• Food prices increased around 20% from 2021 through 2023 and have changed little since. This applies both to the cereal and bakery products index and the food at home index.
• After soaring as much as 40% in the wake of the pandemic, the price of used cars and trucks have declined since late 2022.
• In the last few months new cars also dropped into negative inflation territory.
• Inflation for durable and non-durable goods has cooled significantly since the 2022 peak with durable goods in negative territory since 2023.
• In all states across the country, the change in median income required to buy a home soared from 2019 – 2023 usually in multiples of the change from 2014 – 2018. California of course tops the list: 2% from 2014 to 2018 vs 18.8% from 2019 to 2023.
• Overall hourly wages have lagged inflation since 2021.

The article also presents some stark economic realities starting with this contrast between how people feel about their own economic circumstances versus that of the country as a whole: “In the Fed’s 2023 Survey of Household Economics and Decisionmaking, the share of those saying they were doing ‘at least okay’ remained over 70%, lower than the 78% peak hit in 2021, but roughly where it was before the pandemic. By contrast, a dismal 22% rated the national economy ‘good’ or ‘excellent’.”

Additionally, there are important shifts in measurements of well-being:

• There is unsurprisingly a direct inverse correlation between income and the share of households self-reporting difficulty in meeting expenses. However, this share has trended upward since late 2020 for households making at least $100,000. Households below that income level have generally self-reported small improvements in the past three and a half years.
• Through the end of 2023, inflation-adjusted net wealth of Black households has fallen below levels from the start of 2019.

These data paint a picture of an economy where inflation still weighs on the minds of Americans even as certain inflation pain points have come under control. Given this environment, it is no surprise that the Fed has slow-rolled expectations for rate cuts. However, with the market now pricing in near certainty for a rate cut in September, the Fed may finally be forced to take the plunge and test out inflation expectations.

A Trade on TLT

Since 2021, the core CPI (the consumer price index) has taken the escalator up and the stairs down. Seemingly in expectation of little additional improvement in inflation, long-term bond yields seem to be settling into rangebound trading. Accordingly, I drew new presumed trendlines for the iShares 20+ Year Treasury Bond ETF (TLT) to adjust my trading rules for fading TLT.

Prior to the June 3rd breakout for TLT, I cound consistently fade TLT from the top of a downward trading channel (the dashed blue line). After the breakout, I faded TLT rallies with an expectation of tests of the previous downward channel as support. The soft CPI print for June that drove September rate cut expectations makes me think a new sideways trend is unfolding. The chart below has horizontal black lines that represent the tension and tug and pull between a slow cooling in inflation and the potential stimulative impact of a rate cut cycle ahead of any significant economic weakness.

I used the top of the trading range to twice fade TLT with put options. However, I was not patient enough to see TLT below its 20-day moving average (the black dashed line above). Thus, it is possible I will eventually move the bottom of the trading higher.

Be careful out there!

The post An Inflation Story appeared first on Inflation Watch.

• The Federal Reserve had driven monetary policy to historic heights of accommodation: a 9 trillion dollar balance sheet combined with a return to zero interest rates: an easy money paradigm that itself needed to be transitory.
• The Federal Reserve instituted a risk management framework that targeted tail risks instead of an “expected” path of inflation and its resulting impact on the economy.

Moreover, Stiglitz offered two examples from the economy, autos and shelter, that do not conclusively demonstrate the Fed had no impact on inflation. Even Stiglitz’s discourse on inflation expectations is open to varying interpretations. I will tackle each of these issues one-by-one starting with auto inflation.

Auto Inflation: A Counterfactual

Stiglitz makes a big deal out of the obvious fact that the Fed could not solve chip supply problems in the auto industry by hiking interest rates. While the Fed never staked a claim to such powers, and even acknowledge its lack of such powers, this complaint is common among Fed critics who apparently wanted the Fed to leave monetary policy accommodative and lower for longer. Stiglitz pulls the rug from under the Fed by insisting “Given that its interest-rate hikes did not help resolve the chip shortages, it cannot take any credit for the disinflation in car prices.”

So now with auto prices inevitably lower, critics like Stiglitz are declaring victory on the prediction that car prices would eventually come down. Fine. How about a counterfactual? If the Fed had left rates lower for longer is it credible to believe that the path for prices would have stayed exactly the same (or improve)? I claim the answer is no. Assuming lower loan rates encourage and incentivize more borrowing (indeed this is a fundamental premise for accommodative monetary policy), then rock bottom rates would have fueled on-going and even increasing demand for cars and deepened pressures against short supply. In other words, I am claiming auto inflation would have been even worse and could have caused other cascading problems in the economy.

Even throwing away abstract counterfactual arguments, the actual data is not conclusive enough to suggest the Fed had zero (or even little) impact. The chart below juxtaposes new and used car prices with the auto inventory/sales ratio (cars and light trucks). This ratio puts demand and supply into context. While the the ratio bottomed out in late 2021, it is still nowhere close to pre-pandemic levels. Deflation/disinflation should not be this dramatic with the inventory/sales ratio still at historically low levels. I would have expected a price plunge to accompany a much faster recovery in the inventory/sales ratio. In fact, I would have expected the pendulum to at least swing above 1 again.

Sources: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: Used Cars and Trucks in U.S. City Average [CUSR0000SETA02], retrieved from FRED, Federal Reserve Bank of St. Louis, November 14, 2023. U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: New Vehicles in U.S. City Average [CUUR0000SETA01], retrieved from FRED, Federal Reserve Bank of St. Louis, November 14, 2023. U.S. Bureau of Economic Analysis, Auto Inventory/Sales Ratio [AISRSA], retrieved from FRED, Federal Reserve Bank of St. Louis, November 14, 2023.

In other words, while supply has been slowly normalizing, demand still outstrips supply. This is a condition for higher prices. Yet, resurgent inflation in autos is not likely specifically because high interest rates are constraining and reducing the ability and willingness to pay higher and higher prices. The rate on the 48-month auto loan was last this high in 2002.

Source: Board of Governors of the Federal Reserve System (US), Finance Rate on Consumer Installment Loans at Commercial Banks, New Autos 48 Month Loan [TERMCBAUTO48NS], retrieved from FRED, Federal Reserve Bank of St. Louis, November 14, 2023.

Finally, domestic banks have also tightened lending standards, likely further constraining the ability to pay higher prices. Lending standards tighten with tighter monetary policy as banks become more risk averse and have a higher cost of funds. This is a Fed effect. From the October, 2023 “Senior Loan Officer Opinion Survey on Bank Lending Practices“:

“In a set of special questions, banks were asked to assess the likelihood of approving credit card and auto loan applications by borrower FICO score (or equivalent) in comparison with the beginning of the year. Significant net shares of banks reported that they were less likely to approve both credit card and auto loan applications from borrowers with FICO scores of 620. Moderate and significant net shares of banks reported that they were less likely to approve credit card loan applications and auto loan applications, respectively, from borrowers with FICO scores of 680. In contrast, a modest net share of banks reported being more likely to approve credit card applications from borrowers with FICO scores of 720, while the likelihood of approving auto loan applications to borrowers with FICO scores of 720 was basically unchanged in comparison with the beginning of the year.”

Thus, I claim the Fed deserves at least partial credit for helping to tap the brakes on demand, in the form of ability to pay, in the face of relatively tight inventories. In other words, I find it compelling to create a narrative around a Fed impact that is at least as plausible as the narrative that completely discredits the Fed.

Shelter Inflation

The dynamics of shelter inflation are complex. I grant Stiglitz the point that higher interest rates can exacerbate inflationary pressures by reducing the availability of construction loans needed to increase supply. Interestingly, Stiglitz does not reference the complementary constrain t on supply from existing home owners who refuse to move and incur the cost of mortgages more expensive than their current ones.

Anyway, I will still point out that it was soaring shelter inflation that provided the signal to the Fed that rates were overly accommodative; the episode was a rare moment in Fed history where it acknowledge an inflationary problem from shelter costs. Historically low mortgage rates stoked demand and led to a mini-mania in the housing market. Prices soared practically uncontrollably for homes. Rent soared alongside home prices. I discussed the “housing trigger” for the Fed in “The Federal Reserve Fears On-Going Inflationary Pressures from Rents” and provided more detail in “Inflationary or A Bubble – Housing Prices Help Push A Fed Driving Recession-Pricing for Home Builders.”

I also provided evidence from a home builder about the impact of the Fed on cooling housing prices in “Lennar Corporation: How the Fed Is Cooling Inflation In the Housing Market.”

In other words, the mere fact that one-year leases on rents cause a lag in disinflation is insufficient to dismiss the various ways in which rent inflation forced the Fed to hike and to maintain its hiking campaign. A counterfactual on post-pandemic housing demand and prices in the face of prolonged accommodative policy should not be controversial: we have lived it three times in the span of just one generation.

Core Inflation

Stiglitz noted the following about headline inflation:

“The pandemic-induced inflation was exacerbated further by Russia’s invasion of Ukraine, which caused a spike in energy and food prices. But, again, it was clear that prices could not continue to rise at such a rate, and many of us predicted that there would be disinflation — or even deflation (a decline in prices) in the case of oil. We were right. Inflation has indeed fallen dramatically in the United States and Europe.”

This was a surprising sidebar when the Fed does not set monetary policy by what happens to food and energy. Adding to the distraction, Stiglitz does not label the inflation numbers her uses to compare to the Fed’s target. For the purposes of this discussion I will assume he is referring to core PCE (personal consumption expenditure, excluding food and energy) since it matches the number he uses for September. Yet, I cannot be 100% sure since the 3.7% change in the PCE in September matches the 3.7% headline change in the CPI (consumer price index) for September. This confusion is technically important because the median PCE sits at 4.4%. Core CPI was 4.1% in September, and the October report delivered the tiniest of cooling at 4.0%.

No matter the lens, these levels and incremental declines are hardly an occasion for final victory. While the Fed has every reason to stop hiking rates and watch what happens from here, these numbers do not tell me the Fed can pack up its toys and go home. Stiglitz takes care of that concern by calling the 2% inflation target arbitrary: “There is no evidence that countries with 2% inflation do better than those with 3% inflation; what matters is that inflation is under control. That is clearly the case today.” On the surface, the logic makes sense except that the period of “Great Moderation”, where deflation was the Fed’s biggest concern, was a period where PCE stayed below 2%. We do not have experience in THIS economy with a Fed that overtly allows inflation to stay well above 3%…and the Fed is clearly in no mood to push its luck.

Source: U.S. Bureau of Economic Analysis, Personal Consumption Expenditures Excluding Food and Energy (Chain-Type Price Index) [PCEPILFE], retrieved from FRED, Federal Reserve Bank of St. Louis, November 14, 2023.

Inflation Expectations

Stiglitz claims that the Fed also had nothing to do with controlling inflation expectations. Unlike the Fed, markets knew that inflation would naturally correct itself. Stiglitz even challenges the protest that inflation expectations remained calm specifically because of trust in the Fed: “…inflationary expectations remained tame. While some central-bank economists claim that this was due to their own forceful response, the data tell a different story. Inflation expectations were muted from early on, because markets understood that the supply-side disruptions were temporary.” Stiglitz took a debatable point and breathed unfounded certainty into it. Stiglitz focuses on the 5-year forward inflation expectation rate:

“Only after central bankers repeated over and over their fears that inflation and inflationary expectations were setting in, and that this would necessitate a long slog entailing high interest rates and unemployment, did inflationary expectations rise. (But, even then, they barely budged, reaching 2.67% for the average of the next five years in April 2021, before falling back to 2.3% a year later.)”

Yet, a different interpretation is plausible and valid regarding the stability in the 5-year forward expectation. It appears the market has a bias to expect disinflation (especially in response to shocks). Starting between 2015 and 2017, the market finally believed the Fed could hold inflation closer to 2.0%. This milestone came after persistent messaging, in different forms, from the Fed on the 2% target. It seems odd to blame the Fed for a brief spike in inflation expectations at the time the Fed started hiking rates. I find it more plausible to interpret the rapid return to previous levels as evidence the market was once again mollified over long-term prospects with a Fed clearly serious about constraining inflationary pressures.

Source: Federal Reserve Bank of St. Louis, 5-Year, 5-Year Forward Inflation Expectation Rate [T5YIFR], retrieved from FRED, Federal Reserve Bank of St. Louis, November 14, 2023.

Given it appears to take a lot to convince markets the Fed cannot control inflation over the “long-term”, I turned to shorter-term expectations as a more responsive indicator. It turns out that the 3-year consumer expectations peaked right as the Fed finally dropped the notion of transitory inflation in November, 2021. One-year expectations kept rising alongside inflation readings and peaked with a peak in inflation. Thus, it is very possible that the 3-year expectation more accurately reflects sensitivity to the Fed’s actions where it counts: consumers.

Source: Federal Reserve Bank of New York, Survey of Consumer Expectations

I go into more detail about the mechanics of inflation expectations in “Inflation Expectations and Inflationary Psychology.”

Since short-term expectations can start to bleed into longer-term expectations for inflation, the Fed took a risk management approach when it finally got serious about inflation. Tamp down short-term expectations and remove the risk of perturbing longer-term expectations which could prove harder to control above recent historical ranges.

The Risk Management Approach to Monetary Policy

The question is not whether or not the Federal Reserve should have acted to normalize monetary policy (by picking a non-zero target). The question is how far does/did the Fed need to go. Powell made it abundantly clear that the uncertain (and unprecedented) economic environment put the Fed in a risk management framework. The Fed decided it could not manage policy to the average or expected outcomes in the economy.

For example, a year ago, during the Q&A at a Brookings Institution conference, Powell claimed that monetary policy must take into consideration tail risks and their costs. The Fed collectively had decided that the costs of high inflation outweighed the potential risks of expeditiously hiking rates. The economy has proven so resilient that economists have spent over a year and half pushing out forecasts for a recession, a recession that could have been the main transmission mechanism for monetary policy to tank prices. Now, with the market celebrating the end of rate hikes and declaring victory over inflation, the runway is clear for the soft-landing narrative. I suppose those folks who think the Fed had no influence over inflation will have to conclude that monetary policy is totally meaningless if a recession is not forthcoming!

Conclusion

The inflation debate will never end because participants often bring to the table strong assumptions about the Fed’s capabilities and over-confidence in understanding the intricacies of the post-pandemic economy.

Ultimately, I stand by my long-standing claim that the Federal Reserve acted too slowly as supported by later economic research that I covered last June in “Why Monetary Policy Was Late In Responding to the Pandemic-Era Inflation Surge.” I stake no claim on the ultimate target; I just claim that the Fed needed to start normalizing sooner given what could be known at the time about economic conditions and the massive monetary and fiscal stimulus in the economy. Stiglitz did not explicitly say that he would have preferred the Fed do nothing, but his stance implies as much and feeds the narratives that inflation was never a problem in the first place. Thus, the Fed cannot satisfy anyone, not the inflationistas like myself nor the disinflationistas like Stiglitz….and certainly not the deflationists who held sway for so long going into the pandemic.

Be careful out there!

The post Despite the Inflation Celebrations, the Case Against Team Transitory Still Stands appeared first on Inflation Watch.

Kashkari’s Confessional

Kashkari sums up the Fed’s collective miss as coming from an over-reliance on traditional Phillips-curve models. These models failed the Fed for this economic cycle:

“In these workhorse models, it is very difficult to generate high inflation: Either we need to assume a very tight labor market combined with nonlinear effects, or we must assume an unanchoring of inflation expectations. That’s it. From what I can tell, our models seem ill-equipped to handle a fundamentally different source of inflation, specifically, in this case, surge pricing inflation.”

No wonder it is easy to maintain a deflationary mindset. The Philips-curve models are biased against inflationary pressures.

Refreshingly, Kashkari is not willing to accept economic shocks as an excuse for missing the seriousness of inflation in this economic cycle. Instead, he cautions that such dismissals impede learning. Moreover, he claims that even a crystal ball on inflation shocks would not have pushed the Philips-curve models to raise an inflation alarm. Since Kashkari makes this claim without evidence, I hope that someone in the Fed is working on a related white paper to advance learning on this topic.

Kashkari went on to observe that the Fed’s policy framework focuses on the labor market and inflation expectations: “If we can deepen our analytical capabilities surrounding other sources and channels of inflation, then we might be able to incorporate whatever lessons we learn into our policy framework going forward.” Yet, in April 2022, I summarized two Fed studies that identified housing as a key source of the inflation problem. At the time, I assume these studies helped guide the Fed’s determination to finally start hiking rates. I do not know how to reconcile these studies with Kashkari’s claim, but I hope he finds his way to this work at some point.

Kashkari concludes by standing firmly behind today’s monetary policy. Without a sense of irony, Kashkari defended the current monetary tightening by using wage pressures as his example.

“One may ask why tightening monetary policy is the right response to what I described as surge pricing inflation. Unfortunately, the initial surge in inflation is leading to broader inflationary pressures that the Federal Reserve must control. For example, nominal wage growth has grown to 5 percent or more, which is inconsistent with our 2 percent inflation target given recent trend productivity growth. Monetary policy is the appropriate tool to bring the labor market back into balance.”

Kashkari is also not interested in cutting rates anytime soon: “consider cutting rates only once we are convinced inflation is well on its way back down to 2 percent.” Seemingly like everyone else on the Fed, he fears the echoes from the 1970s warning that it is all too easy to declare a premature victory over inflation.

Easing Financial Conditions

If bond yields are any indication, the bond market stopped worrying about increasing inflation pressures back in October and November. For example, the iShares 20+ Year Treasury Bond ETF (TLT) not only bottomed but also it rallied 15.5% in just three months (TLT moves inversely to bond yields). Accordingly, I am eager to see whether the next announcement on monetary policy calls out the bond market for prematurely facilitating an easing in financial conditions.

The iShares 20+ Year Treasury Bond ETF (TLT) achieved a higher low at the end of December. It is close to a breakout above tis 200-day moving average (DMA) (the blue line above) which would usher in a new phase of easing of financial conditions. Is the Fed ready for that to happen? (Source: TradingView.com)

The Chicago Federal Reserve’s Adjusted Financial Conditions Index has been consistently easing since a cycle high in October.

Be careful out there!

Full disclosure: no positions

The post Kashkari Acknowledges the Fed’s Inflation Miss. Will the Fed Catch Easing Financial Conditions? appeared first on Inflation Watch.

Pandemic-era inflation pressures were not transitory after all. The inflation watchers I follow never believed the narrative given the Fed’s insistence on maintaining historically accommodative policy well past its expiration date. Indeed, the transitory in the economy turned out to be the deflationary psychology of Federal Reserve Chair Jerome Powell.

The journey has been quite a ride for Fed-speak. In July 2020, Powell reassured an economy in lockdown shock that the Fed is “not thinking about thinking about raising rates.” When murmurs and then gripes about creeping inflation emerged in early 2021, Powell insisted inflation pressures would be transitory. In late April of that year, Powell explained the theory at that time behind transitory inflation. Transitory stretched out longer and longer and longer, until finally in December, 2021 testimony Powell essentially asked everyone to leave him alone about the unfortunate and untimely phrase. Now, with inflationary pressures worsening, Powell has found inflationista fervor. Powell even declared that the Fed is ready to take rates higher than the neutral rate. The mad scramble has begun; the Fed wants to get a raging fire under control.

A Pivotal Speech

Today, March 21, 2022, Powell gave what I think is the pivotal speech of his career as Fed chair. With the appropriately ominous title “Restoring Price Stability“, Powell started with this proclamation to the 38th Annual Economic Policy Conference National Association for Business Economics assembled in Washington, D.C. (emphasis mine):

“…the current picture is plain to see: The labor market is very strong, and inflation is much too high. My colleagues and I are acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability. We are committed to restoring price stability while preserving a strong labor market.”

For the folks who might still be in transitory thinking, Powell went on to clarify “…the inflation outlook had deteriorated significantly this year even before Russia’s invasion of Ukraine.”

In racing against the wildfire, Powell and the Fed have an ambitious goal. They want to avoid a recession by tapping the brakes on excessive demand in the economy just enough to gently match limited supply. The strong labor market is both a blessing and a curse in this effort. Powell did not use the term “wage-price spiral” inflation spiral”, but he essentially described such a potential dynamic for today’s economy. Companies are struggling to hire. Employees are shifting into new jobs to gain higher wages.

“There are far more job openings going unfilled today than before the pandemic, despite today’s unemployment rate being higher. Indeed, there are a record 1.7 posted job openings for each person who is looking for work. Record numbers of people are quitting jobs each month, typically to take another job with higher pay. And nominal wages are rising at the fastest pace in decades, with the gains strongest for those at the lower end of the wage distribution and among production and nonsupervisory workers”

Powell summarized: “Overall, the labor market is strong but showing a clear imbalance of supply and demand.” Thus, the Fed feels compelled to “moderate demand growth.” In the process the Fed hopes that the labor market’s very strength will withstand a period of aggressive monetary tightening.

Powell explained that the big surprise came from the stubborn persistence of “supply-side frictions.” The economy cannot handle the rapacious demand in today’s economy without sending prices ever higher. In turn, spiraling inflation threatens to erode wage gains especially for lower-income workers.

No Time to Wait Anymore

Interestingly, Powell provided automobile prices as a good example of the inflation problem. There was a time when commentators insisted soaring car prices would be transitory. Auto prices are now transitory complete. Powell lamented “production remains below pre-pandemic levels, and an expected sharp decline in prices has been repeatedly postponed.” Prices for new cars soared almost all of last year and suddenly look ready to take off again. Used car prices soared even more and could lift again if new car prices rev up again. Regardless, no “base effects” here as worker’s wage gains look sure to come under more pressure.

Source: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: New Vehicles in U.S. City Average [CUSR0000SETA01], retrieved from FRED, Federal Reserve Bank of St. Louis, March 21, 2022.

Source: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: Used Cars and Trucks in U.S. City Average [CUSR0000SETA02], retrieved from FRED, Federal Reserve Bank of St. Louis, March 21, 2022.

These mounting pressures have forced the Fed’s hand. The Fed senses it has no time to wait anymore. The Fed is no longer content to wait for the conventional expectations of normalization to bear fruit. In an inflation emergency the Fed needs to act now… (emphasis mine).

“It continues to seem likely that hoped-for supply-side healing will come over time as the world ultimately settles into some new normal, but the timing and scope of that relief are highly uncertain. In the meantime, as we set policy, we will be looking to actual progress on these issues and not assuming significant near-term supply-side relief.”

Inflation is so strong now that Powell has to look out 3 years to envision inflation returning to the Fed’s target of 2%: “I believe that these policy actions and those to come will help bring inflation down near 2 percent over the next 3 years.”

Recession? What Recession?

No Federal Reserve has ever predicted a recession. The central agent trying to command the economy has a vested interest in projecting utmost confidence in its navigation abilities. Accordingly, Powell looked to history as proof that the Fed can pull off the spectacle of the soft landing for the economy:

“I believe that the historical record provides some grounds for optimism: Soft, or at least soft-ish, landings have been relatively common in U.S. monetary history. In three episodes—in 1965, 1984, and 1994—the Fed raised the federal funds rate significantly in response to perceived overheating without precipitating a recession…In other cases, recessions chronologically followed the conclusion of a tightening cycle, but the recessions were not apparently due to excessive tightening of monetary policy. For example, the tightening from 2015 to 2019 was followed by the pandemic-induced recession.”

The Fed is also encouraged by an economy “well positioned to handle tighter monetary policy.”

Powell formerly insisted the Fed would hold rates lower for longer in order to achieve an exceptionally low unemployment rate. The current path flips to the opposite direction. The Fed is willing to go right past the point of neutral rates to get the fire under control: “if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

Transitory complete. Bring on the inflation hawks.

Be careful out there!

The post Transitory Complete: Fed Chair Jay Powell Gets Comfortable With the Inflation Hawks appeared first on Inflation Watch.

Oil’s relative share of consumer expenditures is another factor to consider. Amazingly, energy’s overall share of consumption has declined as gas prices have soared in recent months.

For more detail and data see “Oil prices and the U.S. economy“

The post Relative, not absolute, oil prices impact the economy appeared first on Inflation Watch.

Ford is clearly reluctant to hike prices and is choosing to dribble them in the hopes they go essentially unnoticed by the average consumer.

Ford cited higher commodity prices for this latest increase.

The post Ford raises prices a third time for 2011 appeared first on Inflation Watch.

The stock is currently trading at a post-IPO low.

Disclosure: author owns shares in GM

The post GM is the latest automaker to raise prices appeared first on Inflation Watch.

Consider these statistics quoted from the article:

• Sales of new cars rose 11 percent, to around 11.4 million, in 2010 and are off to an even stronger start this year.
• More than 859,000 new cars were sold to consumers with a so-called subprime credit rating in 2010, a nearly 60 percent increase from the year before.
• [The packaged consumer loan] market stood at $36 billion in 2008, during the throes of the crisis, but by 2010 it had bounced back to almost $58 billion. Bankers and analysts project that could rise by as much as 15 percent in 2011.
• Over all, lending to subprime borrowers has risen to about 38 percent of the auto finance market, although it is still well below its precrisis highs when it made up nearly half of all loans.

As the NYTimes notes, “…the gradual expansion of credit in virtually every area except real estate is an important sign that the American economy is returning to health.” So while an obsession with housing statistics can mire one in deflationary blues, so many other corners of the economy are flashing much different signals.

The post Automobile subprime lending jumps 60% in 2010 appeared first on Inflation Watch.

Toyota Motor Corp.  is considering raising the prices of some of its export models in the U.S. to counter the impact of the strong yen, the Yomiuri Shimbun reported in its Wednesday morning edition. The company may raise the prices of some of its 2012 export models–including the Prius hybrid, the Corolla and upscale Lexus models–which go on sale in the U.S. from next year, the report said. But to stop the move having an overly negative effect on sales, the automaker will raise prices by only a few percent, the report added.

Related: Nintendo swings to a loss, in part because of the stronger Yen.

The post Toyota may raise prices to counter weak yen appeared first on Inflation Watch.

“Deals are getting more scarce because automakers, newly lean and profitable, are holding the line on those profit-eating promotions. In July, they offered $1,000 less in incentives per car than a year earlier, according to Edmunds.com.”

For now, customers aren’t buying it:

“U.S. auto sales are at a standstill, with potential buyers waiting for more deals but automakers resisting. The industry expects this to be the worst August in 18 years, with sales barely over 1 million cars and trucks. Sales are expected to fall 3 percent from July, according to car-pricing website Truecar.com.”

The post Car prices holding firm appeared first on Inflation Watch.