Used vehicle auction prices have bounced for the third month after last year’s decline. Causing More Trouble for the “Core” CPI

Retail supplies of used cars and trucks declined for the second month in a row. Dealers increase prices to replenish their inventory.

By wolf richter For wolf street,

More trouble is brewing beneath the surface for inflation. Wholesale prices for used vehicles at auction rose 4.3% in January to February, seasonally adjusted, the largest month-to-month jump for any February since 2009, and the third month in a row, all With huge price increases across eight vehicle segments, according to Mannheim, the largest auto auction house in the US and a unit of Cox Automotive, Not seasonally adjusted, wholesale prices jumped 3.7% to $20,652, increasing for the second month in a row.

Both metrics of wholesale prices are adjusted for changes in mix and mileage. These auction prices show that dealers have to pay more to replenish their inventory. And they’re going to try to pass on the increased costs to their retail customers.

The Consumer Price Index for used vehicles typically reflects retail price changes within two to three months:

Month-to-month price increases from January to February:

  • Seasonally adjusted: +4.3% (after +2.5% in January; +0.8% in December).
  • Not seasonally adjusted: +3.7%, (after +1.5% in January).
  • All eight vehicle segments saw a major increase in prices ranging between 3.3% and 5.9%.
  • Rental vehicles sold by fleet at auction: +5.0% (after +2.8% in January).
  • Three-year index: +2.4% (after +1.2% in January).
  • Mannheim said these prices were “not typical” for February.

Year-on-year drop in prices reduced -5.6%, not seasonally adjusted, from a peak-decline of -13.1% in December. Rental risk units were up 0.5% year-over-year, after big month-over-month jumps in January and February.

sellers had more pricing power Compared to what’s typically seen this time of year: The average daily sales conversion rate rose from 59.4% in January to 64.3% in February, both well above normal for this time of year.

Retail sales of used vehicles have declined Up 5% month-over-month and 9% year-over-year on a same-store basis, according to early estimates based on data from DealerTrack, a service of Cox Automotive. This comes after a jump in sales (+16% month-on-month and +5% year-on-year) in January, which pushed down the supply of vehicles.

wholesale supplies fell 24 days at the end of February, 26 days in January, 32 days in December and 29 days in February a year ago.

Retail supplies fell on dealers That’s up for the second month in a row, up to 41 days through the end of February, down from 48 days in January and 57 days in December, based on data from vAuto, a service from Cox Automotive. This dwindling supply explains why dealers were more eager to buy at auction – to replenish their inventory for the spring selling season – and they bid up prices in the process.

Two consecutive months of supply declines in the spring selling season (tax refund season) suggest that there will be more pricing pressure going forward:

When will the jump in wholesale prices be reflected in the CPI?

The consumer price index for used vehicles peaked in January 2022 and then declined, falling 11.6% by January 2023. The CPI for February will be released next week. With a typical lag of about two to three months from wholesale prices, I would expect the CPI for used vehicles to slow or stop its month-to-month decline at that point, and the first increase in the CPI to continue in mid-April. will start showing. ,

The used vehicle CPI is a large component of the “core” CPI (the CPI without food and energy). And a big drop in used vehicle prices in 2022 helped hold back the core CPI. But we are now seeing, for the second month in a row this year, a renewed inflation problem brewing under the surface – and we will see it bubble to the surface very soon.

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