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In August, Inflation eased to its lowest level since February 2021, marking a trend known as “disinflation” where prices are still rising but at a slower pace. While there are pockets of deflation, particularly seen in physical goods like cars and household appliances, a broad and sustained decrease in prices across the economy is unlikely without a recession.
Prices for core goods have decreased by about 2% since August 2023, driven by a normalization of supply and demand after the disruptions caused by the pandemic. The surge in demand for physical goods during the lockdown period, coupled with supply chain issues, led to higher prices which have now begun to deflate.
Examples of where prices have deflated include furniture, appliances, tools, toys, apparel, and vehicles. Factors contributing to the decline in prices range from improved inventory levels in the vehicle industry to the strength of the U.S. dollar relative to other currencies. Additionally, long-term forces like globalization have increased imports of lower-priced goods, further influencing price trends.
Airline fares and grocery prices have also seen a decline, with factors such as lower jet fuel prices and specific supply-demand dynamics affecting pricing. Quality improvements in electronics over time can also result in apparent price declines in data like the Consumer Price Index.
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Emily Jensen, graduated from the London School of Economics and Political Science (LSE) in the UK in 2015 with a degree in Economics. She specializes in financial markets and international trade. After graduating, she worked as an analyst at an investment bank in London, where she developed expertise in global economic trends. She later transitioned into consulting, focusing on fintech ventures and providing insights into global economic developments. Emily is passionate about the intersection of finance and technology and aims to drive innovation in the financial sector.
