Plunge of Retail Inventories, Collapse of New & Used Vehicle Inventories: The Shortages Depicted in Charts

Inventories at retailers document this mess. 

By Wolf Richter for WOLF STREET.

Turns out, when the US government spends $5 trillion in borrowed fiscal stimulus over 16 months, and the Fed hands out $4 trillion in monetary stimulus over the same period, causing asset prices to boom, demand for goods is going to wash over the land in tsunami-like waves, and supply chains that snake all over the world, amid finely honed just-in-time-inventory strategies, get tangled up. And as retail sales spiked in a historic manner, shortages of all kinds have been cropping up, including the semiconductor shortage that has slammed the auto industry with a vengeance.

Inventories at retailers document this mess. Inventories are tight all around, but they’re in catastrophic condition at auto dealers, which before the pandemic accounted for over one-third of total retail inventories.

Inventories at new vehicle dealers, used vehicle dealers, and parts dealers fell to $153 billion in May, down 36% from May 2019, according to data released by the Census Bureau on Friday. And the inventory-sales ratio – with inventories and sales both in dollars, the impact of inflation gets canceled out – dropped to 1.14, the lowest level in the data going back to 1992:

The inventory-sales ratio (inventories divided by sales) is a standard metric in the retail industry. A ratio of 1 means that the retailer has enough goods in inventory for one month of sales at the current rate of sales. This would be 30 days’ supply. A ratio of 2 – meaning 60 days’ supply – is considered healthy in the auto industry.

In dollar terms: The ever-more expensive vehicles in inventory over the years explain all of the long-term rise of inventories in the chart below. Unit retail sales – and unit inventories with them – have had huge cyclical swings, up and down, over the past 20 years and went nowhere. In 2019, new-vehicle unit sales were at 1999 and 2000 levels, with just over 17 million vehicles sold, followed by a plunge in 2020 to the 1978 level.

In unit sales, the industry has stagnated for two decades. And inventories in units paralleled this stagnation. What changed were the prices of vehicles.

Dealers book vehicles into inventory at cost (“invoice”), not at retail price. But MSRP gives us an indication of what happened to dealer cost: the MSRP of the F-150 XLT, the bestselling truck in the US, rose by 80% from the 2000 model year ($19,410) to the 2021 model year ($35,050). And the MSRP of the Camry LE, the bestselling car in the US, rose by 22% over the same period, from $20,388 to $24,970 (the WOLF STREET Pickup Truck and Car Price Index).

In addition, there has been a large-scale structural shift away from less costly cars to more expensive SUVs and trucks, which further ballooned the dollars tied up in inventory, without increasing units in inventory.

It is with this surge in per-unit costs in mind that we look at long-term inventory levels in dollar terms. And this makes the 36% plunge in total vehicle and parts inventories, from $240 billion in May 2019 to $153 billion in May 2021 that much more brutal given the shift to more expensive units over the period:

During the Financial Crisis, there also was a plunge in inventories, but it was accompanied by a collapse in vehicle sales that caused GM, Chrysler, and a slew of component makers to file for bankruptcy protection.

This time around, fueled by stimulus, there has been strong retail demand for vehicles in March, April, and May, and it was only in June, with inventories depleted and prices sky-high, that sales fell sharply and were down 14% from June 2019. But the current inventory data is only for the end of May, which was the base for what was available for sale in early June.

Total inventories at all retailers, from auto dealers to supermarkets, fell to $598 billion in May, seasonally adjusted, down 9.8% from May 2019, the third month in a row of declines, but still up from the low in June last year. These inventories in May, and retail sales in May – which had declined from April – produced the second lowest inventory-sales ratio in the history of the data going back to 1992, the lowest having been in April:

The spikes in the chart above occurred when retail sales suddenly plunged – after the Lehman bankruptcy and in March and April 2020.

In dollar terms: Price increases of goods in inventory over the years explain part of the long-term rise of inventories in the chart below. Note that the decline in inventories over the past few months comes despite rampant cost increases (and price increases), as the stimulus-fueled retail boom drained inventories:

Inventories without auto and parts dealers, in dollar terms are back on expansion track, having reached a new all-time high of $444 billion in May, which shows to just what extent new and used vehicle inventories have plunged, while most other retailers have gotten a better grip on their inventories, with shortages in some products, and more than plentiful supply in other products:

But increased costs of items in inventory cover up part of the tightness; and given the surge in retail sales compared to pre-pandemic years, the inventory-sales ratio, though it has ticked up for the second month in a row, remains near its all-time record low. Note the long-term trend (green line) of two decades of lean-inventory strategies and the shift to ecommerce with its inventory efficiencies (centralized warehousing):

Inventories at food and beverage stores, after the empty-shelves spring last year, have recovered overall and edged up to a new record of $54.4 billion in May.

Because sales at these stores were about 15% higher than they’d been before the pandemic, they pushed down the inventory-sales ratio to 0.73, compared to the multi-year average before the pandemic of 0.78. Food and beverage stores are increasing their dollar inventory overall, but are turning it even more quickly, giving rise to sporadic and brief shortages in a few items here and there.

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  146 comments for “Plunge of Retail Inventories, Collapse of New & Used Vehicle Inventories: The Shortages Depicted in Charts

  1. MF says:

    The ex-auto inventory-to-sales ratio chart seems to mirror the backlog in semi truck orders you chronicled here a few years ago.

    Looks like an inventory buildup created strong transportation demand.

    What I don’t understand is how we can have sea freight rates spiking to the sky during a time when there are so many supply shortages, as evidenced by the super-tight inventory situation.

    I also wonder what will happen to attitudes about just-in-time inventory practices. It should be obvious to everyone occupying a c-suite seat how much risk to their top line revenues this practice represents.

    • 2banana says:

      Risk?

      There is no risk anymore.

      Bailouts and cheap and easy money at ZIRP for everyone…in the club.

      • K says:

        Amen: there is no risk borne by the trillion a I r e families. (Amazon tablet does not like that word. LOL.) Like the money given to the Greeks to “bail them out” was really an indirect bailout of German banks, the stimulus payments really went to them, their cronies, and their Chinese communist partners.

        See “Britain’s Second Empire: The Spider’s Web.” It discusses the massive corruption in the UK primarily but as discussed by Simon Johnson in “The Quiet Coup,” the US government was captured by the same trilliona I r e families, and their enablers. Those enablers will claim anything to keep their misconduct secret.

      • JC says:

        How does one gain entrance to the club? I think I’m ready to roll the dice.

        I’ve been holding out since the great recession. If I’m ready to jump in does that signal the top?!?

      • MF says:

        Bailouts can plug a hole in a quarterly — maybe even annual — report. But they cannot reverse revenue trends. If revenue goes to zero, what’s left to bail out?

      • k says:

        In the game of chess, there is a move whereby your knight threatens both the queen and the rook. The opponent loses either way, whatever move they make: you take their queen or more likely, you take their rook.

        The bankster’s tactics are like that: if inflation can be created enough to get us out of a potential market collapse, then they can keep their Ponzi schemes (a.k.a. corporations) going and increasing in value. If not, if there is a stock market crash, then they will be able to get their privately owned but misleadingly named “Federal” Reserve to “digitally create” $4 to $8 TRILLION to lend to them at 2.5% (because it will be an emergency!), when the stock market tanks below its sustainable, real, fundamental value, and they can then gain ownership of the remaining, decent, productive, legitimate, US companies for bubkis.

    • Wisdom Seeker says:

      Just-in-time inventory isn’t just a C-suite thing. Consumer attitudes about just-in-time purchasing may also have shifted. The toilet-paper fiasco last spring was a wake-up call.

      When you know the stuff you need may not be in the store when you go, you stock up on whatever you can find whenever you can find it.

      Further, when you know inflation is rampant, many people will buy extra of every durable good that you can store, because it’s a better deal than keeping money in the bank. Others will outright hoard stuff in order to resell it later (consider medical respirators and facemasks a year ago…). That extra demand creates even more shortages and pushes prices up even faster. It creates even more inflation.

      Wolf has been cautioning us about how the inflationary mindset can creep into a society and become a vicious cycle, and this is another example.

      • Nick Kelly says:

        There is lots of ammo but I suggest TP not be used for it. Back in the days of Johnny Carson he started a rumor there was a shortage of TP. Next week there was.
        The mills run 24 /7. TP is demand inflexible. They aren’t going to build a new mill just because the public has a bee in its bonnet after a rumor. Go into a store now, lots of TP.

        BTW: it says a lot about the affluence of our society that at a hint of hard times it wants to stock TP. Although the run on flour and rice was also shortly over, it makes more sense to worry about input of food.
        The markets up here with many older Chinese customers were cleaned out of rice. They will remember the Mao famines, and that is harder to forget than a shortage of TP. Grass makes better TP than food. .

  2. James says:

    10-4 JT..Bit what’s their (govt.) end game?

    • Old School says:

      Government game is mostly incompetence and corruption. Anyone old enough to remember the cause of the S&L crisis, the actual corruption involved including political contributions and the horrible clean up using RTC. It was all papered over with losses added to government debt. At least a few went to jail.

      • Seneca’s Cliff says:

        This will take a long time to iron out. I talked to a friend yesterday who is in the business of importing hardware ( bolts etc.) in container size order quantities from Taiwan. She said that as of Friday the total lead time for made to order hardware ( which includes production and transportation) is 350 days.

        • MiTurn says:

          Is basic hardware even made in the US anymore?

          I’d be curious if you could ask your friend.

          I’m finding that almost 100% of replacement auto parts are made elsewhere.

        • cas127 says:

          MTurn,

          It can be surprisingly hard to find out industry specific US production stats, relative to US consumption (ie, how self sufficient could the US quickly be in an emergency).

          US gross consumption stats tend to be available and price based US production stats are also somewhat available (although those get badly distorted by gvt created inflation) but unit-based stats (to strip out inflation distortions) can be surprisingly harder to come by.

          As a fallback, sometimes I have to go to Thomson product directories simply to ID and count US producers by industry, period (sometimes without production level stats).

          You would think such unit production level stats (sans inflation/pricing distortions) would be an absolutely central analytical stat, widely available.

          And their obscurity is a major issue, before we even get into issues concerning multi-component products (like cars) that have extensive intl supply chains.

      • Winston says:

        Former bank regulator William K. Black claims over 1000 S&L employees were prosecuted for the S&L fraud and makes the point about the lack of prosecutions for the -FAR- greater fraud which led to the GFC.

      • NoPrep says:

        I’m old enough to recall. “Regular order” McCain was a Keating 5 guy, as was Astronaut John Glenn. Yes a few went to jail. But why not those two? But since both are dead now I suppose it doesn’t matter to either of them.

      • Grave Digr says:

        Just a quick reminder that government corruption was due to private sector influence. There are no innocent here, except the gullible bagholders – taxpayers.

  3. Jon says:

    NOW to act .. I agree but how ?

    Both parties are same. Not much difference.
    The common joe has no understanding of the bigger picture.

  4. James says:

    JT..or more too the point..what’s your end game?

  5. MiTurn says:

    The cow is already out of the barn. Now’s the time to implement your plan B; you know, the worse case scenario.

  6. Apple says:

    Yeah…let’s put those Jan 6th insurgents in charge. Maybe the guy with the horns can be the new Fed chairman. He looked like the smartest of the bunch.

  7. 2banana says:

    Just for a comparison, the GDP of the United States in 2020 was about $21T.

    Yep. about HALF of the US economy is government debt.

    What could go wrong?

    “Turns out, when the US government spends $5 trillion in borrowed fiscal stimulus over 16 months, and the Fed hands out $4 trillion in monetary stimulus over the same period…”

  8. Paulo says:

    It says six comments, but only three show. Have some been nuked?

    Very informative article. This is certainly a good time to wait before purchasing. Yesterday I drove by 6 car lots on my way to town. Following the WS info on declining autos/trucks, the 1/2 full lots were no surprise. Loose credit and stimulus happening everywhere it seems. Even in Canadian news like CBC there were articles on high mileage cars being worth serious money these days.

    There will be a pull back…it’s coming. This craziness can’t last much longer. There should be some good buys coming along in the next year or two.

    • Anthony A. says:

      Paulo, I’ll bet some comments are stuck in moderation.

      • Wolf Richter says:

        If a comment is in moderation, it does not show in the count. The count only counts published comments that are still there and published comments that were deleted.

    • NotDeadYet says:

      True, Paulo, but with talk of inflation and dollars losing value, many people think they will lose money if they wait. And when it comes down to it, people want to buy new things. Its part of our disposition. It gives us pleasure and excitement for a short while… So it doesn’t take much convincing. Be it an advertisement we see or a fear we will lose money if we don’t act now… the results are the same. A sale is made and we are distracted for a while by our new “thing”. By the way, I agree with you. This is not the time to buy. This is the time to prepare to buy at sometime in the future.

      • 3D Modeler says:

        They say the early bird gets the worm, but I think in this case the patient bird gets the worm. The next major recession is going to be a doozy, in part because is Fed so ill-prepared to deal with it given their $8 trillion balance sheet and near-zero interest rates.

    • Wisdom Seeker says:

      Paulo, I disagree with you about how long the craziness can last. The 1970s showed that the craziness can go on for a long time, if the government doesn’t act decisively to stop it. (And why would they? Government is the biggest debtor and needs inflation to stay solvent.)

      • Nathan Dumbrowski says:

        US Government just might print/conjure/wish Clunkers 2022 into existence? The free money is just to easy to stop. F and GM at near five year high at stock market values. That would seem illogical but these times are strange

      • DR says:

        Wisdom Seeker: The 70s were much different. The demographics were different. Boomer, a growing generation, entering spending phase of life. Dealing with post-Vietnam debt and coming off the gold standard to print more.
        Quite a bit different now.

        • Wisdom Seeker says:

          DR, that’s funny, because I see quite a bit that’s rhyming with history…

          The current demographic wave is much like the one in the 1970s, pushing up demand for everything.

          We don’t have post-Vietnam debt now, we have much more and it includes post-Afghan debt.

          And now we’re not just ditching the gold standard, we’re also ditching the post-gold “stable prices” standard (<2% inflation) as well as the notion that money supply should be as stable as possible (endless QE) and the notion that real interest rates ought to be positive to provide correct incentives for a healthy economy.

      • LouisDeLaSmart says:

        \\\\
        @Wisdom Seeker
        This time it is different. The economy has spread far beyond the nation borders, competition is fierce even amongst “allies”, everyone is waiting for the other player to make a mistake. The dollar although dominant can hold the economy afloat but without a stable manufacturing base, the weallth will only bleed. This will create a strong inflation with a worsening deficit…My point being, unlike the previous scenarios we now have many players playing the game, a few being big players that can move fast…The loses will be swift and painfull…I think Paulo is right, it will not hold for much longer…
        \\\

    • Wolf Richter says:

      Paulo,

      “It says six comments, but only three show. Have some been nuked?”

      The first comment got nuked because it told you how to vote in the next election. And a couple of comments that had replied to it went down with it. Someone was trying to hijack the comments with some political BS. Thankfully I caught it early enough before 60 people replied to it.

      • Freedomnowandhow says:

        Thanks Wolf, if we need more political posturing we only need to watch t.v., or browse the newspaper. Good for you.

      • Ken says:

        Thank you, Wolf.

      • Anthony A. says:

        Thanks Wolf, I come here because there are no politics. Just the facts, Mam, just the facts! (Oh, and then there is M.E.)

    • El Katz says:

      On last night’s TeeVee, commercials were aired by a local Dodge / Ram dealership in Snotsdale announcing “a return to normal pricing” and touting $11,000 discounts on RAM trucks.

      Either customer traffic dropped off the face of the earth due to gouging or RAM figured out how to deliver inventory of possibly de-contented trucks (due to chip shortage) and then shove them through the system with large discounts.

      Found that rather odd…..

      • California Bob says:

        Be aware that the ‘great discounts’ dealers advertise are often for one decontented ‘stripper’ car/truck, and it will be ‘sold’ before you can get to the dealer.

  9. Swamp Creature says:

    I’m keeping my 2000 Toyota Corolla with its hand cranked windows and no chips and spyware. I plan to register it as a historic vehicle (over 20years old) with the DMV and avoid vehicle inspections.

    • Depth Charge says:

      But then you’re not able to use it as a daily driver, right? I’ve looked at historic vehicle tags and it seemed it’s only for garage queens that go to car shows. Bottom line – if you’re driving it regularly, the local DMV wants their money.

    • When I lived in Arizona, the annual emissions test results for my 95 Corolla showed readings all over the place. One time, I barely passed emissions, the next year I passed with flying colors. I always went to the same test station in warm weather with a warm engine and rarely changed anything on my car (spark plugs, etc). The results were always like a bunch of random numbers with no meaning. In Nevada, they have privately owned test stations like they do in California. They only give you a pass or fail test result. I go to the station that offers a free retest if you fail, and I avoid the test stations that also do the repairs in case you fail. Every year, I magically pass.

      Unfortunately, I don’t have the hand-cranked windows and the driver’s side window has been broken for 20 years.

      • Paulo says:

        If you couldn’t buy on time no one would buy much of anything these days. Everything would be unaffordable due to stagnant wages.

        So real wages are lower than ever, requiring Govt to stimmie the economy to keep it going. This is all done with debt with no plan to pay for it. This debases the currency ensuring all consumers pay higher costs for almost everything. It’s kind of like if people were simply paid properly to begin with the prices of goods and services would have to be higher to cover the overhead.

        Meanwhile, the rich bob and weave and dodge everything.

        Bad physics in action.

        • Ron says:

          This is why home loans @3% in my day 20% down payment we had skin in the game but that creates a slow economy

  10. DR DOOM says:

    If the Fed or whatever or whomever the junta that’s in charge must keep all the balls in the air and the political class must do its job of keeping 1/2 of the country at the throat of the other 1/2 . Booze and entertainment are not in short supply and that is most important. That ball can not hit the ground. The amazing thing to me is that a majority of the people believe that the junta in charge will make up for inflation with free money. They ain’t worried. Government creates their reality. Get your popcorn and load the ol’ trusted side by side and pull the sleeve out to open bore to cover the front door and watch the greatest show on earth. It will not disappoint.

  11. MonkeyBusiness says:

    J Pow for Prez!!!

    Combining the Executive Branch and the Central Bank will lead to greater prosperity for all!!!

    Think about it. J Pow can simply issue an Executive Order to buy all debts and forgive them in one stroke.

    • Nathan Dumbrowski says:

      I don’t think that combo is in the cards. This guy will be written about and studied for a very long time. His best bet is to duck out and drop off the radar. Write some books and give some private speeches

    • The Real Tony says:

      The converse is true. Powell is akin to the anti-Christ they wrote about in the bible. Powell will make all Americans poor.

  12. Seneca”s Cliff says:

    Before the model T automobiles were playthings for the rich. I think the current situation is a sign that is what we are slowing returning to. I think these dealerships will never fill back up with affordable cars. As the stimmies disappear more and more people will be unable to afford the new cars that will be available. The fleet of used cars will slowly wear out and the percentage of people owning cars will plummet. Cars will eventually return to being just playthings for the rich.

    • josap says:

      In car-centric cities, how will people get to work?

      • Seneca’s Cliff says:

        Just because people want or need something does not mean the market will be able to provide it.

    • Dan Romig says:

      Seneca’s Cliff,

      It all come down to a basic question for consumers. Do you want a basic, economical and utilitarian vehicle, or do you want a luxurious vehicle that has high performance? In the USA, it seems people want a big truck or SUV.

      The kicker is that in the USA, certain safety standards and testing are required in order for the vehicle to be registered and licensed (plates). This is needed, of course, but is also a barrier to entry for companies seeking to make cheap and bare-bones cars.

      Both of my grandmothers were Welsh. I like fast cars (and bikes & motorbikes). TVR makes a fast car, the Griffith, in Wales. I would love to buy one of these machines, but they are not yet legally imported into the USA. A lot of hoops need to be jumped through before before autos, whether affordable for the masses or playthings for the rich, can be sold to the public.

      • roddy6667 says:

        Is that the same Griffith that was sold in the US in the early Sixties? A friend’s older brother had one. 0-60 in 3.2 seconds in 1964.

        • Dan Romig says:

          Upgraded and updated, but essentially yes.

          Designed by Gordon Murray with a 500 hp producing 5.0 liter Ford Cosworth dry-sump normally aspirated V 8 & a 6-speed manual gearbox. It has a carbon fibre composite frame construction and a carbon fibre ground effects chassis with a weight of 1,250 kg.

        • BatHelix says:

          Wonderful looking car and probably lots of fun but the 60 time was probably twice that. Times under 4 were not had in production cars until very recently and are still a special class.

          I am wondering what happens when every car can have 500+hp easy with electric motors. Power is getting just easy and too much really. It’s scary to think of every distracted, ditzy teenager driving around texting in SUV’s as fast as a new Ferrari…. a new Ferrari, not those slow, old ones with less than 700hp ;)

        • Turtle says:

          @BatHelix It is interesting that when you look at a list of the fastest 0 – 60 times for production cars, there are Tesla family sedans mixed in with seven-figure exotics. YouTube holds some entertaining videos of Tesla drivers rolling up to the local drag strip and silently embarrassing everyone with a car that they probably didn’t even buy for performance.

      • Rudolf says:

        A Chinese company is making a small electric commuter car with a battery range of about 100 miles. Pimped out, it sells for about $5000. Don’t expect to see any of these covers in the US anytime soon

        • Turtle says:

          Small electric commuter cars make a lot of sense.

          That’ll never work here.

    • MiTurn says:

      “I think these dealerships will never fill back up with affordable cars.”

      I think that they will. Just as a the Japanese manufacturers carved out a niche with inexpensive cars, then later the South Koreans, soon we’ll see Chinese makers selling their cars here. They’ve quickly developed an automotive industry that can compete worldwide — only a matter of time before we get another Malcolm Bricklin (first guy to import Subarus into the US) to do the same with a better Chinese brand.

      • Nick Kelly says:

        The Japanese started with cheap cars but they were quality for the money, as with most of their stuff. China does not have that rep.

        ‘They’ve quickly developed an automotive industry that can compete worldwide’

        Really? I’ve seen a Chery dealership in Uruguay but have never seen a Chinese car anywhere else. BTW: all bikes in Uruguay were Chinese Yumbo usually 175 cc. This is not a mainstream auto market but an interesting place to old odd- ball autos.

        • George says:

          Kandi Technologies announced on Wednesday that it would launch two electric vehicles in the US in August and that the cars would be available for delivery by the end of the year.
          Shares of the company have skyrocketed nearly 350% in the past two days.
          The Chinese company competes with the electric-vehicle makers Tesla and Nio

        • MiTurn says:

          Both Volvo and Buick have imported Chinese-made high-end niche models into the US.

          The ability us there.

        • Nick Kelly says:

          Just spent a few minutes looking into Kandi. They have sold very few cars. 90%+ a parts outfit. Looking at the base model with a max of 67 MPH 50-100 mile range do not count on certification for US hiways. Looks more like a boomer, gated- place type grocery getter. There is a market for those but although Tesla has all kinds of competition it is NOT from these guys.
          You may have seen some of the announcements re: EVs in last few months, which turned out to hype. If I had this stock and it was up 300% I’d bail. These guys are not big in China. Are they chasing the car market or the stock market.

        • Ralph Hiesey says:

          Nick
          .
          You say “China does not have that rep.”

          I’m probably older than you, so I remember the phrase “Japanese junk” referring to how Japanese made products were described in the 1960’s. What you are saying about China is exactly what they said about Japan then.

          By the late 1970’s with products from Honda and Toyota US manufacturers were shocked with we finally got better quality cars from Japan at lower price than what Americans were offering.

          People in other countries, even in China, also have some pretty smart people who even now know how to make Iphones–which are not made in America. As far as I know, virtually no volume electronics production is made here anymore.

      • Turtle says:

        Maybe. But I’m still trying to figure out why that $4 Evian water at the Beijing airport tasted so bad. Huge trust issues with China. Just look how long it’s taking Americans to lose the idea that Korean cars are junk. It’s like a 30 year process with cars from Asia. That’ll take even longer with something from China because of their shady reputation.

    • pjmetz says:

      Tata Motors to the rescue!

  13. Depth Charge says:

    My gut is that the fading stimulus, at some point, has got to deliver a gut punch to the auto market. There is no way this is sustainable without endless stimulus. Everybody bought a bunch of cars already. It’s got to slow down.

    • MonkeyBusiness says:

      But they can trade cars between themselves at higher and higher valuation. With a couple of friendly bankers on board, everyone will get richer. Not enough? Contact Softbank to get some funding. Still not enough, issue a “stable” coin backed by automobiles.

      • DanR says:

        Out of curiosity what does it mean when a coin is “backed by” something?

        • Nick Kelly says:

          Ideally the metal it’s made of. With inflation it is common for ordinary coins (not PM) to be worth more than face.

          Up here in Canada when we finally got rid of that damned penny it was costing the mint 2 cents to make one. Needless to say it was no longer copper.

        • MonkeyBusiness says:

          You obviously have not heard of Tether. Do some research and have a laugh.

      • Micheal Engel says:

        Softbank is trending down for four months, since.March

    • Fat Chewer says:

      Yeah, that’s what we said about housing. Didn’t happen.

      • Depth Charge says:

        Housing is illiquid, and totally different than autos. The housing market takes years to correct.

    • SnP says:

      I know someone that traded a used 2018 pick up in after having it for 6 months, it was a lower trim Tacoma, walked away from the dealership with a new Tacoma and $600 in his pockets a few months ago. That’s right, the buy back on the used truck paid for the new truck in it’s entirety. This all makes zero cents.

    • Turtle says:

      Fading stimulus? Good one, Depth Charge.

  14. MCH says:

    WTF in reverse, this is so weird. The normal WTF goes from bottom left to upper right. This is the opposite. This is more bizarre than normal.

  15. OutWest says:

    Honestly, there are too many cars on the road in the US. Traffic jams everywhere. Glad to hear that perhaps there may be less of them in the short term.

    • josap says:

      Higher fuel prices will get cars off the road.

      • Harrold says:

        That sure didn’t happen back in 2008 when oil hit $170 barrel.

      • Turtle says:

        When has that ever happened? Our worst gas prices are always half as much as in Europe. Maybe a small number of people will buy Rangers instead of F-150’s for three or four months.

    • Swamp Creature says:

      Yep, 7$ a gallon will make driving around here a lot easier. Its hell right now. We have the worst drivers in the country next to Miami and Baltimore according to AAA.

  16. DR DOOM says:

    The American consumer is harder to take down than a charging Cape buffalo . They keep coming and you either sell if you are lucky and got the current object of their whim or desire or get the hell out of the way.

  17. Downunder says:

    One thing that stands out in all this crazy inflationary results is where it HAS occurred and where it HASN’T. Australia and many other OECD countries have had similar amounts of fiscal and monetary stimulus without all the resultant fuss.

    I think I big part of the reason why there have been price pressures in the US is that the US has plenty who have previously been on very low incomes receiving stimulus. So no surprises that people have splurged.

    In other OECD countries normal wages and welfare are higher so the change in the income of people hasn’t been as extreme.

    • Downunder says:

      I should add that as an Australian we have had asset price inflation particularly in houses due to monetary stimulus. As I understand it this has been a trend across the OECD.

      Though apart from in a few areas, inflation here has largely been docile. Peoples incomes haven’t changed. The only people who faced noticeable increases in income due to COVID were some part time workers, mostly restricted to students etc.

      • Old School says:

        I heard Yellen give interview around 2019 when Fed was trying to tighten. This was between her being Fed chief and treasury secretary. She said academic studies thought that QE had lowered long term rates by about 1%.

        Since then we have had another $4T of QE so you would think that maybe that lowered long term rates more. You just have to have a little logic to lay current housing bubble right at Fed and government policy. It’s probably going to be an epic screw up, with a crises around the corner.

        • Ron says:

          JP keeps rates low so he can keep job but yelled is a shoe in politics never change

        • Nathan Dumbrowski says:

          Treasury rates continue to drop. 10 year 1.2% and 30 year 1.829%

        • Wolf Richter says:

          Nathan Dumbrowski,

          Junk bonds yields continued to drop as junk bond price surge. The everything bubble is a sign that there is too much cash looking for a place to go.

          BB-rated junk bonds now yield 3.18% on average, totally nuts. The markets have totally gone nuts a while ago. This includes the Treasury market and the housing market and the stock market and the entire bond market. The only thing that matters is the Fed.

      • Artem says:

        The “threat” of delta variant delays any tapering by the FED. If you are selling stocks, you are buying bonds, suppressing yields.

        Rotation back into stocks will commence the moment delta seizes to be a [perceived] threat.

    • Anthony says:

      In the UK (more so England) we do have inflation, our house prices have gone mad but then we always have a housing shortage. Food and normal products are going up as well, as we import everything like the US. What we haven’t done is give massive amounts of free money away. People who were in work, who had to furlough, were paid 80% of their wage by the Govt. What we didn’t do was give stimmies to people who were in work and were earning a good wage..that way lies madness.

      The unemployed just received their normal payments and housing benefit. There was a bonus of £20 a week for the poorest but that ends soon. So, not a great deal of free money but it has meant that the British Government has had to borrow an extra £400 billion to pay its way. Thankfully, as nearly all adults are vaccinated (just the young left to get their shots) the UK is opening up fully from today, 19th July.

      Regarding Delta, loads of new cases but hardly any deaths and it’s very sunny(about 28C) at the moment ha ha

      • Mira says:

        In the UK 46 million people over the age of 50 have had their first shot of covid-vaccine ..
        Almost 90% of the population.
        First vaccine are now being offered to 18 years & above across the UK.

        Efficiency on the part of the UK governments .. they must really have their act together.
        This is fantastic ✔✔✔

        • Mira says:

          Vox has an interesting article ..
          Why getting vaccinated for covid-19 is more popular in the UK than the US.
          It’s no surprise that Australian officialdom has bungled vaccination success ..

        • td says:

          The UK population is a little over 68 million, but the vaccine achievement is still very good. However, it does mean that about a third of the population hasn’t received their first shot and about half have not received their second. The available pool for the Delta variant is still large.

        • Artem says:

          This means U.K. will have almost no COVID deaths for the next 3 years.

          Either you will get a vaccine or you will get COVID and potentially a serious illness. So please get a vaccine if you haven’t already.

          Thanks.

    • Depth Charge says:

      The PPP “loans” (gifts) have more to do with it than has been acknowledged. That was almost a trillion by itself. That’s a sheetload of money.

    • The Real Tony says:

      I live in Canada and no one that didn’t need money got money. That’s the difference. Canadians have zero disposable income so in the near future no one will be buying anything. Either prices will fall here or no one will buy anything except necessities. Also the Canadian dollar rose as the U.S. dollar fell. Canadians got no “free money” like Americans did.

    • RightNYer says:

      If people were sensible, they wouldn’t splurge.

  18. Micheal Engel says:

    1) 30K businesses shut their doors, many operated at lower capacity, but retail inventory is the highest ever.
    2) Yet, Inventory/Sales downtrend continued, reaching the lowest point in 100 years, three months ago.
    3) Both sales and inventory are rising, but prices are rising faster.
    4) Option #1 : the pandemic caused inventory shortages, mismatches, herding & bubbles along with the highest unemployment since the 1930’s, along with gov stimulus, regulations, labor mismatch and shortages that force retailers to raise prices, to lift their markup.
    5) Option #2 : E-commerce, just in time sales, that operate with minimal retailers inventory in their shelves, that perhaps cost a little more, but pale in comparison to sales, by few big whales.
    6) Option #3 : Ivanka online army is using the same brick & mortar inventory, boosting sales and the “efficiency” of sales.

  19. Micheal Engel says:

    7) Great stuff, great 7 one parameter charts, that do all the talking,
    that cover the whole spectrum.

  20. Micheal Engel says:

    8) The lowest ever Inventory/ Sales equal the highest Sales/Inventory turnover in history, the highest ever retail productivity.

  21. Mira says:

    The British have always been happy with their lot as the lower classes .. it must come from having betters & they lived in abject poverty .. it is a case of knowing were you belong & assuming the correct attitude thereof.
    All’s well that ends well .. hey.

    • Petunia says:

      I’ve always been amazed by this myself, that a free people can so easily accept the notion of an upper class.

      • Nick Kelly says:

        Oh where to begin? Well, let’s start with comparing the UK to France. .
        France is vastly more class- ruled than the UK. It doesn’t strike superficial US scrutiny that way because the US compares another English- speaking country with itself. How many Americans speak French? They only see the Brit dramas with the inevitable Bertie Wooster twit.
        No one of humble origins in France has ever risen to power. Thatcher was raised above the family grocery store. PM Major was fathered by 50 yr old circus performer. These things are unthinkable in France. The country is run by a thousand people who all went to two schools.

        Now let’s compare the UK to the US. ‘How a free people can accept the notion of an upper class.’

        Jesus wept. You kept millions as slaves long after it was banned in Britain, and then via Jim Crow laws, created a class lower than ‘po white’ for another 100 years.
        (It was determined in the reign of Elizabeth I in the 1500 hundreds that a human could not be personal property. Of course exploitation by other means existed but it’s not the same thing)

        But moving on this ‘upper class’ which means by birth. What, apart from his name, qualified Bush Junior for the Presidency? Can you think of a Brit PM whose father was PM?

        A particular irony of your comment is that you are constantly complaining about the ‘one percent’ who control everything in the US. The UK (and Canada) have far tougher rules about money in politics. So who is more under the thumb of an upper class?

        • Happy1 says:

          US does have an upper class but there is vastly more mobility to reach that level here than in the UK. The wealthiest here are almost entirely first generation with the exception of the Walmart heirs. The UK is a bastion of dynastic wealth. Bozos and Buffet and Gates and Ellison and Musk are obvious examples.

        • Happy1 says:

          ha ha, Bezos, not Bozos, nice autocorrect!

        • Nick Kelly says:

          ‘The UK is a bastion of dynastic wealth. Bozos and Buffet and Gates and Ellison and Musk are obvious examples.’

          Your examples of ‘dynastic wealth’ aren’t about the UK. Now give a few about the UK. Let’s be clear, I’m talking about upper class as a ruling class. Note that none of yr examples are of people who are politicians, or whose kids are. Dynastic wealth which after two world wars is VASTYLY greater in the US, is much more likely to seek political power in the US.

          One example is the Kennedy dynastic wealth, founded on bootlegging during Prohibition. Another is Trump who inherited 500 million in 1985 dollars. I can’t think of a Brit PM ever with that kind of wealth.

          There seems to be an idea in this smorg from persons obviously unfamiliar with the UK, that upper class birth or even a hereditary title equals automatic wealth and influence. Many actual Peers, titled Lords, have gone broke. Their estates are auctioned, silver service and all, gleefully covered in the UK tabloids.

          From the UK comedy group, talking about the US:

          “Well at least they have inherited our two party system: they have the Republican Party, which is the equivalent of our Conservative Party, and they have the Democratic Party, which is the equivalent of our Conservative Party’

  22. David Hall says:

    It costs money to hold excess inventory. When assembly lines shutdown for lack of parts, then not having excess inventory is risky.

    TSMC is moving towards increasing production of auto component chips.

  23. Random guy 62 says:

    The GM dealer in our town has only 8 new vehicles. Normally that would be maybe 80.

    Our lead time on several items that go into our products has gone for 8-12 weeks…now up to 38+, and still getting longer.

    Crazy stuff.

    • Ron says:

      Vechile industry in transition to electric so shortage of chips is fake making chips for electric and China bought them all American is always playing follow the leader watch our tech sector get slapped down next

      • Harrold says:

        Auto industry will be back to normal by January.

      • Anthony A. says:

        I still think Ron is a bot that’s defective.

      • Auldyin says:

        R
        Mr T put sanctions on Chinese chips a short time back.
        Join the dots, I don’t think the US has got the message about China yet. There’s a whole world of pain waiting if they don’t learn soon.

        • Nick Kelly says:

          The biggest chip source is TSCM in Taiwan. Mainland China is an assembler of products with chips.

        • Auldyin says:

          NK
          I invested in TSCM years ago, pure gold, but China is breathing down their neck for quantity and quality. The mutual chip respect between them is a very big factor in why I think China and Taiwan will co-operate peacefully, if others butt-out and leave them alone.

  24. Micheal Engel says:

    1) Xi xinQing imitate the Ming.
    2) The Ming dynasty sent their castrated naval expedition of treasures
    hunt, to build the global trade.
    3) Admiral Zheng He, the supreme commander the castrated armada, ruled the waves, enslaved Sumatra and Cylone, expanded the “silk road” to India, Lahore, Mecca, Mogadishu, Vietnam, Indonesia…trading with his subjects.
    4) To finance the global navy, the castrated force blackmailed the traders, the bureaucrats and the middle class and jailed those who opposed them.
    5) The Mongol invasions changed the trend. The bureaucrats and the middle class had the upper hand.
    6) The treasure hunt expeditions ceased the global trade decayed.
    7) Ming’s had a change of character from offence to defense. China built a wall.

  25. Brant Lee says:

    It was already difficult to forecast the direction of vehicle powertrains coming this decade. Will this low availability force a faster transition to perhaps electric? How do factories gear up for the future at this point for when the chips actually become more available?

    American manufacturers seem to be in the last hurrah phase, down to making a few over-priced gas vehicles, big profits, no R & D. How will they recover this time?

  26. The artist formerly know as Marcus says:

    I was mistaken recently when I thought that local new car dealers looked full of inventory. I mean, I was seeing Ford dealers with lots full of F150s and others with plenty of SUVs. Then I looked closer and saw all of the 2017-2019 stickers on the windshields. The new car dealer lots are full of used cars. I guess that’s why the wholesale cost of used cars is so high.

  27. TK says:

    The auto price climb is also strongly influenced by longer term car loans. Car loans used to be 4 years, now up to 7. Short sighted consurmerism driven people just look at monthly payment. So the price can slide up without much resistance, Kind of like homes when the 30 year mortgage started. Sometimes I wonder why I am a saver?

    • MiTurn says:

      TK,

      I’m curious. Seven-year loans for new cars. I wonder what the maximum years a loan could be stretched over for a used car. Do you know? I bet the APR woukd be pretty high!

      • Serge says:

        When I bought my g-wagon, dealer offered me a 144 months loan. I didn’t take it buy there is an option for high end cars.

        • Artem says:

          Serge,
          Is that even legal in your state? You can easily get negative equity on a car with a loan this long.

      • random guy 62 says:

        I used to think 5-year loan was crazy on a car, but my thinking has evolved. There is still a lot of room to run for car pricing. I wouldn’t be shocked to see middle class families buying $100,000 cars on 10-12 year loans.

        The primary reason is that modern car last so much longer than older cars. The secondary reason is that most buyers are totally financially illiterate.

  28. Micheal Engel says:

    JP will study 7 charts above, expand the o/n band due to high “inflation”, in order to prevent Sept/ Oct 2008 “event” due to collateral shortages, when the charts change directions.

  29. Paulo says:

    Dow down 700 pts and dropping due to Covid fears and the rampant spread to the doubters and antis. Right now.

    Biden doing a rush rush calming speech.

    hmmmmmm

    • Brant Lee says:

      Down 880 at this point.

      The Only big stock not losing is Tesla. Makes sense to me, NOT.

    • Anthony A. says:

      Buy the dip…….

    • Swamp Creature says:

      Too Late

      Covid is all over the Far East and spreading. Flights are rolling into JFK loaded with spreaders. Same with the Texas border. Look forward to another wave of Covid to hit the USA. That’s what’s un-nerving the markets.
      Meanwhile only 50% of Americans are vaccinated. They are going to go about there lives as normal. Vaccinated people don’t give a s$it about the unvaccinated.

  30. Bobber says:

    Was just looking at a few items on Amazon today. The Intex water floats I bought last year for $12 are now $36. The pocket knife I bought three years ago for $9 is now $24.

    Interesting price movements.

    I didn’t buy anything, of course.

  31. Investor says:

    I am not sure I can gauge this economic cycle. Either we are in the start of a new economic cycle (debt based) and hence the assets prices will keep going up or we at the extra inning of the economic cycle and there will be huge reduction in asset prices soon.

    • John Galt says:

      Dow down 900 points and counting. It’s sad that I’m hoping for a cataclysmic rolling over of the stock market. We may be seeing it right now. Then again, euphoria has proven me wrong again and again . . .

      • Swamp Creature says:

        I couldn’t care less about the stock market. Anyone who still has money in this casino need their head examined. I don’t have a dime in there. If it drops another 1000 points tomorrow it is of no concern to me.

        • John Galt says:

          I agree with your sentiment Swamp. I’ve been out of the market for a couple of years now. My point though is that when I look at the overblown prices in things like housing, vehicles, RVs, etc. . .all I see in my area(Bay area) is a mountain of money flooding to assets that can only come from one place. Stock options at tech companies and high performing portfolios. I cannot wait to see the pain in the housing market when the taps get shut off and people “lose” a bunch of hypothetical money that they weren’t smart enough to take out of the market. Maybe I’m just too old school for today’s economy, but it can’t come soon enough. Imo, if the stock market falls, so will everything else.

        • historicus says:

          We are headed for massive inflation and declining stocks coupled with 0% rates.
          the Fed has crafted a “no place to hide” wealth drain, unintentionally.
          This is what you get when you turn too many knobs and keep them on 10 for too long.
          The Fed went rogue or was hijacked…..IMO.

        • James Quincy says:

          Historicus,

          I think or at least I hope you meant to say “intentionally”. Everything the Fed, Treasury, and Congress is doing is deliberate and criminal. They are robbing the proverbial piggy bank right in front of our eyes. See my comment below (and pardon a couple of typos) for more of what I think about all of this. Keep up the good work Wolf.

  32. breamrod says:

    cynical stocks have taken a beating lately. !0 year yield dropping. Maybe the economy is hitting a soft spot. Panic cycle in August according to Armstrong.

  33. pjmetz says:

    On your charts, what does WTF mean other than an obscene expression?

  34. James Quincy says:

    The unfortunate reality is that nothing will change or improve in this country until the majority of voters realize that there is no real fundamental difference between the Republicans and the Democrats. They are simply two heads on the same snake. The are autocrats. They are career politicians. And as such, their so-called differences are just a dog and pony show to divide the electorate and distract as many as possible from the fact that our government is a corrupt autocracy. Until we collectively demand and impose strict term limits, eliminate lifetime benefits for political “service”, and lock up the entire cesspool that currently occupies our Congress, etc. then there will be no end to the shortsighted and destructive policies coming from every branch, the Federal Reserve, the Treasury, etc. and the continued theft through runaway inflation, ZIRP, insider trading, political “favors”, etc. will completely destroy what is left of this nation. Furthermore, we must realize that we do not live in a democracy and never have. We live in a republic with a “representative” government that only represents itself and its cronies and enablers. One term of 6 years for the President, Senate, and House. Then you are out and have to find a real job and benefits life the rest of us. I realize this may seem a little off topic, but the truth is this is the crux of virtually every problem that exists in this country so it is completely relevant. Hopefully Wolf agrees and posts this for all to consider.

    • Saxons Wrath says:

      Those are good suggestions for a start, but correcting our problems will require much more than suggestions. High crimes and treason will need to to be addressed first….

    • 91B20 1stCav (AUS) says:

      JQ-am okay with ‘term limits’ as long as it applies to ‘family fortunes’/estate /inheritance taxes, as well-EVERYONE has to ‘…out and have to find a real job…’, no third, second or even first-base starts…

      may we all find a better day.

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