Asymptotic

Your Christmas gadgets aren’t getting much cheaper this year

November 21, 2012
November 21, 2012

In a world of what might seem like forever-rising prices, one commodity has been getting consistently cheaper: electronics. But for how much longer?

2012 has been the second most stagnant year for personal electronics prices since the Bureau of Labor Statistics began recording them in 1997. This year’s prices have declined 6.1% so far. Only the 4% drop in 2010 was smaller, over the same time period.

Change in computer prices january to november since 1998 chart

While this year’s decline is comparatively weak, the price of personal computers and peripheral equipment in the United States has fallen consistently and rapidly since 1997. The BLS observes the pace of this price decline slowing.

Personal computers and peripheral equipment consumer price index since 1998 chart

From 1998 to 2005 electronics prices declined 85%. Since 2005, the same length of time, prices have fallen only 61%. A lot of the drop has come about as new bits of technology that initially cost a lot to develop—wifi, bluetooth, touch screens, high-density flash memory, and other now-commonplace marvels—have become abundant and commoditized. As the markets for computers, phones and other gadgets have ballooned, economies of scale have reduced costs. But the scope for those savings seems to be running out. Mikako Kitagawa, a principal research analyst at Gartner, says prices have reached almost bottom as manufacturer margins run thin. She calculates that without a “remarkable invention” prices will not be able to fall much lower in the future.

This decline in computer prices isn’t a trend in other holiday gifts. For instance, the BLS has seen apparel prices fall and rise over the same time.

From 1998 to 2005 apparel prices fell 9.6%. Since 2005, they are up 6.1%. Over the entire span, prices declined 4.1%. Shoppers buying sweaters, scarves, mittens and other apparel this year are facing prices 1.6% higher than last. And clothing shoppers who havent been in stores since the 2010 holiday season will be confronted by a 6.3% increase in prices since their last visit.

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