Inflation in the U.S. has finally started to show signs of cooling, though it still remains at fairly high levels across the country as the January Consumer Price Index (CPI) data came in at 6.4% year-over-year.
Some states are particularly feeling the impact of sky-high prices: According to a recent Moody’s analysis of Bureau of Labor Statistics (BLS) data, Nevada and Colorado are experiencing the highest inflation growth at more than 7.4%. Texas, Florida, Arizona, Utah, Virginia, and Louisiana were also over 7%.
“Inflation hasn’t been this high in so long since the 1970s, so many states are having to grapple with these challenges for the first time,” told Justin Theal, an officer with the Fiscal 50 project at Pew Charitable Trusts.
Furthermore, according to WalletHub data, several metro regions are seeing significant increases in inflation. In Florida, the Miami-Fort Lauderdale-West Palm Beach metro area is at just under 10% inflation while Tampa-St. Petersburg-Clearwater is at 8.9%.
High inflation typically leads to consumers pulling back on discretionary spending as essentials like food and shelter become more costly, though American consumers remain resilient amid decades-high inflation.
The latest BLS data shows that grocery prices remain at high levels, with the category increasing 0.4% on a month-over-month basis in January 2023 and by 11.3% year over year. The cost of eggs, in particular, is up more than 70% on an annual basis.
Another key factor for inflation increases is shelter prices, which accounts for nearly a third of the overall CPI inflation data.
And so migrations within the U.S., along with the subsequent effects on local housing markets, contribute to the various state inflation levels: Address-change-request data over 2019-2021 from the United States Postal Service suggests that Americans moved out of New York, California, Illinois, Pennsylvania, and Massachusetts the most while Texas, Florida, South Carolina, North Carolina, and Georgia saw the biggest inflows of new residents.
Theal stressed that the variation across states is contingent on several factors such as consumer demands, migration, and the effects of the coronavirus pandemic.
“Elevated inflation across all states is disrupting these revenue trends — whether the state is more reliant on sales taxes, which tend to closely follow the ebbs and flows of inflation over time, or if the state is more reliant on personal income taxes, which tend to become more volatile during inflationary conditions,” Theal said. “Overall, no state has gone unscathed in terms of inflation on their state finances.”