As computer chip shortage goes on, cars are scarce, prices are up

For the next few months, Charlie Gilchrist figures his 11 car dealerships in the Dallas-Fort Worth area will sell just about every new vehicle they can get from the factories — and at increased prices.

In normal times, that would be cause for joy. Not so much now. A global shortage of computer chips has forced automakers to slash production. The result has been far fewer vehicles on dealer lots, just as the waning pandemic has fueled a pent-up consumer demand for cars, trucks and SUVs.

Given the robust customer demand, dealers like Gilchrist could sell many more cars and trucks, if only they had more. Even at elevated prices — the average newvehicle sales price tops $40,000, up nearly 10% in two years — customer demand exceeds supply.

new, have been soaring as a result of heavy demand and a computer chip shortage that has slowed auto production and reduced dealer supplies.

Over the past 12 months, consumer prices have jumped 4.2% — the fastest rise since a 4.9% gain in the 12 months that ended in September 2008. Excluding volatile food and energy, core inflation rose 0.9% in April and 3% over the past 12 months.

After years of dormant inflation, with the Federal Reserve struggling to increase it, worries about rising prices have shot to the top of economic concerns. Shortages of goods and parts related to disrupted supply chains have been a key factor.

The Fed, led by Chairman Jerome Powell, has repeatedly expressed its belief that inflation will prove temporary as supply bottlenecks are unclogged and parts and goods flow normally again. But some economists have expressed concern that as the economic recovery accelerates, fueled by rising demand from consumers spending freely again, so will inflation.

“It looks like inflation pressures are not only building but are likely to be here at least through the rest of the year,” said Joel Naroff, chief economist at Naroff Economic Advisors. “With growth robust, firms have a measure of pricing power tat they haven’t had in decades, and they appear to be using it.”

Investors, too, have grown increasingly jittery. On Tuesday, the Dow Jones Industrial Average sank more than 470 points — 1.4% — its worst day since Feb. 26.

After Wednesday’s release of the CPI report, which showed a bigger increase than economists were expecting, bond yields rose. The yield on the 10-year Treasury note rose to 1.67% from 1.62% a day earlier. Bond prices tend to fall, sending yields higher, when investors fear that an increase in inflation will erode the future value of the income that bonds pay.

The April inflation report showed that food prices rose 0.4%, the biggest such increase since a 0.5% rise last June. Energy costs, though, edged down 0.1%, with gasoline pump prices falling 1.4%, the biggest drop since May 2020.