13 October 2022
Inflation update: Core CPI, online grocery prices hit new highs
In September, price increases showed little signs of abating.
In September, price increases showed little signs of abating.
Inflation continued to rise rapidly across the US economy in September, with a new 40-year high in a core measure. Meanwhile, online prices were up on a monthly basis, even as many key ecommerce categories fell. Looking upstream, wholesale prices continued to rise, as well.
Here’s a look at the latest inflation data for September 2022:
CPI month-over-month change, Sept. 2021-Sept. 2022. (Courtesy photo)
For the US economy as a whole, inflation rose 8.2% year-over-year in September, according to the latest reading of the Consumer Price Index (CPI) from the US Bureau of Labor Statistics.
That’s only a slight cooling from the 8.3% increase reported in August.
On a monthly basis, inflation rose 0.4%, which was up from the August increase of 0.1%.
This year has delivered many 40-year-highs for the CPI, and September added another to the record books: The core inflation rate, which excludes the more volatile food and energy prices, was 6.6% on an annual basis. That's the highest since 1982. Core inflation for services, excluding energy, rose 0.8%, and 6.7% year-over-year. The yearly figure was also the sharpest growth since 1982, according to the Wall Street Journal.
Like the August report, September's data showed a new evolution of inflation that is pushing price increases deeper into the economy, beyond elevated gas prices that drove the spike for many months. In fact, the gasoline index fell 4.9% for the month, following a 10.6% decrease in August.
Meanwhile, food, shelter and medical services were among the largest drivers of the inflation growth. The owners’ equivalent rent index rose 0.8% for the month, which was the largest monthly increase since June 1990. Food at home inflation also ticked up again to 13% year-over-year, as all of the grocery categories rose. Among other popular ecommerce categories, cosmetics and personal care products prices rose 0.4%, while toys rose 0.8%. Pet products were up 0.9% for the month, and rose 11.1% annually.
There were only a few declines noted for the month. Apparel prices declined 0.3% for the month, while sporting goods and used car prices fell 1.1% for the month.
Adobe DPI vs. CPI. (Courtesy of Adobe)
When it comes to online prices, the story was less definitive. According to the Adobe Digital Price Index, ecommerce prices in September fell 0.2% year-over-year, but they rose 0.8% on a monthly basis.
This continues an up-and-down picture for ecommerce inflation, which is more focused on goods than the CPI, which includes services and essentials like rent and healthcare. In July, Adobe’s data showed that prices had entered deflation for the first time in 25 months. However, in August, prices ticked up again to a 0.4% annual increase.
A further breakdown shows that 11 of the 18 categories recorded price increases year-over-year. Rising food costs are one of the biggest influences in the digital realm, just as they are in the overall economy. Here's a look at the biggest movers:
Online inflation by category. (Courtesy of Adobe)
A look ahead to the prices goods and services that are being paid to producers before they reach retail shows inflation is rising upstream for the first time in three months, as well.
The Producer Price Index rose 0.4% on a monthly basis in September. This comes after falling 0.2% in August, and a decline in July. The PPI rose 8.5% on an annual basis, the Bureau of Labor Statistics reported. That yearly increase cooled off slightly from an 8.7% increase in August.
Excluding food, energy and trade services, wholesale prices rose 0.4% for the month and 5.6% annually.
Two-thirds of the PPI's increase was attributed to a rise in services prices. Prices for goods rose 0.4% in September on a monthly basis, with 60% of the increase owed to a rise in food prices. This comes after the prices for goods decreased 1.1% in August.
In all, food PPI increased 10.2% year-over-year, running higher than overall prices. High fuel costs are also continuing to have an impact on the CPG industry, which accounts for one-fifth of all freight transportation, according to the Consumer Brands Association, which represents consumer packaged goods companies. Diesel fuel was up 65.9% year-over-year in September.
The PPI tends to be forward-looking, but there are some key events that have yet to show up in these reports. For instance, the PPI does not account for last week's decision by the nations that are part of OPEC+ to cut oil production by two million barrels a day. That could result in gas prices ticking back up.
“September showed ongoing cost pressures and the impact of supply chain disruptions from Hurricane Ian, renewed fears of a rail strike and oil prices that have yet to surface in the data,” said Katie Denis, vice president of communications and research at the CBA, in a statement.
In all, the inflation data continues the story that has been persisting this year: Prices are rising, with the most notable spikes in the essential categories. Gas has been replaced by food and rent as the key driver, but the result is likely to be the same: After spending more on the survival items, consumers will be looking to stretch dollars for discretionary purchases.
It sets up what retail CEOs have been predicting to be one of the more promotional holiday seasons in memory. Broad-based price increases show inflation is digging deeper into the economy, and wholesale inflation shows it likely won’t slow down.
At the same time, the Federal Reserve has said it plans to continue to hike interest rates to bring down inflation to 2% "until the job is done," as Chairman Jerome Powell has repeatedly put it. This report indicates there’s still a long way to go on that front. But as the Federal Open Market Committee considers its latest in a series of big rate increases this month, it will have to weigh the effects of cooling demand on the health of the economy as a whole. Minutes from the September meeting showed that committee members were committed to sticking with rate hikes with inflation “showing little sign so far of abating.” Wednesday’s report probably won’t change that mindset. It also shows that, for another month, the rate hikes are not appearing to have taken hold yet.
New tools from Adobe and Levi's generate product images in multiple variations.
AI is at the top of the conversation across technology in 2023, as new models such as ChatGPT and GPT4 show how ingesting and training large amounts of data can not only help businesses find insights in what already exists, but create something new.
While there is plenty of off-hours time being devoted to experimentation with these new models, the uses of tools that bring together automation and creativity in a way that is valuable for businesses and embraced by their customers are still coming into view.
In ecommerce, the promise of AI appears to be massive. Across marketplaces, advertising and customer service, brands and retailers have seen demands for content and customer touchpoints grow exponentially. With executives constantly in search of efficiency, AI tools stand to help generate voluminous content at scale.
To be sure, it remains early days. AI has not yet arrived permanently in ecommerce workflows, and some of the tools that lead to it arriving may not use the same models that are gaining so much press today. But the teams inside brands and retailers are interested in experimenting with this technology, and pilots can offer hints at where it might be heading.
This week delivered a pair of new launches from Levi’s and Adobe that showed how new tools can help to change how product images are generated. Let's take a look:
Photoshoots featuring models wearing products in real-world settings have long been a staple of the marketing playbook in fashion. Levi’s is piloting a new approach that could bring AI into the equation.
Through a partnership with Amsterdam-based Lalaland.ai, Levi Strauss is planning to test the use of customized, AI-generated models. Designed to supplement human models, Lalaland.ai’s technology is built to help show products for a diverse range of body types, ages, size and skin tones.
Levi’s positioned this as a move to supplement human models. Typically, a product page on the Levi’s app or website only has one model. Using this technology to create multiple images can help create a way for customers to see themselves represented in the products that are shown. It can also help to increase diversity, equity and inclusion within Levi's ecommerce stores, the company said.
“While AI will likely never fully replace human models for us, we are excited for the potential capabilities this may afford us for the consumer experience,” said Dr. Amy Gershkoff Bolles, global head of digital and emerging technology strategy at Levi Strauss & Co., in a statement. “We see fashion and technology as both an art and a science, and we’re thrilled to be partnering with Lalaland.ai, a company with such high-quality technology that can help us continue on our journey for a more diverse and inclusive customer experience.”
A new tool from Adobe is also aiming to automate the work of showing images in multiple variations on ecommerce stores, but this goes beyond fashion.
According to Reuters, the new tool is designed to allow ecommerce brands and retailers to create 3D images that show products from a range of categories in a variety of formats and configurations, as well as settings. It can be used for home goods, toys, furniture, apparel and more. Product images are used across a range of content, from product pages to emails to social campaigns. So the content needs for brands and retailers are voluminous. From Reuters:
But even keeping up with making renderings has created a tremendous amount of work for e-commerce companies as marketing campaigns have become more tightly targeted, said Francois Cottin, senior director of marketing for Adobe's Substance 3D business.
For example, Cottin said, a company selling a coffee machine might want to show the gadget against a different background in different countries, because German kitchens might look different from California kitchens. Most companies have to tap 3D artists to create each image.
This advance is as much about transforming the work of teams as it is about creating the variations of product images themselves. 3D models are currently used by many of the large ecommerce players, but creating them remains the work of large teams with specialty skills in visual effects. The images then head to the hands of marketers and merchandisers who find a home for them on product pages within the customer experience.
Automation can help make all of this work more efficient. Such a tool could also have a huge impact on smaller brands and retailers. If these capabilities move into wider release, a pool of content that would’ve only been available to the most-resourced companies now could be opened up for everyone to use.
While Adobe typically works with enterprises and this product is likely designed for that market segment, its release presents a question worth asking for the future: Will AI be the next ecommerce advance that further levels the playing field between storied brands and fast-rising startups?