As inflation has throttled back from pandemic-era highs, consumers have seen prices decline outright for many household items.
This dynamic, known as deflation, generally doesn’t occur on a broad, sustained scale in the U.S. economy: With limited exceptions, businesses are generally loath to lower prices once they’ve increased, economists said.
But prices in some pockets of the economy, largely for physical goods — from new cars to appliances, sporting goods, consumer electronics and certain apparel — have deflated over the past year, according to the consumer price index.
“We are seeing [deflation] to some extent,” said Stephen Brown, deputy chief North America economist at Capital Economics.
Largely, prices have pulled back as pandemic-era contortions in supply-and-demand dynamics unwind, economists said. The U.S. dollar has also been relatively strong against major global currencies, making it cheaper to import goods from overseas.
But supply chains have “normalized” and deflation has “moderated to a pretty significant degree” as a result, said Mark Zandi, chief economist at Moody’s.
Where there has been deflation
Prices among all physical goods are down 1% since October 2023, according to CPI data. This figure is for “core” goods, a measure that strips out volatile food and energy commodities, the prices of which can be volatile.
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Appliances were roughly 2% cheaper in October than they were a year ago, for example, according to the CPI.
Annual prices have also declined for clocks, lamps and decorative items, down about 3%; dishes and flatware, down 7%; women’s outerwear, down 6%; children’s apparel, down 1%; toys, down 3%; pet products, down 1%; and new cars, down 2%.
Prices for some categories — such as furniture and bedding, men’s clothing, cosmetics, and used cars and trucks — are down from October 2023, but they’ve rebounded somewhat in recent months, according to CPI data.
That said, used cars and trucks should see a resumption of deflation since “wholesale prices have fallen recently, and supply and demand continues to improve in the sector,” Bank of America economists wrote Monday in a research note.
Energy prices and electronics
Gasoline prices are also “way down,” Zandi said.
They’ve declined more than 12% in the past year, according to CPI data. Drivers paid $3.05 a gallon, on average, at the pump as of Nov. 11, according to the U.S. Energy Information Administration.
Consumers “could get more relief there because global oil prices are soft,” Zandi said.
That softness may be in anticipation of President-elect Donald Trump’s proposed policies around China, said Zandi. Those may include tariffs of at least 60% on goods imported from China, a nation with a huge appetite for oil. If Trump’s policies were to negatively affect the Chinese economy, they’d also likely dampen China’s oil demand.
Other energy commodities refined from oil have also seen huge price declines. Fuel oil prices, for example, are down over 20% in the past year, a trend that should contribute to lower prices elsewhere, such as for airfare, economists said.
Food prices are also generally underpinned by their own unique supply-and-demand dynamics, economists said. Bacon, turkey and snacks are about 4% cheaper than they were a year ago, for example.
Lower energy prices can also take pressure off food prices, as it costs less to transport and distribute food to grocery store shelves.
Consumer electronics have also seen big price declines: Computers, video equipment and smartphones are respectively 5%, 10% and 9% cheaper than they were a year ago, according to CPI data.
But consumers might not experience those lower prices at the store. They may exist only on paper.
That’s due to how the Bureau of Labor Statistics measures inflation for certain consumer goods, such as electronics, economists said.
Technology continually improves, meaning consumers get more for their money. The bureau treats those quality improvements as a price decline, giving the illusion of falling prices on paper.