For Some Products, There’s Been Major DEFLATION

Rising food and energy prices have received a lot of media attention lately, along with concerns about the threat of inflation. The chart above (using BLS data via Economagic) shows a sample of products that have experienced significant deflation in the last ten years (as well as deflation in the last few years in almost all cases), double-digit percentage decreases in all cases except for new cars.

Then considering that average hourly earnings have increased by almost 40% over the last ten years, the real prices of those products have fallen by an even greater amount, a HUGE amount. In other words, there are many, many products like computers, cameras, new cars, clothing, TVs, appliances, electronics, software, etc. that are significantly cheaper today than ten years ago, especially after adjusting for increases in earnings.

One reason we don’t pay much attention to these price decreases is probably that they happen so gradually and consistently over time, so we either a) don’t notice the savings, or b) take it for granted and don’t appreciate the incredible savings over time in many of the products that we all buy.

Or maybe it’s also because we buy computers, TVs, appliances, new cars INFREQUENTLY (every 5 year or more in some cases), and don’t notice or appreciate the price decreases the same way we notice price changes for food and fuel that we purchase FREQUENTLY?

But there does seem to be a certain degree of misperception among the general public and media that ALL prices are going up, which is clearly not the case.

Posted in Categories: Contributor, Economy, External Research.

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Comment by Calvin C.

2008-07-24 20:52:37

It’s so true; there’s too much focus on all the gloom & doom.

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