US TV Price Inflation Hits Record High
The increase in LCD TV panel prices has led to an unprecedented increase in TV prices in the US, according to the most recent data from the US Bureau of Labor Statistics (BLS) Consumer Price Index (CPI). In June 2021, for the first time in history, the CPI for televisions exceeded the overall CPI as TV prices increased by 8% compared to June 2020.
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. The first chart here shows the 25-year history of the overall CPI compared to the CPI for TVs. The June 2021 overall CPI stood at 270, which means that a standard basket of goods, which could be purchased for $100 in 1982-1984, would cost $270 for a consumer today. The CPI for TVs in June 2021 was 1.46, which means that a (hypothetical) TV that cost $100 in 1982-1984 would cost $1.46 today. Anyone who still has a TV from 1983 may realize that this might overstate the value of such an ancient artifact.
US Consumer Price Index, 1996-2021
Over the nearly 30-year period of the CPI, since its current index was set to 100, inflation for all goods and services has averaged 3.6%. For TVs, inflation has averaged -14% during the same period. However, this pattern has changed dramatically in 2021 as a result of the unprecedented increase in LCD TV panel prices. In June 2021, LCD TV panels are an average 102% higher in price compared to June 2020.
The next chart shows the Y/Y change in the CPI, which readers may recognize as the more familiar definition of inflation. While the overall CPI has remained within the range of 0%-5% for almost the entire 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%.
Careful followers of the display industry may recognize that the prior “peak” of TV CPI (least negative number) coincided with the last peak of the crystal cycle in 2017, but at that time, TV inflation was still negative and still far lower than the general CPI. The current peak of the Crystal Cycle has shattered all the records for TV inflation.
Y/Y % Change in US Consumer Price Index, 1997-2021
The general CPI in June 2020 increased by 4.8%, the highest level of inflation since 2008. The CPI sub-index for TVs in June 2021 has increased by 8.1% Y/Y, exceeding the general CPI for the first time.
Inflation for TV prices is not expected to have any strong effect on demand, based on the historical example – 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. The general opening of the US economy this summer has led to a decrease in TV demand, and this is expected to continue in the second half. If an increase in COVID-19 cases spurred by the delta variant would lead to renewed lockdowns, TV demand might recover, but we consider this unlikely.
While the US TV market has historically been price-inelastic, some markets in developing regions have been more sensitive to price changes. Whereas in the US, a television is considered a necessity, in many parts of the world, it is a luxury good. Higher TV prices are expected to lead to reduced TV demand in countries like India, Brazil and Indonesia, which have been hit hard by the pandemic.
As we have reported in last week’s issue, we estimate that LCD TV panel prices have peaked and will start to decline in the second half of 2021. After a three-to-four-month time lag, we would expect that TV prices would follow. So, if you’re in the US and in the market to buy a TV, it might be better to wait.