Global Supply Chain Pressure Index Drops Below Average for First Time since Aug. 2019, after Horrendous Spikes

Inflation in goods normalized, but has exploded in services where there are no supply chain issues.

By Wolf Richter for WOLF STREET.

The Global Supply Chain Pressure Index (GSCPI) for February dropped below the historical average for the first time since August 2019. The historical average (green line = 0 in the chart below) is based on data going back to 1998.

The unnerving supply-chain chaos during the pandemic has now been completely unwound. The chaos was caused when massively overstimulated consumers, particularly in the US, but elsewhere too, blew their pandemic trillions on goods, creating such demand for goods, and so suddenly, that no one was ready for it, and the global production and transportation system essentially locked up – causing large-scale shortages across numerous unlikely and unrelated products – including amazingly, the now infamous WOLF STREET beer mug shortage.

Some of those products, particularly used and new vehicles, then spiraled into all kinds of crazy price spikes that were responsible for the initial and sudden outbreak of rampant inflation.

For example, used vehicle prices spiked by over 40% year-over-year at the peak, though used vehicles, ironically, were never in a shortage and weren’t waylaid by containers piling up at ports around the world. It was one of the weirdest consumer-behavior phenomena ever, telling a story about the inflationary mindset – mass psychology – rather than shortages.

This rampant inflation in goods – such as in used and new vehicles, electronics, apparel, sporting goods, (remember the shortages of bicycles, rowing machines, camping and trekking equipment?) started abating in early 2022, as supply chains began the slow process of getting untangled.

But by then, inflation had shifted to services. And as goods price increases began to moderate, or even backtrack, such as with electronics and used vehicles, the services inflation rate exploded, fueling further inflation fears:

The Global Supply Chain Pressure Index is another indicator that the goods-based economy has normalized, while inflation is raging in services that are largely unaffected by supply chains.

The GSCPI was developed by the New York Fed’s Applied Macroeconomics and Econometrics Center in response to the pandemic-era supply-chain mess. It uses data from the transportation and manufacturing sectors going back to 1998, including the Baltic Dry Index, the Harpex index, airfreight cost indices from the Bureau of Labor Statistics, and supply chain-related components from the Purchasing Managers’ Index (PMI). It focuses “on manufacturing firms across seven interconnected economies: China, the euro area, Japan, South Korea, Taiwan, the United Kingdom, and the United States,” according to the New York Fed.

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  112 comments for “Global Supply Chain Pressure Index Drops Below Average for First Time since Aug. 2019, after Horrendous Spikes

  1. Depth Charge says:

    “For example, used vehicle prices spiked by over 40% year-over-year at the peak, though used vehicles, ironically, were never in a shortage and weren’t waylaid by containers piling up at ports around the world. It was one of the weirdest consumer-behavior phenomena ever, telling a story about the inflationary mindset – mass psychology – rather than shortages.”

    I don’t think it’s “weird consumer behavior” at all. When you just hand people free money, they will blow it. They have no respect for it. Heck, if somebody handed me hundreds of thousands – or millions – in PPP “loans” which were actually gifts, think I’d care what the price of the new car was? Nope. I’d just buy myself whatever I wanted, which is exactly what happened. A free car is a free car. Who cares what the price is when you didn’t have to earn the money, it was just handed to you?

    The US government and the FED are an absolutely despicable disgrace of corrupt filth for what they have done. They destroyed pricing in every facet of the economy with their reckless con job.

    There was a Tweet recently from a person who highlighted long time members of Congress and their annual salaries, then showed that their net worths are now in the hundreds of millions. How is that possible? Why are they never investigated or audited by the IRS? Where did all of that money come from? The corruption is staggering.

    • Doolittle says:

      It’s not a swamp. It’s a sewer!

      • Leo says:

        I feel that the so called “supply chain issues” were largely invented to support the “Inflation is transitory” narrative, so that the administration is absolved of the incessant money printing that is primary root cause of entrenched inflation.

        If “supply chain issues” caused inflation, Thierry reversal would have caused Deflation and goods prices should be back at Prepandemic levels. That did not happen!

        • MM says:

          Alternate take:

          Shortsighted politicians and bureaucrats didn’t consider that shutting down the economy *and* handing people free money would cause widespread shortages of things.

        • Mr. House says:

          I find it funny that people feel like they only lie about certain things. I’d point something out huge but wolf will just censor it because we’re only allowed to point out approved lies.

    • Truth says:

      Of course used vehicles were in relative shortage. Not being able to get a new car means a used car is the substitute. Inventory dropped and turnover increased.

      As for services, there was a real drop in demand (and capacity). Then demand surged and capacity took longer to catch-up.

      Services of course also gets distorted by how housing is incorporated, resulting in the odd combo of big housing price declines while “housing” component in services is still driving headline figures up.

      • Wolf Richter says:

        “Not being able to get a new car means a used car is the substitute”

        That’s BS except for the small number of people who totaled their vehicle.

        See my comment below.

        • Phil says:

          one good thing I learned from my step-dad, who was never looking for change under the cushion, is that a used car can be a very good deal. he had an understanding with some mechanics and dealerships. he was no fool, and everyone gets their piece. they were good cars and lasted for years. like a 450SL that lasted for 30, until the mechanic told him to get rid of it.

        • John D Prutsman says:

          Nope, he’s correct. New cars were not available in large part due to chips and every other part we shipped from China. Everyone was buying used.

        • Wolf Richter says:

          “Everyone was buying used.” That’s total BS. Used vehicle retail sales FELL from pre-pandemic levels, while supply remained adequate. All this talk of new-vehicle buyers suddenly massively buying used vehicles is just clueless. You people have to look at the numbers and not just make up some stuff.

    • Sammy says:

      “There was a Tweet recently from a person who highlighted long time members of Congress and their annual salaries, then showed that their net worths are now in the hundreds of millions. How is that possible? Why are they never investigated or audited by the IRS? Where did all of that money come from? ”


      • Flea says:

        It’s called POWER =CORRUPTION a lowly IRS agent against a setting congresswoman,no chance

      • WaterDog says:

        They can legally trade on insider info from their committees.

        Pretty easy money. If they’re NOT rich they’re morons.

        Not even lying, Google it.

    • Steve says:

      As a used truck dealer I can assure you there were huge shortages and still big shortages in certain things. I sell 2002 to 2010. A good used truck in these years now with low miles is still over $10k mostly some over $15k and it is only because of shortages of low mile quality ones. They are not worth it imho. I used to sell this stuff forever at $4500-$6500(2001’s-2004’s). Dealers were happy with $2k profit(I was). Now because of inflation and pandemic spoiling, they want $4-$7k profit! There are plenty of newer low mile trucks at$20-$30k. But the cheaper ones are not enough to go around all the dealers and they are still getting bid up to be profitable enough.. But I do see some easing starting. I’ve panicked first myself and lowered everything to pre-pandemic prices(almost) and it’s still slow. Most dealers have not budged much(yet), but they will. Or fold. Try to find a good low mile Ranger 2002-2010(stopped making in 2011 except for new ones) with low miles under$9-$10. Not gonna see it. There is no supply. Same with older Toyota Tacomas. Overpriced for good not worth it but no supply so price sticks. So there is a shortage on AFFORDABLE quality stuff, that might not come down as much as it should. But if we go into the recession, prices will change. People will stop buying(like now) and the inventory that comes to market will build. Not trade in junk though that always builds, but the source is Government sales which are many and huge. This is all I buy, and in 4-6 months of little consumer buying, these sales of good lower mile vehicles will dwarf the buyers needing them, the market will flood and prices will drop. Especially on the trade in junk. In 08-09-10 I was getting great Fed GSA super low mile trucks at 1/3 the price. All the dealers were gone almost. This business went dead. I expect to see that again, shortly. Wait for it. If you still have a job and cash and a need that is. Things are changing dramatically, rapidly.

      • rodolfo says:

        You are right. Older low mile trucks very scarce.
        Very large supply of these are siphoned off and shipped out of the country to central and South America.
        Except of course in El Salvador where everyone is a BTC millionaire and only buys new

    • Samuel Smith says:

      This was spot on Fed had to have known this would happen sooner rather than later. Here we are two years later suffering from the stimmy and ppp loan money.

    • Brian says:

      Oh, please. First, it was more politicians than the Fed. Second, if they hadn’t done stimulus and the economy plunged into a depression with the stock market continuing in free-fall, everyone would be roasting them over that. Where we are is bad but I personally think where we would have been is worse.

  2. BubbaJohnson says:

    Govern ment created this bubble mess we are in. Interest rates will remain higher for longer and should never return to the lows of before. Cash is King once again. Stay out of debt, live within your means, life is good.

  3. 2banana says:

    Think about the poor children when student loans are not forgiven and have to start being paid back and the final city holdouts for no evictions disappear…

    That might actually chill some demand too.

    • 3bannarers says:

      Think about how you have such a different perspective on ZH.

    • MikeyC says:

      They’ll survive, as did hundreds of thousands of hardworking people who knew if they made a commitment to borrow and pay back a loan – that commitment was their obligation, not the other taxpayers.
      The same goes for renters: you committed to pay an amount for your living space to your landlord…why do you think it’s the governments job to protect you from reneging on your obligation?

  4. gametv says:

    nice article in the WSJ on home sales. it cites that “The total inventory of homes for sale is up from a year ago because homes are sitting on the market longer, but new listings in the four weeks ended Feb. 26 fell 20.3% from a year earlier, according to Redfin.”

    so we have a standoff between buyers and sellers. the question to ask is when sellers will finally capitulate, since buyers simply cannot afford homes at these interest rates.

    the longer home sales volume is depressed and home prices fall, the less buyers will be interested in entering the market. this looks like a very sustained downturn. could this last 3-5 years? could the top to bottom prices fall 50-75%? i personally think that the longer the prices drop, the less buyer interest there will be, until finally, deals emerge that make buying a home a real steal and the new equilibrium is established.

    • Truth says:

      LoL at 50-75% decline. 09-‘11 suffered from a far worse starting condition, real systemic issues (and fears) and we didn’t see nearly that correction. Even as outright speculation (and volumes underlying that speculation) was greater.

      I’d love a 75%, drop – but it is not happening. Also, if the US sees a 75% drop, our Northern friends will see what, a 95% drop? That is where the starting point of affordability (and prior price movement) puts Canada’s market vs the US.


      • VintageVNvet says:

        Can and has happened many times in many ”locations” that I have personally seen since the crash of 1956-7.
        Last crash saw nice ”ranchers” on canal with sailboat clearance ( no bridges IOWs) to the GOM go from asking of $850K in 2006 to sold for $225K in 2009…
        Other location was seeing many houses that had been sold for $40-50K sold for $3-4K…
        Folks really need to ”study, carefully” their desired location, and NOT just what is on the web from Zillow or Redfin or — ALL of which are what used to be called PROMOTERs,,, as in fleecing the suckers.
        Most counties these days, in the various states we have owned in,, have a website where all the ”public” information re local RE is available, though not sure if ALL provide ALL such.

    • butters says:

      50% is most likely, but that will take a couple of yrs. The ‘pandemic gain” will disappear by end of this year.

      • Truth says:

        Maybe the problem is mathematical aptitude (or lack thereof). If the increase in prices was 50% during the past few years, returning to pre-pandemic is a 33% decline from peak. Not 50%.

        Nevermind the absurd 75%.

        I wonder if some commentary on bond math is based on this same aptitude.

        • Truth says:

          Oh, disregard. You are at least referencing different time frames.

          So somehow we are retracing to levels before the surge and unwinding 4 years of growth… fine. Disagree but at least your math is okay.

        • butters says:

          My best case scenario is we will go back to prices from 17/18. Still in bubble territory though.

        • Depth Charge says:

          “So somehow we are retracing to levels before the surge and unwinding 4 years of growth… fine. Disagree but at least your math is okay.”

          House prices were already in a massive bubble before the pandemic. They were already rolling over in 2018 in many areas, and the FED knows that. You can see many areas where they had started to decline.

          The FED knows EXACTLY what they’re doing. Every single soundbite you hear from them is carefully crafted. Every single move is intentional. They used the pandemic as an excuse to try to prop up insane asset bubbles, and push them to even more insane levels.

          The reality is that the FED only has one single tool – the printing press. They can print money – devalue the currency. That’s it. They’ve been doing that for over 20 years. They’re destroying the quality of life of the masses so that all their rich buddies don’t have to pay the piper for their bad bets.

          Getting back to house prices – they fell over 60% in MANY areas last bust. If you are not aware of that, you should make yourself aware of it, because it’s coming again. Unless they have some grand plan to try to juice house prices again, it’s game over. Historically, house prices represented what local incomes afford. That’s where we’re going.

        • VintageVNvet says:

          FOR DC:
          Agree except for the 20 years part; FACT is that FRB was set up to screw WE the PEONs FROM THE BEGINNING,,, and has done so SO consistently and well since the start that I am truly amazed that the FRB still exists as some sort of bastardly combination of ”private” and GUV MINT…
          ONE or the other IMHO might,,, just might, work to heal some of the horrendous damage to WE Peons that the FRB has and continues to accomplish with each and every financial challenge.

    • Seen it all before, Bob says:

      “since buyers simply cannot afford homes at these interest rates.”

      Given the feeding frenzy in January when interest rates dropped 1%, the demand is still high.

      I think most people can’t afford homes at this price at these interest rates but enough can.

      For a soft landing, we need to get to the interest rate where 1 or 2 buyers bid on a house below asking with a typical supply. Just like the good old days. A good part of this is FOMO. That needs to be squelched. Last year it was 50 bidders overbidding on a house. 10 bidders bidding on a house is not much better.

      • Wolf Richter says:

        “Given the feeding frenzy in January when interest rates dropped 1%, the demand is still high.”

        LOL, pending sales ticked up 8% from the collapsed December — I think that’s what you’re referring to — but year-over-year pending sales still plunged 24%. Not exactly a feeding frenzy, but the beginning of selling season (which starts every year at this time) and a brief dip in mortgage rates.

    • Gattopardo says:

      “the question to ask is when sellers will finally capitulate”

      Finally? This just started!!!

    • Juliab says:

      As Wolf always said and I agree, be patient. Housing is not crypto

      • Wolf Richter says:

        I’m getting tired of all these people sitting there impatiently waiting for prices to fall enough and looking for signals so that they can finally buy. I’m starting to think: “Go ahead and buy, and learn your lesson.”

        The lesson being that a home is a highly-leverage money-making investment only in a booming market, which is now finished. Otherwise it’s an endless expense that you need to be able to afford year-after-year. And if you can afford it, you’ll be fine.

        • Juliab says:

          In my country, 88 percent of people own their homes and 65 percent own more than one home. The hysteria here is no less than in the US and I wonder how it is possible for a person to be so greedy. The best investment is in education and health. If you have them, you will always be able to buy a property. I see people with ridiculous salaries who take out huge loans to “save money from inflation” and do not understand that it is better to lose a little money than to lose everything to own another overpriced and worthless property. Apparently, people everywhere are the same.

  5. David Hall says:

    “Used car prices skyrocket in 2021 due to new car shortage” — Michigan Radio, 12/30/21

    • Wolf Richter says:

      Radio station cluelessness?

      1. New vehicle prices spiked a lot LESS than used vehicle prices — and there were actual shortages in new vehicles.

      2. There was adequate of supply of used vehicle throughout. Used vehicle prices skyrocket because buyers paid no matter what because they got into an inflationary mindset frenzy.

      • Truth says:

        How is used supply the relevant metric? First, it clearly dropped from pre-pandemic levels. Second, the relevant metric is total supply. As new supply drops you raise prices on used and maintain (or try to maintain) balanced inventory overall. Classic inventory management through pricing adjustment.

        • Wolf Richter says:

          “… it clearly dropped from pre-pandemic levels.”

          In Dec 2021, when the ratio station made this comment, there was 51 days’ supply of used vehicles on dealer lots; that was 3 days ABOVE average for 2019 (48 days).

          “the relevant metric is total supply.”

          That’s silly. They’re not the same markets. They’re not the same customers. They’re not in the same price category. A lot of used vehicles are sold by dealers that sell ONLY used vehicles (including CarMax and Carvana). People got on long waiting lists to buy a new vehicle. They didn’t trade in their three-year old vehicle that they’d bought new three years ago to buy a three-year old used vehicle, when they want a new vehicle. They would have just kept their truck and waited. And millions did. Get real.

          The average used vehicle asking price, even after the price increase = $26K

          The average new vehicle transaction price = $50K

          (data from Cox Automotive)

        • David Hall says:

          The new car dealers stopped selling their cheaper models and switched production to more expensive vehicles, due to the chip shortage. Used car dealers sold out of their more affordable models, but had plenty of expensive models to sell as people sold cars they were not using.

        • Wolf Richter says:

          You should have listened to the conference calls by CarMax and other auto dealers at the time when they discussed the used-vehicle market. They didn’t run out of used vehicles. They bought at auction what they needed. They all were stumped by their customers’ eagerness to pay whatever, so they raised their prices, and because they knew they could mark up prices enough, they bid up prices at the auction too. They made historically big profit margins. Prices suddenly didn’t matter anymore, for a while. There was adequate inventory in the wholesale channel too. Volume was not big, but prices were and profit margins were.

          Buying a vehicle is the ultimate discretionary purchase. Most people can just keep driving what they have for a while longer. But now they had stimulus cash in their pocket and rates were low, and price just didn’t matter anymore. That’s what you get for handing out free money. It changed the mentality.

        • bulfinch says:

          You left a pinky out of your kid glove whenever you walked back stupid to silly — “stilly”

      • DawnsEarlyLight says:

        Read his comment again, you must misread it. Used car prices certainly spiked due to shortage of new cars.

        • Wolf Richter says:

          So why have used car prices been falling for an entire year — since Jan 2022, even as new vehicles were still in shortage? They’re not connected. That’s why.

          Here is used vehicle CPI (index value):

        • DawnsEarlyLight says:

          Your chart shows it perfectly. Different time periods.

      • Blam35 says:

        I recall Hyundai chastising it’s dealers for charging a 3k availability surcharge. If this behavior was more widespread it could account for lower increases for new cars but I acknowledge my experience is anecdotal. But, is it possible that the used car market has more freedom to increase prices as vehicles are obtained at increasingly higher priced auctions. IDK

        • Flea says:

          Went to Toyota dealer sales woman told me I would pay full msrp ,and basically that whatever they wanted to give me on trade in. Because they have a 100 people waiting list .Told her have a nice day will continue to drive my 7 year old -28 k mile car.

        • Apple says:

          I think auto manufacturers have no idea the damage the dealerships have done to their brand.

      • Steve says:

        No there was and is a shortage of some things. Cargo Vans were few and far between. Try finding any cargo van under 75k mi 2006 up under $10. They used to be only $5-$7k. Same with low mile older trucks. The pandemic money bought up certain things to unprecedented no supply driving prices to the moon. Supply and demand. People panic bought stupidly with free money. There are still huge shortages of certain affordable desirable low mile trucks and vans as before the pandemic there was never a shortage. Not ever a shortage of affordable vehicles. There are no Toyotas on the two block Toyota dealership in Garden Grove. Unimaginable. These new vehicle buyers many have to eat into the used market. That is still affecting used supply(of good used stuff). But note this: there are only 1/4 to 1/3 the buyers as before at most imho.. Same story playing out in housing. Grudge match. Buyers vs sellers. I’ve seen this game before. I place all my money on sellers… Losing.

        • Wolf Richter says:

          Cargo vans? Are you kidding me? That’s less than 3% of total new vehicle sales, fleet and retail, all brands and models combined. Cargo vans are a niche product. So that’s where used cargo van supply comes from. If that’s your example of vehicles in short supply, you’re joking. There’s always a shortage of good low-mileage low-priced cargo vans, LOL, because you’ll never have a lot full of them. But you’re complaining about the price — not that you cannot get them. That’s a different story. That’s a price story, same with all used vehicles, which was my point.

    • rojogrande says:

      I dial it in and tune the station
      They talk about the u.s. inflation
      I understand just a little
      No comprende–it’s a riddle

      Mexican Radio, 12/30/82

    • MiTurn says:

      I regularly search Craigslist, looking for specific models. And I can assure that prices of used cars are definitely falling. A lovely sight!

      I’m just waiting for them to fall even more…no hurry.


  6. Citizen AllenM says:

    The real estate game being played now includes so many dodges to avoid putting the house on the market. In reality, in a declining market, first is best. So many players assume that covid peak will eventually come true again. Now, in many places the bubble of 2005 only got beat in 2017 or so. Twelve years is a long wait to be made just whole while treading water.

    In short, a real economic return to normality is in the works for interest rates, and big negative numbers may now be the reality for the next five years. Real estate and bonds don’t trade like beanie babies or baseball cards.

    The triple D will rule again. Death, divorce, and destitution.

    The current slow death was how the housing crisis started last time. The deniers are all the same. It is sorta boring to see again. Greenspan’s easy money doth make bubbles, and now Bernanke and successors too.

    Remember the epic number of boomers that will shortly begin the long march of selling real estate for the next stages of life….

    As for the rest of the global supply chain, tell me the status of trade with China and the US, and that will be the entire biggest piece of the world trade.

  7. Carlos says:

    It seems like a large portion of this ‘services’ inflation is due to the housing surge finally hitting the CPI figures. For 2021, CPI was reporting ~4% inflation for housing (which is over 1/3 of the total weighting of the CPI), meanwhile the transaction price for SFH surged 40% at the time.

    A lot of that 40% surge has not yet been accounted for in the CPI due to leases, unrealized house equity gains, and whatnot. In 2023 the CPI for housing is now over 7%, which will significantly contribute to the “stickiness” of inflation until that 40% price increase is fully accounted for.

    The logic points to the probable outcome that the only way the Fed can crush inflation as fast and effectively as possible is to crash the housing market, which is extremely sensitive to interest rates and would be apocalyptic if they started liquidating MBS. The Fed’s remarks about how young people should wait to buy a house until the market fundamentals are fixed seems to support this as the agenda pretty strongly.

    • Apple says:

      Services and housing are tracked separately.

    • LongtimeLurker says:

      Are you saying that the primary action the FED needs to do to lower their inflation metric is to rapidly drop real estate asset prices?

      • MM says:

        If RE prices don’t come down, rents will rise dramatically, further fueling inflation.

  8. Moi says:

    Anecdotes: I was in the middle of a strip to the studs townhouse reno when it locked up. They closed the landfill so I had to haul everything home and put it out with the trash. I had ordered the kitchen three months in advance but when due date came 2 weeks before tenants moved in I got “sorry it will be two months”. Ikea!!! saved me.
    Flour was gone for six months because everyone was home making sourdough.
    Seeds were gone because everyone was home teaching their kids how to plant things.
    When I went to buy a particular car model they said sorry come back in nine months and we’ll put you on the waiting list.
    Anyone else got funny stories?

    • Petunia says:

      Was in a Kohls(Sephora popup) yesterday trying to buy a lip gloss, they were sold out of everything. BTW, these lip glosses retail for between $20 – $28, not cheap or discounted.

      • elbowwilham says:

        Is that part of the “Pink” tax? I have found petroleum jelly the best for chapped lips, and a tub costs $1.50 and lasts a long time. But it doesn’t smell or taste fancy.

        • VintageVNvet says:

          Vitamin E oil available for $6-7 USD per ounce, with one very slight bit doing the best job to not only help against sun, but, more importantly, keeps any skin better able to withstand sun going forward.

        • Petunia says:

          Lip gloss is not about chapped lips.

      • MiTurn says:

        I went to one of my favorite fresh donut/coffee shops the other day. Not close by, but worth the ocassional trip.

        A raspberry donut with a medium cup of regular coffee cost $9.60! What?!

        I paid, but never again.

  9. The Real Tony says:

    The shortages are caused by inflation mentality not by any supply chain issues. The old line about more excuses than Carter has liver pills. Supply chain, ghosts and goblins. I’ve heard all the excuses but the real reason is was and still is inflation mentality. They can put the cart in front of the horse with their false claims about supply chain issues but these claims are simply erroneous.

  10. Citizen AllenM says:

    Wolf, how big of an impact is Carvana declining number of vehicles on the lot to that days car graph? They bled $1.8 billion in assets (mainly cars) from start to finish in 2022….so they went a lot leaner…

    Now, just saw a house go in my hood in one weekend- but they undershot the market by 10% and sparked a frenzy. So the denial is still real thing. I will see if they are flippers, airbnb or actual occupiers.

    Global supply chain predictions are going to be ridiculous. How long will the Ukrainian conflict last? When will we see grain production and metal production from Russia on the free markets?

    • Wolf Richter says:

      There have been roughly 2.2 to 2.6 million used vehicles in dealer inventories over the past few months. If Carvana dropped its inventory by about $1.5 billion, that would mean about 60,000 vehicles, out of 2.2 to 2.5 million, so barely a rounding error.

      And the other thing is: those car have to go somewhere. If Carvana didn’t buy them, some other dealer did.

      • Steve says:

        Without being able to sell at pandemic nose bleed prices, Carvana is gone. Flawed business model good for pandemic only. Pandemic buyers are gone. There is no source for Carvana to get vehicles and survive under their current model. They would just become like a regular dealer but will fold from debt. Whatever happened to vroom and true car?

  11. Gen Z says:

    Anecdotal, but current rents in Canada are obscene.

    To rent a bachelor unit is about C$1800 a month in the GTA. It’s also the same price in Halifax which is a small town.

    Even in Montreal, rents are reaching these prices. Five years ago, you would pay half the price for the same unit.

    Something is not right.

    • LongtimeLurker says:

      According to bnnbloomberg, “Canada’s explosive population growth from immigration is causing rents to surge in its biggest cities. And there’s another problem: The country isn’t even properly counting the number of people who need homes.”

      • Petunia says:

        From what I understand, development is highly curtailed in Canada, due to the best land being “Crown Land.” Yes, owned by that crown, and it’s a lot of it too.

        • Ryan L says:

          Lol most crown land in Canada is tundra or boreal forests. Most fertile and land suitable to development are owned privately.

        • Petunia says:


          Developed land was once tundra or forest, lol.

  12. LongtimeLurker says:

    The con job artists in the American government and FED makes it harder to tell who is incompetent and who is malicious.

    It is interesting how seemingly rational individual consumer behavior with used automobiles can lead to a seemingly irrational macroeconomic behavior. Only new autos were really in short supply but that and some stimmies were enough to get some crazy macro effects. Even then Autos are generally discretionary spending anyway so maybe not too rational on the consumer side hahaha.

    • Keppered says:

      “The con job artists in the American government and FED makes it harder to tell who is incompetent and who is malicious.”
      I know.

  13. Random guy 62 says:

    Our factory supply chain hassles have mostly fizzled, but there are still crazy lead times on a lot of things. Prices rose like a rocket and are now falling like a feather. Most things are now showing up on time and outright shortages are few and far between. Our custom manufactured component supplier lead times are still pushing one year while 2-3 months is normal.

    Shopping now for a new forklift since one of our old ones just blew up and needs a $15,000 rebuild. Usually this would be a stock item, or close to it. Bought a new Hyster two years ago for $31k. Same specs this time and the quote was $44k and two year lead time.

    Things are not normal by any means, but definitely seeing an improved supply chain from the worst patch in late 2021.

    • Kevin W says:

      “Prices rose like a rocket and are now falling like a feather.”

      Well done.

    • Petunia says:

      Last summer ordered nightstands online, after 2 months they cancelled my order because of restocking delays. Just reordered the nightstands last month for $300 less and they were delivered last week.

    • VintageVNvet says:

      tanks SO MUCH for your ”boots on the dirt” reports on wolf’s wonder rg8:::
      Had seen these surges and subsequent declines for many decades in role as construction analyst/estimator.
      These days, not so sure of any of the precedents/antecedents, because of the possible or even now likely GUV MINT interference in EVERY MARKET as has been shown the last few years…

  14. Keppered says:

    Right, services been saving up for a raining day? Which makes a supply shortage easier to adjust. Sounds a bit impractical but could be doable. Someone some big player is holding out.

  15. Happy Jack says:

    I was always under the impression the ONLY reason USED cars took such a dramatic rise was because there were no NEW cars available at the time.

    • Wolf Richter says:

      Wrong impression.

      1. Used car prices have been falling since Jan 2022, while new vehicle shortages persisted. Those two are not connected via substitution, as I explained above. Different markets.

      2. Average asking price of a used vehicle $26k, average transaction price new vehicle $50k. Different markets, different customers, different expectations, different wealth and incomes.

      3. Vehicles are a discretionary purchase for most people (except those who totaled their vehicle). They can drive what they have for a while longer, and many did.

      4. If you own or lease a three-year old vehicle that you bought new and want something new, you’re not going to buy a used vehicle. Just not going to happen. You put your name on a waiting list and drive what you have until a new vehicle becomes available that you can buy.

    • phillip jeffreys says:

      There had to be some aspect of speculation as well. Recall all the stories of people being offered deals for cars sitting in their driveways? Happened in my area.

      In an unrelated area, I still receive periodic inquiries from realtors vis whether there is interest in selling my condo (FL). Much less frequent now, however, than a eyar ago.

  16. Kevin W says:

    Goods inflation over the past few years had to be terribly exacerbated by the COVID shutdowns in China, and the blown up logistics chains. I have a literal office view of the railyards, port, and major highways in one of the biggest cities in the world, and can tell you that it was impossible to schedule any deliveries at all. That includes outbound and in, since December 2019.

    So at the same time Congress and the Fed were showering consumers with money to stoke demand, people who would be expected to satisfy it were locked down in their homes. Trucks couldn’t move from neighborhood to neighborhood, let alone across provinces. Drivers had to be tested every handful of miles. Millions of acres of crops never got planted by the armies of migrant workers that need to get on a train to go to work. And so on.

    Companies are responding by moving supply chains out of here, to India, Thailand, VN, Indonesia, and that’s not going to be a smooth and orderly process either.

    It wasn’t just lousy monetary and fiscal policy that have royally screwed things. We now see the problem with front-ending so much of the world’s supply chain in one place, and the confluence of just godawful, over-the-top responses to the pandemic has just smashed complex systems that cannot be put back together again.

    • phillip jeffreys says:


      Recall all the LA Port issues stories.

    • VintageVNvet says:

      good comment KW:
      Please continue to report your situation and opinions on Wolf’s Wonder.
      Thank you.+

  17. Mike R says:

    On the other side of the pond, is a massive glut of empty shipping containers, piling up in every port in China. So yeah, there are few supply chain issues, because obviously demand is way down. At least for goods from China. High services prices are going to be far more entrenched, and it’s going to likely take until we have a very deep recession before those prices relent any.

    • Kevin W says:

      Can confirm.

    • phillip jeffreys says:


      Insurance rates are going up – a lot. This drives HOA rate increases and surcharges (am experiencing these now). Food price increases continue; club membership fess, capitalization fees to clubs, etc., increasing. Income is not increasing proportionately. In my own case, there’s enough discretionary income to absorb the hits – but the approaching headlights grow brighter that personal budget tradeoffs and cutbacks are not far off.

  18. Expat says:

    Has anyone simply stopped to consider that the average consumer is, for lack of a better word, a moron? Homo consumerus did not get his MBA from the Chicago Business School nor channel the spirit of Milton Friedman when he makes his consumption decisions.

    Why search for rational, economic explanations when these are the same humans who bought tulip bulbs for the price of a house or who take out 15 year loans to buy a new car?

  19. Varughese says:

    How can you bring down the inflation in services? Unless the labour supply become tight, this will be a difficult task.

    • MM says:


    • phillip jeffreys says:

      What wld be the profile for an “average” consumer?

      Asking for a friend.

    • rojogrande says:

      I think you mean unless the labor supply loosens, it will be difficult to bring down inflation in services. A recession will do that as MM says.

  20. john overington says:

    The total volume of used cars in the market is made up of a) new cars being sold (or off lease) to be replaced by another new (or on lease) less b) those being scrapped or otherwise removed from the market (eg becoming “classis” cars).
    At one end you would have people who weren’t adding their vehicle onto the used market because they couldn’t get a new one and at the other end, people who weren’t removing their car from the market due to affordability issues.
    Essentially, the change in used cars available would be the reduction of new car sales (expected sales less actual sales) minus vehicles taken off the market. So if new car sales are down by 2 million and scrapped vehicles are down by 1 million, the volume available reduces by 1 million. I have no idea of where to find figures but it’s an interesting exercise.

    • Steve says:

      You were going in the direction of a good point. There has always been and always be a glut of used worn out high mile vehicles. The pandemic excess money panic buying though bought out all the good quality lower mile older trucks and vans and some cars. Note good – quality models. There are still shortages of quality older Ford, Chevy low mile trucks and vans as compared pre-pandemic. Note – in the last recession you could not give a full size truck or van gas guzzler away. Even great ones sat. Things are improving slowly. But the charts, like what Wolf uses mixes in all the lower demand worn out junk with hard to get high demand quality. If you were to separate the good stuff from the bad stuff and make two charts, they would be far apart. Most sensible people fit in the quality chart. But that worn out junk which is most vehicles gets bought and sold so it goes into a chart. Imho this does not reflect reality on a street level like it may imply so you do not get a right understanding of the used vehicle market. Never buy worn out junk. Never. Not even if it is free. It is a money pit and you will curse the seller sooner or later.

  21. Swamp Creature says:

    J Powell did it again. Today he sounded like the moron that he is. When questioned about runaway federal spending contributing to the inflation, he dodged the question and said it had no effect. The market dropped over 300 points as a result as soon as he said it. He should be fired and removed from his position, YESTERDAY!! He is a coward. He didn’t want to jeopordize his job and criticize the admintration who he works for.

    • VintageVNvet says:

      10-4 SC !!!!!!!!!!!!!!!!!!!!!!!!
      Time and enough to get rid, once and for all, of this totally CRAZY and clearly NOT FUNCTIONAL FRB!!!!!!!!!!!!!
      Unless you are one of the RICH FOLKS who started the FRB to screw WE the PEONs, as the FRB has SO clearly done.
      Please folks, look carefully at the degradation of our money since FRB started.
      If that doesn’t give you the ”heebie jibees”,,, nothing will??

    • Wolf Richter says:

      Swamp Creature,

      You hate whatever Powell says. When he says something and markets jump, you hate him for that; and when he says something that makes markets dive, you hate him for that. LOL.

      At least he is NOT finger-pointing, saying that this inflation is the fault of Congress. He could have said that, based on your wishes. But he didn’t. He essentially said it’s the Fed’s job to fix this inflation.

      The Fed has always tried hard to not get involved in fiscal policy. That’s one of the ground rules. The Fed is not an elected body. Fiscal policy is Congress’s job. And Congress needs to do its job.

      • VintageVNvet says:

        Indeed Wolf, ”Congress needs to do it’s job!!!
        For many reasons, ”The Congress” elected by and FOR WE the PEONs does NOT,,, and clearly HAS NOT done it’s job of representing ”we the people” for many decades…
        And thus we now get ”outliers” on both sides who have done and will continue to ”obfuscate” the basic rules of law of the congresses of USA.
        WE the PEONs are paying for this very clear failure to follow the clear rules of ”representation” FOR WE the PEONs,,,
        and as in each and every such failure, so far,,, WE will have even more challenges to not only maintain, but advance our balance with the oligarchy, as was SO clearly seen by our founding folks at least TRYING.

        • Expat says:

          The problem is that people keep electing the same crooks and parties to office. The bipartisan mantra is, “Their guy sucks. My guy is great!” Everyone approves of the guy they voted for and blames everyone else’s votes.

          Face it. Whether you have a mullet and a MAGA hat or a latte and tie-dyed peasant dress, your candidate is a lying sack of excrement. Vote for someone entirely different. Personally, I think the left is capable of making that shift while the right is not (or is unwilling) so splitting the vote on the center-left will lead us to having MTG as president.

          Why not? Gotta hit the bottom before you can feel the highs!

      • Swamp Creature says:


        I don’t hate J Powell but his testimony is all over the map and doesn’t inspire confidence. He said specifically that fiscal policy had little or no impact on the inflation we are enduring. This clip is being repeated all over the media, at least the ones that I watch and may be affecting the markets. I believe that the statement is wrong. Because of these massive deficits the Fed under his leadership and previous Fed chiefs have had to finance the deficits with printed money, leading to the inflation we are now seeing, of course with the usual lag. That might explain the market crash today as investors are bailing out in droves because they have lost confidence in J Powell. I do applaud his efforts to raise interest rates, tighten the money supply, and reduce the balance sheet, though I wish he would do it far more aggressively. Right now, the interest rates are still well below the inflation rate and people are borrowing and spending like there is no tomorrow.

        • Davinsky says:

          SC, post the economy shuttering Pandemic outset, the Fed increased its balance sheet by $4 Trillion and Uncle Sam ( does not rhyme with Sane ) spent some $7 Trillion to force feed consumer spending after they put the U.S. economy in life support. And the Federals in Washington have not found a printed Dollar they will not spend, still off the proverbial tracks!

          So both Excess Liquidity Machines can take a sorrowful bow. Wolf, a chart of GDP vs. Money Supply would be a topic for its own WS piece. Or use whatever adjusted liquidity metric is more accurate in today’s convoluted funding markets.

    • MM says:

      “The market dropped over 300 points as a result”

      I think it had more to do with Jpow’s overall hawkish tone, and the fact that he implied 50bps hikes are on the table for March & May.

      • butters says:

        “on the table”

        Ha ha…not sure anyone believes that. It’s 25, that is it.

  22. SoCalBeachDude says:

    Nothing but inane and outrageous PRICE GOUGING. Nothing else.

  23. Nate says:

    Curious what happens with post-zero COVID China.

    I think it’s fair to say the CCP ‘crats got spooked by the street protests and they want to push growth as hard as Xi will let them. But they got (a) foreign policy issues as both the US & EU are upset about stuff Emperor Xi owns (UKR / Chinese balloons that end up littering our coasts) and (b) demand for goods returned to normal when they want to ramp up.

    So…dumping? Not sure–especially with the tariffs–but not impossible we may see some disinflation happen with the cheaper goods. Just pure speculation; I strongly doubt there would be any data to support it.

Comments are closed.