Calling All Price Detectives
🚀 The quick version: We are entering a strange economic time right now where inflation and price levels are showing wildly different trends across various sectors of products and services.
Let’s explain:
China reported deflation for July. We don’t typically highlight global financial news, but this one is important. For the first time in two years China reported a 0.3% drop in consumer prices and a 4.4% drop in producer prices in July compared to last year.
The drop in producer prices really caught our eye (this is what companies pay for stuff) given about 20% of all U.S. imports come from China. If the companies that are making our stuff are seeing prices coming down, chances are the U.S. consumer should start to benefit and see lower prices in the months ahead for categories that we heavily import.
Here is a list of China’s top 10 most imported products which includes smartphones ($50b), toys ($16.3b), pharmaceuticals ($6.9b), and plastics ($4.6b).
U.S. inflation sticking around 3%. The U.S. Consumer Price Index (CPI) for July came in at 3.2% vs. estimates of 3.3% and slightly up from 3.0% in June.
But the devil was in the details as categories showing actual price declines (meaning prices are coming down) included airline fares, used cars, medical care, and meat/poultry/eggs. While some categories like education and shelter (i.e. rent) continued to rise and stubbornly offset this (although there are signs the latter is starting to cool).
We aren’t holding out much hope for those education costs to come down though as we didn’t see any improvement in the latest tuition statement…
👪 How it affects your family: Lower pricing trends in China make us hopeful that inflation will continue to come down here at home in categories that families deal with every day.
That said, with some stalled progress around the CPI report (we seem to be stuck around 3% inflation), we aren’t totally convinced by experts that think we will get back to that pre-pandemic, 2% level or lower.
What really matters though is the wildly different pricing trends by category (ex. airfare vs. rent) as we can’t remember a time with this much variation.
What it means is that every family has the opportunity to save money and find deals just by paying attention to some of the categories above that are seeing pricing pressure (we also continue to highlight good ones every week).
Here are some tips to help you today:
Set an airfare price tracker. The CPI data above coupled with recent company earnings reports indicates that airline price cuts are coming. It may not hurt to think about your family’s upcoming trips and look to lock in airfare over the next few months. We created a short guide on how to set price alerts on airfare to help.
Monitor car prices (also EVs). Used car prices continue to cool but we are still well above pre-pandemic price levels (the latest Manheim used car price data was also released this past week confirming this trend). What is becoming clearer though is that we are likely to see the most dramatic price decreases in the electric vehicle sector. EVs are not for everyone, but if you are curious if an EV makes sense for your family, you can check out this handy calculator.
Watching everyday product prices online. With the cost to make things like furniture, toys, outdoor equipment, and plastics falling in China, we are likely going to see this flow through to an online storefront near you. Make sure you monitor product prices online and set alerts on deals (here is our guide for 10 easy ways to score the best deals online).
