It is the nature of prices to rise over time, even in low inflation environments. Historically, the US Federal Reserve’s target has been 2% annual inflation.
So when worldwide events like the Covid-19 pandemic push inflation well above the 2% target, it can be a real shock to consumers. Since reaching 9% in June 2022, it has been a slow crawl to lower the pace of inflation to the Fed’s preferred target.
And while inflation has indeed retreated from that 2022 peak — now at 3%, according to the latest consumer price index from the U.S. Bureau of Labor Statistics — prices are still about 20% higher than they were before the pandemic.
There are a handful of retail categories, dominated by consumer electronics, that buck the trend and are actually cheaper now than they were before the pandemic, based on a CNBC review of June 2024 CPI categories compared to June 2019.
This includes telephone equipment; televisions; audio equipment; computers; certain cookware; and toys, games and hobby items.
Same price, better value
Even when annual inflation was at its peak, prices for consumer electronics continued to show signs of deflation. Part of this has to do with nuances with the calculation of the CPI itself.
Prices for smartphones, for example, which are a large component of the phone equipment category, receive special adjustments in the Bureau of Labor Statistics to account for rapid improvements in technology.
The CPI routinely shows that smartphone prices are falling, but it’s actually reflecting that consumers are getting better and more sophisticated products for the same price.
Such hedonic adjustments — the term the BLS uses to describe its adjustments for changes in the quality of items — span the entire consumer price index and include categories from men’s underwear to home computers to refrigerators. They are meant to reflect the difference in value that the consumer is getting for what they are paying.
Why TVs continue to be cheap
But hedonic adjustments cannot account for everything when the CPI is recording falling prices. Televisions are a good example: Prices continue to fall, but in some cases, manufacturers must lower prices to stay competitive and attract consumers’ attention.
“Just from a manufacturing standpoint, generally with new technology and consumer electronics, there’s a naturally evolving learning curve that lowers the cost of a product without compromising quality,” Andrew Csicsila, Americas head of consumer products at AlixPartners . told CNBC ahead of Black Friday last year.
This has happened aggressively with smart TVs, to the point where the technology has become quite universal and making it difficult to compete on product features. But Csicsila also cited other revenue streams for manufacturers that allow them to sell units at barely above cost and flood the ultra-competitive market with low-priced products.
“The reason they’re trying to do this is really to gain data,” Csicsila said. “If you look at their earnings reports, [manufacturers] are citing new revenue streams, which are actually monitoring and sharing the data they’re capturing.”
In other words, the price of the TV box is only an entry point to enter your home. Once you’ve connected it to the Internet and used it with all the functionality a smart TV can offer, manufacturers and app developers have a lot to learn about your entertainment habits.
“The amount of data being exploited and intended to be captured by advertisers is staggering,” Csicsila said.
In the meantime, keep your eyes peeled for those door prizes.