GOBankingRates works with many financial advertisers to showcase their products and services to our audiences.
These brands compensate us to advertise their products in ads across our site.
This compensation may impact how and where products appear on this site.
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information.
you’ve got the option to read more about oureditorial guidelinesand our products and servicesreview methodology.
20 YearsHelping You Live Richer
Reviewedby Experts
Trusted byMillions of Readers
The July CPIinflationreading came in at 2.9%.
So why is inflation slowing?
How have high interest rates and other macroeconomic factorsaffected consumers behavior, and in turn, eased price growth?
Lower Spending on Non-Essentials
Consumers havent stopped buying but they have grown more cost-conscious.
Consumers habits do not change automatically just to reduce inflation, noted author and real estate developerJose Berlanga.
They change their buying behavior because their personal circumstances force them to do so.
And thats exactly whats played out in 2024.
A study by McKinsey & Company found lower consumer confidence coupled with lower spending on non-essentials.
Shift Toward Cheaper Alternatives
Consumers have also switched from more expensive goods and services to lower-cost alternatives.
When prices climb too much, many consumers will switch to a cheaper alternative.
He pointed to a 2024 study by Adobe showing the shift from higher- to lower-cost online purchases.
The cheapest quartile, of personal care items, saw 96% growth year over year.
The opposite also holds true: When they expectlow inflation or deflation, consumers delay purchases.
A July survey by the Federal Reserve found sharply lower inflation expectations among consumers.
Over the next three years, consumers expect a median inflation rate of 2.3%.
Unsurprising, the survey also foundlower spending expectationsamong consumers.
In fact, median spending expectations dropped to the lowest level since April 2021.
When consumers pull back on spending, companies lower prices to spur sales.
Reluctance To Buy Homes
Real estate prices follow thesame market forces.
Sure enough, a July report from Zillow found thathome value growthhit a 14-year low.
Stearn wrapped it up: If you were part of this trend ofmore conscientious spending: Nice work!
You helped lower inflation.
More From GOBankingRates
Share This Article:
