The Prices of Durable Goods Glide Lower

Consumers buy a wide variety of items.

One category of products is known as durable goods. These are items that are expected to last at least three years, according to the Economics and Statistics Administration. Examples include washing machines, cars, furniture, computers and sports equipment.

For more than 20 years, durable goods in the U.S. have seen a steady price deflation.

Read this excerpt from a Feb. 26 Bloomberg article:

Since 1995, durable goods (cars, televisions, computers and the like) have been getting cheaper in the U.S. ...

The great durable-goods deflation ... does not appear to be driven by central banks and their ability to create and destroy money. ...

[T]he rise of China as a giant new low-cost producer of manufactured goods in the 1990s and 2000s put lots of downward pressure on durable-goods prices, but not so much on nondurable goods (the three main categories of nondurables are food, energy and clothing, and China is a big exporter of only the third) and none at all on services.

The other explanation is that manufacturers of durable goods keep getting better at making them. The economics term for this is multifactor productivity growth, and it's been much higher for the past few decades in durable-goods manufacturing than in nondurable-goods manufacturing. ...

It's not just that durable-goods manufacturers have gotten more efficient in making things. It's also that they churn out products that are often vastly superior to those of the past, most notably computers and other electronic devices. Government inflation measures in the U.S. incorporate "hedonic quality adjustments" to try to reflect such improvements. These adjustments are often criticized by skeptics as a manipulation of the inflation rate, but they can't really be avoided. Yes, an iPhone costs a lot more than a Princess telephone did 25 years ago, but it is capable of exponentially more. And a low-end Android phone that does almost as much as an iPhone costs less than a Princess does now!

You can read the entire article by following the link below: