Americans still are benefiting from falling prices for a few essential items like cars and clothing, even though prices for other necessities from energy to housing and health care are soaring.
Dealers shaved prices for new cars in the past year by 1.4 percent on average through discounts and rebates averaging over $4,500 a vehicle, and people who bought used cars got a 6.6 percent reduction from the previous year’s average, according to the Labor Department’s Consumer Price Index.
Some consumer advocates say the dealers are making up in exorbitant finance charges what they are giving up in sticker prices. But the throngs of people flocking to showrooms each time incentives are announced suggest that Americans are pleased with the bargains they are getting.
For those looking to kick the car habit and save on energy costs, public transportation might seem an attractive alternative, with prices there dropping by 1.9 percent in the past year. However, that is not the case in the Washington area, where Metro officials have raised fares the past two years.
Another area where prices continue to fall is computers and telecommunications services such as cell phones — a trend that started in the 1990s during the heyday of the new economy boom.
Prices for personal computers and peripheral equipment dropped a stunning 9.6 percent in the past year, while the cost of telephone service fell a more modest 2.9 percent.
Some inflation experts are skeptical of the price declines for products such as cars and computers reported by the department, because it adjusts the prices downward to reflect technological improvements, even if the sticker price goes up.
“It’s a con, pure and simple,” said Bill Gross, managing director of Pimco Bond Funds.
Under the department’s reckoning, he explained, computer prices have been dropping by 8 percent a year — even though consumers are paying roughly the same sticker price — because the power and memory of standard models has improved.
“They do a disservice to those grounded in the reality of stretching a paycheck for new cars, laptop computers and cell phones that somehow haven’t gone down in price as much as the government says they have,” he said.
One area where prices indisputably have been falling in recent years is apparel — a trend owed to the increasing number of high-quality but inexpensive imports from Mexico, China and other emerging producers.
The boon of imports, which trimmed clothing bills by 0.6 percent in the past year and as much as 4.8 percent for families with small children, has not been without controversy, however.
American textile companies and workers are blaming the flood of imports for the loss of nearly a million jobs at domestic plants in the past decade.
Several manufacturers and unions have petitioned the government to prevent the stream of imports from turning into a deluge next year when global textile quotas are to expire.
While that may help some workers keep their jobs, it would hurt consumers who have benefited from cheaper clothes in recent years. By some estimates, clothing prices could drop another 15 percent if the restrictions are lifted.
Other areas in which consumers have benefited from low-priced imports is home furnishings, where prices have declined by 0.6 percent, and fruit and vegetables, where prices have dipped 0.4 percent.
Prices for imported fruits, vegetables and nuts fell by 3.9 percent in the past year even as the price of domestic produce was rising, according to the department’s Import Price Index. The cost of imported housing fixtures and other components dropped by 1.4 percent.
Low-priced imports also contributed to the cost savings for computer and other electronics users, who saw price declines of 7.7 percent and 5.3 percent on their foreign-made goods.
Photographers also continue to benefit from inexpensive imports, with prices for cameras and related equipment dropping another 1.5 percent this year.
Imports did not account for the drop in car prices, however, as the cost of imported vehicles rose by 1.8 percent, the department said. Deep discounts have been offered primarily by domestic carmakers, which in some cases have been losing money because of them.
“The United States has an enormous appetite for cheap goods, and the rest of the world remains willing to offer us the needed financing” to keep purchasing as much as we want, said Oscar Gonzalez, economist with John Hancock Financial Services.
The U.S. trade deficit has burgeoned to a record $550 billion a year because of America’s love for foreign cars, electronics and other products. A big part of the deficit increase was because of a 37.6 percent jump in the cost of foreign oil, to which Americans also are addicted.
To pay for the trade deficits, the United States has had to attract $1.5 billion a day in loans and other investments from overseas.
This year, the biggest source of deficit financing have been the central banks of China and Japan, which have purchased record amounts of U.S. bonds.
“Eventually we’ll need to pay the bills, but we’ve been saying that for nearly a decade,” Mr. Gonzalez said.
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