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The economy’s motor

Suddenly, the price of second-hand cars is telling us a lot about the state of the economy; a point that applies as much to the US as it does to the UK. Not for nothing, the economics-research arm of the Brookings Institution, arguably the world’s best funded and perhaps most influential think tank, has just featured as its chart of the week changes in used car prices for the US.

Those who think prices of second-hand motors in the UK are silly have seen nothing. In the US, the annual rate of increase peaked at 45 per cent in mid-2021, moderated a touch, accelerated again to beyond 40 per cent and is now braking fairly hard. So the implicit point is that the latest dip in prices portends perhaps not an economy-wide recession in the US, but certainly a marked slowing.

Chartists might agree. They would take one look at the US graph and say the chart line forms a classic ‘double top’, where the second top peaks below the level of the first and gets to its highest point more laboriously. As such, they would explain that’s evidence a trend has run its course and a new one – of falling prices – is established. Not that used car price changes seem as if they are about to turn negative, as of March growth was still running at over 30 per cent.

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