Leading Indicators

Inflation in Greater Philadelphia - Part 5: The October 2021 Update

With the Bureau of Labor Statistics’ recent release of the October 2021 Consumer Price Index (CPI) estimates, many national and local media sources noted that last month’s inflation rate was the highest increase seen in the U.S. since 1990. From our previous analyses of localized inflation, we have found that Greater Philadelphia tends to fall below the national average inflation rate and that different CPI components (like energy, food, housing, etc.) may be primarily responsible for this. To address these findings, part five of this series examines the recent CPI estimates to contextualize local differences from national inflation trends.

 

What You Need to Know

  • The recent spike in inflation is marked by momentum from the COVID-19 pandemic’s economic lockdown and subsequent trade and supply chain constraints.
  • While the U.S. saw an average inflation rate of 6.2 percent between October 2020 and October 2021, Greater Philadelphia’s inflation rate was 5.6 percent.
  • Greater Philadelphia has seen similarly high inflation rates to that of this past October; in October 2004 the region’s inflation rate was 5.2 percent (well above the national rate) and in June 2008—prior to the Great Recession—the rate was 5.1 percent.
  • Relative to other large U.S. metropolitan regions, Greater Philadelphia’s 5.6 percent inflation rate in the past year was below average.
  • Some other metropolitan regions, such as Greater St. Louis, Greater Phoenix, Greater Seattle, and Greater Baltimore, saw much higher inflation rates that exceeded the national rate.
  • When disaggregating the CPI’s components, energy and transportation are the key drivers of Greater Philadelphia’s inflation rate – mirroring national trends.
  • At 5.0 percent, Greater Philadelphia’s inflation rate for apparel outpaced the national inflation rate by 0.7 percent.
  • At 3.6 percent, Greater Philadelphia’s inflation rate for food and beverages was 1.5 percent below the national rate of 5.1 percent.
  • Greater Philadelphia continues to show relative economic resiliency to inflation when compared to national inflation trends and many similarly sized metropolitan regions.

The October 2021 Update

On November 10, 2021, the U.S. Department of Labor’s Bureau of Labor statistics released the Consumer Price Index (CPI) estimates from October 2021. National and local news sources were quick to note that the recent estimates show that inflation is still climbing in the U.S. – more so than in many other nations. These high inflation rates have not been seen in the U.S. since the early 1990s when oil prices surged because of the Gulf War [1]. To understand how close our region mirrors national inflation trends, figure 1 shows the national inflation rate as well as Greater Philadelphia’s inflation rate from January 1990 to October 2021.

 

Instructions for Graph

FIGURE 1 

SOURCE: Consumer Price Index for all Urban Consumers (CPI-U) within the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD and the U.S. City Average from the U.S. Bureau of Labor Statistics.

 

The recent spike in inflation is marked by momentum from the COVID-19 pandemic’s economic lockdown and subsequent trade and supply chain constraints. Yet while the U.S. saw an average inflation rate of 6.2 percent between October 2020 and October 2021, Greater Philadelphia’s inflation rate was significantly lower - at 5.6 percent. This aligns with our previous findings in this series demonstrating that our region remains somewhat more resilient to economic tremors than many other parts of the country.

 

It is also interesting to note that while Greater Philadelphia has also not seen an inflation rate this high since early 1991, there were a few occasions when we came close. In October 2004, Greater Philadelphia’s inflation rate of 5.2 percent exceeded the national average by 2 percent. This may reflect the region’s competitive real estate market at the time that seemed to cool off by the following year [2]. Additionally, Greater Philadelphia’s inflation rate of 5.1 percent in June 2008, prior to the Great Recession, also slightly exceeded the national average before the subsequent crash of the nation’s housing market [1].

 

A Regional Comparison

Greater Philadelphia’s 5.6 percent inflation rate pales in comparison to that in other large U.S. metropolitan regions. Figure 2 shows the October 2021 annual inflation rate for Greater Philadelphia, the U.S., and a panel of large U.S. metropolitan regions with the updated October 2021 CPI estimates. (The Bureau of Labor Statistics only updates the CPI of metropolitan regions smaller than New York City and Los Angeles on a bimonthly basis. They also split these smaller metropolitan regions into two panels where some CPIs are updated on even months while other metropolitan regions—like Boston and Atlanta—are updated on odd months).

 

FIGURE 2

SOURCE: Consumer Price Index for all Urban Consumers (CPI-U) from the U.S. Bureau of Labor Statistics for all major U.S. metropolitan regions with an October 2021 estimate.

 

Among the panel of twelve large U.S. metropolitan regions, Greater Philadelphia’s inflation rate ranked seventh. Interestingly, metropolitan regions with generally higher costs of living—like Greater Los Angeles, Greater Chicago, Greater New York City, and Greater San Francisco—saw lower inflation rates than Greater Philadelphia. Many more affordable metropolitan regions and areas that have seen recent population booms saw higher inflation rates. Greater St. Louis topped the list with an inflation rate of 7.5 percent – 20 percent above the national inflation rate and 30 percent higher than Greater Philadelphia. This may reflect overall higher inflation rates in the Midwest resulting from higher housing costs in tandem with national rises in fuel and transportation [3]. This comparison further demonstrates Greater Philadelphia’s economic resiliency when compared to other areas of the country – a consistent finding of this series on local inflation. 

 

Contributing Components

Disaggregating the components of the CPI indicates which areas of the economy are contributing to national and local inflation rates. Figure 3 details the inflation rates for the national CPI estimates from 2019 to 2021 while figure 4 shows the comparable information for Greater Philadelphia.

 

FIGURE 3

SOURCE: Consumer Price Index for all Urban Consumers (CPI-U) for the U.S. City Average from the U.S. Bureau of Labor Statistics.

 

FIGURE 4 

SOURCE: Consumer Price Index for all Urban Consumers (CPI-U) within the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD from the U.S. Bureau of Labor Statistics.

 

As discussed in the media, energy and transportation costs are key drivers of recent inflation. Bottlenecks in international trade and logistics have slowed the supply of crude oil and gasoline [4]. Additionally, there has been a limited supply of used and new automobiles in the market which has increased pricing [4]. The cost of food and beverages, as well as housing, has also been on a steep incline since earlier this year. Supply chain constraints and limited employment are cited as causes to these price surges [3].

 

Greater Philadelphia’s inflation rates largely mirror the nation – with some slight differences. As at the national level, energy and transportation both saw the largest price hikes in Greater Philadelphia – but not as high as the respective national rates. Greater Philadelphia’s inflation rate for apparel, however, outpaced the national inflation rate by 0.7 percent. In fact, the inflation rate for apparel seems to be much more volatile in Greater Philadelphia than for the nation.

 

The biggest discrepancy was in food and beverages; at 3.6 percent, Greater Philadelphia’s inflation rate for food and beverages was 1.5 percent below the national average of 5.1 percent. This may reflect Greater Philadelphia’s proximity to local food supply chains in Central and Southeastern Pennsylvania as well as Southern New Jersey. The national inflation rate for housing also slightly exceeded Greater Philadelphia’s rate. This is a result of housing prices and the general cost of household items rising more significantly in the Sunbelt, West Coast, and Midwestern areas of the nation [3]. It should be noted, however, that Greater Philadelphia’s inflation rate for housing has seen significant increases in the past year as the supply of housing decreased amidst the pandemic. Greater Philadelphia’s inflation rates for medical care and recreation also remained below their national rates.

 

The Takeaway

Greater Philadelphia continues to show its economic resiliency to inflation when compared with the national inflation trends and those of other metropolitan regions. This does not mean that the diminished supply of goods in our region will not drive-up prices, but it demonstrates that Greater Philadelphia’s more affordable cost-of-living has been an asset. However, while price spikes may be a nuisance to more financially stable residents, they can be devastating to lower-income households. We will continue to uncover the proportional impact of inflation on different households for future pieces of this series.

 

Read More About this Subject:

Inflation in Greater Philadelphia – Part 1: De-Mystifying Local Inflation

Inflation in Greater Philadelphia – Part 2: Comparing Metropolitan Inflation

Inflation in Greater Philadelphia – Part 3: Looking in the CPI’s Basket of Goods

Inflation in Greater Philadelphia – Part 4: Wage Growth and Inflation

 

Works Cited

[1] Huddleston Jr., Tom. 2020. “How many recessions you’ve actually lived through and what happened in every one.” CNBC, 9 April. Retrieved from: (https://www.cnbc.com/2020/04/09/what-happened-in-every-us-recession-since-the-great-depression.html).

 

[2] The Pew Charitable Trusts. 2011. Philadelphia 2011: The State of the City. Philadelphia, PA: The Pew Charitable Trusts – Philadelphia Research Initiative. Retrieved from: (https://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpewtrustsorg/reports/philadelphia_research_initiative/philadelphiacitydatapopulationdemographicspdf.pdf).

 

[3] Dougherty, Danny and Gwynn Guilford. 2021. “Where Inflation Is Highest in U.S.” The Wall Street Journal, 10 November. Retrieved from: (https://www.wsj.com/articles/where-inflation-is-highest-in-u-s-11636585950).

 

[4] Galston, William A. 2021. “Strap Yourself In: Inflation Isn’t Going Away.” The Wall Street Journal, 16 November. Retrieved from: (https://www.wsj.com/articles/strap-yourself-in-inflation-isnt-going-away-gas-labor-shortage-supply-chain-biden-fed-yellen-11637075522).