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Inflation in Greater Philadelphia - Part 7: The December 2021 Update

The January 12, 2022 release of the December 2021 Consumer Price Index (CPI) estimates from the Bureau of Labor Statistics shows that inflation is continuing to climb to historic levels both across the U.S. and in Greater Philadelphia. In part seven of our ongoing series covering the local impact of inflation, we take a closer look at these updated figures and contextualize them for our region.

 

What You Need to Know

  • The December estimates show the U.S. inflation rate rose to 7.0 percent while Greater Philadelphia rose by 6.6 percent.

  • Greater Philadelphia’s inflation rate continues to remain below both the national average and many peer metropolitan regions.

  • The metropolitan regions of Atlanta, Phoenix, St. Louis, Baltimore, Seattle, and Miami all saw December inflation rates that exceeded the national rate of 7.0 percent.

  • When disaggregating the CPI’s components, energy and transportation remain the key drivers of Greater Philadelphia’s inflation rate, mirroring national trends.

  • Apparel prices in Greater Philadelphia dropped by 0.2 percent, versus a national increase of 5.8 percent; apparel prices in Greater Philadelphia remain far more volatile than at the national level.

  • At 4.0 percent, Greater Philadelphia’s inflation rate for food and beverages was 2.0 percent below the national rate of 6.0 percent.

  • At 3.3 percent, Greater Philadelphia’s inflation rate for medical care outpaced the national rate by 1.0 percent.

  • At around 5.0 percent, Greater Philadelphia’s housing inflation rate tracked closely with the national rate.

  • Greater Philadelphia continues to show relative economic resiliency to inflation when compared to national inflation trends, but continued price hikes threaten to cancel out recent wage gains made by many employees.

 

The December 2021 Update

On January 12, 2022, the U.S. Department of Labor’s Bureau of Labor statistics released the December 2021 Consumer Price Index (CPI) estimates for a select number of metropolitan regions – including Greater Philadelphia. Figure 1 adds these December estimates to our ongoing comparison of inflation rates for Greater Philadelphia and the U.S. from January 1990 to December 2021. These recent estimates show that national and local inflation rates continued to climb to historic levels as we reached 2022. 

 

  • userguide generalgraph

 

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.

 

By December 2021, Greater Philadelphia’s annual inflation rate was 6.6 percent while the national rate jumped to 7.0 percent. This marks a 1.0 percent increase since October 2021 for Greater Philadelphia and a 0.8 percent increase for the nation. While Greater Philadelphia’s inflation rate remains below the national rate (a consistent finding within our inflation series), the gap seems to be closing. Since August 2021, the difference between the region’s inflation rate and that of the nation has shrunk from 0.7 percent to 0.4 percent.

 

The sharp uptick from October to December 2021 illustrates that the nation and the region continue to feel the momentum from the COVID-19 pandemic’s economic lockdown and subsequent trade and supply chain constraints. With the added impact of labor shortages, the increased prevalence of the Omicron variant, as well as higher consumer demand during the holiday season, this increase in inflation was largely expected among economists [1,2]. Assuming the Omicron surge peaks in mid-January, this surge in pricing may continue for the next few months [1,3].

 

A Regional Comparison

Greater Philadelphia’s 6.6 percent inflation rate is eclipsed by many other U.S. metropolitan regions. Figure 2 shows both the December and October 2021 annual inflation rates for Greater Philadelphia, the U.S., and a panel of large U.S. metropolitan regions with updated December 2021 estimates. (The Bureau of Labor Statistics only updates the CPI for certain metropolitan regions smaller than New York City, Los Angeles, and Chicago 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 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 both October and December 2021 estimates.

 

Among the panel of large U.S. metropolitan regions, each region saw an increase in inflation from October to December 2021. Greater Philadelphia’s saw the ninth highest inflation rate for December 2021; a step down from October when it ranked eighth.

 

Many metropolitan regions remain consistent with October 2021 rankings. Greater Atlanta continues to see the highest inflation rates with prices jumping almost 2.0 percent from October to December. Greater Phoenix saw the greatest increase from October to December at 2.6 percent; a key driver could be a surge in medical care prices – a finding from part three in this series. Greater Los Angeles, Greater New York City, and Greater San Francisco—metropolitan regions with rather high costs-of-living—continue to see lower than average inflation rates when compared to peers and the U.S. overall. Slight shifts did occur, however: Greater Chicago and Greater Detroit moved up in the rankings, while Greater Houston fell below Greater Philadelphia. Nevertheless, Greater Philadelphia still maintains below-average inflation when compared to the national rate or many of its peers.

 

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 with the October estimates, Greater Philadelphia’s CPI component inflation rates largely mirror the nation – with some slight differences. Energy and transportation continue to act as the main contributors to inflation both nationally and locally. In Greater Philadelphia, the annual inflation rates for energy and transportation stood respectively at 25.1 and 21.0 percent in December 2021. While the national inflation rate for energy saw a slight decline from October to December 2021, Greater Philadelphia’s rate grew by 0.7 percent.

 

Apparel seems to be the largest source of discrepancy between Greater Philadelphia and the nation with the local inflation rate showing more volatility. At –0.2 percent, apparel in Greater Philadelphia saw slight deflation from the previous year, while at the national level apparel prices were up by 5.8 percent over the same period. In October, Greater Philadelphia’s inflation rate for apparel slightly outpaced the national average. It is unclear why this component saw a slight decline in pricing at the local level.

 

Greater Philadelphia experienced upticks in inflation rates for medical care and housing. The December inflation rate for medical care in Greater Philadelphia was 3.3 percent, 1.0 percent greater than the national rate. It also jumped by 2.5 percent from October 2021, while the national medical care inflation rate only grew by 0.9 percent in the same period. With a growing need for more medical care amidst this new COVID variant, continuing price surges will greatly impact residents. Housing prices in Greater Philadelphia largely grew at the same rate at the nation, both seeing roughly a 5.0 percent inflation rate from the previous year. In Greater Philadelphia, however, the rate of growth since October slightly outpaced the national rate by 0.2 percent. The region’s housing market continues to remain hot in comparison with the rest of the country.

 

As in October, the national food and beverage inflation rate continued to outpace our region for December. Greater Philadelphia’s inflation rate for food and beverages was 2.0 percent below the national average of 6.0 percent.

 

The Takeaways

Prices continue to rise in our region, and it does not look like they will slow in the next few months, especially if Omicron and labor shortages continue to inhibit manufacturers and suppliers from producing and transporting more consumer goods. This means that many of the recent wage gains made by employees will be cancelled out by the rise in prices. With the Federal Reserve considering raising interest rates, these unusual price surges may subside later this year, but only time will tell [1].

 

Works Cited

[1] Cox, Jeff. 2022. “Inflation rises 7% over the past year, highest since 1982.” CNBC, 12 January. Retrieved from: (https://www.cnbc.com/2022/01/12/cpi-december-2021-.html).

 

[2] Kohan, Shelley E. 2022. “Record Sales For Online Holiday Shopping Hitting Over $204 Billion.” Forbes, 12 January. Retrieved from: (https://www.forbes.com/sites/shelleykohan/2022/01/12/record-sales-for-online-holiday-shopping-hitting-over-204-billion/?sh=52003e126bb5).

 

[3] Hou, Chia-Yi. 2022. “What forecasters are saying about when omicron could peak.” The Hill, 6 January. Retrieved from: (https://thehill.com/changing-america/well-being/prevention-cures/588617-what-forecasters-are-saying-about-when-omicron).