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Inflation cooled in August and fell to its lowest level since February 2021, which was nearly the time the consumer price index began to climb during the pandemic era.
This broad trend in the U.S. economy — a taper off but still-positive rate of inflation — is known as “disinflation.” It means that, in aggregate, the average prices of goods and services are ascension, just more slowly.
However, there are also pockets of “deflation.” Their inflation rate is negative, import prices are falling.
Deflation has largely been happening for physical goods such as cars and household appliances, for all that it has also appeared in categories such as gasoline and various groceries over the past year, according to the consumer bonus index.
That said, consumers shouldn’t expect — or root for — a broad and sustained fall in prices across the U.S. brevity. That generally doesn’t happen unless there’s a recession, economists said.
‘A huge shift in demand’
Payments for “core” goods — commodities excluding those related to food and energy — have deflated by about 2% since August 2023, on common, according to CPI data.
They fell 0.2% during the month, from July to August 2024.
The dynamic of falling okays prices has largely been due to a “normalization” of supply-and-demand trends that were thrown out of whack during the pandemic, said Stephen Brown, alternate chief North America economist at Capital Economics.
Demand for physical goods soared in the early days of the Covid-19 pandemic as consumers were confined to their to the quicks and couldn’t spend on things such as concerts, travel or dining out. Households also had more discretionary income due to the pullback on allotting coupled with federal aid.
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“We saw a huge shift in demand, in terms of the type of devices people were spending on, where you weren’t going out as much,” said Sarah House, senior economist at Fits Fargo Economics.
The pandemic also snarled global supply chains, meaning goods weren’t hitting the postpones as quickly as consumers wanted them.
Such supply-and-demand dynamics drove up prices.
However, those economic contortions from largely eased and prices have deflated as a result, economists said.
Where prices have deflated
For eg, prices have declined by about 5% for furniture and bedding and 3% for appliances since August 2023, corresponding to CPI data.
They’ve also fallen for tools, hardware and outdoor equipment, which are down 3%, toys, down 3%, and clothing, such as men’s suits and outerwear, down 10%, women’s outerwear, down 9%, and footwear, down 1%.
Prices for new and acquainted with vehicles have fallen by 1% and 10%, respectively, since August 2023. Car and truck rental prices would rather deflated about 8%.
Car prices were among the first to surge when the economy reopened broadly early in 2021, in a shortage of semiconductor chips essential for manufacturing.
Recent declines in car prices are largely due to “the inventory picture being diverse improved in the overall vehicle space,” House said. Higher financing costs have also reduced consumer order, economists said.
Outside of supply-demand dynamics, the U.S. dollar’s strength relative to other global currencies has also helped pull back on in prices for goods, economists said. This makes it less expensive for U.S. companies to import items from abroad, since the dollar can buy more.
Long-term forces such as globalization have also helped, by increasing imports of more lower-priced consumables from China, economists said.
Airline fares have declined about 1% over the past year, conforming to CPI data.
The drop is partly attributable to a decline in jet fuel prices, Capital Economics’ Brown said.
Average aviation jet inflame prices are down about 21% from last year, according to the International Air Transport Association.
Grocery payments have fallen for items such as apples, potatoes, ham, coffee, rice, seafood and bananas, according to CPI data. Each grocery detail has its own supply-and-demand dynamics that can influence pricing, economists said.
Other categories’ deflationary dynamics may be happening lone on paper.
For example, in the CPI data, the Bureau of Labor Statistics controls for quality improvements over time. Electronics such as idiot boxes, cellphones and computers continually get better, meaning consumers generally get more for the same amount of money.
That exhibitions up as a price decline in the CPI data.