In March, Adobe’s Digital Price Index (DPI)—a one-of-a-kind analysis of real-time consumer spending based on 15 billion website visits and 2.2 million product sales—saw a new record: four straight months of U.S. inflation. This is the longest run of rising prices in the Index’s 40-month history.
“This inflationary trend had the attention of the Federal Reserve back in their March meeting,” said Sid Kulkarni, data science analyst for the DPI. “Now that we have another month of inflation on the record, we may be approaching the Fed’s target rate for inflation, perhaps as soon as later this year. And that could have an impact on their decisions about interest rate hikes. It’s something we’ll be tracking closely over the next few months.”
Inflation for the month was 0.3 percent across all product categories covered by the DPI, driven mainly by groceries and travel. Even with this four-month-long run of rising prices, we’re still experiencing deflation of -0.7 percent year-over-year (YoY). But if the inflationary trend continues, we may soon be paying higher prices than we did in 2016, especially for some essential goods.
Rising Prices, Now at a Grocery Store Near You
Groceries were one of the key categories driving inflation this month. The rise overall was relatively small at 0.1 percent, but month-over-month (MoM) increases were significant for key staples, including cheese (0.8 percent), sugar and sweets (0.6 percent), fats and oils (0.4 percent) and meats (0.3 percent). The same categories also saw notable inflation in February.
“We’re seeing the biggest grocery price increases for some of the basics, the things that all of us who cook at home need to buy,” said Sid. “If the trend continues, people may start feeling the pinch in their pocketbooks.”
The upward trend in grocery prices also means we’re closing the gap on deflation from last year. If the pattern we’ve seen so far this year continues, within the next two-to-three months, Americans will be paying more on average for groceries than we did in 2016.
Airfare and hotels were another major factor in U.S. inflation this month. Prices for domestic flights were up 3.1 percent MoM, while domestic hotel rates rose 2.3 percent MoM. The DPI typically finds increases in these categories in early spring, but the gains were higher than expected.
“There’s been talk in the news about fewer travelers visiting the U.S., but we’re seeing higher-than-expected increases in hotel prices, which suggests that the travel market is actually quite healthy,” said Sid. “This will be a segment to watch as we enter the peak spring and summer travel seasons.”
March also saw MoM inflation in computers (0.9 percent) and appliances (0.9 percent).
Inflation Looked Similar Across the U.S., Unless You Wanted to Travel
March was the second month that we broke down our DPI analysis to view inflation state-by-state— details that the Consumer Price Index (as well as other economic measurements), do not break down. This month we found that the inflation rate was more similar across states than it was in February, driven by a level rise in grocery prices nationwide.
For those states with the highest levels of inflation—Massachusetts (0.8 percent), Alaska (0.8 percent), Washington (0.8 percent), Illinois (0.6 percent) and New York (0.6 percent)—travel was a major factor. They saw price jumps in local hotel rates and flights originating in their states.
A few states experienced minor deflation in March, with lower alcohol prices as a key reason: West Virginia (-0.2 percent), Delaware (-0.1 percent), Ohio (-0.1 percent) and Louisiana (-0.1 percent).
The Method Behind the Numbers
The data behind the Adobe DPI is sourced through Adobe Experience Cloud. It represents 80 percent of all online transactions from the top 100 U.S. retailers, including aggregated, anonymous data from 15 billion website visits and 2.2 million products sold online. Unlike the Consumer Price Index (CPI), the DPI can track real-time prices and quantities of items sold. The data also enable new insights into the economy, like our state-by-state analysis.