One chart provides the deflation breakdown for August 2024.

• Inflation refers to an increase in prices for certain goods and services, while deflation is the opposite, where prices decrease.
• Deflation tends not to occur across the overall U.S. economy outside of recessions.
• Since August 2023, the consumer price index has shown a decline in consumer prices for certain categories, including cars, household furniture and appliances, airfare, and certain groceries.

In August, inflation decreased and reached its lowest point since February 2021, coinciding with the start of the pandemic era's consumer price index increase.

The slowing rate of inflation in the U.S. economy is referred to as "disinflation," where the average prices of goods and services are still increasing, but at a decreasing pace.

Prices are falling in certain areas, as indicated by negative inflation rates.

Over the past year, deflation has been observed not only for physical goods like cars and household appliances but also for categories such as gasoline and groceries, as indicated by the consumer price index.

Generally, a broad and sustained fall in prices across the U.S. economy doesn't occur unless there's a recession, economists said. Consumers shouldn't expect or hope for such a scenario.

'A huge shift in demand'

The average decline in prices for "core" goods, excluding food and energy-related commodities, has been around 2% since August 2023, as indicated by CPI data.

They fell 0.2% during the month, from July to August 2024.

Stephen Brown, deputy chief North America economist at Capital Economics, stated that the decline in goods prices is mainly due to the "normalization" of pre-pandemic supply-and-demand trends.

During the initial stages of the Covid-19 pandemic, there was a significant increase in demand for physical goods as individuals were restricted to their homes and unable to spend on activities such as concerts, travel, or dining out. Additionally, households had more disposable income due to reduced spending and government aid.

The Social Security cost-of-living increase could be the lowest since 2021.

According to Sarah House, senior economist at Wells Fargo Economics, there was a significant change in spending habits, with a focus on different types of purchases and less emphasis on going out.

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

Such supply-and-demand dynamics drove up prices.

Prices have deflated as a result of the easing of economic contortions, economists said.

Where prices have deflated

Since August 2023, the cost of furniture and bedding has decreased by approximately 5%, while the price of appliances has decreased by about 3%, according to CPI data.

The sales of tools, hardware, outdoor equipment, toys, men's suits and outerwear, women's outerwear, and footwear have decreased by 3%, 3%, 10%, 9%, and 1%, respectively.

Since August 2023, the prices for new and used vehicles have decreased by 1% and 10%, respectively, while car and truck rental prices have fallen by approximately 8%.

The shortage of semiconductor chips led to a surge in car prices when the economy reopened in early 2021.

The recent decline in car prices can be attributed to both an improved inventory picture in the overall vehicle space and higher financing costs, according to House and economists.

The U.S. dollar's strength relative to other global currencies has helped rein in prices for goods, making it less expensive for U.S. companies to import items from overseas, economists said.

Globalization has contributed to long-term forces by increasing imports of lower-priced goods from China, according to economists.

According to CPI data, airline fares have decreased by approximately 1% in the past year.

A decline in jet fuel prices partly accounts for the drop, according to Capital Economics' Brown.

The International Air Transport Association reports that average aviation jet fuel prices have decreased by approximately 21% compared to the previous year.

According to CPI data, the prices of items such as apples, potatoes, ham, coffee, rice, seafood, and bananas have decreased. Economists explained that the supply-and-demand dynamics of each grocery item can affect pricing.

Other categories' deflationary dynamics may be happening only on paper.

The Bureau of Labor Statistics manages the CPI data to account for quality improvements over time. Electronics, including televisions, cellphones, and computers, are constantly improving, resulting in consumers receiving more value for their money.

That shows up as a price decline in the CPI data.