Many Consumer Prices Are Falling, Not Rising
Interesting graphic above from yesterday's NYTimes (click to enlarge), showing the percentage breakdown of consumer spending in 2008 (15% on food and beverages [vs. 46.4% in 1901!], 18% on transportation, 42% on housing, etc.), and the percentage change in the components of the CPI over the last year from March 2007 to March 2008.
Notice all of the components above in blue, showing the more than 30 goods that have FALLEN in price over the last year (the NYTimes graph is interactive - move your cursor around to see specific items and price changes), including even many food items, such as:
Citrus fruits: -9.5%
Lettuce: -3.2%
Pork chops: -1.3%
Ham: -1.3%
Sugar: -1.7%
Bedroom furniture: -2.3%
New cars: -1.1%
TVs: -18.3%
Clocks, lamps, decorations: -7.5%
Computers: -12%
Women's suits: -6%
Men's shirts: -3.4%
Girl's clothes: -9.4%
Watches: -2.3%
Software: -5.3%
Toys: -5.2%
Phones: -5.3%
Outdoor equipment: -2.5%
Cameras, film: -6.1%
9 Comments:
Ammunition is up 40% for some types.
Fred said...
"Ammunition is up 40% for some types."
Not if you SUBSTITUTE (LOL) just plunk down less money for some Wolf ammo and blast away.
See, no measurable (by definition) inflation.
I entirely understand that deflation happens in certain sectors because of technological advancement, higher productivity, etc., etc.
...but I don't think that the graph shown supports your statement that "prices have fallen" in certain sectors. What we know is that SPENDING has fallen. This could be easily explained by people spending less, even while prices climb, or are flat.
I noticed it doesn't include taxes.
Doesn't it say that consumers are spending less in certain areas, not necessarily that prices are falling?
For a given fixed income, if you spend more on gasoline, you must spend less on something else -- doesn't mean that TV's are 18% cheaper, just that as a whole, we bought less TV's.
I think the graph is confusing because it shows both the specific CPI items and the broader groups. One item in the CPI can go down at the same time a group goes up. You have to pick it apart to find out what it all means.
What good is good news? Let's not report it and stick to reciting what was read off of the police blotter, OK?
There's good news and bad news and obscured news in the graph...
Yep, computers, TV's and other gadgets we crave are down in cost.
Meanwhile, housing, energy and food are up.
That's an inflation scenario that hurts poorer Americans the hardest.
I think we also have to recognize the limitations of the CPI. First, the use of hedonics to claim that newer items "cost less" than the older models because they are "better" is open to abuse.
Second, the use of Owners Equivalent Rent during a time when home prices and rents have diverged greatly can cause inflation to be understated (and may also cause the reverse as home prices drop and rents rise).
Overall, it looks to me like the CPI indicates hard times for the bottom half of our country, but isn't bad if you enjoy a higher income.
Considering the US dollar has plumetted like a stone over the last year recent uptick excepted (about 19% if memory serves me correctly), inflation looks pretty good.
Is there inflation? Of course. Will we all survive? Yes
Required Reading:
Risk: The Science and Politics of Fear by Dan Gardner
Fear has become a fixture in the political dialectic. Perhaps, it is time that we looked at its origins and implications.
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