America On Sale: Great Time To Be A Consumer
Prices on everything from clothes to coffee to cat food are dropping, some faster than they have in half a century. Items rarely discounted — like Tiffany engagements rings — are now. The two biggest purchases most people make — homes and new cars — are selling at steep price reductions.
What's happening now has been building for years. Wal-Mart Stores Inc. introduced "every-day low prices" many years ago. Amazon.com redefined the idea of bargain prices during the late 1990s when it helped introduce online shopping. After the 2001 recession, automakers introduced zero-percent financing to boost sales. McDonald's "Dollar Meals" made fast food even cheaper. But until the Great Recession came along, consumers hadn't seen anything yet.
Hotel rooms cost travelers nearly 20% less, on average, than last year, the biggest decline since Smith Travel Research began collecting data in 1987. Home prices have dropped 30%, on average, from the peak in 2006. In some markets, they're down more than 50%. Homes in parts of Detroit are cheaper than a new car.
Overall, prices are tumbling at the fastest rate in decades. The government's Consumer Price Index, which measures the average price of goods and services purchased by households, has fallen 1.5% over the last 12 months. The reading for July showed a 2.1% annual decline, the biggest since 1950 (see chart above).