From CNBC: 2024-07-12 13:05:36

Inflation has significantly decreased since its peak two years ago, with some prices deflating for consumers. Deflation, the opposite of inflation, measures the rate at which prices of consumer goods or services are falling. Physical goods have seen deflation as pandemic-related supply and demand imbalances normalize.

Core commodity prices have declined by 1.8% on average since June 2023, according to the consumer price index. Economists note broad-based deflation in various categories, including gasoline, groceries, home furniture, appliances, toys, and outdoor equipment. Vehicle prices have also dropped, with new vehicles falling about 1% and used vehicles by roughly 10% over the past year.

Supply and demand dynamics that drove up prices during the pandemic have shifted, leading to deflation for goods like home furniture, appliances, toys, and outdoor equipment. Factors such as decreased demand for physical goods and resolved supply-chain issues have contributed to falling prices. Additionally, the strength of the U.S. dollar relative to global currencies has helped rein in prices for imported goods.

Prices for items such as food, travel, and electronics have also experienced deflation. Grocery prices, including items like ham, rice, and potatoes, have fallen, as have gasoline prices. Travelers have seen lower airline fares, hotel rates, and car rental rates due to factors like increased seat availability. Retailers are being cautious as consumers appear to be more price-sensitive, leading to price promotions.

Electronic items like televisions, cellphones, and computers see price declines in the CPI data due to quality improvements over time. Consumers generally receive more value for the same amount of money, leading to apparent deflation in the electronics sector. However, factors such as increased tariffs and less free trade could drive up prices for goods significantly.

Read more: Here’s the deflation breakdown for June 2024 — in one chart