Where prices fell in November 2023 – in one chart

However, inflation has turned negative in some sectors, such as energy. Deflation, as this dynamic is known, is the opposite of inflation: when prices fall, not when they rise.

Economists say the downturn is largely occurring in the “goods” side of the U.S. economy, or the tangible things Americans buy.

There are several reasons for this.

For one, a Strong US dollar It makes imported goods cheaper. Some of those savings are passed on to consumers, said Mark Zandi, chief economist at Moody’s Analytics.

Zandi said the strong dollar is likely contributing to the contraction in certain categories such as furniture and appliances. In addition, weak demand may be a factor: households that spent lavishly on household goods in the early days of coronavirus lockdowns are likely no longer doing so.

More broadly, the pandemic has disrupted global supply chains, causing shortages that have sent prices soaring. Energy costs rose when Russia invaded Ukraine, leading to higher transportation and other distribution costs.

Economists said supply chain disruptions are now largely in the rearview mirror. the Global Supply Chain Stress IndexFor example, it has retreated to pre-pandemic levels from historic highs at the end of 2021.

“You’ll see that inflation basically followed the same pattern” as the index, with a lag of a few months, said Lael Brainard, director of the White House National Economic Council.

Energy costs decreased. In fact, energy prices, which include categories like gasoline and electricity, fell 5.4% during the year through November, according to a World Bank report. Consumer price index.

“The inflationary effects of the pandemic and Russia’s war in Ukraine are increasingly in the rearview mirror,” Zandi said.

Lower energy costs are also contributing to deflation among some grocery items, since transportation is a major input cost to retail food prices, economists said.

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Some prices, such as airfares and eggs, are also falling after reaching record levels. For example, recent infection rates have risen largely due to a historically deadly bout of avian influenza among egg-laying hens. The prices of eggs and airline tickets fell by about 22% and 12% in the past year, according to Consumer Price Index data.

Consumers also appear to be “wiser” in their purchases as things become more expensive, an important factor in influencing companies to be more careful about how they price, Zandi said.

Commodity prices have fallen, excluding energy and food prices Six consecutive monthsAccording to consumer price index data.

“I think there is more contraction ahead as you see a stronger picture for inventory and signs that consumer demand is starting to wane,” said Sarah House, chief economist at Wells Fargo Economics.

Some of the shrinkage is due in part to measurement quirks.

For example, the US Bureau of Labor Statistics, which compiles the Consumer Price Index report, Regulations To improve quality over time. Electronic devices such as televisions, cell phones, and computers are constantly improving. Consumers get more for roughly the same amount of money, which shows up as lower prices in CPI data.

Health insurance, which falls into the “services” side of the American economy, is similar.

The BLS does not evaluate health insurance inflation based on consumer premiums. It does this indirectly by measuring insurance companies’ profits. This is because the quality of insurance varies greatly from person to person. One person’s premiums may buy high-value insurance benefits, while another person buys meager coverage.

Those differences are in quality Makes it difficult To accurately measure changes in health insurance prices.

These types of quality adjustments mean that consumers don’t necessarily see lower prices in the store, but only on paper.