Coins & Money

Is Online Spending Finally Turning from Inflation to Deflation?

We have all heard about inflation helping to steer the economy into a recession, or at least a classic recession with two quarters of negative GDP growth. And consumer spending is roughly two-thirds to 70% of GDP in general. The hope is that inflation has peaked. It may have peaked. It may not have peaked. Adobe Inc. (NASDAQ: ADBE) is bringing at least some good news on the online spending front by saying that E-Commerce spending has entered into deflation — for the first time in over two years!

The Adobe Digital Price Index (DPI) for July 2022 showed that online prices decreased by 1% in July versus a year earlier. That’s after increasing 0.3% (YoY) in June and after increasing 2% (YoY) in May. The other bit of good news is that online prices also were shown to have dropped by 2% on a monthly basis covering July versus June.

The Adobe data does not track overall spending for collectibles and hobbies outside of what is lumped into other categories. That said, the 2022 National Sports Collectors Convention did show some obvious signs of many sports collectors feeling at least some pressure from travel costs and living expenses when it came to their spending overall versus 2021. Will this, combined with ultra-high prices at the highest end of sports collectibles, bring a boost to collectibles in general?

Is This Really Deflation? 

To back up the data, the DPI is said to analyze one trillion visits to retail sites and over 100 million SKUs across 18 product categories. These include electronics, apparel, appliances, books, toys, computers, groceries, furniture/bedding, tools/home improvement, home/garden, pet products, jewelry, medical equipment/supplies, sporting goods, personal care products, flowers/related gifts, non-prescription drug and office supplies.

Adobe went on to show that July’s deflation reading was the first price drop in 25 months. This report showed that electronics, apparel and toys led the lower online price trends, but food costs remained elevated. In July, 11 of the 18 categories tracked still saw annualized (YoY) price increases. The seven categories showing price drops were electronics, jewelry, books, toys, computers, sporting goods and apparel.

Here was a partial breakdown of the data, verbatim from Adobe:

  • Prices for electronics, the largest category in e-commerce with 18.6% share of spend in 2021, fell sharply and decreased 9.3% YoY (down 2% MoM). This is a greater YoY decrease than June (down 7.3% YoY) and May (down 6.5% YoY).
  • Prices for apparel fell 1% YoY (down 6.3% MoM), marking the second consecutive month where prices fell after dropping 0.1% YoY in June. Apparel prices had increased for 14 consecutive months since April 2021, with prices having spiked in recent months (up 9% YoY in May, 12.3% YoY in April and 16.3% YoY in March).
  • Toy prices fell significantly, dropping 8.2% YoY (down 2.9% MoM), a record YoY low for the category in the last 31 months.

And the standout for online food costs showed that grocery prices rose by 13.4% YoY (up 1.4% MoM), which Adobe says was a record yearly high and the largest increase of any category.

The Total Dollars Spent!

So, what’s the total tally here? According to Adobe’s data, consumers spent $73.7 billion online in July versus an online spend of $74.1 billion in June. Before thinking everything else is lower, Adobe did show that an annual basis showed that the e-commerce spending in July grew 20.9%. Their notes indicated that Prime Day drove record online sales for the retail industry overall. They showed:

  • 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% YoY.

Patrick Brown, Adobe’s vice president of growth marketing and insights, said of the July report:

“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. It provides a bit of relief for consumers, as the cost of food continues to rise both online and in stores.”

On a month over month basis, Adobe showed the following:

  • Only 4 of the 18 categories in the DPI saw price increases MoM.
  • Price drops were observed across 14 categories including electronics, personal care products, office supplies, jewelry, books, furniture/bedding, toys, home/garden, appliances, flowers/related gifts, computers, sporting goods, medical equipment/supplies and apparel.

So, what does all this mean ahead of the formal inflation report due this week and as the Federal Reserve wants to keep hiking interest rates?

The take of Collectors Dashboard should not at all be a taken as overall deflation having arrived after a year of significant and aggravating price gains. Overall inflation is still front and center in the economy in the summer of 2022. This is at least a start, and we have all seen in July’s and August’s numerous corporate earnings reports that the online consumer facing sites have been generally reporting slightly weaker to mixed reports about spending, earnings and even employment.

Now it’s up to the rest of the economy to begin to show whether or not these massive price hikes over the last year can finally start to abate. That is likely to be a slower change than this Adobe report indicates.

Categories: Coins & Money, Misc., Non-Sports, Sports

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