Equipment prices! Will they stop going up?

[vlaiv]

@Shimrod

Maybe it seems that bringing economics to this discussion is going off topic -  but I don't think so.

It serves a purpose to better understand original question - will prices of astro gear continue to go up or will they stop?

First thing to understand is that they are in fact not going up.

They still cost the same - it is value of everyone's work denominated in euro, pound and dollar that is decreasing.

You are getting payed less for your work thanks to monetary policy (good or bad - I personally think it is incompetent). It might seem as if prices are going up - but what is really happening is that value of your work is going down so that you can get more competitive against low cost labor of China. That was the point of quantitative easing.

This is exchange rate.

Say that something costed 1000 CNY back in May 2020 - you needed to spend 1000 / 8.3 = 120 euro on that

Imagine for a moment that now in May of 2022 this thing still costs 1000 CNY in china to produce. How much will you have to pay for it? 1000 / 7.1 = 140 euro

That is almost 20% increase in price - but in reality, for someone in china - price did not change.

Euro is now worth less (as there is much more of it in the economy - but actual amount goods and services did not increase at same rate) and if you receive your salary in euros and it stayed fixed - you are now working for less value - your labor is valued less (to be more competitive on global market).

Question is - how much more devalued work needs to be to settle things down. We have seen that amount of money increased by 100% in last couple of years (almost doubled) - but I don't think that economic growth was more than few percent. There is still "room" for prices to rise even if we don't hit inflationary spiral.

We hear a lot of possibility of stagflation hitting and I think it is very plausible that it will happen.

Before it all ends, in my view, EQ6R mount could easily hit $3000+ mark and more.

 

[Elp]

Part of it is also driven by supply and demand, if there was more available it would usually be cheaper (see how oil production is controlled) but I don't think that really applies to a niche area such as hobbyist astronomy. Reliance on LCC sources has had some contribution, look at how the micro chip reliance has affected supply of electronics so much it has driven Intel to invest massively in US manufacture to stop over reliance on the far East. If production were controlled more locally prices could be more stabilised, but with anything in manufacturing there is some sort of reliance on external sources be it energy, oil derived products, raw materials etc. The point about keeping to a specific profit margin is sound, in manufacturing during times of inflated costs  this is expected to be achieved by internal management of processes to become more efficient. Some companies absorb increase in costs but there's a limit, eventually it would have to be passed onto the consumer.

[Shimrod]

3 hours ago, vlaiv said:

Maybe it seems that bringing economics to this discussion is going off topic -  but I don't think so.

It serves a purpose to better understand original question - will prices of astro gear continue to go up or will they stop?

First thing to understand is that they are in fact not going up.

They still cost the same - it is value of everyone's work denominated in euro, pound and dollar that is decreasing.

You are getting payed less for your work thanks to monetary policy (good or bad - I personally think it is incompetent). It might seem as if prices are going up - but what is really happening is that value of your work is going down so that you can get more competitive against low cost labor of China. That was the point of quantitative easing.

 

 

Quantitative easing was introduced to increase the money supply and improve liquidity in the credit markets once the central banks could not drop interest rates any further. In the UK this occurred after the the Bank of England had dropped interest rates to 0.5% in March 2009. It had, and has nothing to do with currency exchange rates or being competitive with another country. It has distorted the bonds market, and it will be an interesting experiment to see how it all gets unpicked in the future.

3 hours ago, vlaiv said:

Say that something costed 1000 CNY back in May 2020 - you needed to spend 1000 / 8.3 = 120 euro on that

Imagine for a moment that now in May of 2022 this thing still costs 1000 CNY in china to produce. How much will you have to pay for it? 1000 / 7.1 = 140 euro

That is almost 20% increase in price - but in reality, for someone in china - price did not change.

Euro is now worth less (as there is much more of it in the economy - but actual amount goods and services did not increase at same rate) and if you receive your salary in euros and it stayed fixed - you are now working for less value - your labor is valued less (to be more competitive on global market).

Question is - how much more devalued work needs to be to settle things down. We have seen that amount of money increased by 100% in last couple of years (almost doubled) - but I don't think that economic growth was more than few percent. There is still "room" for prices to rise even if we don't hit inflationary spiral.

We hear a lot of possibility of stagflation hitting and I think it is very plausible that it will happen.

Before it all ends, in my view, EQ6R mount could easily hit $3000+ mark and more.

 

Currency fluctuations have always caused price changes but it does not mean your labour is valued less. In your example, if you only buy goods produced in your own country then the value of your labour is unchanged.

Inflationary pressures that will apply to astronomy goods include wage and fuel inflation in the western world and transport costs. This latter cost I expect to resolve over the next twelve months or so unless we continue to see lockdowns in China - otherwise the world is very much learning to live with Covid.  There is also wage inflation in China - there is already a very large, relatively wealthy middle class - as other wages get pulled up the cost of goods production will increase. With this I would expect to see a mix of price increases for industries that are difficult to relocate, for others the production lines will probably move to lower wage countries elsewhere in Asia.

I expect some further price rises, a period of stability and then prices gradually dropping again as supply chain pressures ease. Let's check back in a couple of years and see what happened!

Edited May 9, 2022 by Shimrod

[Elp]

Indeed, but if the past is anything to go by, if they can get consumers to buy at an existing price, what incentive do they have to offer a price reduction other than to shift stock? A bit strange with astro stuff as some of the things I've had for years haven't really changed in price at RRP, it's the other stuff which people rely on where there's more difference.

Edited May 9, 2022 by Elp

[VNA]

The cost of energy has gone through the roof, so manufacturing, transportation, etc. goes up accordingly. Add unbalanced supply and demand, and so many other factors.

[v4cascade]

Good thing your other hobby isn't firearms. Prices on those 2x even 3x since covid and has only slightly came down in the past few months. 

[vlaiv]

Trend seems to continue ...

 

[StarryEyed]

Look on the bright side. We can all start grinding flats for our next scope start some carpentry classes. 

[scotty38]

Yep Esprit 100 now £1899, pretty sure early last year it was sat around £1350 if memory serves me correctly when I went for the less expensive GT81 instead which is still at the same sort of price...... If only I'd known as I've considered upgrading a couple of times 🙂

[tooth_dr]

I was thinking about purchasing a mono ZWO2600, didnt realise they were now not far off £3k 🙄

[Ouroboros]

I do sometimes wonder how much “expectation inflation” plays a role. Consumers are told there’s inflation.  They expect to pay more, so they do just that.  Less than scrupulous suppliers might take advantage of that. 

[Shimrod]

1 hour ago, Ouroboros said:

I do sometimes wonder how much “expectation inflation” plays a role. Consumers are told there’s inflation.  They expect to pay more, so they do just that.  Less than scrupulous suppliers might take advantage of that. 

In the case of the UK, given most goods from China are pricing in dollars, around 26% of the price increase is down to the weaker £. Add in increased shipping costs and it's not too difficult to see where the price rises have come from. In a period of high inflation, you might expect more people to be buying sooner rather than later to avoid further price increases.

[Ouroboros]

It’s to be expected in times of inflation that people may decide to buy now because they expect costs to be 10% or whatever higher in a year’s time.  That behaviour may in itself produce upward pressure on prices.

Secondly there will be suppliers, I’m thinking more widely than suppliers of astronomy kit, who are sitting on goods they bought when it was cheaper who can now put it on sale at the higher market price.