Home Furnishings Prices Continue Four Year Decline

January 23, 2017  by Jane Chero in Economic News, Financial Reports, Industry   

The Consumer Price Index is defined by the Bureau of Labor Statistics as the measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI-U (Consumer Price Index – Urban Consumers) represents all urban consumers, about 89 percent of total U.S. population. This article focuses on the Consumer Price Index from 2010 to 2016.  To interpret the CPI note that the base year indexes is always shown as 100.  The index for subsequent years indicates the percentage growth over that base year.  For example, an index in the year 2013 of 119.3 indicates the price of that consumer item has grown 19.3 percent since the base year of 2010. On the other hand, an index of 86.2 indicates the price of that item has fallen 13.8 percent.  Each year represents the growth over the base year.

The prices of consumer items grew steadily coming out of the recession for virtually all broad product categories until 2012 to 2014, when Durable Goods, including furniture, appliances, and electronics, along with Non Durables, and Commodities began to decline.  The Services sector, led by skyrocketing medical costs, is the only broad group continuing to see large price increases.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) for all consumer items increased 9.9 percentage points over the last six years – an average of 1.6 percent a year. Meanwhile, the purchasing power of the dollar decreased with time – declining 9 percentage points since 2010 (Table A) Durable Goods has been the worst performing sector in price growth compared to Non Durables, Services, and Commodities (Table B).

Durable Goods prices grew slightly coming out of the recession, but began declining in 2012, and this year are 3.3 percentage points below 2010. With a constant upward trajectory, the price of all consumer Services has increased 14.4 percentage points from 2010 to 2016 –due in part to escalating medical costs. 

 

Housing

Except for home furnishings and operations, housing and home energy costs have grown over the past six years. Both Rent and Home prices have crept up an average of 3 percent (Rent) and 2 percent (Homes) a year – resulting in overall growth of 18.6 and 15.7 percentage points. And while Household Energy prices peaked at an index of 106.8 in 2014, prices quickly fell back down this year to just 1 percent growth since 2010. With Rent and Home prices growing, consumers may have fewer disposable dollars available for Household Furnishings and Operations which are both below 2010’s index by 2.9 percent (Table C).

Furniture and Home Furnishings

Focusing on Household Home Furnishings prices, the accessories category (Clocks, Lamps, and Decorator Items) has the most negative price growth – dropping 29.1 percentage points since 2010 (Table D). Major Appliances is second with a 13.9 percent decline. Furniture and Bedding, Window Coverings, and Floor Coverings all experienced slightly less negative growth – falling between 3.9 percent and 8.8 percent from 2010 to 2016.

Furniture Products

The CPI breaks Furniture into three broad categories – (1) Living Room including Upholstery, Kitchen, and Dining Room, (2) Bedroom including Bedding, and (3) Other Furniture. All three categories are down in price from 2010 (Table E). Bedroom Furniture experienced small price increases leading up to 2012, most likely via Mattresses, but has declined steadily in price since then. Currently Bedroom and Bedding is down 4.9 percent from 2010 prices. Living Room, Kitchen, and Dining Room Furniture peaked at 102.1 index in 2012 before falling to 96.1 this year, a level 3.9 percent below 2010.

Television and Cable

In many electronics categories, the price of the durable good has fallen while the cost of operating that product has increased. For example, Television prices have dropped dramatically, but the cost of programming services has skyrocketed. The price of televisions has fallen 65 percentage points since 2010 or about 16 percent a year.  During the same time period, Cable and Satellite Television and Radio Services have jumped a total of 17 percentage points – a roughly 4 percent yearly increase (Table F).

Computer and Electronic Services

Similar to Televisions, Personal Computer prices continue to fall – down 41.6 percentage points in six years (Table G). Surprising to some, Wireless Telephone Service prices are also down, while Internet Services have stayed steady with a slight increase of 0.5 points from 2010 to 2016.

New Vehicles and Gas

New cars and trucks is one Durable Goods area that has seen steady price increases, up 6.8 percent since 2010 (Table H).  On the flip side, however, is that while cars have become more expensive, gasoline prices have become cheaper. Gas prices peaked in 2012 at levels 30.8 percent above 2010, but began their decline three years ago.  In 2016 the price of gasoline is down 23.4 percent down from 2010.

Food and Beverages

Food, both groceries and restaurant prices, have experienced overall growth from 2010 to 2016 (Table I). Food away from home showed the most growth – increasing 16 percentage points.

Medical and Drug Prices

By far the largest increases in prices come from the Medical Industry (Table J). Aside from Health Insurance which has fluctuated since 2010 with the introduction of Obamacare, all medical services and drug prices have maintained an upward trajectory. Hospital Care alone is up to 30.5 percent in 2010 to 2016. All other physician services, dental services, and prescription drug costs have grown between 16.5 percent and 22.8 percent. Even medical care for your pet is skyrocketing growing over 20 percent since 2010.

Education and Childcare

As shown in Table K, education for all ages along with childcare costs are close behind medical care in services that have sharply increased over the past six years. Up to an index of 126.1 in 2016, College Tuition and Fees have jumped an average of 4 percentage points per year. Consistently on an incline, childcare has increased 14.6 percent points from 2010 to 2016.

The Consumer Price Index clearly shows how consumers are faced with growing prices in the Services area but over the last two years have seen overall declines in durable and non-durable goods.  The problem for the home furnishings industry is that prices have been consistently falling since 2012 which may be good for consumers, but not so good for the retailer.