Why smartphones deflated 22% while almost everything else is becoming more expensive

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3 years ago

October 17, 2022

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Shoppers queue in like outside the Apple store during the launch day of the new iPhone 14 series smartphones in Hong Kong, on September 16, 2022.

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The closely-watched consumer price index continues to show headline inflation in the U.S. hovering at levels last seen in the mid-1980s.

Prices for a wide variety of goods and services, including food, airfare, and gasoline rose in the latest reading released last week. All told, on a 12-month basis, headline inflation was up 8.2%, according to the Bureau of Labor Statistics, which publishes the CPI.

But one product category monitored by the CPI recorded a 22% plunge, showing deflation: Smartphones.

That might seem counterintuitive. Most phones are expensive and prices for the best ones aren’t going down. Apple released new iPhones in September at the same U.S. prices as last year’s options, for example. And Samsung’s high-end devices cost as much as $1,800 this year. Average selling prices for smartphones continue to climb in markets around the world.

It turns out, smartphones aren’t getting cheaper. They’re getting better. And that’s why CPI shows them deflating instead of inflating like lots of other goods.

Here’s why: Normally, the CPI likes to compare prices for identical items which don’t change much from year-to-year. So, it might compare eggs against eggs, for example. But in the case of smartphones, BLS has to control for devices that get better each year. If smartphones are improving and the price is staying the same, then BLS records a price decline.

“There’s been a lot of declines in the [smartphone] index. And that’s really just in large part dealing with the quality improvements,” said Jonathan Church, an economist at BLS.

Twice a year, BLS looks at the new smartphone models and measures how they’ve improved — whether they have better cameras, displays, or other new methods.

“For smartphones, we’re talking about things like screen size, RAM, processor speed, phone camera or rear camera, whether it’s foldable, or things like that,” Church said.

Then, BLS makes a “quality adjustment.” If the price of the new iPhone didn’t rise, but it received new features, then the CPI would consider that device to be more valuable than the old one, and it assumes consumers get more value for the same money.

Estimating the size of the quality adjustments is done with a hedonic modeling method and BLS uses data from a third-party dataset that includes smartphone specs.

Or, as BLS puts it: “If a replacement smartphone is different from its predecessor and the value of the difference in quality can be accurately estimated, a quality adjustment can be made to the previous item’s price to include the estimated value of the difference in quality.”

BLS has indexed smartphone technologies to a starting point in late 2019, when Apple’s newest device was the iPhone 11 and Samsung’s best was the Galaxy S10. In fact, smartphone prices have been deflating since 2019, according to the CPI.

Eventually, Church said, smartphones may mature into the kind of product that would see price increases and inflation. But the rate of improvement would have to slow down.

“It’s really only that a certain mature point in the cycle that their price will start to go up again,” Church said. “It seems pretty early in the lifecycle still, smartphones in general.”

Technology

Trump aims to cut $6 billion from NASA budget, shifting $1 billion to Mars-focused missions

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2 days ago

May 2, 2025

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Trump aims to cut billion from NASA budget, shifting billion to Mars-focused missions

The Trump administration has floated a plan to trim about $6 billion from the budget of NASA, while allocating $1 billion of remaining funds to Mars-focused initiatives, aligning with an ambition long held by Elon Musk and his rocket maker SpaceX.

A copy of the discretionary budget posted to the NASA website on Friday said that the change focuses NASA’s funding on “beating China back to the Moon and on putting the first human on Mars.”

NASA also said it will need to “streamline” its workforce, information technology services, NASA Center operations, facility maintenance, and construction and environmental compliance activities, and terminate multiple “unaffordable” missions, while reducing scientific missions for the sake of “fiscal responsibility.”

Janet Petro, NASA’s acting administrator, said in an agency-wide email on Friday that the proposed lean budget, which would cut about 25% of the space agency’s funding, “reflects the administration’s support for our mission and sets the stage for our next great achievements.”

Petro urged NASA employees to “persevere, stay resilient, and lean into the discipline it takes to do things that have never been done before — especially in a constrained environment,” according to the memo, which was obtained by CNBC. She acknowledged the budget would “require tough choices,” and that some of NASA’s “activities will wind down.”

The document on NASA’s website said it’s allocating more than $7 billion for moon exploration and “introducing $1 billion in new investments for Mars-focused programs.”

SpaceX, which is already among the largest NASA and Department of Defense contractors, has long sought to launch a manned mission to Mars. The company says on its website that its massive Starship rocket is designed to “carry both crew and cargo to Earth orbit, the Moon, Mars and beyond.”

Musk, who is the founder and CEO of SpaceX, has a central role in President Donald Trump’s administration, leading an effort to slash the size, spending and capacity of the federal government, and influencing regulatory changes through the Department of Government Efficiency (DOGE).

Musk, who frequently makes aggressive and incorrect projections for his companies, said in 2020 that he was “highly confident” that SpaceX would land humans on Mars by 2026.

Petro highlighted in her memo that under the discretionary budget, NASA would retire the SLS (Space Launch System) rocket, the Orion spacecraft and Gateway programs.

It would also put an end to its green aviation spending and to its Mars Sample Return (MSR) Program, which sought to use rockets and robotic systems to “collect and send samples of Martian rocks, soils and atmosphere back to Earth for detailed chemical and physical analysis,” according to a website for NASA’s Jet Propulsion Laboratory.

Some of the biggest reductions at NASA, should the budget get approved, would hit the space agency’s space science, Earth science and mission support divisions.

Petro didn’t name any specific aerospace and defense contractors in her agency-wide email. However SpaceX, ULA and Jeff Bezos’ Blue Origin are positioned to continue to conduct launches in the absence of the SLS. Boeing is currently the prime contractor leading the SLS program.

“This is far from the first time NASA has been asked to adapt, and your ability to deliver, even under pressure, is what sets NASA apart,” she wrote.

President Trump’s nominee to lead NASA, tech entrepreneur Jared Isaacman, still has to be approved by the U.S. Senate. His nomination was advanced out of the Senate Commerce Committee on Wednesday.

WATCH: CNBC’s interview with NASA’s astronauts on their nine months in space

Technology

Temu halts shipping direct from China as de minimis tariff loophole is cut off

Published

2 days ago

May 2, 2025

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Temu halts shipping direct from China as de minimis tariff loophole is cut off

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Chinese bargain retailer Temu changed its business model in the U.S. as the Trump administration’s new rules on low-value shipments took effect Friday.

In recent days, Temu has abruptly shifted its website and app to only display listings for products shipped from U.S.-based warehouses. Items shipped directly from China, which previously blanketed the site, are now labeled as out of stock.

Temu made a name for itself in the U.S. as a destination for ultra-discounted items shipped direct from China, such as $5 sneakers and $1.50 garlic presses. It’s been able to keep prices low because of the so-called de minimis rule, which has allowed items worth $800 or less to enter the country duty-free since 2016.

The loophole expired Friday at 12:01 a.m. EDT as a result of an executive order signed by President Donald Trump in April. Trump briefly suspended the de minimis rule in February before reinstating the provision days later as customs officials struggled to process and collect tariffs on a mountain of low-value packages.

Jeff Bezos discloses plan to sell up to $4.8 billion in Amazon stock

Published

2 days ago

May 2, 2025

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Jeff Bezos discloses plan to sell up to .8 billion in Amazon stock

Jeff Bezos, founder and executive chairman of Amazon and owner of The Washington Post, takes the stage during The New York Times’ annual DealBook Summit, at Jazz at Lincoln Center in New York City, Dec. 4, 2024.

Michael M. Santiago | Getty Images

Amazon founder Jeff Bezos plans to sell up to 25 million shares in the company over the next year, according to a financial filing on Friday.

Bezos, who stepped down as CEO in 2021 but remains Amazon’s top shareholder, is selling the shares as part of a trading plan adopted on March 4, the filing states. The stake would be worth about $4.8 billion at the current price.

The disclosure follows Amazon’s first-quarter earnings report late Thursday. While profit and revenue topped estimates, the company’s forecast for operating income in the current quarter came in below Wall Street’s expectations.

The results show that Amazon is bracing for uncertainty related to President Donald Trump’s sweeping new tariffs. The company landed in the crosshairs of the White House this week over a report that Amazon planned to show shoppers the cost of the tariffs. Trump personally called Bezos to complain, and Amazon clarified that no such change was coming.

Bezos previously offloaded about $13.5 billion worth of Amazon shares last year, marking his first sale of company stock since 2021.

Since handing over the Amazon CEO role to Andy Jassy, Bezos has spent more of his time on his space exploration company, Blue Origin, and his $10 billion climate and biodiversity fund. He’s used Amazon share sales to help fund Blue Origin, as well as the Day One Fund, which he launched in September 2018 to provide education in low-income communities and combat homelessness.

WATCH: Amazon has levers to pull with tariffs