Key Points
- As shoppers await price cuts, retailers like Home Depot say their prices have stabilized and some national consumer brands have paused price increases or announced more modest ones.
- Yet some industry watchers predict deflation for food at home later this year.
- Falling prices could bring new challenges for retailers, such as pressure to drive more volume or look for ways to cover fixed costs, such as higher employee wages.
They don’t HAVE to go up, but inflation is helpful to the economy and deflation is harmful. With deflation everyone stops spending because their dollar will buy more tomorrow, and that lack of activity hurts the economy.
With a little bit of steady inflation it encourages spending, but wages tend to keep up so it doesn’t actually hurt people.
Also those times when inflation outpaces wage growth are theoretically helpful (in a market that doesn’t have other failures) because if wage growth has stalled that means the value of that labor to the employer has decreased, and inflation helps reset that value calculation without making it a normal thing for companies to reduce your wage at an annual review, think of how hard that would be to budget for.