Grocery prices are continuing to drive up online inflation

Online inflation slowed for the second consecutive month in May driven by lower prices on electronics and apparel, but grocery prices remained elevated, according to Adobe Digital Price Index.

The online pricing measure was released Thursday ahead of the government’s May report on the US consumer price index, which has been posting nearly 40-year highs for inflation. The consumer price report is due out Friday.

Overall prices online in May declined 0.7% from April, according to Adobe Analytics, which tracks 1 trillion visits to retail sites and more than 100 million items shopped online. May’s year-over-year increase of 2% for online inflation follows a 2.9% increase in April and a record increase of 3.6% in March.

The past two years of rising prices online reversed a trend of prices historically dropping 5% a year online, based on Adobe’s index. The research firm has attributed higher prices to supply chain issues.

Shoppers are also curtailing spending online. Consumers spent $78.8 billion online in May and $77.8 billion in April, but well below the $83.1 billion spent in March, which was up 8.9% from a year ago.

Despite a modest increase in consumer spending last month, the uncertain economy and rising costs in core areas like groceries has lowered demand.

“Slower consumer spending on discretionary items has driven slower, single-digit e-commerce growth since March, and this pullback mirrors the easing in online inflation,” said Patrick Brown, Adobe’s vice president of growth marketing and insights.

Electronics – the biggest merchandise category in e-commerce by share of spending – posted a 1.4% decline in May of April and a 6.5% decline from a year ago.

Apparel prices were down 1.5% in May from April and up 9% from a year ago. Past months had recorded double-digit year-over-year percent increases for apparel.

Heavy discounting in apparel is expected as retailers are left with inflated inventories due to planning misses and arriving shipments past seasons. Walmart said it had cut apparel prices in the first quarter and Target said this week that it’s slashing prices on apparel and other categories to move excess inventory.

Grocery prices continue to surge and rose 1.3% in May from the prior month and 11.7% from a year ago. That was a new record for online food inflation, Adobe said. It was also the first month that online grocery prices have risen more than apparel.

Twitter: @MariaHalkias

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