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The latest data, released on Tuesday, revealed a 1.6% month-over-month increase (seasonally adjusted) in the MUVV index for June, marking a 6.3% year-over-year rise. This surge, the highest in almost three years, pushed the index to 208.5, the highest since October last year.
The primary driver of this increase can be attributed to the ripple effects of President Donald Trump‘s 25% tariff on imported vehicles.
“Wholesale prices in the second quarter were volatile as tariffs significantly impacted new-vehicle sales and supply, which then spilled over into the used-vehicle market,” said Jeremy Robb, senior director of economic and industry analytics at Cox Automotive.
Typically, car prices tend to cool off during the second half of the year. However, Robb noted that the retail market has maintained strong demand compared to previous years, while the supply of off-lease vehicles has decreased significantly, keeping used car prices elevated.
In the spring, American consumers rushed to purchase new vehicles ahead of the tariff implementation, causing a surge in sales. Nevertheless, sales plummeted in May and continued to decline in June.
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Americans rushed to purchase used cars before the new tariffs took effect. Image: Reuters. |
Despite expectations of a resurgence in overall inflation, Federal Reserve officials remain cautious. They maintain that the risk of rising prices persists and are not rushing to cut interest rates.
The MUVV index has been a critical data point for many economists and Fed officials, especially during the post-COVID economic recovery phase. In late 2020, the index began a steep climb that lasted over a year. By mid-2022, inflation in the US, as measured by the CPI, had surpassed 9 percent, the highest since the 1980s.
“Don’t ignore indicators like used-vehicle prices, food, energy, and consumer expectation surveys. They all provide important information about inflation trends,” warned Fed Governor Christopher Waller.
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