In October 2024, deflation trends have been observed in the U.S. economy, particularly in the prices of physical goods. While deflation is not a common occurrence, the past year has seen a decline in prices for various items such as new cars, appliances, sporting goods, consumer electronics, and certain apparel.
The decrease in prices can be attributed to the normalization of supply chains and the relative strength of the U.S. dollar against global currencies, making imports cheaper. According to the consumer price index (CPI), prices for physical goods have decreased by 1% since October 2023, excluding volatile food and energy commodities.
Specific categories that have experienced deflation include appliances (2% cheaper), clocks, lamps, and decorative items (3% cheaper), dishes and flatware (7% cheaper), women’s outerwear (6% cheaper), children’s apparel (1% cheaper), toys (3% cheaper), pet products (1% cheaper), and new cars (2% cheaper). While some categories like furniture, bedding, men’s clothing, cosmetics, and used cars and trucks have seen price declines, they have shown signs of rebounding in recent months.
Energy prices have also seen significant declines, with gasoline prices dropping over 12% in the past year. This decrease in prices is reflected in consumer expenses, with the average price at the pump being $3.05 per gallon. Additionally, other energy commodities derived from oil, such as fuel oil, have experienced price reductions of over 20%, which could lead to lower prices in related sectors like airfare.
Food prices have been influenced by unique supply-and-demand dynamics, with items like bacon, turkey, and snacks being approximately 4% cheaper than a year ago. Lower energy prices can also alleviate pressure on food prices, as transportation and distribution costs decrease.
Consumer electronics have witnessed notable price declines, with computers, video equipment, and smartphones being 5%, 10%, and 9% cheaper, respectively, compared to last year. However, consumers may not directly benefit from these lower prices due to quality improvements that are considered price declines by the Bureau of Labor Statistics. This phenomenon can create an illusion of falling prices on paper, even if the actual prices in stores do not reflect the decline.
