It is the nature of prices to rise over time, even in low inflation environments. Historically, the target for the US Federal Reserve has been 2% annual inflation.
So when global events like the Covid-19 pandemic push inflation well above that 2% target, it can come as a real shock to consumers. Since reaching 9% in June 2022, it has been a slow crawl to reduce the rate of inflation to the Fed’s preferred target.
And while inflation has indeed receded from its peak in 2022 — now at 3%, according to the latest consumer price index from the US Bureau of Labor Statistics — prices are still about 20% higher than they were before the pandemic.
There are a few retail categories, dominated by consumer electronics, that are bucking the trend and are actually cheaper now than before the pandemic, based on a CNBC review of CPI categories in June 2024 compared to June 2019.
This includes phone hardware. televisions; audio equipment; computers; certain cookware; and toys, games and hobby items.
Same price, better value
Even as annual inflation peaked, consumer electronics prices showed steady signs of deflation. Some of this has to do with nuances to the calculation of the CPI itself.
Prices for smartphones, for example, which are a large component of the phone hardware category, receive special adjustments in the Bureau of Labor Statistics to account for rapid improvements in technology.
The CPI usually shows that smartphone prices are falling, but it actually reflects that consumers are getting better, more sophisticated products for the same price.
Such hedonic adaptations — the term the BLS uses to describe its adjustments for changes in product quality — covers the entire consumer price index and includes categories from men’s underwear to home computers to refrigerators. They are intended to reflect the change in value the consumer receives for what they pay.
Why TVs continue to be cheap
But hedonic adjustments cannot account for everything when the CPI records price declines. Televisions are a good example: prices continue to fall, but in some cases, manufacturers have to lower prices to remain competitive and attract consumer attention.
“Purely from a manufacturing standpoint, in general with new technology and consumer electronics, there’s a learning curve that naturally evolves that brings down the cost of a product without compromising quality,” said Andrew Csicsila, Americas head of consumer products at AlixPartners. he 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 makes it difficult to compete on product features. But Csicsila has also reported other revenue streams for manufacturers that allow them to sell units just above cost and flood the highly competitive market with low-priced products.
“The reason they’re trying to do this is really to get data,” Csicsila said. “If you look at their earnings reports, [manufacturers] they invoke new revenue streams, which are actually tracking and sharing the data they capture.”
In other words, the price of the TV box is just an entry point to get into your home. Once you connect it to the internet and use it with all the features a smart TV can offer, there’s a lot for manufacturers and app developers to learn about your entertainment habits.
“The amount of data that advertisers are harnessing and aiming to capture is staggering,” Csicsila said.
In the meantime, keep your eyes peeled for those door-to-door prices.
