Inflation rates depend a lot on where you live

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The Bureau of Labor Statistics will release January inflation data later this week. Inflation rose 7% year-on-year, the biggest 12-month increase since 1982, according to the December consumer price index. However, the magnitude of the price increases varies widely from one city to another.

In Atlanta, prices rose 9.8% annually, the largest increase of any urban area surveyed by the BLS. Inflation in Detroit, at 7%, matched the US city average, while prices in San Francisco rose 4.2%, the smallest year-over-year gain of selected local areas in the BLS report. We looked behind the numbers to find out what’s driving inflation and how it’s affecting consumers and businesses in these cities.

Atlanta

Caroline Fohlin, a professor at Emory University, said the reason inflation rates vary in different parts of the country may be as simple as a cheaper area becoming a more popular place to live. More people move there and drive up prices, creating a higher rate of inflation than a city that was expensive to begin with (like San Francisco).

“When you talk about inflation, you’re talking about a growth rate of consumer products, so when you think about percentage inflation, you realize, ‘OK, well, places that were a little less ladies before, the same amount of the price increase is going to be a higher percentage,” she said.

Fohlin said there are various factors behind Atlanta’s high inflation rate, such as population growth, insufficient housing supply and labor market shortages.

Detroit

Lester Gouvia, owner of Caribbean restaurant Norma G’s Detroit, sees price increases on “probably 90% of the stuff” he buys. A 35-pound container of frying oil went from about $17 to $47, and oxtail, one of the most popular items on its menu, went from about $4.50 to $10. $ per pound. Gouvia has had to raise prices on its menu several times, but said most of its customers are understanding because they are also seeing their grocery bills go up.

In addition to food prices, Gouvia’s utility and internet costs at Norma G have risen, and he has raised the salaries of his employees. “It was difficult,” he said. “But you have to keep going, otherwise, you know, you’re closing the doors.”

San Francisco

Cynthia Cummins, founder and principal realtor of Kindred SF Homes in San Francisco, is doing her best to avoid most daily price increases “because everything is so expensive here.” Her therapist and housekeeper raised their rates by 25%, but that was no surprise to Cummins. “I didn’t even blink. I just said, ‘Sure, your rates have gone up. I understand.'”

Home prices remain high in San Francisco. According to the California Association of Realtors, the median price for a single-family home last December was $1.2 million.

“Price increases have made my work more absurd,” Cummins said. “I have to have a sense of humor when my clients write an offer, and we hear someone else has offered an extra million dollars,” she added. “The way to survive is not to take it too seriously.”

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