Chip Shortage In Focus With US Automakers Like Tesla, Ford, GM But Cathie Wood Says Used-Car Data Points In Different Direction

Ark Invest CEO and popular money manager Cathie Wood said on Wednesday that latest used car price data indicate sales have peaked and that prices will come down as deflation plays a bigger role in the coming days.

What Happened: The latest inflation numbers from the U.S. Department of Labor on Wednesday showed used car prices are still rising, but not nearly as fast as in previous months. 

Wood has in the recent past propagated the idea that the big risk over the next few years is deflation and not inflation and that it could benefit investments in innovation strategies.

Wood tweeted on Wednesday to say that while many auto companies are blaming the 20% drop in U.S. auto sales, since April, on chip shortages, it seems used car sales have peaked and that the "prices will round trip."

The latest U.S. government data shows flat used car prices contributed to a drop in the overall pace of price increases in the U.S. economy during the month of July.

See Also: Cathie Wood Maintains Inflation To Prove Temporary, Says 'Cracks' In Commodity Markets Evident

“The index for used cars and trucks rose 0.2% in July after rising at least 7.3% in each of the last three months,” the report said, adding that the deceleration in the index was a key reason for the smaller monthly increase in all items except food and energy. 

Benzinga's Take: Prices of both used and new cars have surged to levels not seen in many years and have become a concern for the White House.

The latest government data indicates a pause in that steep rise, as noted by Wood. The vehicle prices have risen due to a host of reasons, including the global semiconductor shortage that has brought down inventory levels at dealerships to the lowest in decades.

According to the Manheim Index, which tracks the used car prices, on a month-over-month basis, all major market segments saw declines in July, with pickup trucks declining the most and sports cars declining the least.

Despite the pause, used car prices are still way up at 23.6%, according to the Manheim Index.

Key automakers such as General Motors Co GM, Ford Motor Co F, and electric vehicle maker Tesla Inc TSLA and others have all been struggling to wade through the global semiconductor shortage for about a year now when demand suddenly sprung back after the pandemic induced lockdowns were lifted.

See Also: US Automakers — Ford, GM — Stare At Lowest Inventory In 12 Years But Here's Why They Could Still See Major Jump In Q2 Sales