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Inflation
has
throttled
back
significantly
since
peaking
two
years
ago.
The
U.S.
economy
is
even
seeing
some
prices
deflate
for
consumers.
Deflation
measures
how
quickly
prices
are
falling
for
a
consumer
good
or
service.
It’s
the
opposite
of
inflation,
which
gauges
how
quickly
prices
are
increasing.
Physical
goods
have
accounted
for
much
of
the
deflation
over
the
past
year,
according
to
economists.
This
is
happening
as
supply
and
demand
dynamics
that
were
thrown
out
of
whack
in
the
pandemic
normalize.
Commodity
prices
(excluding
those
related
to
food
and
energy)
—
so-called
“core”
goods
—
have
declined
by
1.8%,
on
average,
since
June
2023,
according
to
the
consumer
price
index,
a
key
inflation
measure.
“We
have
seen
core-goods
deflation
in
quite
a
few
categories,”
according
to
Olivia
Cross,
a
North
America
economist
at
Capital
Economics.
“It’s
quite
broad
based,”
she
added.
“I
think
that’s
something
we
expect
to
persist
for
a
little
while.”
Prices
on
gasoline
and
many
grocery
items
have
also
pulled
back.
However,
consumers
shouldn’t
expect
a
broad
and
sustained
fall
in
prices
across
the
U.S.
economy.
That
generally
doesn’t
happen
unless
there’s
a
recession,
economists
said.
Why
prices
are
deflating
for
goods
Demand
for
physical
goods
soared
in
the
early
days
of
the
Covid
pandemic
as
consumers
were
confined
to
their
homes
and
couldn’t
spend
on
things
such
as
concerts,
travel
or
dining
out.
The
health
crisis
also
snarled
global
supply
chains,
meaning
goods
weren’t
hitting
the
shelves
as
quickly
as
consumers
wanted
them.
Such
supply-and-demand
dynamics
drove
up
prices.
The
environment
has
changed,
though:
The
initial
pandemic-era
craze
of
consumers
fixing
up
their
homes
and
upgrading
their
home
offices
has
diminished,
cooling
prices.
Supply-chain
issues
have
also
largely
unwound,
economists
said.
Since
June
2023,
consumers
have
seen
prices
deflate
for
goods
like
home
furniture
for
a
living
room,
kitchen
or
dining
room
(down
by
4.9%),
appliances
(-3.6%),
toys
(-6%),
dishes
and
flatware
(-10.2%)
and
outdoor
equipment
like
grills
and
garden
supplies
(-4.3%).
More
from
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Finance:
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largely
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economists
Here’s
the
inflation
breakdown
for
June
2024
—
in
one
chart
Here’s
why
housing
inflation
is
still
stubbornly
high
Car
buyers
have
also
seen
prices
for
new
vehicles
fall
more
than
1%
and
for
used
vehicles
by
roughly
10%
over
the
past
year.
Vehicle
prices
were
among
the
first
to
surge
when
the
economy
reopened
broadly
early
in
2021,
amid
a
shortage
of
semiconductor
chips
essential
for
manufacturing.
“Vehicle
prices
remain
under
pressure
from
improved
inventory
and
elevated
financing
costs,”
Sarah
House
and
Aubrey
George,
economists
at
Wells
Fargo
Economics,
wrote
in
a
note
this
week.
(Higher
financing
costs
are
the
result
of
the
Federal
Reserve
raising
interest
rates
to
tame
inflation.)
Outside
of
supply-demand
dynamics,
the
U.S.
dollar’s
strength
relative
to
other
global
currencies
has
also
helped
rein
in
prices
for
goods,
economists
said.
This
makes
it
less
expensive
for
U.S.
companies
to
import
items
from
overseas,
since
the
dollar
can
buy
more.
Long-term
forces
like
globalization
have
also
helped,
such
as
importing
more
lower-priced
goods
from
China,
Cross
said.
However,
a
shift
toward
higher
tariffs
and
less
free
trade
could
serve
to
push
up
goods
prices
“quite
significantly,”
she
added.
Why
there’s
been
deflation
for
food,
travel,
electronics
Prices
have
also
declined
for
items
including
food,
travel
and
electronics.
Grocery
prices
have
fallen
for
items
such
as
ham,
rice,
potatoes,
coffee,
milk
and
cheese,
according
to
CPI
data.
Each
grocery
item
has
their
own
supply-and-demand
dynamics
that
can
influence
pricing,
economists
said.
For
example,
apples
prices
are
down
12%
in
the
past
year
due
to
a
supply
glut,
while
egg
prices
surged
in
2022
due
largely
to
a
historic
and
deadly
outbreak
of
bird
flu.
Gasoline
prices
have
fallen
by
2.5%
in
the
past
year.
Weaker
recent
prices
were
the
result
of
“tepid
gasoline
demand,
increasing
supply,
and
falling
oil
costs,”
according
to
AAA.
Travelers
have
seen
deflation
for
airline
fares
(prices
are
down
5.1%
annually)
amid
factors
like
an
increased
volume
of
available
seats.
Hotel
rates
are
also
down,
by
2.8%,
and
car
rental
rates
by
6.3%
since
June
2023.
watch
now
Consumers
also
appear
to
be
more
price
sensitive,
which
has
caused
retailers
to
be
a
bit
more
cautious,
economists
said.
For
example,
there
have
been
more
price
promotions
lately
at
grocery
stores,
with
a
few
“major
retailers
recently
announcing
price
cuts
that
are
likely
to
pressure
competitors’
pricing,”
wrote
House
and
George
of
Wells
Fargo.
Elsewhere,
some
deflationary
dynamics
may
be
happening
only
on
paper.
For
example,
in
the
CPI
data,
the
Bureau
of
Labor
Statistics
controls
for
quality
improvements
over
time.
Electronics
such
as
televisions,
cellphones
and
computers
continually
get
better,
meaning
consumers
generally
get
more
for
the
same
amount
of
money.
That
shows
up
as
a
price
decline
in
the
CPI
data.
