Online inflation eases, but prices are still climbing

Consumer Price Index

Prices across the US continued to rise in April, but the rate at which they are rising slowed slightly from the 40-year highs recorded in March. That’s the takeaway from latest numbers in the US government’s Consumer Price Index (CPI), which has become closely watched when it is released each month amid rising inflation.

The CPI increased .3% month-over-month. This was down from a 1.2% increase in March.

On a yearly basis, the CPI for all items rose 8.3% for the 12 months ending in April. That’s down from the increase of 8.5% in March, which was the highest recorded increase in 40 years.

When subtracting the typically-volatile food and energy categories, the CPI increased 6.2% over the last 12 months. Food prices continue to reach 40-year highs, as the 9.4% increase in that measure was the highest since December 1981.

Meanwhile, in a key consumer goods category, the CPI news release pointed out that the apparel index fell 0.8% percent for the month period, ending a string of six consecutive increases.

There are a couple of ways to read these results. For one, it’s important to remember that prices are still rising. We’re still in a period of high inflation that’s driving prices up, and it remains close to a 40-year high. And it's still outpacing expectations, as the 8.3% increase was higher than economists' estimates of 8.1%, CNBC reported.

However, the downtick in the increase on monthly and annual measures indicate that the monthslong upward march of prices up could be turning around. This is just one month, though. It’s not yet known whether this will become a trend.

Online inflation

According to the Adobe Digital Price Index, online prices rose 2.9% year-over-year. This was also down from a record high in March of 3.6%. Prices rose .5% from the prior month in April.

On an industry level, 10 of the 18 consumer goods categories tracked by Adobe saw month-over-month decreases in April.

Adobe noted a few key data points that stood out:

• Apparel prices rose 12.3% on a year-over-year basis, which was the largest increase this month. That marks 13 straight months of inflation, but still marks a slowdown from prior months.
• Grocery prices are continuing to rise, and its 10.3% YoY increase was a new annual high.
• Pet products prices rose 8.0% YoY, which is the highest annual increase in the category.
• Computers and electronics are both seeing prices come down. The electronics drop of 5.2% YoY was the largest recorded since November 2020, while computers saw their 16th straight month of deflation.
  

Online consumer spending grew at a modest 4.5% YoY, Adobe notes, which was below the double-digit growth in January and February. It was also down 6.8% month-over-month. Consumer demand is watched in tandem with inflation to observe whether price increases are having an impact on shoppers' willingness to buy. In March's Adobe Digital Price Index and throughout first quarter earnings results, leaders had commented that consumer demand appeared to continue to be strong.

“As the cost of borrowing and economic uncertainty rises for consumers, we are beginning to see the early impact on both online inflation and spend,” said Patrick Brown, vice president of growth marketing and insights at Adobe, in a statement. “However, durable demand for ecommerce still drove over $77 billion in spend last month, as consumers continue to embrace the ease of online shopping and more personalized customer experiences in the digital economy.”

Going forward, we'll be watching whether the trends observed in the online realm will extend to the wider economy.

Ecommerce Channel Price Index

The last three years can be marked by cascading economic challenges. The pandemic arrived in 2020, leading shoppers to increase spending on goods while experiences were temporarily on hold. Then, a supply chain crisis came in 2021, upending the shipping and delivery of those goods. In turn, was a major factor behind the 40-year-high inflation in 2022 as fewer available goods – and the parts to make them – drove prices up.

The importance of that context stands out while reading the InFORM report, an analysis of the state of multichannel ecommerce for the first quarter of 2022 that was released this week by ecommerce operating system Tradeswell. Among a number of findings, the report offers a breakdown of prices by ecommerce channel.

Tradeswell’s Channel Price Index shows the change that took place over the last year as supply chain shocks gave way to inflation.

When the supply chain crisis started blinking on the radar screen in the second quarter of 2021, average selling prices in marketplace channels increased. Soon after, there was a price increase in DTC channels.

“For example, Amazon Vendor Central prices fell at the peak of the supply chain crisis but increased almost 4% compared to historic averages in Q4 of 2021—indicating Amazon’s desire to maximize revenue from its available inventory,” the report states. “As the supply chain squeeze becomes less of a challenge in Q1 2022, we see prices normalize."

There was more moderation across these channels in the first quarter of 2022. Tradeswell’s analysis shows that price growth has not caught up with the inflation rate across the wider economy, as groceries and energy aren’t bought online.

Still, apparel continued to get more expensie, posting a quarterly average selling price 9% higher than the historical average in the first quarter, according to Tradeswell. This category was affected by factory lockdowns and worker shortages at textile factories in Southeast Asia amid the spread of COVID-19 in 2021, and the transportation delays across shipping and trucking.

“As a result of the increase in consumer demand and shortage in products, apparel companies increased their prices,” the report states.

In a nutshell, that describes the dynamic across many categories of the economy.