Everything Mania in the markets.

But for the week, total assets on the Fed’s weekly balance sheet through Wednesday, March 31, fell by $31 billion from the record level in the prior week, to $7.69 trillion. Over the past 13 months of this miracle money-printing show, the Fed has added $3.5 trillion in assets to its balance sheet:

One of the purposes of QE is to force down long-term interest rates and long-term mortgage rates. But long-term Treasury yields started rising last summer. The 10-year Treasury has more than tripled since then and closed today at 1.72%. Mortgage rates started rising in early January. Bond prices fall as yields rise, and the crybabies on Wall Street want the Fed to do something about those rising long-term yields and the bloodbath they have created in the prices of long-term Treasury securities and high-grade corporate bonds.

But instead, the Fed has said in monotonous uniformity that rising long-term yields despite $120 billion of QE a month are a welcome sign of rising inflation expectations and a growing economy:

…click on the above link to read the rest of the article…

wolf richter, wolfstreet, qe, quantitative easing, money printing, credit expansion, fed, us federal reserve, central bank, interest rates, wall street

US Dollar’s Status as Dominant “Global Reserve Currency” Drops to 25-Year Low

April 1, 2021

US Dollar’s Status as Dominant “Global Reserve Currency” Drops to 25-Year Low

Central banks getting nervous about the Fed’s drunken Money Printing and the US Government’s gigantic debt? But still leery of the Chinese renminbi.

The global share of US-dollar-denominated exchange reserves dropped to 59.0% in the fourth quarter, according to the IMF’s COFER data released today. This matched the 25-year low of 1995. These foreign exchange reserves are Treasury securities, US corporate bonds, US mortgage-backed securities, US Commercial Mortgage Backed Securities, etc. held by foreign central banks.

Since 2014, the dollar’s share has dropped by 7 full percentage points, from 66% to 59%, on average 1 percentage point per year. At this rate, the dollar’s share would fall below 50% over the next decade:

Not included in global foreign exchange reserves are the Fed’s own holdings of dollar-denominated assets, its $4.9 trillion in Treasury securities and $2.2 trillion in mortgage-backed securities, that it amassed as part of its QE.

The US dollar’s status as the dominant global reserve currency is a crucial enabler for the US government to keep ballooning its public debt, and for Corporate America’s relentless efforts to create the vast trade deficits by offshoring production to cheap countries, most prominently China and Mexico. They’re all counting on the willingness of other central banks to hold large amounts of dollar-denominated debt.

But it seems, central banks have been getting just a tad nervous and want to diversify their holdings – but ever so slowly, and not all of a sudden, given the magnitude of this thing, which, if mishandled, could blow over everyone’s house of cards.

20 years of decline.

…click on the above link to read the rest of the article…

wolfstreet, wolf richter, us dollar, world reserve currency, central banks, money printing, fed, us federal reserve, money, us debt, debt, united states

Archegos Implosion is a Sign of Massive Stock Market Leverage that Stays Hidden until it Blows Up and Hits the Banks

March 29, 2021

Archegos Implosion is a Sign of Massive Stock Market Leverage that Stays Hidden until it Blows Up and Hits the Banks

Banks, as prime brokers and counterparties to the hedge fund, are eating multi-billion-dollar losses as they try to get out of these secretive stock derivative positions.

The implosion of an undisclosed hedge fund, now widely reported to be Archegos Capital Management, is hitting the stocks of banks that served as prime brokers to the fund. The highly leveraged derivative positions, based on stocks, had blown up spectacularly. Banks get into these risky leveraged deals because they generate enormous amounts of profit – until they blow up and banks get hit as counterparties.

Credit Suisse [CS] is down 13% at the moment in US trading after it warned this morning that “a significant US-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks,” and that it and “a number of other banks are in the process of exiting these positions,” and that the loss resulting from this exit “could be highly significant and material to our first quarter results.” The bank deemed it “premature to quantify” the loss.

Nomura Holdings [NMR] is down 14% at the moment in US trading after it warned this morning that “an event occurred that could subject one of its US subsidiaries to a significant loss arising from transactions with a US client.” It estimated the loss from this one client at “approximately $2 billion, based on market prices as of March 26.”

As Credit Suisse pointed out, “a number of other banks” are also involved as counterparties to that one unnamed hedge fund, and have been trying to get out of these positions since last week.

…click on the above link to read the rest of the article…

financial markets, archegos, wolf richter, wolfstreet, stock market leverage, credit suisse, banks, nomura

What’s Behind the Stunning Spike in Used Vehicle Auction Prices? That Consumers Aren’t on Buyers Strike Shows Something Big about Inflation Has Changed

March 29, 2021

What’s Behind the Stunning Spike in Used Vehicle Auction Prices? That Consumers Aren’t on Buyers Strike Shows Something Big about Inflation Has Changed

Need a used pickup truck? Forget it, or pay out of your nose for it. But even spurned mid-sized cars are seeing stunning price increases.

Prices of used cars and trucks of up to eight years old that were sold at wholesale auctions during the week ended March 21 jumped by 3.1% from the prior week, according to data by J.D. Power on Friday. Over the past four weeks, prices have spiked by 8.3%. Compared to early March 2020, just before the end of the Good Times, prices have spiked by 19.5%:

When you talk to dealers that came back from auctions to buy vehicles to replenish their inventories, they tell you with an exasperated voice about prices being bid up to ridiculous levels, particularly on trucks. But they’re in the business of buying and selling vehicles, and they have to replenish their inventory, and so they’re buying, and in order to buy, they have to bid up prices, and they’re planning to pass those ridiculous prices plus adequate profits on to their customers.

And in a big change with past practice, the astute American consumer that haggled and shopped to get the best deal has not been resisting the price increases that started last year — but has been paying them.

Manheim, the largest wholesale auto auction operator and a unit of Cox Automotive, reported in its mid-month update that wholesale vehicle prices mid-March had jumped by 3.75% from February, based on its Used Vehicle Value Index (adjusted for mix, mileage, and seasonal factors).

The index is now 22.3% higher than in February 2020, before all heck broke loose, the largest 13-month increase in the data going back to 1998, beating the 13-month surge of 20% in 2010, following the cash-for-clunkers program that had taken a whole generation of serviceable older used vehicles off the market:

…click on the above link to read the rest of the article…

wolf richter, used vehicle prices, inflation, wolfstreet,

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