Inflation cools to 6.5% in December, discounts drive ecommerce prices

​Consumer Price Index: Comedown continues

The federal government's most closely-watched inflation gauge pointed downward in December.

Prices across the U.S. economy fell 0.1% on a monthly basis, according to the Consumer Price Index. On an annual basis, the inflation rate cooled to 6.5%, which is down from 7.1% in November. The annual rate marked the lowest increase since October 2021, when inflation began its upward march in earnest amid supply chain chaos.

A decrease in gas prices was “by far” the biggest contributor to the monthly decrease, per the CPI report. On an annual basis, the increases in food and energy were below totals recorded for November.

Food inflation continues to be volatile. Even as the overall rate of monthly food inflation slowed to 0.3% in December from 0.5% in November, three of the primary categories showed increases. Egg prices increased 11.1% for the month. The food at home index, which measures groceries, continues to run well ahead of the overall inflation rate at 11.8% year-over-year, with cereals and bakery rising 16.1%.

Core inflation, which leaves out volatile food and energy prices, rose 5.7% on an annual basis, also below November’s reading. On a monthly basis, the core inflation rate of 0.3% was slightly above the 0.2% increase in November. Increases in shelter prices continued to drive this number up. Among consumer categories, increases in apparel and household furnishings were also among the key drivers, while personal care prices decreased slightly for the month.

Is three a trend? The slowdown in price increases began in October, and continued throughout the final three months of the year. This came after the Federal Reserve aggressively rose interest rates to combat inflation for much of 2022. As we begin 2023, prices are still high, though they are falling. Interest rates are still high, and the Fed intends to keep them there. The effects of both of these forces will continue to filter out across the economy, and weigh on consumers who are proving more cautious with discretionary funds. The bigger trend won't change in a month, but this latest inflation report is a sign that things are heading in the right direction.

​Ecommerce prices: Cooling annually, but rising monthly

Ecommerce prices had a mixed record in December.

On an annual basis, online prices fell 1.6% in December compared to the same month of 2021, according to the Adobe Digital Price Index.

But, on a monthly basis, prices rose 1.1%. indicating that November’s Cyber Week discounts were particularly deep.

Holiday deals continued to drive down prices, as nine of the 18 categories tracked by the DPI recorded price decreases.

Computers fell 16.2% year-over-year.

Electronics prices fell 12% year-over-year.

Toys decreased 7.1% year-over-year.

Sporting goods fell 5.9% year-over-year.

On a monthly basis, each of these categories increased or were flat, showing the impact of Cyber Week's massive deals. Only six categories saw prices fall month-over-month.

Inflation also continued to cool in non-promotional categories that weren’t subject to holiday discounting.

Grocery prices continued to decelerate, even as they followed the highs of food inflation across the economy. They were up 13.5%, continuing a steady decrease from September’s record high of 14.3%.

Personal care prices rose 1.6% year-over-year, which was down from increases that reached as high as 3% in October.

Medical equipment and supplies also fell 4.1%, which was also down from 6.6% in November and 5.3% in October.

Nine categories saw price increases in all. Others seeing increases were apparel, pet products and furniture/bedding.

Overall spending in ecommerce reached $95.1 billion for December, according to Adobe. That’s a 5.8% increase over the record-setting figures of 2021. While the overall spending figure is not adjusted for inflation, Adobe notes that the increase was “clearly driven by net-new demand, not higher prices.."