Regional inflation at a stubbornly-high 9.2%
Update since Friday: the region made national news on Monday when a group of independently organized workers at Amazon’s San Bernardino airport facility walked out over low pay and hazardous working conditions. See the article in the Washington Post here. A bright spot in the ever-dwindling real estate market is that permits for new construction have been booming; see an analysis here. A recent Beacon Economics/UC Riverside white paper report identifies demographic factors as the major growth challenge for the United States over the next decade.
The Inland Empire’s inflation statistics are looking bleak. At 9.2% year-over-year inflation in July, the region now has one of the highest annual inflation rates among the 20-or-so metro areas tracked by the BLS. Inland Empire inflation is higher than the average among similar Western regions. Both San Diego (7.3%) and Los Angeles (7.7%) have lower inflation rates.
People are complaining about inflation nationally, but even locally, businesses are suffering from higher input prices (like coffee beans, lumber, or steel prices), gas prices, rental prices, car prices, and many more. Businesses are also taking advantage of the general conversation about inflation as an excuse to raise prices on all sorts of other products and services and to squeeze even more out of the consumer, even as nominal wages fail to keep up with the rising cost of living.
Why are things particularly bad out here? The cause of the higher regional inflation is even more upsetting: it’s housing, which for purposes of the CPI, mainly addresses rental prices because house prices for ownership are not captured well in the CPI.
Housing prices increased 8.4% in the IE vs. 5.3% in Los Angeles. Since housing already accounts for over 40% of the typical IE consumer’s budget, these increases are having a major impact on those who don’t currently own their home. As demand surges for cheaper rental units within the Los Angeles “commuting zone”, relatively affordable areas in the IE start to suffer. For example, median rent for a 2-bedroom unit in San Bernardino County is currently $1,639, compared to $2,225 in the L.A. metro area.
These dynamics – of higher demand for cheaper areas pushing up prices in those areas – impose undeserved pressure on residents who live and work locally. I’ve mentioned how this works in the real estate market before; see here. The dynamics in the rental market are similar – precisely because of better affordability out here, affordability quickly diminishes over time.
Other expenditure categories reporting higher inflation include food and beverages, which increased 10.5% over the year, and transportation prices (i.e., gas and car/truck) which grew 15.6%. See the table above for a full list.