One chart displays the deflation breakdown for September 2024.

• Over the past year, the consumer price index indicates that deflation has occurred in certain areas of the U.S. economy.
• The prices of some imported goods, consumer electronics, energy, and food items have decreased.
• Across the economy, deflation is uncommon, according to economists. Businesses generally do not decrease their prices.

Over the past year, some areas of consumer spending, such as furniture and gasoline, have experienced deflation while inflation has gradually eased across the U.S. economy.

Deflation is when prices decline for goods and services.

Economists stated that it's uncommon for prices to decrease from their current values throughout the entire economy.

The prices of many physical goods have decreased due to the normalization of supply-and-demand dynamics after the pandemic.

Mark Zandi, Moody's chief economist, stated that he does not anticipate price cuts outside of goods prices.

According to Zandi, businesses will maintain their prices if demand is weak, but outright price drops are infrequent, even during a recession.

The prices of energy and food commodities can fluctuate, and the quality of consumer electronics keeps improving, although statisticians may view this as deflation, but it may not be noticeable in stores.

Which goods prices have deflated

Since September 2023, the consumer price index has shown a 1% decrease in the average prices of "core" goods, which exclude food and energy.

The demand for physical goods increased during the initial stages of the Covid-19 pandemic due to restrictions on travel, concerts, and dining out. With more time at home, households had more disposable income and received financial aid, leading to an increase in spending on physical goods.

The pandemic disrupted global supply chains, causing delays in the delivery of goods to consumers.

Such supply-and-demand dynamics drove up prices.

As a result of the easing of contortions, prices have decreased, economists said.

The cost of household furnishings has decreased by approximately 2% over the past year, as has the price of appliances (by 3%), tools and hardware (by 4%), women's outerwear (by 6%), and sporting goods (by 2%), according to CPI data.

The cost of health care is increasing due to Ozempic.

Sarah House, senior economist at Wells Fargo Economics, stated that vehicles have been one of the key areas of goods deflation.

Since September 2023, the prices of both new and used vehicles have decreased by 1% and 5%, respectively.

Since vehicles experienced one of the largest price increases during the inflation surge in 2021, it's natural to expect some "give back" in prices, as seen in the 45% increase in used car prices from June 2020 to June 2021.

In an effort to combat high inflation, the U.S. Federal Reserve aggressively raised interest rates, resulting in higher financing costs for car buyers. This, in turn, weakened demand and pushed down prices, according to economists. In September, the Fed began a cycle of interest rate cuts.

The U.S. dollar's strength relative to other global currencies has helped U.S. companies import items from overseas at a lower cost, economists said.

Energy, food and consumer electronics

Zandi stated that consumers may observe a "normalization" of prices in food and energy, aside from imported goods. This is due to the impact of "big swings in commodity prices, the value of currencies, and trading relationships," he explained.

The cost of regular unleaded gasoline has decreased by approximately 16% since September 2023, as per CPI data.

The supply-and-demand dynamics of specific food categories, such as apples, potatoes, frozen vegetables, and fresh fish and seafood, have led to price declines of approximately 11%, 4%, 2%, and 1%, respectively.

The quality of consumer electronics, including televisions, cellphones, and computers, is constantly improving, resulting in consumers receiving more value for their money. According to the U.S. Bureau of Labor Statistics, which produces the monthly CPI report, this is equivalent to a price decrease in the inflation data.