Americans are still feeling the pinch of the pandemic at the grocery store—on top of increased rent, utilities, and seemingly every other service. But now, more and more Americans have a sense of normalcy again, so why aren't prices returning to normal yet? And will they go down in 2024?
Supply chain bottlenecks and soaring demand for goods and services following the re-opening of the economy after the pandemic-related lockdowns sent prices for goods and services skyrocketing to four-decade highs last summer.
But over the last few months, inflation has been decelerating. In November, prices rose by 3.1 percent, lower than last month's jump of 3.2 percent, with prices for food among the cost of goods that ticked down slightly.
Groceries declined by 0.5 percent. Key products that saw a drop in prices included rice and pasta, bread, different types of meats and milk—goods that tend to be essential in households across the country.
"The two-month move in the [Consumer Price Index], which was close to unchanged, was the weakest two-month move in the index since the depth of the COVID recession in March and April of 2020," Diane Swonk, KPMG's chief economist, told Newsweek in a note.
The rise in prices propelled the Federal Reserve to hike interest rates at a breakneck pace to slow inflation.
Will Prices Drop in 2024?
Inflation has slowed and, at their gathering last week, Fed policymakers suggested that prices will continue to fall over the next year.
Things like housing costs, which in November also shot up faster than the previous month, could see a decline next year.
"Rents and homeowners' equivalent rent both advanced 0.5 [percent] during the month, a little faster than hoped," Swonk said.
However, there was an indication that Americans may be starting to see relief and could witness declines in costs over the next year.
The median ask for rent fell 2 percent in November from a year—the largest such drop in three years, according to real estate platform Redfin.
"Renters are finally catching a break," Redfin's chief economist Daryl Fairweather said last week. "Better deals are easier to come by because landlords are doling out concessions and rents have started falling in a meaningful way. Rising supply also means renters have more good options to choose from."
This drop in rent costs will start to register soon, suggested KPMG's Swonk.
"The drop in new lease prices for apartments, which takes a while to show up in new lease prices, has yet to fully make its way into pricing measures," she said.
The outlook for food prices suggests that prices are expected to decelerate from this year's highs.
Last month, the U.S. Department of Agriculture forecast food prices to increase by 2.9 percent in 2024—half from this year's rise of 5.8 percent. Meanwhile, groceries are estimated to rise by 1.6 percent compared to the 5.2 percent jump seen this year.
That outlook suggests that the cost of goods and services will be rising but at a slower rate than it has over the last two years.
Some economists are blaming companies for maintaining high prices to paddle their profits.
"Inflation is not being propelled by an overheated economy. It's being propelled by overheated profits," Robert Reich, former Labor Secretary, wrote earlier this year. "Inflation [is] driven in large part by corporations raising their prices to fatten their profits."
