Inflation Surge: Consumer Appliances

May 2022

Inflationary pressures have been present in the appliances industry since late 2020. Production capacity challenges include labour shortages, persistent semiconductor shortages and elevated commodity prices. In 2022, inflationary pressures will come from a new front, with reductions in production expected to result from lockdowns in China. In the long run, inflation in the appliances market could prove to be persistent.

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This report comes in PPT.

Key findings

Inflation in appliances might be persistent

Historical findings have shown that inflation in appliances is sticky. Evidence in the US market shows that previous price increases during inflationary periods are not reversed completely once inflation reduces. A minimum increase of 20-30% usually remains for major appliances; however, it should be noted that this was before the period of hyper-efficient globalised supply chains, which have tended to dampen inflation.

Higher input costs and shortages to continue into 2023

High prices of commodities will continue to drive inflation well into 2023. Another significant driver of inflation will continue to be the semiconductor shortage, which has led to companies focusing on higher margin products. This shortage has been exacerbated by a shortage of gases used for chip manufacturing, such as argon and xenon, because of the war in Ukraine. The chip shortage is expected to last until 2024.

Redesign of appliances

High prices of commodities have led to companies redesigning some of their products. Copper accounts for 20-30% of inputs costs for air conditioners, and high copper prices have led to companies such as Daikin replacing copper with aluminium in their products. Engineering plastics from DuPont could also prove suitable replacements for expensive metal alloys.

E-commerce companies may help reduce inflation

E-commerce companies have played a role in negating inflation in many industries. In 2021, both JD and Tmall, in partnership with major appliance brands, conducted campaigns with promises of CNY10 billion in rebates. Similar campaigns globally may prove to be one of the few deflationary factors in the current environment.

Key findings
The many layers of global inflation
Industry impact: Rising commodity, labour and logistics costs
Deconstructing inflation drivers for the consumer appliances industry
Consumer appliances inflation: Contributory factors
Company impact
Inflation has affected lower priced items more than the rest
Whirlpool: A balancing act between price increases and demand erosion
Daikin: Adapting to high copper prices
E-commerce: A deflationary force in the Chinese appliance market
How much pricing power do appliance companies have in an inflationary environment?
Conclusion: Consumer impact
Slower economic growth and substantial inflation increases amid rising uncertainty
Supply chain problems and rising energy prices drive producer price growth
Real GDP annual growth forecasts and revisions from last quarter
About consumer appliances quarterly forecast updates
Consumer appliances: Reporting timeline

Consumer Appliances

Consumer Appliances is the aggregation of major appliances and small appliances. Major appliances are an aggregate of the following categories: refrigeration appliances, home laundry appliances, dishwashers, large cooking appliances and microwaves. Small appliances are an aggregation of the following categories: food preparation appliances, small cooking appliances, vacuum cleaners, irons, personal care appliances, heating appliances and air treatment appliances.

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