A customer buys eggs at a Kroger supermarket on August 15, 2022 in Houston, Texas.
Brandon Bell | Getty Images
July’s consumer price index report finally showed a sign of possible relief – inflation rose less than expected from a year ago, and was level with the month, meaning a basket of items and services generally stayed the same price.
But some items have fallen, on a monthly and weekly basis, possibly indicating that inflation is past its peak and may be cooling.
This is good news for consumers pressured by higher prices and looking for some sign of relief. Some of the top products whose prices have fallen include eggs, milk, and gasoline.
“Fuel inflation has been very high and that will have quite a meaningful impact on consumers and their spending habits,” said John Leer, chief economist at Morning Consult. “I think that’s actually a good thing for the economy.”
Grocery aisle prices down
Many of the items taken off are linked to food and energy, often the most volatile costs faced by consumers.
Grocery store staples are submerged. Large white eggs cost an average of $2.14 for a dozen, during the week of August 15-21, according to the USDA. That’s a whopping 60 cents drop from the previous week, when the average was $2.74 per dozen.
The average price for a gallon of milk fell from $3.24 in the period August 8-12 of the previous month to $3.16 from $3.24 in the same period, and the average price of butter fell to $3. 67 from $4.68 in the same time frame, according to USDA data.
Chicken breast prices also fell weekly from August 8 to 12, but other parts of the chicken are also falling – chicken wings prices are falling and are now cheaper than before the pandemic, according to data from the Ministry of Agriculture.
Oil pulled fuel prices down
Outside of food, there has been a decline in energy-related consumer goods and services.
This is because oil prices are often subject to large price swings as the balance between supply and demand shifts. This year, the war between Russia and Ukraine has upset that balance and the price of oil spiked as countries stopped buying from Russia, a major exporter.
However, oil prices have fallen again, reducing the cost of energy and especially gasoline. The national average for a gallon of regular gasoline is $3,918 as of Friday, according to AAA. While that’s higher than a year ago, it’s a solid drop from the $4,495 consumers paid for gas a month ago, and a sharp drop from the recent high of $5,016 reached in June.
This may also have consequences for another part of the economy that experienced a price dip month after month: airline tickets. According to travel site Hopper, the average domestic air ticket price in August fell from $332 in July to $295 in August. That is again in line with the average price for a domestic ticket in the same month in 2019.
Fuel costs aside, this drop in ticket prices could be because consumer demand is declining, according to Kevin Gordon, senior investment research manager at Schwab.
“That could be the destruction of demand,” he said, adding that the reopening of pandemic lockdowns has pushed up the price of things as consumers rush to get back on vacation. Now that the holiday season is coming to an end, that demand has decreased.
A month doesn’t make a trend
Of course, a month when prices fall in some categories is not a trend.
The slowdown in price increases — and declines in the cost of some items and services — may mark the beginning of declines, but it takes more months of data to know for sure.
“I think it’s way too early to start a winning round,” Leer said, adding that consumers should expect the next year and a half to two years in a high-inflation world.
In addition, it’s important to remember that falling prices, or the cooling of inflation, could ultimately be a signal that the US economy is slowing.
“You want the price pressure to be relieved, but what the end goal is with that is probably getting us closer to a recession,” Gordon said. As the Federal Reserve continues to raise its benchmark rate, it wants the economy to slow down, but will try not to push the US into a recession that would lead to job losses.
Furthermore, the prices of other common items have remained stubbornly high and are still rising. For example, the price of most fruit remains high and is even rising week after week, according to USDA data. Rapid changes are also normal — although dairy fell through Aug. 12, milk and butter prices rose again through Aug. 19, the USDA found.
According to the Bureau of Labor Statistics, coffee prices rose 3.5% from June to July. Housing costs such as rent have also remained high and are some of the hardest to retire, Gordon noted.
Still, it’s good for consumers and sentiment to see the prices of common items fall again.
“I think consumers increasingly believe that inflation is going to fall,” says Leer.