Easing Auto Supply-Chain Woes May Foreshadow Path for Inflation
Comment of the Day

November 12 2021

Commentary by Eoin Treacy

Easing Auto Supply-Chain Woes May Foreshadow Path for Inflation

This note from Bloomberg may be of interest to subscribers. Here is a section:

Investors will keep a close eye on UMich inflation expectations, due at 10 a.m. NYT. Another piece of the inflation picture that bears attention is the auto supply-chain crunch that’s been an exceptionally large contributor to rising prices.

News from Toyota adds to signs that supply issues may finally be easing. The carmaker is targeting greater December output than it’s seen in recent years, with next month set to be the first time in seven months that all of Toyota’s production lines in Japan will be operating normally.

That follows an Oct. 31 report that GM had no chips-related downtime scheduled in North America, the first time it had been able to resume full production since February. BMW’s results showed it’s muscling through the chip shortage, and Ford said revenue and profit rose due to increases in chip availability and vehicle shipments. Smartphone chipmaker Qualcomm‘s outlook, and steel and freight shifts, have also added to recent signs of broader relief.

Yet consumers may not feel like there’s been a downshift. U.S. used-vehicle prices rose 9.2% in October, according to Manheim Auctions; the index was up 38% from a year earlier. Reported used-vehicle inflation is also lower than suggested by the Manheim index, suggesting another big print for November’s CPI, as my colleague Cameron Crise pointed out.

Eoin Treacy's view

There is clear potential that we are looking at the peak of supply disruption for chips. This is obviously a nuanced topic because there are lots of different kinds of chips and not every sector requires the same types of components. However, on aggregate, the supply of chips to the sectors that have contributed most to inflationary pressures is improving.

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