Encouraging inflation news: Online prices keep dropping

By Matt Egan

In a positive sign for inflation-weary consumers, online prices dropped in December as retailers resorted to deep discounts to lure shoppers, according to a Tuesday report from Adobe Analytics.

Adobe said e-commerce prices were 1.6% lower than the year before, marking the fourth consecutive month of annual price declines.

For many years, online prices did nothing but fall as e-commerce was immune to inflationary pressures. That changed following the start of the Covid-19 pandemic as strong demand and supply chain trouble lifted online prices.

Vivek Pandya, lead analyst at Adobe Digital Insights, told CNN the return of falling prices is a big positive for consumers.

“When online prices began dropping over the summer, our thinking was that one month could be a fluke, but two months could be a trend,” Pandya said. “Now that we’re in a fourth consecutive month of online deflation, with price increases cooling even in non-promotional categories, it is an encouraging sign for consumers worried about high inflation.”

The report comes as government statistics show inflation continues to cool off. The Bureau of Labor Statistics is expected to say on Thursday that consumer prices increased by 6.5% year over year in December, marking the sixth straight month of easing inflation.

Holiday season promotions helped drive down prices in December. The categories experiencing the biggest annual price drops include computers (-16.2% year over year), electronics (-12%), toys (-7.1%) and sporting goods (-5.9%), Adobe said.

“Retailers, who were either dealing with excess inventory or contending with a softening spending environment, embraced big discounts this year to drive volume,” Pandya said.

Prices are still rising year over year in products that typically lack heavy discounts, including personal care (+1.6%) and medical equipment (+4.1%).

Grocery prices jumped 13.5% year over year in December, although that is the third straight month of easing inflation in that category after it hit a record high of 14.3% in September.

Although online prices fell on an annual basis, Adobe said they increased by 1.1% between November and December.

Pandya said this month-over-month increase was driven by the fact that many retailers offered record-setting discounts in November around Black Friday and Cyber Monday, deals that were eventually unwound.

“It would’ve been unusual if prices did not increase month over month,” he said.

Asked if online prices are getting back to their normal pre-Covid trends, Pandya said prices for some categories like groceries and apparel remain hot, while others such as electronics are experiencing consistent price drops.

“We’re not out of the woods yet, but it is trending towards that direction,” he said.

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