Everybody notices when prices go up. But when they fall, it's an unacknowledged gift.
Ask a typical American family, and they'll tell you that the surging costs of healthcare and education are among their biggest strains. Energy prices are an ongoing concern, stable now but punishing when they spike. But many consumers don't realize that dozens of everyday goods and services have been getting cheaper. Overall inflation in 2010 is just 2 percent or so, after a record drop in prices in 2009. Some economists even think deflation is a bigger risk to the economy than inflation, since falling prices can cut into corporate profits and force long-lasting pay cuts.
But for now, consumers are enjoying a windfall of cheap stuff, thanks to low-cost imports, rapid technological change, and falling demand for some things. To determine the most significant price declines, I analyzed data from the Bureau of Labor Statistics on the 211 categories that make up the consumer price index, the most common measure of inflation. Over the last 10 years, the cost of goods and services in about 60 of those categories has fallen, while overall inflation has been about 28 percent, or 2.8 percent per year. A lot of other stuff has risen in price, but by less than inflation, which means it's getting more affordable for people whose incomes are keeping up with inflation.
Some things don't seem cheaper because manufacturers often keep prices stable while adding new features or improving performance—and convincing consumers they've got to have the latest 4G phone or ultrathin laptop. But consumers still get more for their money, even if they're paying for extras they don't really need. Here are some of the most notable things that are coming down in price:
Housing. By now, we all know about the housing bubble and bust: After rising sharply for several years, home prices turned south in 2006, and they've been falling ever since. The loss of home equity has been devastating for some homeowners, but the comedown has also tamed runaway housing costs that were pushing a basic home out of many people's reach. With the recent dip, average housing costs have now risen by about 28 percent since 2000, which is about the same as overall inflation. Average rent has risen by about 29 percent. And the recent decline could continue for another year or so, lowering monthly costs for many ordinary families. One downside: With property values falling, tax rates are going up in many areas to compensate for lost tax revenue.
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Your family room. It's not just homes that are falling in value; the price of many things inside is coming down, too. The furniture you sit on has fallen by about 12 percent 2000, while the cost of a TV has plunged by 84 percent. Video recorders, audio systems, and movies are cheaper, too. The cost of cable and satellite TV has gone up, but overall, home entertainment has become a bargain. If it doesn't seem that way, it might be because you bought a huge plasma TV or elaborate home-theater system that would have been an unreachable dream 10 years ago.
Your kitchen. Food prices have risen by a bit more than inflation, but the cost of big appliances like refrigerators and dishwashers has barely changed since 2000, which is a net gain for consumers. The cost of small appliances like coffee makers, toasters, and blenders has dropped by about 23 percent, while dishes and flatware are down about 28 percent. Maybe that helps explain why Americans seem to be eating more.
Your laundry room. Price tags on washer and dryers are about the same as they were in 2000, even with snazzy new color-coordinated machines and lower energy usage. And millions of consumers have saved money by trading down from name-brand detergents to store brands, which are cheaper but often seem just as good.
Your bedroom. Sleep is getting cheaper, as long as you factor out the medication that helps you nod off. The cost of bedroom furniture has dipped by about 4 percent since 2000, while bedding, window treatments, and linens have fallen by more, thanks largely to cheap material from China and other low-cost countries.
Your workbench. Tools, paint, hardware, and lawn and garden equipment are about 4 percent cheaper than they were 10 years ago. If you don't have a cordless drill, you're living in the dark ages.
Your office. Be thankful for Moore's Law, which states that the number of transistors able to fit on a computer chip will double about every two years. The remarkable consistency of chip technology has forced computer prices down by a staggering 84 percent since 2000. That doesn't mean we're spending less on computers, but it does mean we have more of them, plus access to capabilities like video streaming that were uncommon 10 years ago. Internet access, long-distance phone service, and even stationery have gotten cheaper as well.
Clothes. Virtually every type of apparel has come down in price, thanks to cheap overseas factories that now crank out much of our clothing. The cost of apparel in general has fallen about 8 percent since 2000, with men's clothing down by about 12 percent and women's by 10 percent. The cost of kids' clothing has plummeted by about 27 percent. Even categories that have gone up in price, like footwear, jewelry, and women's dresses, have risen by less than inflation.
Cars. Now you really know the salesman is fibbing when he says that special low price is only valid till the end of the month. The average cost of a new car is about 3 percent lower than in 2000, despite better safety equipment and more advanced electronics. Used vehicles are down even more, by about 8 percent. Aggressive new fuel-economy rules should gradually raise the cost of cars, but for the time being, weak demand is likely to offset that and keep the deals coming.
Communication. If you want to avoid talking to your nebbish cousin from Ohio, you'll have to come up with a better excuse than money. The cost of keeping in touch is about 9 percent cheaper than it was 10 years ago, with wireless service down 20 percent and landline long-distance down 19 percent. If your phone bill seems to be going up instead of down, it's probably because you're buying a bundle of services—like text messaging and mobile E-mail—that barely existed in 2000.
Photography. America has become Shutterbug Nation thanks to camera prices that have fallen 64 percent since 2000. The cost of processing film has risen slightly, but of course many people bypass film these days and use their own printers, or post photos to the Web and enjoy them for free online.
Toys. The occasional safety scare might be unnerving, but Americans have saved a bundle thanks to cheap toys from China and other low-cost importers. Overall, the cost of toys has fallen by 44 percent since 2000, one of the biggest price drops for any category. Sporting goods—the adult equivalent of toys—have stayed about the same, making them cheaper, after inflation.
Music. There's no accounting for taste, but in terms of cost, the past decade has been a huge win for music fans. First, the cost of audio equipment like iPods and other music players has fallen by about 43 percent. And the cost of music itself has drifted down, as online delivery has replaced CDs. For those who make their own, musical instruments are a bit cheaper, too.
Club dues and fees. If you're not a joiner, maybe it's a good time to become one. Membership fees for golf and tennis clubs, gyms, and other sports-related organizations drifted down during the recession, and since 2000 they've risen just 16 percent—a net decline, after inflation. Just remember to tip the caddy.