Prices for Some Goods Are Actually Falling This Holiday Season - The New York Times
Category: News & Politics
Via: jbb • 10 months ago • 49 commentsBy: Ben Casselman, Jordyn Holman and Jeanna Smialek (nytimes)
S E E D E D C O N T E N T
As inflation slows, prices for some physical goods are falling outright, which could lift consumers' spirits.
American shoppers endured more than two years of rapid inflation but are now getting relief as prices of many products are falling.Credit...Jutharat Pinyodoonyachet for The New York Times
By Ben Casselman, Jordyn Holman and Jeanna Smialek
Dec. 15, 2023
American shoppers, burned by more than two years of rapid inflation, are getting some welcome relief this holiday season: Prices on many products are falling.
Toys are almost 3 percent cheaper this Christmas than last, government data shows. Sports equipment is down nearly 2 percent. Bigger-ticket items are also showing price declines: Washing machines cost 12 percent less than a year ago, for example. And eggs, whose meteoric rise in prices last winter became a prime example of the country's inflation problem, are down 22 percent over the past year.
Consumer prices, in the aggregate, are still rising, though not nearly as quickly as a year ago. Most groceries still cost more than they did a year ago. So do most services, such as restaurant meals, haircuts and trips to the dentist. And housing costs, the biggest monthly expense for most Americans, are still rising for both renters and home buyers. Overall, the price of physical goods is flat over the past year, while the price of services is up a bit more than 5 percent.
Still, economists view the moderation in goods prices as an important step toward putting the high inflation of the past two and a half years more firmly in the rearview mirror. They expect it to continue: Most forecasters say prices for physical products will keep falling next year, especially prices for longer-lasting manufactured goods, where the recent declines have been largest. That should help price increases overall to ease.
"We're just kind of in the beginning of that phase, and we should continue to see downward pressure on prices in this category," said Michelle Meyer, chief economist for Mastercard.
For consumers, who have been dour about the economy despite low unemployment, falling prices on many goods could provide a psychological lift. After the rapid inflation of the past few years, a mere slowdown in price increases might not feel like much to celebrate. But seeing prices fall could be a different story — especially because some of the biggest recent declines have been in categories that consumers tend to pay the most attention to, such as gasoline. (The price of regular gas, which topped $5 a gallon nationally in June 2022, has fallen to just over $3 on average, according to AAA.)
ImageMost groceries still cost more than they did a year ago. Credit...Maansi Srivastava/The New York Times
"People will key in on certain prices," said Neale Mahoney, a Stanford University economist who recently left a role in the Biden administration. "We know that people will overweight certain things."
The price of many goods soared in 2021, fed by a surge in demand from consumers flush with pandemic relief checks and by supply chain disruptions that limited supplies of many products, especially those from overseas.
Many economists initially expected a quick reversal, but instead prices kept rising. Supply chains took longer to return to normal than expected, and Russia's invasion of Ukraine led to a spike in energy prices in 2022. At the same time, consumer demand for goods remained high, and many companies took advantage of the opportunity to push through price increases and pad their profit margins.
Now, however, many of those forces are beginning to fade. Supply chains have largely returned to normal. Oil prices have fallen. Economic weakness in China and other countries has held down demand for many raw materials, which feeds through to consumer prices.
Softer demand from American consumers could also be playing a role. The Federal Reserve has raised interest rates repeatedly since early last year in an effort to curb spending and control inflation. Consumers have so far proved remarkably resilient, but retailers in recent months have reported that shoppers have increasingly traded down to cheaper items or waited for sales before buying — trends that could accelerate if the economy cools further next year.
"We think that the consumer is going to be looking for value, and that's because they are very sensitive to price," Carlos E. Alberini, chief executive of Guess, the fashion retailer, told investors last month. The company has "revisited some of the pricing structure we have in all brands," he added.
ImageThe price of services is up a bit more than 5 percent for such things as restaurant meals, haircuts and trips to the dentist.Credit...Hiroko Masuike/The New York Times
Some toy manufacturers and retailers that sell toys have also said they expect sales this season to be less robust than in years past and have leaned into advertising their products' affordability.
At many companies, price cuts have taken the form of Black Friday sales and holiday promotions that are larger for some categories of items than in past years. At Signet Jewelers, the big diamond retailer, sales fell in the third quarter, and the company recently said that it expected sales to be lower this holiday season than last year in part because of "elevated promotional activity."
"It's been a different holiday season," Virginia C. Drosos, Signet's chief executive, told investors on a conference call this month. Instead of shopping early, customers are waiting to make their purchases and are looking for deals, she said.
Matt Pavich, senior director of innovation and strategy for Revionics, a company that uses artificial intelligence to help retailers set prices, said companies were trying to cut prices before their competitors do.
"As prices come down, there's going to be the race to bring prices down more, get the credit for that," he said. "We're going to see retailers really trying to win back consumers' trust."
Still, prices for most products remain well above where they were before the pandemic. A dozen eggs cost about 50 cents more than in February 2020. Used car prices, another prominent example of pandemic sticker shock, have fallen more than 10 percent from their peak early last year but are 37 percent above where they were in February 2020.
Services prices are still climbing more quickly than before the pandemic. Some economists say that goods prices will need to fall further for overall inflation to return to the Federal Reserve's target of 2 percent a year.
"We need pretty substantial deflation, and I wouldn't call what we're seeing 'substantial,'" said Wendy Edelberg, director of the Hamilton Project, an economic policy division of the Brookings Institution. "It's not even substantial in a historical context."
Indeed, prices of durable goods fell much of the two decades that preceded the pandemic. Long-term trends such as globalization and automation have tended to push down manufacturing costs. Intense competition among retailers, especially with the rise of online shopping, meant those savings were mostly passed on to consumers.
Services prices, on the other hand, rarely fall, in part because wages account for a much larger share of the cost of most services. During the decade before the pandemic, services prices gradually rose while goods prices were flat or fell, resulting in an extended period of stable, moderate inflation.
Economists don't expect to see outright deflation, in which prices fall for both goods and services. That's a good thing: Overall price declines are generally viewed as economically dangerous, if they last.
Image"When demand in the economy is weak, the last thing you want is someone to say, 'I'm not going to buy that car today because it's going to be $600 less expensive in six months,'" said Karen Dynan, an economist at Harvard.Credit...Brittany Greeson for The New York Times
There are a few reasons. For starters, in theory, deflation could prompt consumers to hold off on spending, touching off a downward spiral. People may be unlikely to buy today what they expect to be cheaper tomorrow. Once deflation takes hold, it can be difficult to escape: Japan has been stuck in a deflationary pattern since the late 1990s.
"When demand in the economy is weak, the last thing you want is someone to say, 'I'm not going to buy that car today because it's going to be $600 less expensive in six months,'" said Karen Dynan, an economist at Harvard.
For another, companies are unlikely to raise wages in a world where they cannot charge more. And if wages are not going up — or are even going down — it will be harder for households to keep up with fixed bills, like mortgage interest payments.
But while broad-based price declines are a problem, most economists view the more limited declines happening now as a sign that the economy is gradually moving past the disruptions of the pandemic.
"Supply chains have basically normalized," said Neil Dutta, head of economic research at Renaissance Macro. "Household demand behavior has basically normalized, the dollar is still pretty strong. I wouldn't see a reason why goods prices would go higher."
Ben Casselman writes about economics with a particular focus on stories involving data. He has covered the economy for nearly 20 years, and his recent work has focused on how trends in labor, politics, technology and demographics have shaped the way we live and work.More about Ben Casselman
Jordyn Holman is a business reporter for The Times, covering the retail industry and consumer behavior.More about Jordyn Holman
Jeanna Smialek covers the Federal Reserve and the economy for The Times from Washington.More about Jeanna Smialek
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Will you let us know if or when inflation under Biden gets lower than when he took office?
Joe took it from around two up to about 9 and we are supposed to celebrate him getting it back to 3?
That must be the 'magic' of Bidenomics!
LMAO!
Nope, just loads of people unimpressed with the results of Bidenomics.
Yet the vast majority of Americans are just not buying it. What is todays excuse, they are too stupid or is it a messaging problem?
Of course not.
Hard to convince people with less disposable income today than 3 years ago how "great" Bidenomics is.
Say, what with these FANTASTIC numbers you keep lauding, why on earth would NYC have to slash any city services in this robust Biden economy? That doesn't even make sense.
Why is California with its HEAD Biden Cheerleader going to run a massive deficit amid DECLINING tax revenues?
It is the old if I keep shoveling enough shit eventually someone will eat it economic theory.
In a Chicago suburb:
OAK PARK, Ill. (WLS) -- Just three and a half weeks ago the Village of Oak Park agreed to allocate an additional $1 million to continue housing a group of 160 migrants that were brought in from Chicago's 15th police station during a Halloween day snowfall. With that funding set to run out by February 6, the village sent out a letter to the migrants Wednesday telling them they must move out by the end of January.
"They gave us the letters last night when we went to pick up our dinner," said Milagros de Marquez, who, along with her husband and three children, has been living at the Carleton Hotel for five weeks now.
Not to mention all the little snowflakes that say they can't afford to pay back their student loans.
You catch more flies with manure than vinegar. [deleted]
Apparently a shoe clerk at the mall doesn’t make that much.
Biden wouldn't need cheerleaders if the economy was all that great.
I have asked many times for the explanation why--if Bidenomics is so successful--why can't people pay their LEGAL debts?
Didn't work for Hunter as he had to get his sugar bro to pay HIS debts!
Probably could have made more at Amazon.
You know, if AOC and others hadn't fucked it all up.
When I was in college, my roommate worked part-time sort packages ast a UPS distribution site. Worked hard but made great money back in the day.
Good to see Joes economic plans are working out so well, as long as you are not a citizen.
removed for context
My wife and I once lived in hotels for five weeks. We were at the end of a 4 3/4 year assignment in Europe and we took an extended vacation in France and Italy before flying back to the states. a great time but of course we had to pay for the hotels ourselves.
It pains me to say this as an Italian American but the bread was much better in France than Italy
We like Piadina Romagnola, a flat bread and Ciabatta with herb olive oil.
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Right now US oil and gas production is its highest ever and gas prices are falling daily just in time for holiday travel season!
Does that make you Sad?
It makes me sad the average price of gas under Biden is much higher than under his predecessor, and that wages aren't keeping up with inflation.
Do you celebrate that?
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Isn’t that going to piss off the green weenie climate screamers? dementia boy, or somebody in his admin, must’ve realized it’s was completely fucking stupid to declare war on oil.
What has Bidenomics done for income inequality?
Maybe not Bidenomics specifically but Joe has made progress in the income equality for the totally unqualified as long as they check the right boxes. Hell, they even hired them to put on some weird Christmas dance in the white house (when the dance crew is not calling for defunding the police, prison abolition and promoting the Marxist BLM).
GasBuddy has best gas prices in the Bronx at $3.29 - 3.35. You must be livin' high on the hog.
Hmm....real facts aren't going to stop the cheerleading.
So the civilian unemployment rate dropped to 3.7%. Good deal but it's not the lowest.
Jan 2020 was 3.5%. Maybe you should do some homework and stop being a cheerleader.
Civilian unemployment rate (bls.gov)
PolitiFact | Are gasoline prices under Joe Biden ranging from $5 to $8 a gallon, as Donald Trump said?
Gasoline prices are higher under Biden than they were under Trump. Federal Energy Information Administration data shows that the average gasoline price during Trump’s four-year term was $2.46 per gallon. During Biden’s presidency so far, the average has been $3.54. (These figures are not adjusted for inflation.)
Bidenomics isn't working for the majority.
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I think that Texan is summarizing recent polling.
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That is because:
A. You read the post
B. You understood the post
Thank you.
So sorry you had to point out the obvious.
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Yep, prices are down some, but not enough to save Biden's ass. His approval rating is down to 33%
There are rumors that he might be close to having an "LBJ moment" sometime in the near future.
He's going to have those n******** voting democrat for 200 years?