Personal Finance

Here’s the deflation breakdown for July 2024 — in one chart

Published

7 months ago

August 15, 2024

Business Finance News

Fotostorm | E+ | Getty Images

Inflation cooled below 3% in July 2024, the first time it dropped beneath that level in more than three years.

While many areas of the U.S. economy are dis-inflating — meaning their prices are still rising, though at a slower rate — some have been outright deflating. That means their prices have actually declined.

Deflation has largely occurred for physical goods, though it has also appeared in categories like airline fares, gasoline and various food items, according to the consumer price index.

These are “micro pockets” of deflation, said Joe Seydl, senior markets economist at J.P. Morgan Private Bank.

But the deflationary dynamic is less widespread than it was earlier in the pandemic, when the unwinding of contorted supply-and-demand dynamics made it more pronounced, economists said.

“Broadly speaking, deflation for various items is increasingly less broad-based,” said Mark Zandi, chief economist of Moody’s.

Consumers shouldn’t expect a broad and sustained fall in prices across the U.S. economy. That generally doesn’t happen unless there’s a recession, economists said.

Why goods prices have fallen

“Core” goods — commodity prices excluding those related to food and energy — have declined by about 2% since July 2023, on average, according to CPI data.

They fell 0.3% during the month, from June to July 2024.

Demand for physical goods soared in the early days of the Covid-19 pandemic as consumers were confined to their homes and couldn’t spend on things such as concerts, travel or dining out.

The health crisis also snarled global supply chains, meaning goods weren’t hitting the shelves as quickly as consumers wanted them.

Such supply-and-demand dynamics drove up prices.

The environment has changed, however.

To that point, the initial pandemic-era craze of consumers fixing up their homes and upgrading their home offices has diminished, cooling prices. Supply-chain issues have also largely unwound, economists said.

Furniture and bedding prices are down more than 5% since July 2023, according to CPI data. Prices have also fallen over the past year for dishes and flatware (down about 8%), laundry equipment (-6%), nonelectric cookware (-10%), toys (-3%), and tools and hardware (-1%), according to the CPI.

Apparel prices are also down, for men’s and women’s outerwear (-12% and -4%, respectively), and infants and toddlers (-4%), for example.

Prices for new and used vehicles have fallen by 1% and 11%, respectively, since July 2023. Car and truck rental prices have deflated about 6%.

Car prices were among the first to surge when the economy reopened broadly early in 2021, amid a shortage of semiconductor chips essential for manufacturing.

“Vehicle prices remain under pressure from improved inventory and elevated financing costs,” Sarah House and Aubrey George, economists at Wells Fargo Economics, wrote in a note last month.

The economy does not look like it's in a recession, says New Century's Claudia Sahm

Higher financing costs are the result of the Federal Reserve raising interest rates to tame high inflation. Economists expect central bank officials to start cutting rates at their next policy meeting in September.

Outside of supply-demand dynamics, the U.S. dollar’s strength relative to other global currencies has also helped rein in prices for goods, economists said. This makes it less expensive for U.S. companies to import items from overseas, since the dollar can buy more.

Long-term forces like globalization have also helped, such as importing more lower-priced goods from China, economists said.

Deflation for airfare, food and electronics

Daniel Garrido | Moment | Getty Images

Airline fares have declined about 3% over the past year, according to CPI data.

The drop is partly attributable to a decline in jet fuel prices, said Stephen Brown, deputy chief North America economist at Capital Economics. Average aviation jet fuel prices are down about 17% from last year, according to the International Air Transport Association.

Airlines have also increased the volume of seats available on domestic routes, largely by flying bigger planes, Hayley Berg, lead economist at travel site Hopper, wrote in April.

This summer, “we’ve repeatedly seen airlines slash prices on many routes for travel in the next few months,” wrote Gunnar Olson, flight deal analyst at Thrifty Traveler. “It’s led us to declare that this is the best summer ever for travel.”

Grocery prices have fallen for items such as cereal, rice, bread, ham, fish, cheese, ice cream, potatoes, apples, bananas, margarine and snacks, according to CPI data.

Each grocery item has its own supply-and-demand dynamics that can influence pricing, economists said. For example, apple prices have deflated almost 15% in the past year due to a supply glut.

Additionally, there have been more price promotions lately at grocery stores, with a few “major retailers recently announcing price cuts that are likely to pressure competitors’ pricing,” wrote House and George of Wells Fargo.

Other categories’ deflationary dynamics may be happening only on paper.

For example, in the CPI data, the Bureau of Labor Statistics controls for quality improvements over time. Electronics such as televisions, cellphones and computers continually get better, meaning consumers generally get more for the same amount of money.

That shows up as a price decline in the CPI data.

Personal Finance

DOGE actions may cause Social Security benefit ‘interruption’: ex-agency head

Published

24 minutes ago

March 1, 2025

Business Finance News

Then Social Security Commissioner Martin O’Malley testifies before the Senate Committee on the Budget on Sept. 11, 2024.

Anna Rose Layden | Getty Images News | Getty Images

Social Security has never missed a benefit payment since the program first began sending individuals monthly benefits more than eight decades ago.

But the recent actions at the U.S. Social Security Administration by Elon Musk‘s so-called Department of Government Efficiency are putting monthly benefit checks for more than 72.5 million Americans at risk, former commissioner and former Maryland governor Martin O’Malley told CNBC.com.

“Ultimately, you’re going to see the system collapse and an interruption of benefits,” O’Malley said. “I believe you will see that within the next 30 to 90 days.”

Ahead of any interruption in benefits, “people should start saving now,” O’Malley said.

The Social Security Administration uses multiple systems and technologies that Elon Musk has criticized for leading to errors. As commissioner, O’Malley told Congress the agency needed more funding for IT modernization.

O’Malley said DOGE leaders are now making changes at the agency, and significant staff cuts have already led to system outages. Those intermittent IT outages may happen more frequently and for more extended periods of time until there is a “system collapse and an interruption of benefits,” he said.

Neither the Social Security Administration nor the White House responded to requests for comment by press time.

Social Security Administration leadership upheaval

The Department of Government Efficiency, also known as DOGE, is not a federal department. And Musk, whom President Donald Trump brought on board to implement DOGE, is not an elected official.

Since its establishment, DOGE has looked to slash spending at federal government agencies.

Top Social Security official exits after refusing DOGE access to sensitive data

The cuts have led to leadership upheaval, with the recent resignation of acting commissioner Michelle King following a reported disagreement over DOGE’s access to sensitive data. O’Malley resigned from the Social Security Administration in November to run for chairman of the Democratic National Committee, a race which he lost to Minnesota Democrat Ken Martin.

Trump has nominated Frank Bisignano, CEO of financial-technology company Fiserv, to serve as the new commissioner of the Social Security Administration. Bisignano has yet to sit for Senate confirmation hearings.

In the interim, Lee Dudek, who first joined the agency in 2009, has been appointed acting commissioner.

Earlier this month, Dudek posted on LinkedIn that he had been placed on administrative leave from the agency for helping DOGE representatives, The Wall Street Journal reported on Feb. 20.

“Our continuing priority is paying beneficiaries the right amount at the right time, and providing other critical services people rely on from us,” Dudek said in a Feb. 19 statement about his appointment.

Whose benefits may be most at risk

Yet experts say the benefits Americans rely on could be at risk based on the Trump administration’s overhaul of the agency.

“The American public needs to understand that one of their major social safety nets is in dire jeopardy,” said Jill Hornick, a union official at the American Federation of Government Employees Local 1395, which primarily represents Social Security offices in Illinois.

“It’ll take a while for the effects to be felt, but they’re coming,” Hornick said, predicting what will happen to Social Security is going to be “far worse” than the planned cuts to Medicaid.

For people who are already receiving Social Security benefits, most of that is automated and may not be affected, she said. However, processing new claims — whether it be for retirement or disability benefits — may take longer since those cannot be processed without Social Security employees, she said.

On Thursday, the Social Security Administration sent a notice to employees that gives them until March 14 to decide whether to take an early buyout. Unlike a previous January offer, this now includes service employees, and staffing reductions in that area may impact how quickly the agency processes benefit claims and provides other services, Hornick said.

For example, if a woman files for a survivor benefit after her husband passes away, she needs to provide a copy of her marriage license. A Social Security employee then needs to code the system to verify they have seen that document and the applicant is eligible for benefits, Hornick said.

“Not everybody can do things electronically,” particularly the older adults and disabled individuals who the Social Security Administration serves, said Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare.

“If you don’t have people to run an agency that requires hands-on customer service, then of course there’s a risk that you could end up with benefits being either denied or interrupted,” Freese said.

Office closures may reduce access to services

The DOGE savings web page has a list of about 45 Social Security locations where leases will be terminated, according to Rich Couture, spokesperson for AFGE SSA General Committee, a union that represents 42,000 Social Security employees nationally.

The list provides little information on the uses for the locations that are being closed. Based on the square footage listed, they may be sites used to conduct in-person hearings for disability benefits, Couture said. In one case, the location seems to be a busy New York state field office that provides general services, he said.

“If they’re going to close these offices that are busy in highly populated areas, it would suggest to me that there’s no office in this country that would be safe from having a lease terminated, especially in rural areas,” Couture said.

Fiserv CEO on the nomination to Social Security Commisioner role

In a recent statement, Rep. John Larson, D-Conn., said the moves are a “backdoor benefit cut.”

“Let me be clear — laying off half of the workforce at the Social Security Administration and shuttering field offices will mean the delay, disruption and denial of benefits,” Larson said.

In a statement to CNBC.com earlier this week, the Social Security Administration said it has not set any reduction targets, in response to reports it plans to cut 50% of its employees.

As a union, AFGE has been issuing bargaining demands in response to the agency’s recent decisions and plans to enforce employee rights through other methods as necessary, spokesperson Couture said.

While many lawsuits have been filed, it will take time to work through them, especially as the courts are now being flooded with cases tied to the Trump administration’s actions, said Nancy Altman, president of advocacy organization Social Security Works.

The biggest results may come from the pressure American voters could put on elected officials, former SSA commissioner O’Malley said.

“I think many people throughout the country are going to start bringing a lot of heat to members of Congress who have been facilitating, supporting, aiding and abetting the breaking of their Social Security and the interruption of benefits that they work their whole lives to earn,” he said. “These are earned benefits.”

Personal Finance

As the price of bitcoin falls, you can leverage this tax loophole

Published

17 hours ago

February 28, 2025

Business Finance News

Jaque Silva/ | Nurphoto | Getty Images

With the price of bitcoin down from a record high in January, there’s a chance for some investors to score a tax break, experts say.

Following a post-election rally, the flagship digital currency touched $109,000 on inauguration day before falling in February. As of midday Friday, the price was around $84,000, after dipping below $80,000 overnight, according to Coin Metrics.

The latest selloff presents a tax planning opportunity, including a “loophole” that could go away amid Congressional tax negotiations, according to Andrew Gordon, a tax attorney, certified public accountant and president of Gordon Law Group.

The strategy, known as “tax-loss harvesting,” allows you to offset profitable investments by selling declining assets in a brokerage or other taxable account. Once your losses exceed gains, you can subtract up to $3,000 per year from regular income and carry excess losses into future years.

Some investors wait until December for tax-loss harvesting, which can be a mistake because asset volatility, particularly for digital currency, happens throughout the year, experts say.

“You should look for these opportunities continually and take advantage of them as they occur,” Gordon said.

You should look for these opportunities continually and take advantage of them as they occur.

Andrew Gordon

President of Gordon Law Group

The crypto wash sale ‘loophole’

When selling investments, there’s a wash sale rule, which blocks you from claiming a loss if you repurchase a “substantially identical” asset within a 30-day window before or after the sale.

But currently, the wash sale rule doesn’t apply to cryptocurrency, which can be beneficial for long-term digital currency investors, experts say.

“If you sell, for instance, bitcoin at a loss today and then buy it back tomorrow, you still have your loss on the books,” Gordon said. “This is an extremely effective strategy for crypto investors because they don’t have to exit their position.”

However, the strategy could disappear in the future as Congressional Republicans seek ways to fund President Donald Trump‘s tax agenda.

Sens. Cynthia Lummis, R-Wyo. and Kirsten Gillibrand, D-N.Y., in 2023 reintroduced a regulatory framework for cryptocurrency, which included closing the crypto wash sale loophole. Former President Joe Biden‘s fiscal year 2025 budget also included the proposal.

In the meantime, “the IRS gives us this loophole. We may as well take it,” Adam Markowitz, an enrolled agent at Luminary Tax Advisors in Windermere, Florida, previously told CNBC.

Of course, you should always consider your investing goals and timeline before implementing the tax strategy.

Personal Finance

Americans are suffering from ‘sticker shock’ — here’s how to adjust

Published

23 hours ago

February 28, 2025

Business Finance News

A worker stocks eggs at a grocery store in Washington, D.C., on Feb. 12, 2025.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Whether it’s a dozen eggs or a new car, Americans are having a hard time adjusting to current prices.

Nearly all Americans report experiencing some form of “sticker shock,” regardless of income, according to a recent report by Wells Fargo.

In fact, 90% of adults said they are still surprised by the cost of some goods, such as a bottle of water, a tank of gas, dinner out or concert tickets, and said that the actual costs are between 55% and 200% higher than what they expected depending on the item.

Many Americans are still cutting back on spending, making financial choices and delaying some life plans, the Wells Fargo report also found. The firm polled more than 3,600 consumers in the fall.

“The value of the dollar and what it is providing may not be as predictable anymore,” said Michael Liersch, head of advice and planning at Wells Fargo. As a result, “consumer behaviors are shifting.”

Still, adjusting to a new normal takes time, he added: “Habit formation does take a while. Next year what you can imagine seeing is consumers being a little less surprised or shocked by prices and adapting to the current situation to create that goals-based plan.”

Some change is already apparent. Although credit card debt recently notched a fresh high, the rate of growth slowed, which indicates that shoppers are starting to lean less on credit cards to make ends meet in a typical month, according to Charlie Wise, TransUnion’s senior vice president of global research and consulting.

“After years of very high inflation, they are kind of figuring it out,” Wise said. “They’ve adjusted their baseline for what things cost right now.”

But with President Donald Trump‘s proposed 25% tariffs on imports from Canada and Mexico set to take effect in March, there is also the possibility that prices will rise even further in the months ahead.

Consumers fear inflation will pick up

Mexico and Canada tariffs could put pressure on some consumer staples, experts say. That includes already high grocery prices, which are up 28% over the last five years, according to the Bureau of Labor Statistics.

The prospect of tariffs and renewed inflation is weighing heavily on many consumers.

The Conference Board’s consumer confidence index sank in February, notching the largest monthly drop since August 2021. The University of Michigan’s consumer sentiment index similarly found that Americans largely fear that inflation will flare up again.

A recent CreditCards.com survey found that 23% of Americans expect to worsen or go into credit card debt this year, in part because they are making more purchases ahead of higher tariffs.

How to battle sticker shock

Consumer savings expert Andrea Woroch recommends setting a spending plan and tracking expenses. That helps you pinpoint wasteful purchases and those where prices are accelerating and take steps to save.

“Write out all your expenses currently from those essentials and the wants, figuring out an average monthly spend for fluctuating categories,” she said. “Once you have it all listed out, you can begin hacking away at unnecessary purchases or at least set goals for reducing in those nonessential categories.”

Identify triggers that lead to impulse purchases to help dodge them in the future, Woroch also said. “If you can’t resist a sale, then unsubscribe from store newsletters and turn off push notifications in deal apps.”

Ultimately, being more in control of your spending will “reduce the stress that comes with worry about how you’re going to afford higher prices,” Woroch said.