Two GM plants making full-sized pick-up trucks in the U.S. are quiet again in the week ahead. A third assembly plant in Mexico also is shut down for the week. It’s not for lack of demand for Silverado 1500s and GMC Sierra 1500s. It’s because of a shortage of one of the smallest parts in these big machines: semiconductors.
Idling these plants despite consumer demand for their trucks is just one contributor to inflation. Fewer new trucks rolling off the line means buyers have scooped up used trucks. And more buyers of used trucks have pushed up prices. A lot.
The average asking price for a used vehicle topped $25,000 in late June for the first time. That was up 25 percent from a year earlier, according to auto inventory software firm vAuto. New vehicle prices also hit a record high in June rising over 6 percent to more than $42,000.
Vehicle prices are a driving force behind the headline inflation number right now. And consistently high inflation not only is a speed bump for investors, but a speed limit on the economy.
Since the spring, inflation has been running hotter than what the Federal Reserve would like to see. However, the central bank and the stock and bond markets are convinced this higher-than-desired inflation is temporary. “If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we’d be prepared to adjust the stance of policy,” Federal Reserve Chairman Jay Powell said on July 28, while the agency made no change to its monetary strategy.
The June Consumer Price Index jumped 5.4 percent from a year earlier — the largest 12-month increase in 13 years. Stripping out volatile, but normal price movements of food, energy and homes, and removing the price changes of new and used vehicles results in a less concerning, but still higher than desired inflation increase of 3.6 percent from a year ago.
July CPI data will be released Wednesday. Prices will continue rising. Investors will be looking to see if inflation is turning and slowing, or if the acceleration continues — and what’s fueling it.
