Even in a low-inflation environment, it’s the nature of prices to rise over time. Historically, the Fed has targeted an annual inflation rate of 2%.
So when a global event like the Covid-19 pandemic pushes inflation well above the 2% target, it can have a real shock to consumers. Since reaching 9% in June 2022, inflation has been slowly declining towards the Fed’s preferred target.
While inflation has indeed fallen from its 2022 peak — now down to 3%, according to the latest Consumer Price Index from the Bureau of Labor Statistics — prices are still about 20% higher than before the pandemic.
A handful of consumer electronics-focused retail categories have bucked the trend and are actually now cheaper than before the pandemic, according to a CNBC review of June 2024 versus June 2019 Consumer Price Index (CPI) categories.
These include telephone hardware; televisions; audio equipment; computers; certain cooking utensils; and toys, games and hobby items.
Same price, better value
Even as annual inflation peaks, consumer electronics prices consistently show Signs of deflation. Some of this has to do with nuances in the calculation of the CPI itself.
For example, the price of smartphones is an important part of the phone hardware category, and the Bureau of Labor Statistics makes special adjustments to their prices to accommodate rapid advances in technology.
CPI typically shows smartphone prices falling, but this actually reflects that consumers are getting better, more sophisticated products for the same price.
Such hedonic adjustment — the term BLS is used to describe its adjustment for changes in the quality of goods — covers the entire Consumer Price Index, including the following categories: men’s underwear arrive home computer arrive refrigerator. They are designed to reflect changes in prices paid by consumers.
Why TVs are still cheap
But when CPI prices fall, hedonic adjustment cannot explain everything. Televisions are a good example: Prices keep falling, but in some cases, manufacturers have to cut prices significantly to stay competitive and capture consumers’ attention.
“From a purely manufacturing perspective, new technologies and consumer electronics generally have a natural learning curve that reduces product costs without compromising quality,” said Andrew Csicsila, head of consumer products for the Americas at AlixPartners. Black last year told CNBC before Friday.
This is happening so obviously with smart TVs that the technology has become so ubiquitous and difficult to compete on product features. But Sisera also quoted Manufacturers’ other revenue streams allow them to sell products at slightly above cost and flood a competitive market with low-priced products.
“The reason they’re trying to do this is really to get data,” Sisera said. “If you look at their earnings reports, (manufacturers) cite new revenue streams, which are really the monitoring and exchange of data they capture.”
In other words, the price of a TV box is just the entry point into your home. Once you connect it to the internet and use all the features a smart TV can offer, manufacturers and app developers can learn about your entertainment habits.
“The amount of data that advertisers are leveraging and capturing is staggering,” Sisera said.
In the meantime, keep an eye out for those shocking prices.
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