According to the Adobe Digital Price Index (ADPI), online prices were down 2% in July compared to June, and down 1% compared to 2021. This is the first drop since January 2020, pre-COVID, and follows three consecutive months of slowing price increases.
In July American inflation hit a 40-year peak, topping 9%, a rate driven by rising ‘real world’ costs. For example, the petrol index fell 7.7% last month, offsetting increases in the food and shelter indexes, which in turn resulted in the all-items index going unchanged over the month. The energy index fell 4.6% over July as the petrol and natural gas indexes declined, but the electricity index increased. The food index continued rising, increasing 1.1% over July as the food-at-home index rose 1.3%.
It’s been a momentous month for online prices, too—especially when it comes to electronics
The ongoing inflation online reflects the price of digital purchases. 14 of the 18 categories tracked by the ADPI saw monthly price drops. Electronics, the largest eCommerce category, with 18.6% share of spend in 2021, saw the second biggest category price drop, down 9.3% YoY (2% MoM). That’s close to electronics’ pre-COVID level: prices fell 9.1% YoY between 2015 and 2019. This also marks the category’s third straight month of price drops.
Computers lead all categories, with a 10.2% drop YoY (3.2% MoM). Apparel had the biggest monthly price drops, down 6.2%, but dropped only 1% YoY. This has been apparel’s first notable YoY decrease. Last month prices fell only 0.1% YoY. Prior to that they’d been rising for 14 months straight.
Seven categories saw YoY price increases while dropping MoM: personal care, furniture, medical supplies, office supplies, appliances, home and garden, and flowers and related gifts. Groceries saw the biggest yearly price increase of 13.4%, and the second biggest monthly increase of 1.4%.
In July people spent $73.7bn online, $400m less than in June. But on a YoY basis, eCommerce spend in July grew 20.9%, driven by both Prime Day and record online sales for the overall retail industry. This year so far people have spent $525.4bn, growing 9.2% YoY.
What are the implications of these price decreases across the board?
On August 10 the news of a slowing American inflation rate was a potentially hopeful sign for the economy—but possibly not, too. Online prices might simply have dropped because people couldn’t buy electronics in light of increasingly expensive necessities such as food. Ditto the overall growth in online spending. Is it up because prices are up, or just because people are confident enough to spend more on items that are less expensive?
There’s another perspective, of course: perhaps we’re just adding more debt. Over the past year credit card debt has jumped by $100bn (13%), the biggest percentage increase in over two decades. Last quarter, with interest rates rising, credit card balances increased by $46bn. The impact of inflation has been apparent in the high volume of borrowing. And while seasonal patterns typically include an increase in Q2, the 13% cumulative increase in credit card balances since Q2 2021 represents the largest in 20 years.
According to Joelle Scally, Administrator of the Center for Microeconomic Data at the New York Fed, ‘While household balance sheets overall appear to be in a strong position, we’re seeing rising delinquencies among subprime and low-income borrowers, with rates approaching pre-COVID levels.’ Moreover, the share of current debt transitioning into delinquency increased modestly for all debt types, but still remains historically low. The delinquency transition rate for credit cards increased by 0.5%.
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