Supply is increasing though through mining. Stolen coins are still coins. And there's no way that lost coins are out pasing newly mined coins. True loss/data destruction/inaccessibility is fairly rare.

Even in the Bitcoin community it's a huge misconception that Bitcoin is somehow inherently deflationary. The supply increases predictably through mining. It can be price deflationary when demand exceeds supply. But there is nothing inherent or guaranteed about that at all.

Bitcoin is inflationary, with a predictable inflation schedule.