Dallas, Detroit, Honolulu, San Francisco and Seattle are distinctly different US cities, but with one thing in common: their residents have been hit hardest by inflation.
That's according to a WalletHub study that compared key inflation metrics within 23 major metropolitan statistical areas relative to the latest Consumer price index data, as well as CPI data from two months ago and one year ago. The findings suggest that inflation is hitting certain cities harder than others, further stretching Americans' budgets in some parts of the US.
Inflation rose 3.3% nationally in May compared to a year ago but it rose even more in Detroit at 3.5% a year ago, San Francisco at 3.8%, Seattle at 4.4%, Dallas at 5% and Honolulu at 5.2%, shows WalletHub study. In contrast, the impact of inflation in San Diego, Atlanta, Denver, Minneapolis and Tampa has been much less extreme in some cases, with increases of between 1.8% and 3.2% in these cities.
Inflation in Dallas is particularly intense because of a housing shortage that is driving up the cost of housing, a local economist said. The Dallas-Fort Worth area has seen an influx of 150,000 residents between July 2022 and July 2023, and those new residents haven't found adequate housing, said Dean Stansel, a research economist at Southern Methodist University in Dallas.
“Government restrictions on new home construction are making it difficult for supply to keep up with demand,” Stansel told CBS MoneyWatch. “This housing shortage is driving prices higher than they would have been otherwise.”
Other cities like Seattle are likely still struggling with inflation because of minimum wage hikes that have added higher labor costs to local businesses, Stansel said.
“These higher labor costs lead to higher prices for production for businesses that use minimum wage labor, such as fast food restaurants and grocery stores,” Stansel said. “These higher prices for cheap food are especially hard on those on low incomes who are struggling to make ends meet.”
CPI data released this week boosted the Federal Reserve to leave its benchmark interest rate unchanged and pencils in just one rate cut for this year. The Fed has not revealed when that rate cut will occur.
Within the data, the price of airline tickets, furniture, clothing, new vehicles, energy and recreation fell in May, helping to contain inflation, but accommodation costs rose for a fourth straight month, a 0, 4% Medical care, used cars and trucks, educational costs, and eating out also increased. Economists say housing and fuel costs are the two biggest anchors weighing on inflation to reach the levels the Fed wants to see.
“The expectation is that inflation in these areas will eventually fall as these price effects run their course in different markets, but it's true that this is taking longer than many initially anticipated,” said Grant Black, an economist at Lindenwood University, in the WalletHub study. “Fortunately, recent inflation data shows that food and fuel prices have started to fall modestly, which is a boon for consumer budgets.”
