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Online Prices Drop for First Time in Two Years

By:
Ruth Singleton
Published Date:
Aug 9, 2022

Online Shopping e-commerce cart digital

Online prices dropped by 1 percent in July over the previous July, ending a two-year-long streak of inflation, according to a report issued by Adobe on Tuesday, An Adobe press release reported that electronics, apparel and toys drove down prices, while food costs remained high. 

The press release noted that July is the first month in which e-commerce entered deflation, after 25 consecutive months of persistent inflation. The drop in prices follows an 0.3 percent year-over-year increase in June and a 2 percent increase in May. 

According to CNN Business, these figures signal a potential easing of the pricing pressures that have affected consumers and raised fears of a recession. Yet it may take a while before inflation gets near normal levels. Also, while waning inflation would be a positive development, the factors behind the dropping online prices may not be great news, CNN noted. CNN pointed to a combination of "wavering consumer confidence and a pullback in spending" as well as oversupply by some retailers.

Adobe listed the following notable categories in its Digital Price Index for July: 

 Electronics: Prices were down by 9.3 percent year over year and by 2 percent month over month, bringing them back to pre-pandemic levels, when electronic prices fell by 9.1 percent year over year, on average, between 2015 and 2019. As the biggest category in e-commerce by share of consumer spending, price movements in electronics have an outsized impact on overall inflation online.  

 Apparel: Prices were down by 1 percent year over year and by 6.3 percent month over month. The 1 percent year-over-year drop is the first  notable decrease for the category, as prices fell by only 0.1 percent in June. It comes after 14 consecutive months of rising prices.  

 Toys: Prices were down by 8.2 percent year over year and by 2.9 percent month over month, the largest year-over-year drop for the category since December 2019, when prices were down by 10 percent during the holiday shopping season. This is the 16th consecutive month of deflation for the category, after prices had risen by 0.2 percent year over year in March 2021.  

 Groceries: Prices continued to rise, increasing by 13.4 percent year over year and by 1.4 percent month over month, more than any other category. The latest increase sets a new year-over-year record, following a 12.4 percent increase in June, a 11.7 percent  increase in May and a 10.3 percent increase in April—all previous record highs. Grocery prices have risen for 30 consecutive months, and the category remains the only one to move in lockstep with the Consumer Price Index on a long-term basis.  

 Pet Products: Prices were up 12.6 percent year over year and by 1.7 percent month over month, a record year-over-year high for the category. Online inflation for pet products has continued for 27 consecutive months, as pet ownership surged during the COVID-19 pandemic, and demand for related goods remains high.  

Adobe models the Digital Price Index on the Consumer Price Index (CPI), published by the U.S. Bureau of Labor Statistics. It uses the Fisher Price Index to track online prices. The Fisher Price Index uses quantities of matched products purchased in the current period (month) and a previous period (previous month) to calculate the price changes by category. Adobe’s analysis is weighted by the real quantities of the products purchased in the two adjacent months. 

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