Some welcome inflation news: Prices for goods online are falling

We’ll learn more about whether inflation is tapering off on Wednesday with the release of the Consumer Price Index for March.

But we already have a preview of prices in one very particular slice of this economy: online shopping. They’re actually down, according to Adobe Analytics. And not just slowing down — actually down 1.7% year-over-year.

Ten out of the 18 online categories that Adobe looked at in March saw prices fall from the same period the previous year, and they’ve been falling for months. 

“Electronics is a category where we saw prices down 13%,” said Vivek Pandya, lead insights analyst for Adobe. “And it’s really indicative of the levels of demand that consumers have for that category at the moment.”

So, for example, people splurged on computers for a while during the pandemic, and now they’re over it. PC shipments fell by 29% in the first quarter, according to IDC.

“The other category that saw pretty strong down year-over-year change was flowers and gifts,” Pandya said. “These, again, are categories that are not quite essential in an environment like this.”

An environment where some of the most stubborn inflation is in the most essential things: food and shelter. If you have to pick between sending flowers and paying for actual groceries, guess which one’s gonna win out?

Another reason online prices have fallen is that these prices are mostly for goods as opposed to services.

“Good prices tend to be commodity-, supply chain-oriented,” said Rick Rieder, managing director at Blackrock.

Commodities go up and down, supply chains get clogged and unclogged. Prices move up and down. But offline, the economy has moved to services — think airfare and restaurants — where prices have not come down.

“For services, it’s much less likely, and it’s particularly less likely when wages are going up,” said Markus Brunnermeier, a professor of economics at Princeton.

Wages are a big part of the cost of services, and they rarely go down. That makes prices for services harder to bring down, too. But wages aren’t rising as fast as they were last year.

“You still have wages running year on year a little over 4%, but that’s down from almost 6%,” said Blackrock’s Rieder. “So, if wages come down from elevated levels, then service inflation tends to come down.”

Between goods inflation and services inflation, Rieder added that we might get down to 4% overall inflation by the end of the year.