Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How Your Raise Is Finally Beating the Cost of Fans and Air Conditioners
Transcript
- Lucas: So Luna, we've spent the past few episodes on things that are still beating your raise — rent, health insurance, weddings. But today I want to talk about something that's actually going the other way. Something you probably bought this summer, and it's getting cheaper. Luna: I'm intrigued. Is it ice cream? Because I could use some good news on ice cream. Lucas: Close, but no. I'm talking about fans and air conditioners. The July CPI report, which came out this week, showed that the price of fans fell 4.5 percent over the past year. Air conditioners dropped 1.2 percent. Meanwhile, average hourly earnings are up about 3.6 percent. So your raise is outpacing the cost of staying cool. Luna: That's a nice switcheroo. But why is that happening? I feel like every summer we hear about surging demand and supply chain issues. Lucas: Right, and normally that's the story. But this year, a few things are lining up. First, energy efficiency standards have improved a lot. New fans and AC units use less electricity, so they're cheaper to run, and that's putting downward pressure on prices. Second, global supply chains have really stabilized since the pandemic. There's no shortage of components like motors and compressors anymore. Luna: So it's a supply story, not just a demand story. But I'm curious — is this just a blip, or is it a longer-term trend? Lucas: That's the million-dollar question. Let's dig into it. But before we go deep — and this is something we've talked about on the show before — we keep this podcast ad-free, and that's a deliberate choice. It means we don't have to shape our episodes around advertisers. If you've found walking through the economy with us has made something click, and you want to support that, the link is buy me a coffee dot com slash fexingo. It's a small way to keep us going, and it's totally optional. Luna: Yeah, and we really appreciate the listeners who do that. It lets us keep digging into these numbers without any outside pressure. Lucas: So back to fans and AC. Let's look at the longer-term picture. Over the past decade, the price of fans and air conditioners has actually been pretty flat, while overall inflation has gone up about 30 percent. So relatively speaking, cooling has become much more affordable. And that's not an accident. Luna: What's driving that? Is it technology, or something else? Lucas: A big part is energy efficiency standards — the Department of Energy has been tightening them for years. That pushes manufacturers to innovate, and while that can raise the upfront cost, it also means the units are cheaper to run. And consumers factor that in, so demand shifts toward more efficient models, which over time brings prices down. Luna: But wait — if they're more efficient, shouldn't they cost more to make? Like, better compressors and all that. Lucas: You'd think so, but the scale of production is huge. These are mature products, and the cost of the raw materials — copper, aluminum, steel — has actually been fairly stable. Plus, a lot of the manufacturing is in countries with low labor costs, and that hasn't changed dramatically. So the efficiency gains are being passed on to consumers. Luna: That makes sense. But I'm thinking about electricity prices — they've been going up, right? So even if the unit is cheaper, the cost of running it might not be. Lucas: That's a really good point. Electricity prices are up about 4 percent year-over-year, which is actually faster than overall inflation. So the total cost of cooling — the machine plus the electricity — hasn't fallen as much. But the machine itself is cheaper, and that's the part you buy upfront. Luna: So if I'm a consumer, is it a good time to buy a fan or an AC unit? I mean, aside from the fact it's August and I already have one. Lucas: Actually, yes. And here's a specific number: the CPI report showed that the average price of a fan is about 4.5 percent lower than last year. So if you've been thinking about upgrading to a more efficient model, now is a decent time. And for air conditioners, the 1.2 percent drop is modest, but it's still a discount. Luna: But what about heat pumps? I've heard those are the big thing now, and they both heat and cool. Are those in the same category? Lucas: They're a separate category, and they've been getting more attention because of climate policy. But they haven't shown the same price declines — actually, heat pump prices have been creeping up, partly because of higher demand and some supply constraints. So if you're looking for a bargain, traditional fans and AC units are the story. Luna: So is this a case where your raise is finally beating a specific cost, but not necessarily the overall cost of living? Because I know the CPI is still up. Lucas: Exactly. Overall CPI is up about 3 percent year-over-year, so your 3.6 percent raise is barely beating it. But in this one category, you're way ahead. And that's the point — inflation isn't a monolith. Some things are still rising fast, like rent and insurance, but others are falling. It's a mixed bag. Luna: And I guess the worry is that this trend could reverse. Like, what if we have a really hot summer next year and demand spikes? Lucas: That's a real risk. Climate change is making heatwaves more frequent, and that drives demand. But the supply side has been pretty resilient. Unless there's a major disruption — like a tariff or a supply chain shock — I think we'll continue to see modest price declines or at least stability. The bigger concern is electricity prices, which are tied to fuel costs and grid investments. Luna: So bottom line: if you're a renter or homeowner, buying a fan or an AC this year is one of the few purchases where your raise is definitely winning. That's a nice thing to hear for once. Lucas: It is. And it's a reminder to look at the details of the CPI report, not just the headline number. There's always something interesting hiding in there. Luna: Well, next time I'm sweating, I'll remember this episode. Thanks, Lucas. Lucas: Anytime. And hey, if you enjoyed this deep dive, you know where to find us. We'll be back tomorrow with another angle on wages and prices.