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No longer a bargain? Inland Empire is inflation hot spot, CPI says

”Survey says” looks at various rankings and scorecards of geographic locations while noting these grades are best seen as a mix of art and data.

Buzz: Like the weather, summer’s inflation spurt is hotter inland.

Source: My trusty spreadsheet analysis of 23 metropolitan areas tracked by the Consumer Price Index looks at recent inflation rates and compares them with pre-pandemic conditions in the 12 months ended February 2020.

Note: The CPI figures used are an average of June and July because just three regions have monthly indexes — Los Angeles-Orange County, New York-New Jersey and Chicago. The other 20 get inflation calculations are every other month.

Details

The Inland Empire is a national inflation hot spot. Its cost-of-living is soaring at a 6.5% annual rate — tied for third-highest among the 23 metros.

The spike is not terribly new. In the 12 months before coronavirus upended the economy, inflation in Riverside and San Bernardino counties averaged 2.9% — No. 4 nationally. Still, this translates to a pandemic era inflation jump of 3.6 percentage points, the eighth-largest bump of the 23 metros.

Conversely, L.A.-O.C. inflation looks relatively mild at 3.95% in June-July, fourth-lowest among the metros. It’s not much of a pandemic change, either, by CPI math.

In the year before COVID-19 arrived, L.A.-O.C. inflation averaged 3.13% — then second-highest — and the increase since of just 0.82 points is the second-smallest hike nationally.

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There are some curious storylines in this inflation scorecard. Let’s consider who’s at the top.

The Inland Empire joins some high-profile, fast-growth markets usually considered “affordable” that now suffer from lofty inflation rates …

No. 1 Atlanta: The nation’s highest annual rate was 6.7% in June-July vs. 2.5% in the 12 months before coronavirus. So the pandemic pumped up inflation by 4.2 points, the fourth-biggest jump.

No. 2 Tampa: 6.6% vs. 2.2% pre-virus — up 4.4 points, No. 3 gain.

No. 3 (tie with I.E.) Minneapolis: 6.5% vs. 2.4% pre-virus — up 4.1 points, No. 5.

Next, ponder who joined L.A.-O.C. at the bottom of this ranking. It’s a group of established large metros, largely on the coasts, with long histories of high-cost living …

No. 17 Baltimore: 4.5% in June-July vs. 1.6% in the year before virus — up 3 points, the 16th biggest hike of the 23.

No. 18 Washington: 4.4% vs. 1.4% pre-virus — up 3 points, No. 15 gain.

No. 19 Boston: 4.3% vs. 2% pre-virus — up 2.3 points, No. 18.

No. 21 New York: 3.8% vs. 1.8% pre-virus — up 2 points, No. 20.

No. 22 Denver: 3.5% vs. 2.4% pre-virus — up 1.1 points, No. 21.

No. 23 San Francisco: 3.2% vs. 3.1% pre-virus — the smallest gain.

By the way, San Diego’s 6% latest rate was the seventh-highest nationally. Compared with 2.3% inflation in the year before the virus, the 3.7-point jump was seventh-biggest.

Caveat

First of all, some critics are not big fans of the CPI as an inflation yardstick in general. They claim it underestimates jumps in the cost of living for varied reasons.

For example, take housing expenses — the largest element in the CPI. By this math, the cost of putting a roof above your head rose 4.3% in the past year in the Inland Empire but just 1.6% in L.A.-O.C. Does that sound odd?

Plus, these regional gaps must be seen with a long lens. Yes, the I.E. rate is the highest in its inflation index’s three-year history. And while it’s above its coastal neighbors, the last time L.A.-O.C. had a higher rate was 2008. So these are noteworthy price hikes everywhere.

Finally, the Federal Reserve, the central bank empowered to watch the cost of living, somehow insists the recent inflationary upswings seen in many measurements are temporary conditions. Why? The Fed thinks it’s primarily due to fixable supply-chain hiccups and a rebound from deep discounting required to sell goods and services in mid-2020 when coronavirus was icing much of the economy.

Bottom line

Like many economic trends in this pandemic era, the overall picture has many geographical twists.

The CPI stats suggest that a few under-the-radar metros known for “affordability” now are hammered by the cost of being discovered. It seems growing populations and workforces are outstripping supplies of local goods and services and creating an inflation problem.

Does that mean places such as the Inland Empire will face losing some of that low-cost financial appeal?

If you think of inflation as one measurement of a region’s economic heat, the extremes of this latest CPI ranking appear to mirror other snapshots of local business climates. And in the pandemic era, the upstart places have all the mojo.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com


Source: Orange County Register

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