Online prices kept falling in April, headline inflation held steady

Inflation continues to be a defining factor of consumer behavior in 2023. New data from the U.S. government and Adobe issued this week offered a look at how price trends are playing out across the economy.

The overall inflation rate held relatively steady from the prior month, while online prices are falling faster.

Let’s dig in:

Headline inflation cooled in the slightest of ways in April. The Consumer Price Index reported the following for April 2023:

Inflation rose 4.9% from a year before, down just slightly from the 5% gain in March.

On a monthly basis, inflation rose 0.4%, which was up from 0.1% in March.

Core inflation, excluding food and energy, rose 5.5%.

Shelter remained the greatest contributor to the core inflation, rising 8.1%.

Food at home, which includes groceries, rose 7.1%, continuing a marked deceleration in this category.

What it means: Inflation is continuing its comedown from the highs of 2022, but it has not been a fast fall. The slight downtick observed in the numbers will do little to change consumer behavior from its current “frugal mindset,” said GlobalData Managing Director Neil Saunders.

"Unfortunately, we are currently in a period where the consumer economy is neither accepting of a new price level nor is sufficiently convinced that prices are coming down anytime soon," Saunders wrote. "Households are also facing higher debt servicing costs from elevated interest rates. There is really nothing in the economic data to produce a feel-good factor. This means many money-saving behaviors will persist for at least the balance of this year."

Online prices fell more markedly than those in the wider economy for April. The Adobe Digital Price Index reported the following for April 2023:

Online prices dropped 1.8% compared to April 2022, marking the eighth straight month of decline.

On a monthly basis, prices fell 0.7% from March.

Eleven out of 18 categories saw falling prices on an annual basis.

Here’s a look at key categories that saw declines:

Grocery prices were up 9.3% year-over-year, but continued a decline that has been underway for a number of months. At peak, online grocery inflation reached 14.3% in September 2022.

Personal care prices were up 3%, which was also a decline from the 4.3% observed in March. This category spiked to a 6% increase in February, and has been declining since.

Appliances fell 7.1%, which was the largest year-over-year drop for this category since Adobe’s tracking began in 2014.

Sporting goods marked the twelfth consecutive month of price declines, with a 6.4% year-over-year drop. Prior to that sporting goods prices rose for 28 straight months.

Other notable declines included toys (down 5.9% YoY), home/garden (down 5.6% YoY) and electronics (11.6% YoY).