One of the things that's helped bring inflation down is a sustained drop in the cost of imports. Take a look at the latest figures:
Starting in February, the supply chain pressure index went negative, indicating that supply chain issues were all but gone. At the same time, imports became deflationary. They didn't just flatten: stuff from overseas costs less today than it did a year ago. Import prices in June were 6.1% lower than last year, and even core imports were 1.5% lower.
And this has all happened without an especially strong dollar to help it along. What's happened is simple: when production cratered during the pandemic, supply declined and imports therefore cost more. Once everything recovered, however, there was no reason to think that goods would stay at high prices. Instead, with supply restored to normal, prices are falling back to their old levels.
This is different from what happens during a monetary inflation: Even when the inflationary episode ends, there's still way more money sloshing around in the system and prices remain at high levels. They just stop going up.
This is yet more evidence, as if any more were needed, that pandemic inflation was not normal inflation. It was not the '70s; it wasn't even the '50s. It was purely artificial, caused by a virus that killed off supply along with fiscal stimulus that maintained demand. When the virus and the stimulus went away, so did inflation.
Coincidentally, Temu came up in September and the subsidized model of direct exports to consumers has begun in earnest, following on the heels of Shein's brick and mortar (and pop-up) stores skipping the middle man and bringing fast fashion home to the poorest Americans.
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Another reason why this was not your father's or even grandfather's inflation is the vulture snatch-and-grab behaviour of present-day bizness. A company costing in an extra 30% because they thought they could get away with it would have resulted in (so I was told and so I hope) severe penalties levied on the do-badder. Not so today, of course; the common man has a lot less power and corporate entities a lot more.
Hasn't the dollar strengthened recently, and the Chinese currency gotten weaker?
Came here to say something similar. The RMB is the weakest it's been in ages vs. the dollar. The US still importants tens of billions worth of goods from China every month, so cheaper Chinese products must have a material effect on the overall cost of US imports.
Not sure about Kevin's claim here - the import price index is still 12% above prepandemic values (though as always, it depends on what time-point you choose). So are we going back to normal or merely coming off an overshot?
(data link here - https://tradingeconomics.com/united-states/import-prices - click on 5-year or more; or https://fred.stlouisfed.org/series/IR -- note, BTW, that it doesn't go back to the 70's 😉 )
This is a specific case of my general problem with inflation discussions: when you say "inflation is now at 0" it just means that we've baked in the x% increase in prices that happened last year. That's quite different than saying that prices have "gone back to normal" -- after all, why not show a 2-year or n-year inflation rate, or as I did above, compare it to a "significant" starting point (pre-pandemic)? Especially in this case where the question is how much of recent economics was just a blip due to COVID?
Chinese prices are virtually stable after 2.5% inflation last year. That alone represents a hefty real cut in $US prices (and no doubt explains why the trade deficit with China is back to pre-trade war levels).