By admin 
Inflation rose slightly in October for the first time since the spring. Nationally, prices rose 0.2% month-on-month and 2.6% year-on-year, according to the latest figures. Consumer price index.
That overall number, 2.6%, is what we usually focus on when we talk about inflation, but it only tells part of the story. Inflation is not the same everywhere. For example, in the New York region this is currently 4%, while in the Tampa region it is 1.2%. In urban Hawaii it is 4.2%, and in and around Phoenix it is 1.6%.
What drives this one regional differences with inflation? It mainly comes down to one thing: housing.
If you’re wondering, “Why would prices move more in one area than another?” Steve Reed, an economist with the Bureau of Labor Statistics’ Consumer Price Index program, said, “The rental market is actually an area that can vary more from place to place than most markets.”
With most things we spend money on, if prices rise in one part of the country, they are likely to rise at the same rate elsewhere.
“Just like food prices in grocery stores,” Reed said. “That is mainly a national market. And the same goes for durable goods. Cars aren’t going to be much cheaper in Seattle, but they’re going to be much more expensive in Tampa, or something like that.”
The same goes for clothing, electronics and furniture.
“One way to think about this is that these are products that can be moved from one place to another,” said Yiming Ma, associate professor of business administration at Columbia Business School.
With everything that can be shipped, there is competition. If a company in Boise increases the price of dishwashers, a customer can simply go online and buy a cheaper dishwasher elsewhere.
“That’s why in many of these industries where moving products is more feasible, regional differences tend to be much smaller,” Ma said.
But with homes it’s a different story. There is not the same kind of cross-border competition. It is a much more local market. If you have to live in a certain region for work, you can’t really look for a cheaper apartment somewhere far away. So housing markets can and do behave differently in different parts of the country.
“In places where there is much more demand for housing, perhaps because population or employment is growing, prices can rise faster,” said Jed Kolko, an economist who previously worked at the Commerce Department. “Especially in places where demand is growing and there is little housing construction.”
Housing is also a major driver of inflation because it is the largest monthly expense most people have. It weighs heavily in the consumer price index.
“Of the goods a consumer purchases, somewhere between 30 and 50% of their wages go toward housing,” said Ken Poole, president and CEO of the nonprofit Center for Regional Economic Competitiveness. “So even a small increase in housing construction can have an outsized impact on your household budget.”
It also has an outsized impact on inflation in the country where you live.
In the first few years of the pandemic, when many people moved from big, expensive cities like New York to more affordable cities in the Sun Belt, “Florida markets had the highest inflation rates,” says Barbara Denham, a leading economist at Oxford Economics. “And they don’t do that anymore, because the rate of increase in their housing costs is not as dramatic as, say, two or three years ago.”
In fact, the Tampa region now has one of the lowest inflation rates in the country, and New York one of the highest.
Although housing is the biggest factor, there is something else that plays a role: gas prices.
“The extent to which different regions are affected by a change in gasoline prices is the extent to which you drive versus the extent to which you use public transportation, for example,” says Columbia’s Yiming Ma.
In Tampa, for example, most people drive, so gas prices make up a larger portion of the household budget and inflation calculation, compared to New York City, where many people take the subway. So when gas prices fall, as they have recently, inflation in Tampa will fall faster than in New York.
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