Phoenix inflation is the highest in the United States, according to the Common Sense Institute
Nobody likes to pay more for less. But if you live in the Phoenix metro area, you do just that.
Inflation there is higher than anywhere else in the country, according to a recent study of the Common Sense Institute, a nonpartisan, nonprofit think tank based in Phoenix.
Inflation is hitting all Americans, but no more so than Arizonans who have faced an unprecedented price spike of 10.9% over the past 12 months, 3 points higher than the rest of the country.
“It has a significant impact on the typical household,” said Jim Rounds, a Tempe-based economic analyst. Phoenix New Times. “This is close to the worst it’s going to be.”
In February 2021, a gallon of gasoline in Arizona cost $2.25. Today it’s $4.63, more than double, according to AAA.
“The gas price issue is a real issue,” Rounds said. “It has an impact when you’re buying milk or cheese, because those items have to be transported.”
Yet it’s not just fuel prices that are on the rise, dripping past the gas pump onto grocery store shelves.
Remember when a gallon of milk is $1.98 in Phoenix last year? Today, Valley residents aren’t likely to get a gallon of whole milk for their Apple Jacks for less than $3.26, according to the United States Department of AgricultureMarch report.
Inflation is a growing problem in the Phoenix metro area.
Since October, prices of basic necessities have jumped at least 1% every month.
Phoenix lends itself to unprecedented inflation due to its rapidly growing economy, Rounds said. Stronger economic growth leads to greater demand for products.
This does not bode well for Valley residents as businesses continue to struggle to get food, drink, clothing and sundries to consumers amid soaring fuel prices and shortages. of shipping containers, among other issues.
“A high-growth region like greater Phoenix is under more pressure to deliver to consumers,” Rounds said. “But at the moment it can’t.”
It all started with the pandemic.
Demand for gasoline, recreation and services plummeted as a mass exodus from the office locked people at home in isolation. When people returned to work last year, demand reverted to something resembling the pre-coronavirus norm.
Supply, however, still lags behind.
“COVID still has an impact on what’s happening right now,” Rounds said. “It’s causing this lingering effect that hits the wallets of every household in Arizona.”
Inflation has an outsized effect on low-income people, say economists.
According to the Common Sense Institute study, the average household in the Valley spends an additional $4,462 on food, shelter, transportation, medical care and other goods and services compared to a year ago.
Since February 2021, all items have increased in price. Fuel has increased by 44% and energy by 29% in Arizona, the study finds.
The study, citing the US Bureau of Labor Statistics, also points out that housing costs have jumped by more than 12%, almost three times more than the rest of the country.
“Housing affordability is a major issue,” Rounds said. “House prices are rising here more than anywhere else.”
In 2020, the cost of energy, clothing, raw materials, education, durable goods, recreation and transportation have all gone down. Annual inflation from 2010 to 2019 averaged just 2% in Arizona.
A lot has happened since then.
“The Ukrainian crisis and the US response to it are likely to put additional pressure on commodity, energy and gas prices,” the researchers of the recent study concluded. “For these reasons, we believe further consumer price inflation is likely over the next three to six months, rather than an easing.”
Rounds says it could take until the end of the calendar year for rapid inflation to subside in metro Phoenix.
Other experts predict early 2023.
“It’s going to be sticky for a little while,” Rounds said. “Prices will remain stuck at this higher level for some time to come.”
In January, the Phoenix metro area recorded the second highest inflation after the Atlanta metro area. But inflation has risen more than 2% since then, putting the Valley of the Sun at the top of the list.
Rounds advises low-income people in the Valley to make a conscious effort to live within their means, but not to stop spending altogether.
The good news, he says, is that Phoenix has one of the strongest economies in the country.
“There is a light at the end of the tunnel,” he said. “We will get there.”