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

Published

2 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.

Miguel Candela | Anadolu Agency | Getty Images

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

Nvidia down 30% from high as tech-led sell-off hits ‘Magnificent Seven’

Published

5 hours ago

March 10, 2025

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Nvidia down 30% from high as tech-led sell-off hits 'Magnificent Seven'

Nvidia CEO Jensen Huang gives a keynote address at CES 2025, an annual consumer electronics trade show, in Las Vegas on Jan. 6, 2025.

Steve Marcus | Reuters

Nvidia has lost nearly a third of its value just two months after notching a fresh high.

The leading chipmaker slumped about 5% on Monday, building on last week’s losses as heavy selling continued across the tech sector. The popular artificial intelligence stock has shed about a fifth of its market cap since President Donald Trump’s inauguration.

The stock hit an intraday high of $153.13 on Jan. 7.

Tariff fears and growth concerns have rocked technology stocks, including Nvidia, over the past week, with the tech-heavy Nasdaq Composite dropping more than 4%. The Nasdaq traded at a six-month low on Monday.

Many technology companies rely on parts and manufacturing overseas and new levies could push up prices. That has also sparked worries of a U.S. recession, which Trump did not rule out over the weekend.

Tesla led the declines among the “Magnificent Seven” names, plummeting more than 13%. The Elon Musk-backed electric vehicle company has plunged 16% over the past week and shed nearly 44% since Trump took office in January. The stock is also coming off its longest weekly losing streak in history as a public company.

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Technology

Elon Musk’s X suffers multiple outages

Published

5 hours ago

March 10, 2025

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Dado Ruvic | Reuters

Elon Musk’s social media platform X experienced several outages on Monday morning, leaving some users unable to load the site.

Nearly 40,000 users reported problems with the platform around 10 a.m. ET, according to the analytics platform Downdetector, which gathers data from users who spot glitches and report them to the service. Around 28,000 people were experiencing issues as of 11:30 a.m. ET.

When X resumed loading for users Monday afternoon, Musk said the company had suffered a “massive cyberattack.” Musk did not provide any evidence, and CNBC could not independently verify that a cyberattack took place.

“We get attacked every day, but this was done with a lot of resources,” Musk wrote in a post. “Either a large, coordinated group and/or a country is involved.”

X did not immediately respond to CNBC’s request for comment.

Musk acquired X, formerly known as Twitter, for $44 billion in 2022. The Tesla CEO slashed the company’s headcount by about 80% from 7,500 employees to 1,300 workers, and just 550 full-time engineers, by January 2023.

X has experienced several large-scale outages since Musk’s takeover. Users reported problems with the platform in December 2022 and with the site’s desktop app in July 2023, for instance.

The timing of the X outage couldn’t have been worse for NFL fans, who rely on the service for news updates. The first day of the NFL’s free agency tampering window began at 12 p.m. ET with the service down, sending fans searching for other options such as linear TV and Bluesky to get their news on player signings.

— CNBC’s Alex Sherman contributed reporting.

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Watch: Elon Musk on X subscriptions: ‘Free speech isn’t exactly free it costs a little bit’

Technology

Bitcoin falls to November low under $80,000 on heightened recession fears

Published

5 hours ago

March 10, 2025

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Bitcoin falls to November low under ,000 on heightened recession fears

CFOTO | Future Publishing | Getty Images

Bitcoin dropped under the $80,000 level Monday, dragged by the continued selling pressure in the equities market.

The price of the flagship cryptocurrency was last lower by 5% at $78,714.96, its lowest level since November, according to Coin Metrics.

Stock Chart IconStock chart icon

Bitcoin in the past day

Shares of companies linked to the crypto space also slid. Coinbase fell roughly 14%. Robinhood lost 17%, and bitcoin proxy play Strategy, formerly known as MicroStrategy, declined 16%.

Bitcoin ETFs are coming off their fourth week in a row of outflows. They logged $867 million of outflows last week, bringing the four-week total to $4.75 billion, according to CoinShares. Continued bearishness pushed crypto prices even lower over the weekend, with bitcoin dropping sharply on Sunday evening to the $80,000 level for the first time since Feb. 28.

President Donald Trump signed an executive order to establish a U.S. bitcoin reserve and a digital asset stockpile late last week, disappointing some investors. However, macro uncertainty was the key driver of the accelerated downward move Monday, after Trump over the weekend didn’t rule out the possibility of a recession in the U.S.

Absent a crypto-specific catalyst, macro concerns are likely to continue weighing on cryptocurrency prices in the near term. This week, the market will be watching for key economic indicators, including the Job Openings and Labor Turnover Survey (JOLTS) Tuesday, the consumer price index on Wednesday and the producer price index slated for Thursday.

Although investors expect cryptocurrency prices are likely to pull back even more before making a run for a new record, their positive outlook on the year driven by regulatory tailwinds is still intact.