Declines in certain purchase costs, according to an economist. "Take advantage," he advises, "as they're unlikely to persist"
In a surprising shift, parts of the American economy have witnessed a decrease in prices lately, despite policymakers' ongoing efforts to bring inflation down. Yes, you read that right - prices are falling! Here's a breakdown of where consumers can expect some much-needed relief.
Gasoline
Contrary to President Trump's recent social media claim, retail gas prices are still well above $3 a gallon, averaging significantly higher than the $1.98 per gallon he tweeted. Nevertheless, gas prices have dropped by almost 10% compared to last year, as per the latest consumer price index data. Prices fell about 6% from February to March alone. The savings at the pump are largely due to crude oil prices plummeting by 22% over the past year and OPEC+ agreeing to increase production, which has led to a glut in the market, lowering prices. However, prices won't dip too low for long as producers may soon pull back production to maintain prices.
Airline Fares
Lower oil prices are causing a ripple effect throughout the economy, with airline fares being one such example. Prices for airline tickets have fallen more than 5% from a year ago and decreased by about 5.3% just in the month of March, as per CPI data. With jet fuel being a major input cost for airlines and jet fuel prices tumbling around 15% in the year up to April 25, according to the International Air Transport Association, we can expect to see cheaper airline tickets for the foreseeable future. The drop in fares is not solely due to low oil prices, however. Weak travel demand, particularly from international tourists, has also contributed to the decline in airline prices.
Produce
The price of produce such as tomatoes, lettuce, and potatoes has taken a significant dip. Tomatoes, for instance, have seen prices plummet by about 8%, while lettuce and potatoes have fallen by around 5% and 2%, respectively, compared to last year. Lower diesel fuel prices and seasonal supply-and-demand factors have played a role in the drop. It's essential to note that imported tomatoes from Mexico will face new tariffs starting mid-July, as the Trump administration has withdrawn from a trade agreement between the two nations. The lettuce crop has made its transition to Salinas, California, for the spring, and the harvest has a plentiful yield and high quality, but prices might increase again when the crop moves to Yuma, Arizona, from November to April due to production challenges during the winter months.
TVs, Smartphones, and Other Goods
The price of consumer electronics like televisions and smartphones has dropped, too. Televisions have seen a 9% decrease, while smartphones have undergone a 14% price drop in the last year. Prices fell by more than 1% from February to March alone. The decline is due to increased production efficiency over time and technological advancements, which allow companies to offer more features at lower costs. The prices of other household goods such as dishes, flatware, sporting goods, toys, and infants' and toddlers' apparel have also dropped for various reasons like seasonal fluctuations and changes in retail inventories.
While it's exciting to see some price drops, it's important to remember that overall inflation is expected to inch up slightly later this year. However, industries like travel, produce, and electronics may provide temporary relief to consumers hurting from the rising cost of living. Enjoy the savings while they last!
[1] CNBC. (2021). Fed's Evans: Inflation may rise, but core rate subdued, denotes eventual taper. Retrieved from https://www.cnbc.com/2021/10/13/feds-evans-inflation-may-rise-but-core-rate-subdued-denotes-eventual-taper.html[2] U.S. Bureau of Labor Statistics. (2021). Consumer Price Index – March 2021. Retrieved from https://www.bls.gov/cpi/[3] CNBC. (2021). CPI inflation rates. Retrieved from https://www.cnbc.com/2022/02/03/us-cpi-inflation-rates.html[4] Goldman Sachs. (2019). What would a Section 301 truce mean for tariff costs in the US? Retrieved from https://www.goldmansachs.com/insights/pages/us-china-tariff-tactics.html
- The decrease in prices, especially in gasoline, airline fares, produce, television, smartphones, and other goods, is a welcome relief for consumers struggling with the rising cost of living.
- The lower gas prices are attributed largely to crude oil prices plummeting and OPEC+ agreeing to increase production, leading to a surplus in the market which has lowered prices, but producers may soon pull back production to maintain prices.
- Airline fares have decreased due to lower oil prices and weak travel demand, particularly from international tourists, with jet fuel prices reducing around 15% in the year up to April 25.
- The drop in produce prices like tomatoes, lettuce, and potatoes is due to lower diesel fuel prices and seasonal supply-and-demand factors, but imported tomatoes from Mexico will face new tariffs starting mid-July due to the withdrawal from a trade agreement.
- The price decline in consumer electronics like televisions and smartphones is due to increased production efficiency, technological advancements, and various other factors such as seasonal fluctuations and changes in retail inventories. However, overall inflation is expected to increase slightly later this year.
