smart spending

7 falling price tags

Highlights
  • Competition, outsourcing drop cost of many goods.
  • Cheaper items include electronics, clothes and cars.
  • Improved quality of products factored into price comparison.

Your financial ship is taking on water from all sides: a plunging stock market, alarming spikes in food costs and a home value that's headed in the wrong direction. Now, Congress is enlisting your help to bail out Wall Street as well.

Ready for some good news?

Preposterous though it may seem, we have identified seven islands of relief in this dark sea of economic uncertainty.

That's right -- seven categories of consumer goods and services in which prices have actually declined over the past decade.

The good news comes from the Bureau of Labor Statistics' Consumer Price Index, or CPI. The Federal Trade Commission coordinates with the Bureau of Labor Statistics, or BLS, to make sure the CPI reflects an apples-to-apples value comparison before adjusting for inflation.

An improvement in the quality of a product over time is an important factor in this calculation.

"When they examine, they try to correct for differences in the quality of products," says Tom Kelly, who used to work for the FTC and is now director of the Center for Business and Economic Research at Baylor University in Waco, Texas.

"So when you make comparisons, you're comparing two similar-quality products. If the price remains the same and the quality goes up, that effectively reduces the price."

Following are seven categories of goods and services that are comparatively cheaper today than they were 10 years ago. All figures are based on a BLS comparison of like products and services from August 1998 and August 2008.

7 savings
The cost of these seven goods and services has actually gone down over time.
Items that have grown cheaper
1.Phones5.Toys
2.Electronics6.Apparel
3.Footwear7.Watches
4.New vehicles  

Phone bargains: Can you hear me now? 

Motormouths rejoice: The price of wireless telephone services dropped 31.6 percent during the past decade, while the price of long-distance telephone calls fell 23.1 percent.

Why the cell phone bargains?

"Cellular telephone service was a relatively new item 10 years ago," says Dan Ginsburg, BLS supervisory economist for the CPI services section. "Usually, items that come in with new technology start off higher priced, but as sophistication in delivering the service becomes greater and competing companies develop more high-tech solutions, the costs keep coming down. Competition helps keep the prices low."

You can thank competition for the long-distance savings, too.

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Ginsburg credits the 1983 deregulation of telephone services that resulted in the "Baby Bells" for reducing the cost of long-distance calls.

"As competition crept into the market, it became much less expensive with newer technology to make long-distance calls, so the prices just came way down," he says. "Suddenly, the Sprints and MCIs and other companies were eligible for long-distance service. It worked the way they thought it would."

Electronics: Applause, applause 

It's hardly news that the prices of personal electronics have dropped to what would have been garage-sale prices a decade ago. This is true of televisions (down 77.9 percent); computers (down 88.3 percent); audio equipment (down 39.3 percent); and videocassettes, video discs and other media, including rentals (down 20.4 percent).

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