10 things that are getting cheaper

Since inflation barged into the US economy two years ago, there’s been wide variation in prices. Some things have gotten a lot more expensive, others just a little more expensive. In general, however, almost everything has gone up in price.

We’re finally seeing price declines in some areas, as inflation settles down. The broad trend so far this year is disinflation, which means a declining rate of inflation. Since peaking at 9% in June 2022, the overall inflation rate has dropped to 3.2%. That’s obviously good news, but disinflation means prices are still rising—just by less than they used to. It also means all the price hikes of the past remain in place.

When prices fall, that’s deflation, and that helps consumers regain lost ground after inflation eroded their purchasing power. For the last two years, Yahoo Finance has been tracking monthly changes in the cost of 27 spending categories that capture most of the things ordinary families spend their money on. We’re now seeing year-over-year price drops in more than one-third of those categories, the most since we started tracking the data.

The chart below shows 10 spending categories where prices have declined during the last 12 months. We also include the two-year change in prices for those categories, to capture the broader price trends since inflation became a problem in 2021. Average incomes have risen by 4.4% during the last year, and 10% during the last two years. Anything that has risen by less than incomes is getting cheaper on a real, inflation-adjusted basis.

Used vehicles are one standout category. For about a year, there was eye-popping inflation in used vehicles, because a shortage of microchips for new cars sent millions of buyers into the used market, with demand and prices surging. Starting in October 2021, the annual inflation rate for used vehicles was 38% or higher 10 months in a row, with the peak hitting 60% in June 2022. As more new vehicles came online, used prices began to drop, with the biggest decline so far being a 27% year-over-year decline in June of this year.

Used vehicles are now 5.6% cheaper than they were a year ago, and just 0.6% costlier than two years ago. That two-year number tells us the market is getting back to normal. Prices are still above pre-COVID levels, but they’ve risen by considerably less than incomes since 2021, which means the typical worker can afford a bit more. Consider used vehicle inflation solved.

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The cost of transportation more broadly is down 3% during the last year, but is still up 13% during the last two years, mainly because the cost of gasoline and new vehicles is still elevated on a 24-month basis.

Prices have yo-yoed in a few other categories that are now also normalizing, including airfare, rental cars, appliances, and furniture. There was never much COVID-era inflation in medical care, education, toys, or electronics. Before COVID, however, the cost of healthcare and college tuition routinely rose by more than incomes, so nobody’s likely to think either of these things is suddenly a bargain.

Anybody managing a family budget will notice a couple of things conspicuously missing from this list of things getting cheaper: food and rent. Food prices are now rising at a modest 3.6% year over year, but during the last two years they’re up 17%. That’s a good example of the trend improving, but the longer-term hit of higher prices still causing pain.

Rents are up 8% since this time last year, and 15% since 2021. Housing costs are the biggest expenditure for most families, and elevated rents remain the biggest unsolved inflation problem. Most homeowners were able to lower their housing costs during the last few years, by refinancing their mortgages when rates were at record lows. Renters didn’t get that break. Help may be coming, however. A Zillow measure of rent inflation peaked last year, and has been dropping since then, which may portend lower rents as leases come due and renters re-sign or move.

Overall inflation, including all categories, is up 3.2% year-over-year and 12% during the last two years, or just two percentage points more than incomes. Housing, food, and energy are the main forces pushing that higher. In the best scenario, inflation would be low and incomes, on a sustained basis, would be rising by a little bit more than inflation.

We’re not there yet, but we’re getting closer.

Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.

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