The world of online shopping was inflation proof for a long time until Covid-19 turned everything upside down.
E-commerce prices began to rise in June 2020, kicking off an unprecedented 25-month streak of increases that underscored the severe pricing pressures hitting the U.S. economy.
This sequence is finally over. Online prices fell 1% year over year in July, ending a nearly two-year streak of persistent inflation, according to a Tuesday report from Adobe.
The change is even more pronounced month over month where online prices fell 2% in July, Adobe said.
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The results bode well for the inflation crisis, signaling a potential easing of price pressures that have weighed on consumers and raised fears of recession.
Of course, it may take a considerable amount of time for inflation to return to normal levels, and Adobe noted that online grocery prices continue to rise.
Inflation remains far too high across the US economy.
Consumer prices jumped 9.1% year-on-year in June, the biggest increase in more than 40 years. A new report due out on Wednesday is expected to show inflation easing in July, although it remained uncomfortably high at 8.7%.
While slowing inflation is a positive development, the factors driving the online price change may not be good news. Adobe pointed to a combination of “shaky consumer confidence and falling spending” as well as oversupply from some retailers.
Walmart, Target and Best Buy have all recently warned of an inventory glut that is eating away at profits and driving down prices.
Online deflation was driven by a 9.3% year-over-year drop in prices for electronics, Adobe said, the area where consumers spend the most.
Beyond electronics, online prices for toys fell sharply by 8.2% in July, the most since late 2019, according to Adobe.
Online clothing prices rose for 14 straight months until June, when they fell 0.1% year-over-year, Adobe said. This deflationary shift continued into July, with online clothing prices falling 1% year-over-year and 6.3% month-over-month.
Walmart in particular has called apparel an area where the retail leader is forced to cut inventory.
Although deflation returned to online shopping overall, Adobe found that online prices were moving in the wrong direction in a few key categories.
Online grocery prices jumped 13.4% year-over-year in July, marking a new record high, according to the report. This is an acceleration from previous records of 10.3% in April and 11.7% in May.
Similarly, Adobe said online pet product prices jumped 12.6% year-over-year, marking a record high and the 27th consecutive month of price increases.
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