Federal Reserve chair Jerome Powell says the high inflation seen in 2021 is a temporary side effect of the consumer economy finding its way out of the pandemic recession and grappling with global supply and delivery problems. But Powell may be in an economic minority as inflation in the United States continues to grow faster than the public and many economists are comfortable with. While prices for many common goods are rising across the country, the inflation isn’t spread out evenly.
Over the last six months, inflation in Washington, Idaho and other western states has outpaced the Northeast, but trends below other parts of the country. That might come as a surprise to many people, said Gonzaga University economist Ryan Herzog.
“I think if you were to ask people where do you think inflation is the highest, they would default to California and the West. Which is actually is actually where it is the lowest now. Some of the highest we’re seeing now is the Midwest and the South,” Herzog said.
Prices for a “market basket” of goods and services rose six percent in western states from October 2020 to October 2021, according to the Consumer Price Index, a commonly-used measure of inflation. Prices in the Midwest and the South climbed 6.6 percent, and Northeastern consumers saw a 5.4 percent increase. Inflation in the West has been below that of the Midwest and South since April 2021.
The regional breakdowns offer some detail. But inflation is not tracked at the state level, which makes it hard to see local patterns in price rises. There are differences between states, Herzog said, even ones that share a border. He would like to study price patterns in Spokane and Coeur d’Alene, for example, to see how factors unique to both cities influence costs of goods and services.
“Is minimum wage a driver of these price differences? Are we seeing price differences because gas prices in Idaho are a little bit cheaper than Washington?” Herzog said. “There’s some structural differences between the two states.”
The CPI surveys prices in larger metro areas, such as Seattle and San Francisco, but it does not examine smaller metros, such as Spokane-Coeur d’Alene, leaving out another important layer of data for understanding price fluctuations.
Higher inflation rates in Southern and Midwestern states appear to be tied to gas prices and driving habits, Herzog said. Gas prices in the West are typically higher year-round, so their increases don’t take as big a bite out of cost of living. When gas prices in other parts of the country rise, Herzog said, it can create a much bigger inflationary jump.
The next update on inflation from the commonly-cited Consumer Price Index is set for release December 10.