US TV Price Inflation Easing as Panel Prices Flow Through to Retail

Published November 15, 2021

The steep declines in LCD TV panel prices are reversing the unprecedented surge of inflation in TVs, and prices have peaked but remain higher on a Y/Y basis, according to the most recent data from the US Bureau of Labor Statistics (BLS) Consumer Price Index (CPI).

The BLS publishes CPI statistics for hundreds of categories, and its current data set goes back to 1996, but the CPI is indexed to 1982-1984. This note from the Economist describes the detail of compiling the report and how the BLS works to account for changes in products as technology progresses:

“In America statisticians survey nearly 10,000 people every quarter, construct a sample of 80,000 things they buy, and then monitor their prices by ringing up thousands of shops, restaurants and offices.”

The October 2021 overall CPI stood at 276.57, which means that a standard basket of goods that could be purchased for $100 in 1982-1984 would cost $276.57 for a consumer today. The CPI for TVs in June 2021 was 1.48, which means that a (hypothetical) TV that cost $100 in 1982-1984 would cost $1.48 today. The TV index and the overall index are now going in opposite directions: on a M/M basis overall prices were up 0.8%, while TV prices were down 2.2%.

The chart here shows the Y/Y change in the CPI, which readers may recognize as the more familiar headline definition of inflation, and in the CPI sub-index for TV. In the period from 1997-2021, the CPI for TV has spent nearly the entire flat panel display era below -10%. For a period of more than ten years from 2005 to 2017, the CPI for TV was always below -10% and often below -20%.

Y/Y % Change in US Consumer Price Index, 1997-2021

The general CPI in September 2021 increased by 6.2%, the highest level of inflation since the 1980s. The CPI sub-index for TVs in September 2021 has increased by 9.4% Y/Y, a clear decrease from the 13.3% recorded in August, which was the highest level ever. The TV CPI was negative Y/Y as recently as March 2021. The October price decrease of 2.2% represents a substantial reversal for TV inflation for a single month; it represents a rate of -23.4% on an annualized basis, and if TV deflation continues at the same pace, TV prices will fall below the previous all-time low set in October 2020 in March 2021.

Inflation for TV prices in the US may not have any strong effect on demand, based on the historical example – past examples of TV deflation did not lead to a surge in demand in the US. Instead, the influence of the pandemic will be the dominant force for TV demand in the US. This summer’s general opening of the US economy led to a slowdown in TV demand, and sales have declined Y/Y since May.

As we have reported for several months, we estimate that LCD TV panel prices declined by double-digit percentages each month from August through October and will continue to decline to the end of the year. In general, we estimate that there is a three-to-four-month time lag between changes in LCD TV panel prices and corresponding changes in TV retail prices, but in this case, the rapid fall in panel prices may have accelerated this shift.

The peak in panel prices occurred in June or July, with some variation by screen size, and it appears that the peak of US TV inflation happened in August or September, with likely a similar variation by product. As we reported last week, the prices for Black Friday special deals have generally been higher than for Black Friday 2020, which would be consistent with the 9.4% inflation rate of the TV CPI, but prices may fall throughout the holiday season and into 2022.

Image Description
Written by

Bob O'Brien

bob.obrien@displaysupplychain.com