Cooling inflation doesn’t mean a drop in prices

Inflation has eased significantly, dropping from a peak of 9.1% last year to 3.1% in November. But people are still unhappy about the economy, according to a recent Gallup poll. Why?

Many people point to the high grocery prices and medical bills. They were looking forward to seeing costs plummet as inflation cooled.

But that is not what happens when inflation slows down.

Disinflation isn’t deflation
Cooling inflation is called disinflation. It means the prices don’t rise fast. What the US is experiencing now is disinflation.

Deflation means the prices fall lower than before. For example, gas prices fell during the pandemic due to fewer people driving. That is deflation. However, it is generally not desired as it can hinder economic growth.

If the cost of buying a smartphone is less next year than this year, people will hold off on purchasing, which will decrease sales and employment and slow down the general economy.

Although overall prices are rising, individual items like eggs (-22%), smartphones (-14%), and airfares (-12%) have experienced price decline this year, according to the US Bureau of Labor Statistics data.