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Online Retail Entered Deflation for the First Time in Over Two Years Last Month, Adobe Reports

After 25 consecutive months of persistent inflation, prices for products sold online decreased in July, according to new data from Adobe released on Tuesday.

In July 2022, online prices decreased 1% year-over-year and dropped 2% on a monthly basis, according to the latest Adobe Digital Price Index (DPI). What’s more, most of the categories tracked by Adobe – 14 out of 18 – saw month-over-month price decreases in July.

Prices for electronics, the largest category in e-commerce with 18.6% share of spend in 2021, fell sharply and decreased 9.3% compared to latest year. Prices for apparel fell 1% from a year ago and 6.3% down from last month, marking the second consecutive month where prices fell for the category.

Food costs remained high however, with grocery prices rising 13.4% over last year, a record high and the largest increase of any category.

U.S. consumers are pulling back on spending due to soaring inflation last month. In July, consumers spent $73.7 billion online, $400 million less than the prior month, Adobe found. Compared to last year however, e-commerce spend in July grew 20.9%, with Prime Day driving record online sales for the retail industry overall.

Online spending in July also decreased compared to May ($78.8 billion) and April ($77.8 billion). E-commerce demand remains resilient on a year-to-date basis, with consumers spending $525.4 billion online in 2022 so far, growing 9.2%, Adobe added.

“Wavering consumer confidence and a pullback in spending, coupled with oversupply for some retailers, is driving prices down in major online categories like electronics and apparel,” Patrick Brown, VP of growth marketing and insights at Adobe, said in a statement. “It provides a bit of relief for consumers, as the cost of food continues to rise both online and in stores.”

This news comes after The Federal Reserve and Congress work to tamp down record inflation that has gripped the nation for months. On Sunday, the U.S. Senate passed the Inflation Reduction Act, a legislation package meant to help reduce inflation with new proposed tax rules and cost cuts.

The historic legislation, if enacted, will make a down payment on deficit reduction to curb inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40% by 2030. The bill will also finally allow Medicare to negotiate for prescription drug prices and extend the expanded Affordable Care Act program for three years, through 2025.

According to the legislation, the package would raise an estimated $739 billion in tax revenue, including $313 billion through a 15% corporate minimum tax and $124 billion through the IRS enforcement of a reformed tax code.

At the same time, The Federal Reserve hiked interest rates by 0.75% late last month, repeating the same hike seen in June. “The committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2% and anticipates that ongoing increases in the target range will be appropriate,” the Fed said in a statement at the time.

In June, consumer prices surged by 9.1%, bringing inflation to a new more than 40-year high, according to the Bureau of Labor Statistics’ monthly report. This number was up from 8.6% growth in May and from the 8.3% growth in April and represented the largest 12-month increase since the period ending November 1981.

Footwear prices are also on the rise, growing 5.8% in June compared to last year, the Footwear Distributors and Retailers of America (FDRA) found. This increase marks the fifteenth straight month of above-trend increases in footwear, which are typically 0.7% year-over-year. FDRA predicts that footwear prices in 2022 could likely rise at the fastest rate in decades.

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