Leading Indicators

Inflation in Greater Philadelphia – Part 2: Comparing Metropolitan Inflation

This data brief is the second part in our series covering the impact of inflation on Greater Philadelphia. In the first part of this series, we described how inflation is measured and its potential impact on the purchasing power of Greater Philadelphia’s residents. For part two of this series, we compare the inflation rates of Greater Philadelphia with the other top 19 metropolitan regions in the United States. As the nation continues to recover from the COVID-19 pandemic, we hope to explore potential drivers of inflation in these regional economies for insights that can explain rising prices in Greater Philadelphia in the near and distant future.

 

Key Takeaways

  • Greater Philadelphia’s inflation has largely remained below the U.S. average, with regional inflation rates from 2011 to 2021 averaging around 0.4 percent below the national average.
  • Metropolitan regions in the Southern and Western U.S. largely saw higher inflation rates than the national average in the past decade.
  • Metropolitan regions in the Northeast and Midwest remained slightly below the national inflation rate – with the Midwest seeing the highest deflation rates among the four geographic regions in 2015.
  • Metropolitan regions like Riverside, CA, Phoenix, AZ, and San Francisco, CA saw the highest differences in average annual inflation rates in the past decade, at roughly one percent greater than the national average.
  • From 2011 to 2021, Greater Philadelphia saw the lowest average annual inflation rate among the 20 largest U.S. metropolitan regions at 1.5 percent.
  • Greater Philadelphia’s average annual inflation rate from 2011 to 2021 was 0.4 percent less than the national average of 1.9 percent.
  • Slow, but steady, population growth and a greater diversity of industry sectors may be keeping Northeast metropolitan regions, like Greater Philadelphia, below the national inflation rate – and more resilient in the face of surging prices.

 

Greater Philadelphia and the U.S. City Average

For the past decade, Greater Philadelphia’s inflation has largely remained below the U.S. average. Figure 1 details annual inflation rates for Greater Philadelphia and the U.S. from 2011 to 2021 by calculating the change from the previous year’s CPI. So, in August 2021, Greater Philadelphia’s CPI was 4.6 percent greater than it had been in August 2020.

 

Graph instructions

FIGURE 1 

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

 

While the difference in inflation rates between Greater Philadelphia and the U.S. average has remained minimal for the past ten years—averaging around 0.4 percent—Greater Philadelphia’s lower inflation rates suggests that our region may be more resilient to price shocks when compared to the average U.S. metropolitan region. In fact, during the decade in question, the only extended periods of time that Greater Philadelphia’s inflation rate exceeded that of the U.S. average was the first six months of 2016 and the latter three quarters of 2019 – but rarely extending beyond half a percentage point difference. Even this past August, amid rapidly rising prices, Greater Philadelphia’s inflation rate was 0.7 percent less than the U.S. average.

 

Regional Differences in Inflation Rates

Greater Philadelphia’s position in the Northeast region of the U.S. may help explain its lower-than-average inflation rates. Price fluctuations affect regional economies in unique ways. These can be mitigated or exacerbated by geographic location, population growth trends, diversity of industries, access to supply chains, employment opportunities, average wages, etc. To better understand the factors influencing Greater Philadelphia’s inflation rate, we compared inflation rates across the 20 largest U.S. metropolitan regions from 2011 to 2021. These metropolitan regions, as well as their geographic regional groupings, are detailed in figure 2.

 

FIGURE 2 

NOTE: Coordinates for central cities of the 20 largest U.S. metropolitan regions as of 2020.

 

Aggregating average inflation rates by geographic region, we find that metropolitan regions in the Northeast region of the U.S. tended to have lower rates of inflation than the national average from 2011 to 2021 (as shown in figure 3). While metropolitan regions in the South and West largely saw higher inflation rates than the U.S. average in the past decade, the Northeast and the Midwest regions remained slightly below the national inflation rate – with the Midwest seeing the highest deflation rates, or decreases in inflation, among the four geographic regions in 2015.

 

FIGURE 3

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

 

This ten-year trend suggests that slow-growth economies might be more resilient to price shocks over time. Many of the metropolitan regions of the South and West have seen substantial population and employment growth in the past few decades [1]. The metropolitan regions of the Midwest and Northeast saw minimal population growth (and sometimes decline) with modest job growth across a diversity of industry sectors.

Figure 4 further illustrates the regional differences in inflation rates by comparing the difference between each of the 20 largest U.S. metropolitan regions’ average inflation rate from 2011 to 2021 with the national average inflation rate of 1.9 percent (shown as zero in the graph). Many Western and Southern metropolitan regions saw inflation rates in the past year exceeding the national average. These Sunbelt and West coast metropolitan regions have seen recent population booms as they grow major service and tech industries [2,3,4]. In fact, as of the 2020 census Phoenix surpassed Philadelphia to become the fifth largest city in the U.S. [5]. With swiftly growing populations, there is higher demand for housing and commodities that can push up prices in local supply chains. San Francisco’s housing market is a prime example of a saturated market where minimal new housing options continue to drive the price of existing housing higher as demand increases [6].

 

FIGURE 4

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

 

Northeast and Midwest metropolitan regions have largely seen average annual inflation rates from 2011 to 2021 that were lower than the national average. For the past few decades, many of these metropolitan regions saw population and industrial decline as manufacturing moved to the South or overseas and new service industry centers in the South and West concurrently drew jobs away [7]. As of the past decade, many metropolitan regions in the Northeast and Midwest have seen minimal population growth, but this means there is not as much demand for housing and commodities that would push prices to the level many Southern and Western metropolitan regions are currently experiencing.

 

Greater Philadelphia falls at the very bottom of the 20 largest metropolitan regions with an average annual inflation rate for the past decade at roughly 0.4 percent less than the national average. Our region’s modest growth in population and employment in the past decade seems to have kept it more resilient to price shocks than other U.S. metropolitan regions. This lower-than-average difference does not indicate decline, however. Rather, it is more indicative of slow, but steady, population and economic growth on par with neighboring metropolitan regions like Chicago, Washington D.C., New York City, and Boston. These metropolitan regions are characterized by a diversity of industries and are balanced by a history of both steady industrial and population decline followed by new incremental growth [8,9]. They are not as reliant on single sector growth like other Southern or Western metropolitan regions. Thus, these metropolitan regions with more mature and steady-growth economies may be less likely to feel the brunt of inflation than their Southern or Western counterparts.

 

Going Forward

With this baseline comparison of the 20 largest metropolitan region’s historic inflation rates, we plan to dive deeper into the metrics behind the consumer price index to determine which factors are contributing to both historic and recent pricing spikes.

 

Want to learn more about inflation in Greater Philadelphia?

Read the next piece in our series here

Or start at the beginning of our series

 

Read More About this Subject:

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

Why Haven’t Philly Wages Increased with Employment Levels? (Part 1)

Why Haven’t Philly Wages Increased with Employment Levels? (Part 2)

 

Works Cited

[1] Briney, Amanda. 2019. "The Sunbelt of the Southern and Western United States." ThoughtCo, 7 August. Retrieved from: (https://www.thoughtco.com/sun-belt-in-united-states-1435569).

 

[2] Bailey, Tom. 2016. “The Sun Belt shines for US tech and manufacturing.” The New Economy, 22 October. Retrieved from: (https://www.theneweconomy.com/strategy/the-sun-belt-is-the-driving-force-behind-continued-us-success-in-tech-and-manufacturing).

 

[3] Muro, Mark and Jacob Whiton. 2018. “Tech is (still) concentrating in the Bay Area: An update on America’s winner-take-most economic phenomenon.” Brookings, 17 December. Retrieved from: (https://www.brookings.edu/blog/the-avenue/2018/12/17/tech-is-still-concentrating-in-the-bay-area-an-update-on-americas-winner-take-most-economic-phenomenon/).

 

[4] Grothaus, Michael. 2019. “These 5 cities account for 90% of the growth in high-tech jobs.” Fast Company, 9 December. Retrieved from: (https://www.fastcompany.com/90440704/these-5-cities-account-for-90-of-the-growth-in-high-tech-jobs).

 

[5] Vanek, Corina. 2021. “Census: Phoenix surpasses Philadelphia for 5th largest, diversity also increases.” Phoenix Business Journal, 12 August. Retrieved from: (https://www.bizjournals.com/phoenix/news/2021/08/12/phoenix-surpasses-philadelphia-as-5th-largest-city.html).

 

[6] Sherman, Natalie. 2019. “Why US tech giants are putting billions into housing.” BBC News, 17 November. Retrieved from: (https://www.bbc.com/news/business-50295130).

 

[7] Ohanian, Lee E. 2014. “Competition and the Decline of the Rust Belt.” Federal Reserve Bank of Minneapolis, 20 December. Retrieved from: (https://www.minneapolisfed.org/article/2014/competition-and-the-decline-of-the-rust-belt).

 

[8] Rosewicz, Barb, Melissa Maynard & Alexandre Fall. 2021. “Population Growth Sputters in Midwestern, Eastern States.” Pew Charitable Trusts, 27 July. Retrieved from: (https://www.pewtrusts.org/en/research-and-analysis/articles/2021/07/27/population-growth-sputters-in-midwestern-eastern-states).

 

[9] Beck, Stacie. 2014. “How the Changing Economy has Slowed Economic Growth in the Northeast and Mid-Atlantic.” Inside Sources, 19 August. Retrieved from: (https://insidesources.com/how-the-changing-economy-has-slowed-economic-growth-in-the-northeast-and-mid-atlantic/).