Even in a low inflation environment, prices will still rise over time. Historically, the Federal Reserve’s target has been a 2% inflation rate annually. However, amidst persistent high inflation and soaring prices, there are some goods that are “bucking the trend” and are actually cheaper than before the pandemic.
The global spread of the COVID-19 (Chinese virus) pandemic has pushed up inflation rates. In June 2022, the inflation rate in the United States reached 9%. Since then, the inflation rate has been slowly moving towards the Federal Reserve’s preferred target of 2%.
According to the latest Consumer Price Index (CPI) data from the U.S. Bureau of Labor Statistics, the current inflation rate has declined to 3%, but prices are still about 20% higher than before the pandemic.
However, an analysis by CNBC on categories within the Consumer Price Index (CPI) shows that in June 2024, compared to June 2019, there are several retail categories that have seen prices decrease, especially in the consumer electronics sector, where prices are currently lower than before the outbreak of the pandemic.
This includes phone hardware, televisions, audio equipment, computers, certain kitchenware, as well as toys, games, and hobby supplies.
Even at a time when annual inflation rates are at their highest, the prices of consumer electronics products continue to show a deflationary trend. This is partly due to subtle differences in the calculation of the CPI itself.
For example, smartphones are an important component of the phone hardware category, and the Bureau of Labor Statistics (BLS) makes specific adjustments to reflect the rapid advancements in technology.
The CPI usually shows a decrease in smartphone prices, but in reality, it reflects consumers getting better and more advanced products for the same price.
This value-preserving adjustment made by the Bureau of Labor Statistics covers the entire Consumer Price Index, including a wide range of goods from men’s underwear to home computers and refrigerators, aiming to show the changes in the price consumers pay relative to the value they receive.
However, when the CPI indicates a downward price trend, the value-preserving adjustment may not explain everything. Televisions are a prime example: prices keep falling. In some cases, manufacturers have to significantly reduce prices to stay competitive and attract consumer attention.
This situation is notably seen with smart TVs as this technology has become quite ubiquitous, making it challenging to compete based on product features alone. Nevertheless, price reductions by retailers may have more long-term considerations.
Andrew Csicsila, Managing Director of Consumer Products at AlixPartners Americas, told CNBC before Black Friday last year that the price of a television is just the entry ticket to your home. Once you connect it to the internet and start enjoying the various features of a smart TV, manufacturers and app developers can gain insights into your entertainment preferences.
“The amount of data that advertisers leverage and target is staggering,” he said.