Despite soaring U.S. inflation, some things are getting cheaper


Americans are getting walloped by higher inflation. A recent estimate by economists at the University of Pennsylvania's Wharton Business School found that the average household must spend $3,500 more in order to buy the same amount of goods and services they did in 2000. But despite inflation hitting a 40-year high in January, a handful of items have actually gotten cheaper over the last year. 

Prices dropped for more than a dozen goods and services from January 2021 to January 2022, according to government data released on Thursday. That includes books, smartphones, and other items, such as:

  • Girls apparel: -4.3%
  • Ship fare: -2.1%
  • Cosmetics: -1.7%
  • Tenants and household insurance: -1.7%
  • Men's pants and shorts: -0.8%

To be sure, such purchases don't offset the sharply higher prices that Americans are paying for groceries, gasoline, rent, and other staples. But they offer insight into the quirks of an economy in which rising demand from consumers, exacerbated by a strangled supply chain, is pushing up prices for everything from meat to bicycles. 

Inflation's continual "ebb and flow"

"What we're seeing is that the inflation rates tend to ebb and flow with the state of the virus," said Adam Shapiro, an economist at the Federal Reserve Bank of San Francisco. "When the pandemic first hit, we saw a very sharp decrease in inflation" as people stayed home and cut back on spending. 

That's no longer the case. And with continuing supply-chain issues causing shortages of computer chips, auto parts, and other products, inflation is unlikely to go away any time soon, according to economists. 

"There is a strong risk that these supply constraints and bottlenecks could persist and that will push up inflation," Shapiro said.

So why are some items declining in price while everything else is rising? There may be two reasons, economists and industry experts said. First, production and marketing peculiarities within some industries may have caused pricing to remain stable or even fall. 

Second, the price tag of some tech products has stayed level even as the devices saw gains in processing power, giving consumers more features. That added product value is something the Labor Department takes into account when tracking inflation through its Consumer Price Index. In other words, consumers are getting more for their money, which for economists is equivalent to a decline in price.

Pricing books by their covers

Avid readers will be pleased to learn that books are one item bucking inflationary pressures. Through January, retail book prices sank 1.2% over the last year, government data show.

Kristen McLean, a books analyst at market research firm NPD Group, said she suspects the BLS data shows a decline in book prices because the agency might have collected more data from online sites due to some stores shutting in early 2021 as COVD-19 flared. Online bookstores discount books more than physical stores. 

A shift to online books, which typically are cheaper than printed books, as well as some stores being closed during the pandemic, could have caused the dip in book prices, agreed on Steve Reed, an economist with the Bureau of Labor Statistics. The long-term trend for book prices is flat, he added.

But McLean's data shows that book prices remained steady, partly due to a quirk that is specific to the bookselling market. Because book prices are printed on covers, retailers can't increase the price of an already printed item. 

"Those costs weren't really passed onto consumers because we were working with old stock in 2021," McLean noted. 

But book prices are likely to jump in 2022 as publishers bring out new titles and reprint older books, which allows them to issue copies with higher prices on the covers, McLean said. She's not sure how much book prices will increase but noted that shipping costs have become "extreme" and that some publishers are struggling to find paper. 

"Publishers are trying to figure out right now what is the tolerance" for higher prices among consumers, McLean said. 

Better and cheaper tech

Smartphone prices have declined more than 13% over the last year. Meanwhile, the price of software has declined 2%, while audio equipment has slipped 1.2%. 

That's part of a long-term trend in durable goods — defined as consumer products that don't need to be purchased often — declining in price due to technological advancements. Think back to television sets when technology first emerged in the 1950s. Early TV sets were luxury items, with only a few households able to afford them. 

But the cost of TVs and many other tech products have plunged in recent years, partly due to an increase in features. That means consumers are getting more for the same price. (This chart from the BLS shows that while all items increased 47% in price from 1997 to 2015, TV sets slumped 94%.)

Another category that has seen a major price dip over the past year: School meals, where costs have tumbled almost 60% since  January 2021. That decrease stems from the federal government's push to provide free meals for K-12 students, which has lowered the cost for parents, Reed said. By contrast, the price of food away from home. such as at restaurants and cafes, has increased 6.4% in the last year.

Last year, it was a nasty surprise. And it wasn’t supposed to last. But now, inflation has become an ongoing financial strain for millions of Americans filling up at the gas station, lined up at a grocery checkout lane, shopping for clothes, bargaining for a car, or paying monthly rent.

For the 12 months ending in January, inflation amounted to 7.5% — the fastest year-over-year pace since 1982 — the Labor Department said Thursday. Even if you toss out volatile food and energy prices, so-called core inflation jumped 6% over the past year. That was also the sharpest such jump in four decades.

Consumers felt the price squeeze in everyday routines. Over the past year, prices rose 41% for used cars and trucks, 40% for gasoline, 18% for bacon, 14% for bedroom furniture, 11% for women’s dresses.

The Federal Reserve didn’t anticipate an inflation wave this severe or this persistent. In December 2020, the Fed’s policymakers had forecast that consumer inflation would stay below their 2% annual target and end 2021 at around 1.8%.

But after having been an economic afterthought for decades, high inflation reasserted itself last year with brutal speed. In February 2021, the government’s consumer price index was running just 1.7% ahead of its level a year earlier. From there, the year-over-year price increases accelerated steadily — 2.7% in March, 4.2% in April, 4.9% in May, 5.3% in June.

By October, the figure was 6.2%, by November 6.8%, by December 7.1%.

For months, Fed Chair Jerome Powell and others characterized higher consumer prices as merely a “transitory” problem — the result, mainly, of shipping delays and temporary shortages of supplies and workers as the economy rebounded from the pandemic recession much faster than anyone had anticipated.

Now, many economists expect consumer inflation to remain elevated well into this year, with demand outstripping supplies in numerous areas of the economy.

“Inflation remains the single largest near-term challenge to the economy,″ said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Although price pressures are expected to ease as the year progresses, inflation will remain above the Fed’s 2% target for some time to come.″

So the Fed has radically changed course. Last month, the central bank signaled that it will begin a series of rate hikes in March. By doing so, the Fed is moving away from the super-low rates that helped revive the economy from 2020′s devastating pandemic recession but that also helped fuel surging consumer prices.



Good news — mostly. When the pandemic paralyzed the economy in the spring of 2020 and lockdowns kicked in, businesses closed or cut hours and consumers stayed home as a health precaution, employers slashed a breathtaking 22 million jobs. Economic output plunged at a record-shattering 31% annual rate in 2020′s April-June quarter.

Everyone braced for more misery. Companies cut investment and postponed restocking. A brutal recession ensued.

But instead of sinking into a prolonged downturn, the economy staged an unexpectedly rousing recovery, fueled by vast infusions of government aid and emergency intervention by the Fed, which slashed interest rates, among other things. By spring of last year, the rollout of vaccines had emboldened consumers to return to restaurants, bars, shops, and airports.

Suddenly, businesses had to scramble to meet demand. They couldn’t hire fast enough to fill job openings — a near-record 10.9 million in December — or buy enough supplies to meet customer orders. As business roared back, ports and freight yards couldn’t handle the traffic. Global supply chains became seized up.

With demand up and supplies down, costs rose. And companies found that they could pass along those higher costs in the form of higher prices to consumers, many of whom had managed to sock away a ton of savings during the pandemic.

But critics, including former Treasury Secretary Lawrence Summers, blamed in part President Joe Biden’s $1.9 trillion coronavirus relief package, with its $1,400 checks to most households, for overheating an economy that was already sizzling on its own.

The Fed and the federal government had feared an agonizingly slow recovery like the one that followed the Great Recession of 2007-2009.



Elevated consumer price inflation will likely endure as long as companies struggle to keep up with consumers’ demand for goods and services. A recovering job market — employers added a record 6.7 million jobs last year and tacked on 467,000 more in January — means that many Americans can continue to splurge on everything from lawn furniture to electronics.

Many economists foresee inflation staying well above the Fed’s 2% target this year. But relief from higher prices might become. Jammed-up supply chains are beginning to show some signs of improvement, at least in some industries. The Fed’s sharp pivot away from easy-money policies toward a more hawkish, anti-inflationary policy could slow the economy and reduce consumer demand. There will be no repeat of last year’s COVID relief checks from Washington.

Inflation itself is eating into household purchasing power and might force some consumers to shave back spending.

Omicron or other COVID variants could cloud the outlook, either by causing outbreaks that force factories and ports to close and disrupt supply chains even more or by keeping people home and reducing demand for goods.

“It’s not going to be an easy climb down,″ said Sarah House, senior economist at Wells Fargo. “We’re expecting CPI to still be roughly 4% at the end of this year. That’s still well above what the Fed would like it to be and, of course, well above what consumers are used to seeing.″



A strong job market is boosting wages, though not enough to compensate for higher prices. The Labor Department says that hourly earnings for all private-sector employees fell 1.7% last month from a year earlier after accounting for higher consumer prices. But there are exceptions: after-inflation wages were up more than 10% for hotel workers and more than 7% for restaurant and bar employees in December from a year earlier.

Partisan politics also colors the way Americans view the inflation threat. With a Democrat in the White House, Republicans were nearly three times as likely as Democrats (45% versus 16%) to say that inflation is having a negative effect last month on their personal finances, according to a University of Michigan survey.

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