Impact of retail price reductions on inflation

According to federal inflation data, prices have decreased on a variety of goods such as cars, furniture, appliances, sporting goods, and dairy products over the past year. However, the part of the economy that is still experiencing rapid price increases is in services like housing, health care, and insurance. Despite efforts to bring down these prices, they have been more difficult due to their reliance on workers who have recently received pay raises. Inflation has increased by 3.4 percent compared to a year ago with some services still experiencing double-digit growth.

Retail analyst Sucharita Kodali of Forrester suggests that these price cuts will not significantly impact inflation since the current highest inflation rates are in housing, medical services and gas prices. However, these price cuts may affect consumers’ perceptions of prices when they shop in mass retail stores. Perception of price is often more important than actual price changes for consumers.

By Sophia Gonzalez

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