Economy
10 August 2022
Ecommerce prices are in deflation for the first time in 2 years
As digital prices fell, inflation in the wider economy showed signs of slowing.

As digital prices fell, inflation in the wider economy showed signs of slowing.
After months of prices rising at historically high rates, there were signs of some easing in the upward march of inflation in July. However, food prices remain on the rise.
Here are the latest numbers for July 2022 for the economy as a whole, and ecommerce:
The heat of the summer brought a cool down for inflation.
The Consumer Price Index registered an 8.5% increase on a yearly basis in July, according to the US Bureau of Labor Statistics.
This was down from a 40-year-high increase of 9.1% in June, offering signs that the rapid rise of inflation over recent months may be starting to slow down.
Prices overall were flat month-over-month. But the cooling owed mostly to falling gas prices, which fell 7.7% month-over-month.
That was enough to offset a 1.1% rise in food prices from June to July. Food offers a reminder that inflation is still rising at rates not seen for 40 years. The food index increased 10.9% over the last year, which was the largest 12-month increase since the period ending May 1979.
Consumer Price Index, 12-month percentage change. (Source: US Bureau of Labor Statistics)
So-called core inflation, which leaves out the more volatile food and energy indeed, increased 5.9% on an annual basis and 0.3% monthly, according to the BLS. The monthly increase was smaller than April, May or June.
Among consumer goods categories that showed movement, household furnishings prices rose 0.6% after increasing 0.4% in June. Personal care was up 0.4%. Meanwhile, apparel prices fell 0.1% after rising the prior two months.
While the CPI provided some signs that price pressures are beginning to ease, the monthly measure is simply a snapshot. It could show inflation's rise slowing this month, only to tick up again next month. That dynamic was evident from March to April, when a one-month slowing in price increases gave way to a new 40-year high of 9.1% in June. However, falling gas prices that have been observed throughout the summer will buoy hopes that inflation has peaked. However, the CPI offers a reminder that gasoline prices remain 44% higher than a year ago.
The Federal Reserve has taken action to get prices under control with back-to-back interest rate increases of 0.75%, which are unusually large hikes for the central bank. After the latest increase in late July, Fed Chairman Jerome Powell said that it may take months before the effects of the interest rate hikes are evident. Powell has said price stability is the body’s top priority as it seeks to prevent inflation from taking hold within consumer mindsets.
The Fed has said it would take decisions about further increases meeting-by-meeting, and base it on the data that becomes available in the meantime. Before it meets in September to consider any additional action, there will be another CPI release, as well as the July personal consumption expenditures index data, which is the central bank's preferred inflation measure.
Even as inflation begins to come down, it's worth remembering that the conditions it created are likely to remain in the months ahead. On earnings calls to recap the second quarter, public companies in the retail and consumer goods space have detailed outlooks that include continuing declines in consumer demand.
"We are keenly aware of what's happening around us. We anticipate that inflation and the continued softness in consumer spending on goods will persist through the remainder of the year," said Shopify CFO Amy Shapero told analysts on the ecommerce company's earnings call.
Adobe Digital Price Index: 2015-present. (Source: Adobe Analytics)
Online inflation data from Adobe Analytics showed that ecommerce prices were falling so precipitously that they are entering a deflationary period.
According to the Adobe Digital Price Index, online prices in July dropped 1% year-over-year. This came after a 0.3% increase in June and 2% increase in May. Prices fell 2% month-over-month.
The index, which analyzes one trillion visits to retail sites and over 100 million SKUs across 18 product categories, had previously shown 25 straight months of rising prices. Put another way: deflation is showing up for the first time in two years.
Ecommerce prices fell amid a complicated environment that mixes sagging consumer sentiment, an influx of inventory, deal events around Prime Day and the start of back-to-school shopping season.
Adobe said consumers spent $73.7 billion online in July, which was $400 million less than the prior month. However, Prime Day drove a 20.9% increase in ecommerce spending on a year-over-year basis.
In all, prices fell in 14 of the 18 categories tracked by the index on a month-over-month basis. But on a year-over-year basis, prices increased in 11 of the 18 categories. Here are a few highlights:
“Wavering consumer confidence and a pullback in spending, coupled with oversupply for some retailers, is driving prices down in major online categories like electronics and apparel,” said Patrick Brown, Adobe’s VP of growth marketing and insights. “It provides a bit of relief for consumers, as the cost of food continues to rise both online and in stores.”
The full chart showing pricing category changes is below
(Source: Adobe Digital Price Index)
With prices continuing to rise, it's worth clicking into specific categories. That's what market research firm Numerator did in a report for July.
For one, it detailed grocery inflation, which is distinct from the CPI's "food at home" and "food away from home" indexes.
Grocery inflation reached a record high in July, as prices rose 15.4% year-over-year, per Numerator. In particular, the snacks and beverages categories outpaced overall grocery inflation. Both have doubled since the beginning of the year, with snacks prices rising 19% and beverages up 18.1%. Online grocery prices rose +25.7%, said Numerator.
Health and beauty inflation rates doubled in four months. The spike to a year-over-year increase of 18.5% for July in this category had doubled April's 9% increase.
Household products rose 21.6% in July on an annual basis. The biggest increases were noted in household cleaners, and paper and plastic products.
Taken together, the data reported this week indicates that inflation's rise could be starting to ease. But food prices continue to rise rapidly, and that's an important point to underline. Given the importance of the food category to daily lives and its impact across grocery, CPG and restaurants, food could replace fuel as the category to watch.
The Adobe Digital Price Index showed a 1.8% annual decline.
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).