Inflation in Greater Philadelphia - Part 8: The February 2022 Update

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.

At 7.3 percent, the recent February 2022 estimate places Greater Philadelphia’s inflation rate at a historic high. In fact, the regional inflation rate has not been this high since December 1990. It also marks a 0.7 percent increase in our regional inflation rate since December 2021. The good news, however, is that Greater Philadelphia’s inflation rate still falls beneath the national rate of 7.9 percent (a consistent finding of our inflation series), and the rate of inflation seems to be slowing.

The recent uptick in inflation this past year reflects the remaining impact or momentum from the COVID-19 pandemic’s economic lockdown and subsequent trade and supply chain constraints. The largest jump in inflation occurred at the beginning of 2021 when vaccines became more readily available, businesses and schools reopened, and many consumers returned to their typical in-person buying habits. Supply chains and employment, however, had not returned to their pre-pandemic levels. This shortage of products and workers increased prices since supply could not meet consumer demand. Thus, from February to June 2021, the national and regional inflation rates spiked by 3.7 and 3.9 percent, respectively. After a slight decline in the summer of 2021, prices climbed in autumn of 2021 as holiday shopping increased demand and the Omicron variant still impacted supply chains and employment. This increase, however, was less pronounced than in the previous spring. From October 2021 to February 2022, both the national and regional inflation rates have only increased by 1.7 percent, respectively. It still places us at a historic high, but it seems that the momentum is ebbing.

Regional Comparisons 

Greater Philadelphia’s inflation rate continues to remain eclipsed by other major U.S. metropolitan regions. Figure 2 shows the December 2021, October 2021, and February 2022 annual inflation rates for Greater Philadelphia, the U.S., and a panel of large U.S. metropolitan regions with updated February 2022 estimates. (As we’ve previously noted, 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.) 

FIGURE 2 

SOURCE: October 2021, December 2021, and February 2022 Consumer Price Index (CPI) estimates for all Urban Consumers (CPI-U) from the U.S. Bureau of Labor Statistics for all major U.S. metropolitan regions and the U.S.

Among the panel of large U.S. metropolitan regions, only Greater St. Louis saw a decline in its inflation rate from December 2021 to February 2022. Greater Philadelphia saw the tenth highest inflation rate for February 2022; one step down from December 2021 when it ranked ninth and two steps down from its eighth-place designation in October 2021.

There have been shifts in rankings since December 2021. At 10.9 percent, Greater Phoenix surpassed Greater Atlanta for the highest inflation rate in February 2022 among the panel of metropolitan regions. Greater Atlanta dropped to second place with an inflation rate of 10.6 percent. Greater Miami saw significant increases in its inflation rate, jumping from seventh place in October 2021 to sixth place in December 2021, and then to third place in February 2022. These increases may be driven by Greater Miami’s hot housing market [1]. Unlike Greater Miami, Greater St. Louis has seen significant declines in its inflation rate since October 2021. It held the second highest inflation rate among the panel in October 2021, dropped to third place by December 2021, and now has the fifth highest inflation rate as of February 2022. The decline is not entirely clear, although some speculate that an overall lower home price appreciation relative to salaries in Greater St. Louis may be a contribution [2]. Many of the other metropolitan regions remained relatively consistent with their previous months’ prior rankings. 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.

Contributing Components 

Disaggregating the components of the CPI shows 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 February 2019 to February 2022 while figure 4 shows the comparable information for Greater Philadelphia. Greater Philadelphia’s CPI component inflation rates continue to mirror those of the nation – with only a few differences.

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.

Energy and transportation continue to act as the main contributors to inflation both nationally and regionally. In Greater Philadelphia, the annual inflation rates for energy and transportation stood respectively at 24.4 and 20.1 percent in February 2022. The national inflation rate for energy declined by 3.7 between December 2021 and February 2022. This decline, however, predates the war in Ukraine and its subsequent impacts on global energy markets; it, therefore, may be short-lived.

Greater Philadelphia’s inflation rate for apparel is far more volatile than that of the nation. While our region saw declines in its inflation rate for apparel in December 2021, the inflation rate stood at 4.4 percent in February 2022 – indicating modest growth from the previous year. The national inflation rate for apparel continues to see modest growth since February 2021.

Greater Philadelphia’s inflation rates for food and beverages, housing, and recreation saw significant increases since October 2021 – largely mirroring national trends. The regional inflation rate for food and beverages increased from 4.0 percent in December 2021 to 7.9 percent in February 2022 – a 3.9 percent increase. This puts Greater Philadelphia’s food beverage inflation rate higher than the national rate of 7.6 percent. Similarly, the regional housing inflation rate increased by 1.0 percent from December 2021 to 6.2 percent in February 2022. This places Greater Philadelphia’s housing inflation rate at 0.3 percent higher than the nation.

Greater Philadelphia’s medical care inflation rate declined since October 2021, unlike the national inflation rate. At –0.2 percent, medical care saw slight deflation from the previous year. 

The Takeaways 

While prices continue to rise across the nation, it does look like inflation is slowing. The rate of growth, while at historic levels, seems to be plateauing now that Omicron variant has largely subsided, and employment seems to be reaching its pre-pandemic levels for many industries. With the Federal Reserve focused on addressing national inflation rates by raising interest rates, higher prices may begin to subside later this year. Although, international conflicts may continue to affect energy markets. 

Works Cited 

[1] Bloomberg. 2022. “U.S. rent inflation hits record 12.6% — Miami up 39%”. The Orange County Register, 15 March. Retrieved from: (https://www.ocregister.com/2022/03/15/u-s-rent-inflation-hits-new-high-led-by-miami-with-39-rate/). 

[2] Zillow Research. 2022. “Skyrocketing Home Values Out-earn Salaries.” Zillow, 18 March. Retrieved from: (https://www.zillow.com/research/home-value-appreciation-incomes-30862/).