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In a year when inflation rose across the U.S. economy, some corners of the consumer market did the opposite: prices fell.
According to the Consumer Price Index, categories such as consumer electronics, beef, and cars and trucks had the largest percentage declines.
Here are the commodities that had the biggest deflation in 2022.
Several consumer electronics products topped the list: smartphones; televisions; “other” video goods, excluding television sets; and computers, peripherals and smart home assistants. Their respective prices decreased by 22.2%, 14.4%, 8.6% and 5.8% in 2022.
Consumer electronics prices generally decline over time, as measured by CPI and other measures of inflation. This has largely been the trend since 2006, for example, according to CPI data on information technology, hardware and services.
The pandemic era was an exception, as households upgraded and bought new technology devices under stay-at-home orders, boosting demand while critical parts such as semiconductor chips were in short supply.
Consumers might find the idea of this broad deflationary trend strange when sticker prices on popular items like smartphones, TVs and computers don’t seem to have come down.
Economists believe that the dynamics of deflation are a measurement quirk rather than a reflection of what consumers pay out of pocket. The U.S. Bureau of Labor Statistics adjusts technology prices for quality, such as improvements in chips, software and screen resolution, which give the illusion of falling prices on paper.
In other words: better quality for the same money creates deflation in the eyes of federal statisticians.
“You get more bang for your buck,” said Tim Mahedy, senior economist at KPMG. “You’re still paying $800 for an iPhone, but your iPhone is much better.”
This economic modeling is known as “hedonic quality adjustment”. BLS uses this method for things like consumer appliances, electronics, and clothing.
This dynamic in the measurements coincides with weaker demand, which is due in part to consumers not having to stay indoors, as was the case during the pandemic era, and the easing of supply shortages.
“It’s been the same story for the last 20 years,” Andrew Hunter, senior U.S. economist at Capital Economics, said of the overall deflationary trend in consumer electronics. “It seems to be coming back in the last six months.”
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Used cars and trucks, vehicle rental
A used car dealership in New York on January 19, 2022.
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Used car and truck prices were among the first to rise as inflation persisted into early 2021. According to the Consumer Price Index, this category increased by 37.3% that year, the most of any commodity except energy goods such as gasoline and fuel oil. .
Now the prices of used cars and trucks have come down. In 2022, they decreased by 8.8%. Only the prices of smartphones and televisions fell faster.
Rental car and truck prices have followed a similar trajectory. In 2022, they decreased by 4.9%, compared to a 36% increase in the previous year.
A shortage of semiconductor chips, a key vehicle component, halted global production of new vehicles during the pandemic. Car inventories collapsed to record lows, causing vehicle prices to rise sharply in 2021.
You get more bang for your buck. You’re still paying $800 for an iPhone, but your iPhone is much better.
Senior Economist at KPMG
The supply shortage forced more buyers into the used vehicle market, driving up prices. Among those buyers were car rental companies that had to replenish fleets they had previously eliminated during the pandemic due to reduced consumer demand.
The supply shortfall led to increased demand from American travelers looking to travel in 2021 when Covid vaccines were introduced, but travel outside the US was somewhat limited.
However, global car production has now picked up as supply chains normalize, economists said. This led to a decline in used vehicle prices.
“The rental car companies were buying and now they’ve completely stopped buying used vehicles,” said Mark Zandi, chief economist at Moody’s Analytics.
Higher interest rates have also dampened consumer demand.
Black Angus cows on a farm in Pleasureville, Kentucky.
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Raw beef steaks, roast beef and other types of beef and veal fell last year by 5.4%, 3.5% and 6.7% respectively.
Meanwhile, bacon prices fell by 3.7%.
That came as consumers saw overall grocery prices move in the opposite direction, rising nearly 12% in 2022, according to CPI data.
Beef price trends are largely the result of drought conditions in the U.S. and the associated economics of beef production, said Amy Smith, vice president of Advanced Economic Solutions, a consulting firm specializing in food economics.
According to the US Department of Agriculture, more than 78% of the US experienced some level of drought on December 6. About 69 percent of the U.S. cattle herd is in these drought-affected areas, up 33 percentage points from a year earlier, the USDA said.
This is important because drought reduces pasture and forage areas; at the same time, corn and wheat prices have been high, making it expensive to feed pastures with animal feed, Smith said.
As a result, many farmers have chosen to cull cows early for beef production, increasing the available supply of beef and lowering prices at the grocery store, Smith said.
The USDA described cattle slaughter in the first half of 2022 as “aggressive culling,” primarily due to “pasture conditions and increased operating costs.” The pace of beef cow slaughter in July was the fastest on record since the USDA began tracking the data in 1986.
Meanwhile, lower bacon prices are due in part to a higher supply of pork domestically as exports to other countries decline, Smith said. The USDA estimates total US pork exports in 2022 at 6.3 billion pounds, down 10% from 2021.