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The price of new and used vehicles decreased in July compared to last year.
Robin Beck/AFP/Getty Images
Rising prices for new and used cars have been a thorn in the side of American consumers for years. New pricing data shows that some relief is finally on the way.
This is not good news for stocks of such automakers
Ford Motor
Bar: F) f
general motors
(GM), though. Moreover, not all news is good for car buyers either. You will bite off the repair and insurance costs.
On Thursday, Bureau of Labor Statistics released US consumer price data for July Prices of a basket of consumer goods advanced by 3.3% on an annual basis. This is up from 3.1% in June, snapping 12 consecutive months of low numbers.
However, the number was low enough to placate investors who want the Fed to stop raising interest rates. the
Standard & Poor’s 500
And
Dow Jones Industrial Average
He spent most of Thursday trading in the green.
Higher rates have increased the cost of personal transportation. In the second quarter, 17.1% of Americans who finance a new car were paying $1,000 a month or more. This is up from just 4.3% in the second quarter of the 2019 pandemic.
Prices are not the only reason. Prices of new and used cars increased by about 29% from the end of 2019, before the pandemic hindered production and reduced the supply of cars.
Prices of new and used cars are coming down, if slowly. In July, prices fell 0.2% year-on-year, the third such decline in the past seven months.
This is not good news for auto investors. Rising car prices have boosted automakers’ profits and the fear that lower prices will translate into lower profits.
Fear appears in stocks. Ford stock was down 4.8% in late trading Thursday at $12.12. General Motors stock is 5.6% off at $34.24.
Lower prices are good news for car buyers. The problem is that insurance and repair costs are going up. Transportation services costs rose 9.3% year-on-year in July, the 28th consecutive monthly increase.
Insurance and repair costs can lag behind car prices, but they eventually catch up. Expensive cars require expensive parts to repair, and insurance is higher, too.
Transportation costs are up about 21% since the end of 2019. It’s likely that there will be some other increases to come to match the rise in vehicle costs.
This isn’t good news for consumers, but things are fine. The misery index – the rate of inflation plus the unemployment rate – held steady at 6.8 in July, up from 6.7 in June but down from 11.9 last year.
At least with working people and lower inflation, fixing a car won’t break the bank.
Write to Al Root at allen.root@dowjones.com