Here’s the breakdown of deflation in August 2024 – in one chart | Real Time Headlines

Inflation cools in August hit rock bottom Since February 2021, when the consumer price index began to climb during the epidemic.

This general trend in the U.S. economy—inflation is declining but remains positive—is known as “deflation.” This means that, overall, the average price of goods and services is rising, just at a slower pace.

However, there is also some “deflation”. Their inflation rate is negative, which means prices are falling.

Deflation has occurred primarily in physical goods such as cars and household appliances, although deflation also occurred in items such as gasoline and various groceries last year. consumer price index.

That said, consumers should not expect — or support — widespread and sustained declines in prices across the U.S. economy. Economists say that usually doesn’t happen unless there’s a recession.

Prices of “core” commodities (excluding food and energy-related goods) have risen Shrink about 2% on average since August 2023, according to CPI data.

From July to August 2024, the index fell by 0.2%.

Stephen Brown, deputy chief economist for North America at Capital Economics, said the dynamics of lower commodity prices are largely due to the “normalization” of pre-pandemic supply and demand trends.

In the early days of the Covid-19 pandemic, demand for physical goods soared as consumers were confined to their homes and unable to spend money at concerts, travel or dining out. Households also have increased discretionary income due to spending cuts and federal aid.

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“We’re seeing a huge shift in demand in terms of the type of spending that people are not going out as much,” said Sarah House, senior economist at Wells Fargo Economics.

health crisis also Chaotic global supply chainsmeaning products aren’t getting to shelves as quickly as consumers would like.

This supply and demand dynamic drives up prices.

However, economists say these economic distortions have largely eased, and prices have fallen.

When the economy fully reopened in early 2021, car prices were among the first to surge. Semiconductor chip shortage Crucial for manufacturing.

House said the recent decline in vehicle prices was largely due to “greater improvement in inventory conditions across the automotive spectrum.” higher financing cost Consumer demand also fell, economists said.

In addition to supply and demand dynamics, the strength of the U.S. dollar relative to Economists said other global currencies also helped keep commodity prices in check. This makes it cheaper for U.S. companies to import goods from overseas as the dollar weakens Can buy more.

Economists say long-term forces such as globalization are also helping, increasing imports of more low-priced goods from China.

Airline fares fell about 1% last year, according to Consumer Price Index (CPI) data.

Capital Economics’ Brown explained that the decline was partly due to lower jet fuel prices.

average jet fuel price dropped According to data from the International Air Transport Association, this is an increase of approximately 21% from last year.

Prices of groceries such as apples, potatoes, ham, coffee, rice, seafood and bananas fell, according to Consumer Price Index (CPI) data. Economists say each grocery item has its own supply and demand dynamics that affect pricing.

Other categories of deflationary dynamics may only occur on paper.

For example, in the CPI data, the U.S. Bureau of Labor Statistics control Quality continues to improve over time. Electronics like TVs, cell phones, and computers continue to get better, which means consumers are often getting more for the same money.

This appears as price drop in CPI data.