Used Cars, PCE Data Hint that Inflation May be Transitory

The used car market can reveal broader inflationary patterns. Prices for used cars and trucks rose nearly 30% between May 2020 and May 2021.


Source: Shutterstock


key takeaways

  • The latest core PCE reading showed the biggest increase since 1992, but was in line with estimates
  • Used car prices, which rose nearly 30% between May 2020 and May 2021, may be topping out

The latest personal consumption expenditures (PCE) data released Friday shows that the Federal Reserve is unlikely to make any major policy changes in the near future. 

In the biggest increase since 1992, core PCE rose 3.4% year-over-year, exceeding the 2% flexible target set by the Fed, but in line with economists’ estimates. The core index rose 0.5% from last month in May, lower than the expected 0.6%, according to data from the Commerce Department.

PCE chart

Equity futures rose at the open and government bond yields stayed flat on the news. As Fed officials have continued to downplay inflation concerns, this reading is unlikely to shift current policy significantly. 

Used car pricing reveals inflationary patterns

Eyes are also on used cars, a market that can reveal broader inflationary patterns. Prices for used cars and trucks rose nearly 30% between May 2020 and May 2021.

Surging prices in the second-hand vehicle market have helped US inflation soar to the highest levels in more than a decade. Used car prices rose 10% in April and an additional 7.3% in May. In May, used cars made up one-third of the overall rise in consumer prices. 

“The latest Manheim Used Vehicle Value Index shows used car/truck inflation is in the process of topping out,” said Nicholas Colas, co-founder of DataTrek Research. “That’s important to broad measures of US inflation; May’s core CPI inflation reading of 3.8% was just 2.7% without used vehicle inflation.”

In June, Manheim’s wholesale index of used-vehicle value was 36% higher than a year earlier. This was down from an annual rate above 50% in April. If used car prices are peaking, it may be a sign that the current spike in inflation will also run its course shortly. 

“Used car inflation should be less of an issue in the second half of 2021, lowering the chance of big upside surprises in upcoming CPI reports,” said Colas.

Bank stress test results

Bank shares were also on the rise Friday following the Fed’s statement that the biggest US lenders would be able to easily withstand a severe recession. The 23 financial institutions that participated in the stress test, including Bank of America, Citigroup and Goldman Sachs, “would experience substantial losses under the severely adverse scenario but would remain well above their minimum risk-based requirements and could continue lending to businesses and households,” according to the Fed’s Dodd-Frank Act Stress Test released Thursday. 

The pandemic impact

As the Fed continues to watch inflation and employment numbers, the pandemic continues. Even as unemployment numbers remain high, there is a record number of job openings in the US. Officials are urging Americans to continue to exercise caution and get vaccinated as the new Delta variant poses a threat. 

“Six hundred thousand-plus Americans have died, and with this Delta variant you know there’s going to be others as well. You know it’s going to happen. We’ve got to get young people vaccinated,” Biden said during a trip to North Carolina Thursday. 


Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg


In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.


Revolut said that the standalone crypto exchange is currently “invite only”


The stock price jump comes after Coinbase reported ending its seven-quarter run of net losses during the fourth quarter


BUZZ holds shares of Coinbase, Robinhood and MicroStrategy


Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile


The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally


While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders