Adobe: Online inflation returns in August

Consumers dreading August due to the impending end of summer had another reason to be unhappy with the eighth month of the year.

Online prices increased 0.4% year-over-year and 2.1% month-over-month in August 2022, according to the latest Adobe Digital Price Index (DPI). This marked a comeback for online inflation after the DPI recorded declining prices in July 2022, dropping 1% year-over-year following 25 previous straight months of online inflation.

Online grocery prices seeing their highest annual increase (14.1% year-over-year) during the month, while electronics prices continued to drop (10% year-over-year). Consumer spending online in August reached $64.6 billion, an increase of 6.5% year-over-year, which Adobe says attests to the strength of the digital economy overall.

DPI data indicates online inflation in August was driven by groceries, where prices rose 14.1% year-over-year (YoY) and 1.1% month-over-month (MoM), another record YoY high recorded by Adobe for the category. Apparel prices also contributed, rising 4.9% YoY (up 8.7% MoM) as seasonal promotions fade.

Prices for apparel had fallen 1% YoY in the month prior (July), driven in part by back-to-school discounts and oversupply for certain retailers. Personal care products also saw a notable uptick in August, with prices rising 2.7% YoY (up 1.1% MoM), the highest YoY increase recorded by Adobe since March 2021, when prices hit a record high at 3.6% YoY.

Categories such as electronics have kept topline inflation (up 0.4% YoY) below one percent, with prices falling significantly at 10% YoY in August (down 0.9% MoM). Computers have also contributed, with prices falling 12.6% YoY (down 2.3% MoM).

Notable categories in the Adobe Digital Price Index for June:

• Groceries: Prices continued to surge and rose 14.1% YoY (up 1.1% MoM), more than any other category. This represented a new record on an annual basis, following a series of record highs: 13.4% YoY increase in July, 12.4% YoY increase in June, and an 11.7% YoY increase in May. Grocery prices have risen for 31 consecutive months, according to DPI data, and it remains the only category to move in lockstep with the Consumer Price Index on a long-term basis.

• Apparel: Prices were up 4.9% YoY (up 8.7% MoM), after falling for two consecutive months (down 1.0% YoY in July, down 0.1% YoY in June). The category is seasonal in nature, according to Adobe, driven by heavier discounting periods as retailers make way for new inventory.

• Personal care products: Prices were up 2.7% YoY (up 1.1% MoM), the highest increase since March 2021, when the category hit a record high and rose 3.6% YoY. Prices for the category have remained consistently elevated since September 2020, with only one month (November 2021) seeing a price drop at 0.9% YoY. Demand for personal care products has risen in tandem with online grocery shopping, as the two categories often share the same e-commerce basket, Adobe said. 

• Electronics: Prices were down 10% YoY (down 0.9% MoM), falling faster than pre-pandemic levels when electronic prices fell 9.1% YoY on average between 2015 and 2019. Prices have fallen consistently since December 2021 (down 2.6% YoY) and accelerated in recent months (down 9.3% YoY in July 2022, down 7.3% YoY in June 2022). 

• Computers: Prices were down 12.6% YoY (down 2.3% MoM), the biggest drop since the beginning of the COVID-19 pandemic in March 2020. Computer prices have fallen online for 20 consecutive months, and now outpace pre-pandemic levels when prices fell 9.2% on average between 2015 and 2019.

“The modest uptick we see in online prices for August was driven in large part by rising food costs that show no signs of abating, just as seasonal discounts in a category like apparel phased out through the end of summer,” said Patrick Brown, VP of growth marketing and insights, Adobe. “Consumer demand for e-commerce also remains steady and will keep prices elevated, especially for growing categories such as groceries, pet products, and other consumer staples.” 

The Adobe DPI is modeled after the Consumer Price Index (CPI), published by the U.S. Bureau of Labor Statistics and uses the Fisher Price Index to track online prices. The Fisher Price Index uses quantities of matched products purchased in the current period (month) and a previous period (previous month) to calculate the price changes by category. Adobe’s analysis is weighted by the real quantities of the products purchased in the two adjacent months.