Here’s the deflation breakdown for May 2024 — in one chart

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Here’s the deflation breakdown for May 2024 — in one chart

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Consumers saw prices for some goods and services deflate in May, amid a backdrop of broadly easing inflationary pressures.

Whereas inflation is a measure of how quickly consumer prices are rising, deflation is the opposite: It gauges how quickly they’re declining.

There are currently some “micro pockets” of deflation in the U.S. economy, said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank.

In these pockets, there was an “extreme disconnect” between supply and demand during the Covid-19 pandemic that sent prices soaring, Seydl said. Prices are now normalizing as those dynamics unwind, he said.

However, Americans shouldn’t expect deflation across the broad U.S. economy, economists said.

“Consumers would love to have the prices they had back in 2019,” Seydl said. “But we very likely won’t see that, unless we have a major recession.”

Why prices are deflating for goods

Consumers have largely seen prices deflate for physical goods, such as cars, furniture and appliances, economists said.

For example, households have seen prices for furniture and bedding fall by 3.7% since May 2023, according to the consumer price index. Those for laundry equipment, dishes and flatware, and outdoor equipment and supplies are down 8.8%, 8.1% and 5%, respectively.

Prices have also fallen for new cars by 1.4% in the past year, while those for used cars and trucks decreased 9.3%. Vehicle prices were among the first to surge when the economy reopened broadly early in 2021, amid a

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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.

“A lot of that funding found itself in new cars and home renovations,” said Michael Pugliese, a senior economist at Wells Fargo Economics.

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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.

Now, however, they’ve fallen back to earth. 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.

Overall physical goods prices, excluding food and energy commodities, have

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in all but one month since May 2023, for example, according to Bureau of Labor Statistics data. Goods prices are down 1.7% over the past year.

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.

The Nominal Broad U.S. Dollar Index is higher than at any pre-pandemic point dating to at least 2006, according to Federal Reserve

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. The index gauges the dollar’s appreciation relative to currencies of the nation’s main trading partners such as the euro, the ********* dollar and the ********* yen.

Deflation for groceries, travel and electronics

Prices have also declined in the past year for some non-goods items.

For example, grocery prices have fallen for items such as ham, rice, fresh fish and seafood, milk, potatoes, coffee, margarine and cheese. Notably, consumers have seen

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13.2% in the past year amid burgeoning supply.

Each grocery item has unique supply-and-demand dynamics that can influence pricing, economists said. Egg prices, for example, spiked in 2022 due largely to a historic and deadly outbreak of bird flu and have since fallen.

Travelers have also seen deflation for airline fares, down 5.9%, hotel rates, down 1.7%, and car rental rates, down 8.8%, since May 2023. For example, airlines have increased the volume of available seats for travelers by flying larger planes on domestic routes, which has

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, Hayley Berg, lead economist at travel site Hopper, wrote recently.

Additionally, evidence suggests “consumers are becoming a bit more price sensitive,” said Olivia Cross, a North America economist at Capital Economics.

That behavior is a gut check for retailers, who may find they need to offer more competitive prices to attract customers, she said.

Elsewhere, some deflationary dynamics may be happening only on paper.

For example, in the CPI data, the Bureau of Labor Statistics

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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.

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Consumer prices,Personal finance,Breaking News: Economy,Economy,U.S. Economy,Inflation,Deflation,business news
#Heres #deflation #breakdown #chart

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