The Prices of This Household Item Has Plunged
September and October news headlines all read about the same — inflation has not tapered off. Prices of anything surged year over year in October, from gasoline (49.6%) to beef and veal (20.1%). Still, some prices declined, and the price of this item has plunged — food at elementary and secondary schools.
As the U.S. adjusted to the post-pandemic world, some economists said inflation would ease. There are still enough jobs open, some argued, keeping the labor market market loose enough that it would not drive up wages. A booming economy would increase production of the items most Americans need for day-to-day life. With abundant supply, inflation would last a quarter or so, but not more, some said. (Prices of houses have also soared. These are the states where home prices went up the most in the last 12 months.)
There were prominent economists who argued otherwise. Former Treasury Secretary Lawrence Summers, who is a well-regarded economist, said the assumption inflation could be tamed was false. Government spending to help build jobs after the 2020 recession and for other purposes proposed by the Biden Administration would fund a surge in consumer spending. Troubled supply chains would mean many goods would be in low supply. The formula for sharp inflation is already in place, Summers argued.
The September CPI supported the alarms of people who hold the same view as Summers. What consumers pay for goods and services rose 5.4% on an unadjusted basis compared to September 2020, and October was even worse. The all items index rose by 6.2% from October of last year — a 31-year high. (The price of this household item is soaring.)
Despite the fact that some items rose by double digits year over year, some items went against the tide. 24/7 Wall St. reviewed the BLS Consumer Price Index Summary to find the items with price declines from a year ago.
Remarkably, some prices dropped by double digits. Among these were smartphones, telephone equipment, and food sold at schools and employee sites. Specifically, the price of food at elementary and secondary schools plunged by 58.8% year over year. There are no ready explanations for any of these.
In fact, smartphone prices dropped even as one of the most expensive smartphones in history, the iPhone 13, recently hit the market. So why did prices of smartphones drop? It may be discounts offered on earlier versions of the iPhone. It may be the subsidies wireless carriers pay to customers to either keep them or move them from other carriers. The government data does not say.
Food sold at schools and employee sites may be easier to explain. Schools have been shuttered off and on during the pandemic. Even when schools opened, parents have kept children home. And in a work-from-home environment, the chance that businesses have returned to regular schedules for employee meals is unlikely. However, as with smartphones, this is speculation.
While most front-page news stories about food prices reflect that they have soared this year, there are exceptions. The price of frankfurters, lettuce, and cheese fell year over year. This contrasts to uncooked beefsteak, which rose in October 24.2% year over year.
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