Deflating Goods: A Puss in Boots Perspective

Deflation Hits Physical Goods

Oh how the times have changed! Inflation seems to be taking a backseat as certain categories of physical goods are deflating. That's right friends prices are actually going down instead of up! I must say it's quite a turn of events. According to those smart economists demand for goods shot up during the COVID 19 pandemic but now that things are slowly returning to normal the supply is catching up and prices are falling back down to earth. It's a game of supply and demand my dear readers!

Back to the Pre Covid Era

Ah the good old days! We're reverting back to the pre Covid era where people focused more on services rather than buying physical goods. You know those tangible objects that you can touch and feel like my beloved boots! Haircuts and veterinary visits fall under services my friends. So it seems that the demand for goods is dipping as people shift their spending towards services once again.

Deflating Prices and Funny Figures

Let's talk numbers shall we? Prices for various physical goods have experienced some serious deflation. I'm talking about furniture and bedding ( 2.9%) major household appliances ( 7.3%) men's suits sport coats and outerwear ( 5.3%) girls' apparel ( 9%) video and audio products ( 5.8%) sporting goods ( 1.1%) toys ( 4.2%) and even college textbooks ( 5.7%). Oh and let's not forget about used cars and trucks which have deflated by a whopping 3.5%! Those are some seriously funny figures if you ask me!

The Deflationary Factors Unmasked

So what's causing this deflation frenzy? Well my dear readers it's a combination of things. The normalization of supply and demand dynamics is certainly playing a role but let's not forget about the strong U.S. dollar. It's flexing its muscles and making it cheaper for companies to import goods from overseas. Oh and falling energy prices are also in the mix reducing transportation and manufacturing costs. It's like a perfect storm of deflationary factors!

But Beware Houthi Mischief Looms

Ah those pesky Houthi militias! Just when we thought deflation was here to stay they go and cause mischief by attacking merchant vessels in the Red Sea. If those disruptions continue we might see a reversal of some goods deflation. Oh the drama! It's enough to make a swashbuckling cat like me reach for his sword!

Services Are Holding Strong

While physical goods are deflating left and right services are holding their ground. You see my friends the average American spends two thirds of their budget on services rather than goods. Sure there's been some disinflation (a slower rise in prices) in the services sector but it hasn't quite dipped into deflation territory like core goods. Services businesses are more sensitive to labor costs and with the job market heating up wages are on the rise. So services are standing tall while the goods deflate!