Used cars are on display at Frank Bents Wholesale Motors’ sales area in El Cerrito, California on March 15th. Supply chain growls and pent-up demand are driving the prices of many things up, including new and used cars. Justin Sullivan / Getty Images Hide caption
Justin Sullivan / Getty Images
Justin Sullivan / Getty Images
The prices of many things are skyrocketing in the US, and John McConnell’s recent car buying experience helps explain why.
McConnell of Colorado Springs, Colorado was recently looking for a Toyota Tacoma to replace his two-year-old Nissan Altima and was shocked to see the one he wanted was several thousand dollars above the sticker price.
He still wants to buy it.
“I’m not going through a midlife crisis. It just itches me, ”says McConnell. “I’m ready to pay a little more at the moment I think because I can afford it at the moment.”
After a year of the coronavirus pandemic, McConnell was itching to go camping and doing more outdoor activities. And like many Americans who got through the pandemic, he had the money.
“You know that a small Nissan won’t keep up on many roads here in winter,” he said, explaining his decision to upgrade.
The Department of Labor will release its latest inflation measurement on Thursday for the 12-month period ending in May.
April readings showed prices rose 4.2% – the fastest pace in more than a dozen years – which raised inflation fears across the country.
Prices are driven higher by the clutter in the supply chain resulting in a shortage of key components such as computer chips for cars, hence the higher price Toyota wants its pickups to be.
At the same time, the rapid rollout of COVID-19 vaccines is causing a surge in backlog after a year of domestic incarceration, and those who can afford it are willing to pay.
“It’s just not going to stop. People have money in their pockets,” said billionaire Warren Buffett, whose Berkshire Hathaway company sells everything from See’s Candies to prefabricated houses. “It’s not a price-sensitive economy right now, at least not.”
At Berkshire Hathaway’s annual meeting last month, Buffett described the economy as “scorching hot.”
The consumer price index offers a kind of temperature check. The April report showed that food prices were up 2.4% year over year. Used car prices rose 21%. And gasoline prices were up 49.6% from the depressed price in April 2020.
While many consumers put up with the higher prices, they are a hardship for some.
Justin Bergin’s work as an art installer has all but dried up during the pandemic. He’s scratched by selling his own pictures.
“Feeding three children is not an easy task on a budget at first,” says the single father from Baraboo, Wis. “But now that prices are rising, it is even harder for me to get a full shopping cart.”
Bergin buys a lot more rice and pasta these days. He also often doesn’t have to say more when his children ask about expensive things in the supermarket.
Both the Biden administration and the Federal Reserve argue that the surge in inflation is likely to be short-lived. Some prices, such as airfares, are just returning to normal after a steep slump during the pandemic. Others are the result of temporary shortages that should resolve on their own as supply catches up with demand.
Rising labor costs are driving prices up in some areas, but officials don’t believe this is the start of an upward spiral like this out of control US experience in the 1970s. Chipotle said this week It is increasing menu prices by about 4% to cover its new average hourly wage of $ 15 per hour for employees.
“We’re seeing some inflation, but I don’t think it’s going to last,” said Treasury Secretary Janet Yellen said last weekend. “We will monitor this very closely, keep an eye on it and try to address any problems that arise if it turns out to be necessary.”
Higher inflation could be seen as a sign that the economy is recovering after a very difficult year.
As hard as the last year was for Bergin, the artist felt tremendous relief when he got vaccinated and was able to see friends again.
“Oh my god, yes,” exclaimed Bergin. “I went to an art opening and saw a friend from graduate school and we hugged and I felt this wave of joy roll over me – like ‘Wow, another adult, another person going through things and we’ are here at the same time . ‘ It was just wild. “
It’s a priceless feeling that doesn’t appear in the consumer price index.