Here is the deflation breakdown for September 2024 – in one chart

Inflation has gradually eased across the U.S. economy, and some sectors of consumer spending, such as furniture and gasoline, have even deflated over the past year.

Deflation occurs when prices for goods and services fall.

It’s rare for prices in the economy as a whole to fall from their current levels, economists said.

However, prices for many physical goods have fallen as supply and demand dynamics return to normal after the pandemic-era contortions.

“Outside of commodity prices, I don’t think we’ll see price reductions,” said Mark Zandi, chief economist at Moody’s.

“[Businesses] Prices will remain under control if demand is weak, but outright price drops are very rare, and even in a recession they are not common,” Zandi said.

In addition, energy and food commodity prices can be volatile, so it is not unusual to see up and down swings. Consumer electronics are also constantly improving in quality, a dynamic that statisticians equate with deflation, but which may only be visible on paper and not in the store.

According to the Consumer Price Index, average prices for ‘core goods’ – commodities excluding food and energy – have fallen by around 1% since September 2023.

Demand for physical goods soared in the early days of the Covid-19 pandemic. Consumers were confined to their homes and could not spend money on things like concerts, traveling or eating out. Households also had more discretionary income as they cut back on spending and received more money from federal aid.

The pandemic has also disrupted global supply chains, preventing goods from reaching shelves as quickly as consumers wanted.

Such supply-and-demand dynamics drove up prices.

Now those distortions have largely subsided and prices have fallen as a result, economists say.

For example, home furnishings prices have fallen by around 2% over the past 12 months, as have those for appliances (down 3%), tools and hardware (4%), women’s outerwear (6%) and sporting goods (2%). , according to CPI data.

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Here is the inflation breakdown for September 2024

Vehicles have also been “one of the biggest drivers of goods deflation,” said Sarah House, senior economist at Wells Fargo Economics.

Prices for new and used vehicles have fallen by 1% and 5% respectively since September 2023.

It’s normal to see some price increases, as autos saw one of the biggest spikes when inflation started to rise in 2021, House said. For example, in June 2021, used car prices were increase of 45% from a year earlier.

The US Federal Reserve also aggressively raised interest rates to combat high inflation, leading to more expensive financing costs for car buyers. That weakened demand, which also pushed prices down, economists said. The Fed began a rate cutting cycle in September.

Aside from the dynamics of supply and demand, the strength of the US dollar also matters against other global currencies has also helped keep prices for imported goods in check, economists said. This makes it cheaper for American companies to import items from abroad because the dollar can buy more.

Beyond imported goods, consumers may also see a “normalization” in food and energy prices, Zandi said. They are affected by “major fluctuations in commodity prices, the value of currencies and trade relationships,” he said.

For example, prices for regular unleaded gasoline have fallen by about 16% since September 2023, according to CPI data.

Food prices are also generally supported by their own unique supply-and-demand dynamics. Categories such as apples, potatoes, frozen vegetables and fresh fish and seafood have seen prices fall by approximately 11%, 4%, 2% and 1% respectively.

The quality of consumer electronics such as televisions, mobile phones and computers is also constantly improving, meaning consumers generally get more for the same money. The U.S. Bureau of Labor Statistics, which compiles the monthly CPI report, equates that to a price drop in inflation data.