The Bureau of Labor Statistics published the Consumer Price Index for May 2021 on June 10, 2021. According to the report, Consumer Price Index for All Urban Consumers increased 0.6% month-over-month and 5.0% on a year-over-year basis. Month-over-month index for Food at Home, Electricity, and Shelter rose 0.4%, 0.3%, and 0.3%, respectively. The index for used cars and trucks rose 7.3% and 29.7% on a month-over-month and 12-month basis. The index for commodities less food and energy was up 6.5% on a 12-month basis. In short, inflationary prices are expected in the near term, especially with continuing supply chain challenges and commodity price increases.
It is worth parsing through Table A. some more since The CPI for All Items less Food and Energy rose 0.7% month-over-month and 3.8% on a year-over-year basis. Food grew 0.4% and 2.2%, while Energy remained unchanged on a month-over-month basis but grew 28.5% on a year-over-year basis. Thus, the inflationary prices experienced are not as equally dispersed with specific cohorts under heightened scrutiny. The Consumer Price Index releases from the Bureau of Labor Statistics include the CPI based on individual expenditure under Table 2. Peeling through the respective categories, one comes across sub-categories, and one sub-category, particularly interesting to chart on a historical basis, was Toys.
The word toy is interchangeably used to highlight a gallery of valuable items used to display financial or societal status or as the collection of items used by an average parent to distract or compound their child’s attention to gain time to complete other chores. For an adult, a toy might be the $2.68 million 1966 FERRARI 275 GTB sold on June 15, 2021, Sotheby’s Milan Auction, whereas it might be the $54.99 Hot Wheels Mainline 50-Car Case Pack sold by Mattel Inc (NASDAQ: MAT) for a child. Economics teaches that prices go up over time. While it is easy to apply that notion to various subcategories, compared to other indulgences, Toys as a category, are significantly cheaper and have been since the start of the 21t century.
Consider this chart that compares the Consumer Price Index For All Urban Consumers: All Items Less Food and Energy with Alcoholic Beverages, Toys, and Admission to Movies, Theaters & Concerts in the U.S. The chart was constructed using data available from FRED, Federal Reserve Bank of St. Louis. City Average indexed to 100 since January 2015. Starting in January 2015, even though the price of Admission to Movies, Theatres, & Concerts has trended above the CPI for All Items Less Food and Energy, the CPI for Toys has cratered dramatically. In addition, the CPI for Alcoholic Beverages trended lower monthly than the CPI for All Items Less Food and Energy.
Expanding this chart since the start of the 21st century highlights the uncanny deflation in Toys. From 2002, going to the movie theatre has been relatively more expensive than buying a toy. Between January 2000 and May 2021, the Consumer Price Index for Toys in the U.S. City Average has dropped 72.4%. When prices are lower, economics teaches us that demand and buying would increase. In the case of toys, the opposite is true.
The following chart was created with the frequency at Annual. The chart shows that Retail Sales for Beer, Wine & Liquor Stores have increased 134.5% compared to a 2.3% increase in Retail Sales for Hobby, Toy & Game Stores. A steady deflation has not encouraged extravagant spending on Toys. Demand has not outperformed in an environment with consistent deflation. Adding Retail Sales for Hobby, Toy & Game Stores and Beer, Wine & Liquor Stores illustrates the anomaly. The reason I use Alcohol as a comparison is due to its somewhat parallel relationship to the Consumer Price Index All Items Less Food and Energy.
A possible exposition could be the ingenious transformation of our society into a technology-reliant paracosm. We use rudimentary toys to keep children of a certain age distracted, after which they transition to sometimes playing complex video games on a tablet or gaming system. The distance from playing with toys that squish, squeak, jingle, or bounce transitions to arcade games played with nimble fingertips on screens is marginal to minimal compared to maybe 30 years ago when technology was not as cross-sectional with society. The rise in professional and e-sports provides a case study where visible is the demise of toys.
According to the Guinness World Records, in 2005, when Major League Gaming signed Victor De Leon III or Lil Poison to a professional contract, he became the youngest professional video gamer. In 2018, Mr. Nick Akerman of The Bleacher Report published the story of Anders Vejrgang, a Danish “FIFA Phenom,” who’s “12 but is already playing FIFA at an elite level. He even has a manager” . Fortnite led 15-year old British sensation Jaden Ashman in 2019 to become the youngest esports millionaire. Mr. Brain Lufkin for the BBC provides excellent commentary regarding the various interactions between video games and gamers in How video games turn teenagers into millionaires. The biggest takeaway from Mr. Lufkin’s piece should be the world of video games is multi-dimensional, unlike your physical toys, since video games can be monetized through different avenues.
Even though the price of Toys is low when associated with the Consumer Price Index for Toys since 2000, the demand for Toys has not been egregious. As reflected from Retail Sales, demand for toys has not matched a low price environment. Other pleasurable avenues such as video games have taken over to provide engagement in different contexts and settings. Therefore, expecting a correction in the disparity between the Consumer Price Index for Toys and the Consumer Price Index for All Items Less Food & Energy could be challenging. One thing is for sure; toys appear to be the one category where the current round of “transitory” inflation fears has not materialized. As a matter of charts, it has not materialized since the start of the 21st century.