Inflation is a hot topic in the US, affecting everything from groceries to gasoline. In this post, we explore how inflation impacts US cities, shaping their economies and residents’ lives. To prepare our list, we have referred to a recent report from WalletHub on Changes in Inflation by City.
They analyzed the impact of inflation on 23 Metropolitan Statistical Areas (MSAs) by comparing their Consumer Price Index changes over the latest month versus two months prior and one year ago, using data from the U.S. Bureau of Labor Statistics. Each MSA’s weighted average score across these metrics was used to rank-order the sample.
Here are the cities most and least affected by inflation and the potential causes behind these variations. Join us to find out if your city is on the list.
Here are the five cities in the US, which were most affected by inflation.
Detroit-Warren-Dearborn, MI
The Detroit-Warren-Dearborn metropolitan area faced the most inflammation problems. Detroit’s economy is heavily tied to the auto industry. Supply chain issues and chip shortages have limited car production, increasing prices for new and used vehicles. This could have a ripple effect, increasing transportation costs for goods and services throughout the MSA. Along with that, the potential nationwide rent increase could also be another contributor.
Total Score – 75.00
Dallas-Fort Worth-Arlington, TX
Dallas-Fort Worth-Arlington (DFW) stands out as a metro area experiencing particularly high inflation compared to the national average. One prime reason could be the surge in housing. This surge pushes housing demand and prices upwards. This can be attributed to factors like a strong job market and business climate attracting people from other areas.
Limited new construction of affordable housing units further intensifies the issue, making it harder for residents to keep up with rising rents or mortgage payments. Besides the nationwide supply chain issues, materials shortages and transportation disruptions can make things more expensive than usual.
Total Score – 66.02
Urban Honolulu, HI
To start with, Honolulu, being an island city, relies heavily on imported goods. Disruptions in global supply chains and rising fuel costs can significantly impact the price of transporting these necessities, leading to inflated prices for consumers.
Plus, Honolulu has limited developable land, restricting the construction of new housing units. This scarcity, combined with high demand, especially from tourism, drives housing prices and rents much higher than the national average.
Along with that, Hawaii imports most of its fuel, making it vulnerable to global energy price fluctuations. Since transportation costs are already a factor, any increases in oil prices can have a magnified effect on the cost of electricity and other energy needs in Honolulu.
Total Score – 63.79
San Francisco-Oakland-Hayward, CA
San Francisco-Oakland-Hayward is a hub for technology and innovation, yet it grapples with inflation due to a combination of national trends and local factors. Firstly, the Bay Area is infamous for its steep housing costs. Limited land availability and strong demand from tech companies and remote workers have driven rents and home prices far above the national average. In addition, California has a higher gas tax and stricter environmental regulations than other states. These factors, combined with national energy price fluctuations, can lead to San Francisco residents paying more for gasoline and electricity.
Total Score – 62.17
Seattle-Tacoma-Bellevue, WA
This tech hub, too, suffers from cost inflation due to a mix of national and regional influences. Due to Seattle’s strong tech sector, a large group of skilled people choose to settle here. While this translates to higher wages for some, it can also increase housing costs as demand for living space increases. This creates a ripple effect, potentially making other goods and services more expensive.
Also, Seattle struggles with limited land availability and high housing demand. This drives rent and homeownership costs well above the national average. Although Washington generates a significant amount of hydropower, the state does import some electricity. Therefore, national fluctuations in energy prices, particularly for natural gas used for heating, can impact overall energy costs for Seattle residents.
Total Score – 60.65
Here are the five cities that were least affected by the inflation rate due to multiple internal reasons. Let’s look at what they are.
San Diego-Carlsbad, CA
San Diego-Carlsbad is among the least affected by inflation. The MSA might benefit from a moderate housing market, a diversified economy and a recent rent slowdown.
Compared to other major California cities like San Francisco or Los Angeles, San Diego’s housing market shows some signs of affordability. While still expensive, it might not be experiencing the same rapid price hikes seen elsewhere. Plus, San Diego’s economy isn’t solely reliant on a single industry. Its mix of tourism, military presence, healthcare, and technology sectors might provide some buffer against national economic slowdowns that can affect specific industries.
Total Score – 30.93
Atlanta-Sandy Springs-Roswell, GA
This MSA also ranks amongst the cities least affected by inflation. The reasons can be similar to those of San Diego in addition to a recent wage growth. Atlanta boasts a diverse economic base, including healthcare, manufacturing, logistics, and finance. This diversification can provide some insulation against national economic downturns that might hit specific industries harder.
Besides, reports suggest Atlanta has seen recent wage growth, particularly in certain sectors. While this doesn’t necessarily outpace inflation entirely, it could help some residents maintain purchasing power compared to areas with stagnant wages.
Total Score – 26.01
Denver-Aurora-Lakewood, CO
Denver-Aurora-Lakewood, ranking lower on the inflation scale, might benefit from a few reasons. Firstly, Denver’s proximity to energy production areas could offer residents some buffer against fluctuating energy prices. Data shows Denver’s inflation rate dipped below 3% in early 2024, significantly improving from the previous year. This could be due to falling gasoline prices or a slowdown in housing market growth, offering some temporary relief for residents.
Additionally, Colorado’s growing focus on renewable energy sources like wind and solar power could provide some long-term stability in energy costs for Denver residents.
Total Score – 23.83
Minneapolis-St.Paul-Bloomington, MN-WI
There’s a combination of reasons why Minneapolis would rank amongst the top two least-affected MSAs. To start with, unlike other coastal cities, Minneapolis-St. Paul offers housing that is comparatively affordable. While housing costs have risen, they might not be experiencing the same rapid surges seen elsewhere. On top of that, the city’s economy is diverse, including industries like healthcare, manufacturing, finance, and education.
Data from the Bureau of Labor Statistics shows that Minneapolis-St. Paul’s Consumer Price Index (CPI) has grown at a slower pace than the national average in recent months. This could be due to a combination of factors mentioned above, offering some temporary relief for residents compared to areas experiencing sharper inflation.
Total Score – 18.66
Tampa-St. Petersburg-Clearwater, FL
Tampa Bay, the metropolitan area encompassing Tampa-St. Petersburg-Clearwater ranks as the least affected on the list with a 0.00 score. This fascinating score can be explained by the recent rent slowdown of the area along with it’s diverse economy.
The Tampa Bay area boasts a diverse economic base that isn’t reliant on one specific industry. Tourism, healthcare, finance, and government sectors contribute significantly, offering some buffer against national economic downturns that might hit specific industries harder.
Total Score – 0..00