Inflation is hitting a sector that has historically been untouched by it, because supply chain disruptions are so bad.
In fact, the supply disruptions have seriously disrupted Moore's Law, according to Nicholas Colas, DataTrek Co-Founder Nicholas Colas, who pointed out that computers are now 8% more expensive than a year ago, the first time tech hardware has ever contributed to inflation. Moore's Law is a rule based on a prediction by Gordon Moore in 1965, which predicts that the number of transistors on a chip doubles every two years. Their production costs decrease as technology products get better, faster, and more powerful over time.
The Consumer Price Index, which measures the average change in prices over time for a set basket of goods and services, factored Moore's Law into its equation because of the advances seen to benefit consumers who experience relatively lower prices.
Technology products have had a deflation effect on the U.S. price levels and haven't experienced inflation as much over the years on the CPI due to a quirk in how their price increases are calculated, according to Colas.
Colas said that the government regularly performs a hedonic adjustment on tech products to account for increasing utility since one gets better chips and products for the same money.
The adjustment doesn't make sense to the layperson, Colas flagged.
The CPI calculation says that a computer is 69 percent less expensive now than it was in 2006, and laptops and computers are expensive because of hedonic adjustment.
The latest product is much better than the 2006 version, but is 69 percent better? Reasonable people can differ on the answer, Colas said.
Inflation is now cutting across sectors in America and even tech hardware has become inflationary, as seen in the chart below.
Colas said consumer Tech hardware is contributing to inflation after 14 years of acting as a drag on aggregate price levels.
He said that seeing computer prices rise like this despite being adjusted for utility purposes is a concern.
Moore's Law has met its match for the moment in the form of supply chain constraints, at least when it comes to computing power per dollar, he added.
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