If computers were like cars

Imagine this situation. You are cruising along at 65mph when your brakes freeze and your engine stalls. You reach for your mobile and, assuming you have a signal, dial General Motors technical support, only to be told to reboot your car.

Fortunately, cars work well. If you ever need service, that is customer service, from one of the newer high-tech industries, you might as well just throw the damned product out.

Each time the consumer price index comes out, I am struck by the disconnect between reported inflation (low) and my experience of inflation (not so low), manifested by the degradation of services.

The trend in goods prices, which have been falling for a year, may be changing. Excluding volatile food and energy prices, core commodities prices rose 0.3% on a three-month annualised basis in September and October. With services prices, which make up 59% of the CPI, accelerating at a 3.5% pace (with and without food and energy) and commodity price changes flattening out, the deflation case may be losing its one standing leg.

'There is evidence that the softer dollar has eased the downward pressure on some goods prices, especially apparel prices, which have not fallen since July,' says Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla, New York.

In the past three months, apparel prices rose 4.7% annualised, matching the increase in medical care, one of the usual CPI offenders.

The discrepancy between goods and services prices is even more glaring when one considers the quality adjustment made for the former. The Bureau of Labor Statistics (BLS) determines how much of the price change is improved quality ' you pay more for a car but get more car for the money. It makes no equivalent adjustment for services.

The BLS said the retail value of quality changes for a sample of 2003 domestic light trucks was 39.9% of the average $583 increase in the manufacturers' suggested list price. In other words, an average $233 price increase on 2003 light trucks would show up as no change in that component of the CPI.

Airfares are 5.1% lower than a year ago, according to the BLS. Since the service provided is, say, 10%-15% worse, long check-in lines, delayed flights, skimpy meals, adjusted airfare prices should be up, not down.

On that score, I marvelled at the report that consumer satisfaction rose in the third quarter and has been rising ever so slightly all year. I don't know any consumer who is more satisfied about anything except a complete refund. I have three Kyocera phones from Sprint PCS at home (two are awaiting a bubble-wrap kit for return) and a new Dell laptop that, after two hours of dithering on my own and three with various Dell technicians, I am sending back.

How can consumers be satisfied with these presumably productivity-enhancing devices when they don't work well enough to enhance productivity? Everyone has similar stories, so what could the consumer possibly be satisfied about?

Lower prices, according to Claes Fornell, director of the National Quality Research Center at the University of Michigan's Business School, which helps produce the quarterly American Customer Satisfaction Index.

Am I weird? If I get $200 off the price of a computer and spend five hours in a high-anxiety state either on hold or in conversation with a representative, waste a couple of evenings and am so stressed I perform poorly at work, the attraction of the discount fades.

Bloomberg newsroom, New York

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