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Inflation in metro Phoenix rises again; region stays No. 1 for highest rate in the country
Russ Wiles, Arizona Republic
5 min read
Chiffon Valentine watches the gas pump while filling up her car at the Shell gas station on Scottsdale Road and Weber Drive on March 13, 2022, in Tempe, Arizona.
Marc Rivas didn't miss a beat when asked where he has felt the pinch of higher inflation lately.
"Flowers," said Rivas, 46, while waiting with his family outside a restaurant for a Mother's Day brunch. "A dozen roses is now $80."
But then he went on, adding that high gasoline prices, private-school tuition for his two boys and the regular grocery bill have taken a toll, too. Rivas, who owns an advertising agency, said many of his clients are grappling with higher costs as well.
"I'm feeling it personally and on the business side," he said.
Phoenix once again leads the nation for inflation rates among big cities, at 11% for the past 12 months through April, the Bureau of Labor Statistics reported Wednesday.
That topped Atlanta's 10.8% pace among the roughly two-dozen big cities for which the bureau breaks out statistics. No other large U.S. cities have inflation in double digits.
For the same 12-month period, the national inflation rate was 8.3% through April, down slightly from 8.5% in March.
Metro Phoenix also had the nation's highest rate through February, the last time the BLS tracked Valley inflation on its every-two-months schedule. The Phoenix area's annual inflation rate as of February was 10.9%, showing that prices here continue to rise even as they have moderated a bit nationally.
Nationally, the Consumer Price Index in April was pushed up by price increases for housing, food, airline fares and new vehicles, though energy and gasoline prices declined slightly. Also, used vehicles — another source of recent price increases — also dipped, the BLS said.
Over the past 12 months, energy including gasoline was still up 30.3% and food was up 9.4%, the biggest 12-month increase since April 1981. A new concern now is that the Russian invasion of Ukraine will push up wheat prices, as the latter nation is a major exporter of wheat.
Why is inflation so high in Phoenix?
In metro Phoenix, rising rents and home prices are a major contributor to the inflation surge, economists say. Gasoline prices are another problem, partly because Arizona increases prices with pollution-fighting additives and because some of the supplies here come through California refineries and congested Los Angeles-area ports.
"I think it’s the strong growth in Phoenix that’s driving it," said George Hammond, an economist at the University of Arizona in Tucson. "Phoenix replaced all of the jobs lost during the pandemic by the middle of 2021; the nation still has not met that benchmark."
Strong job growth has pushed up labor costs. Wages, salaries and benefits surged 5.5% in the first quarter, he said, compared to 4.8% for the nation overall. That's in addition to home prices that are running much hotter than nationally.
"Overall, Phoenix is growing very fast across most metrics, and in the current environment that means that demand is outstripping supply," Hammond said.
The fuel-price spike was exacerbated by declines in private energy investments in recent years, including fuel-distribution networks in the West, said Dennis Hoffman, an economist at Arizona State University.
“These reduced investments have resulted in a slowing of domestic output and distribution over the past five to six years as energy investors have become increasingly attracted to investments in renewables, not in fossil fuels,” he said.
Grappling with higher gas, rents
Gasoline is one of the most obvious catalysts that consumers cite when discussing inflation, partly because prices are visible on almost every commercial street corner around the Valley.
"The last time I filled up my tank, it was over $50," said Pam Oliver, a retired laboratory manager from Ohio now living in Phoenix who drives a Mazda sedan.
"I do like biking when I can, and I am biking more because of gas prices," she said. But otherwise, Oliver said she and her husband haven't adjusted their behavior much because of inflation.
It's a different story for Aaron Raymond. He's considering moving from Ahwatukee Foothills to Scottsdale, partly to avoid a possible $400 monthly rent increase for his one-bedroom apartment and partly to be closer to his job.
"My gas bill has doubled," said Raymond, 34, who said he's also struggling with his goal of buying a home at a time when housing prices have surged.
Businesses are feeling it, too
On the business side, Kelly Cooper, who owns BKD's Backyard Joint in Chandler and two Melting Pot restaurants in the Valley, said he has noticed higher prices for food, fuel and labor.
"Meat and produce definitely have been the biggest cost increases for us, as we've seen increases of 60% on many items that are essential to our operation," he said.
Cooper anticipates that price increase for alcohol and electricity could be next.
"Small businesses looking for a break are going to continue to get hit with crisis after crisis," he said.
Melissa Maggiore, who owns the Italian Daughter restaurant in Scottsdale, said food prices have risen upward of 8% across the board, with many suppliers adding surcharges to cover gasoline and increases for their own workforce wages.
"It has left us in a very difficult position, as we have to do our best not to extend too much of this hit to our guests," she said. "It really is a balancing act right now."
While many consumers and businesses are struggling, they aren't necessarily willing yet to cut back on some expenses or find substitutes.
"Part of the reason for the higher than expected inflation was a record 18.6% monthly gain in airline fares as travel demand increased," said David Kelly, chief global strategist at JP Morgan Asset Management, discussing the national inflation numbers.
Ben Ayers, an economist at Nationwide, pointed to continuing supply-chain disruptions and accelerating labor expenses that have pushed up costs for many types of goods and services.
When will inflation cool off?
Many economists, including Kelly and Ayers, expect inflation to moderate in coming months.
"Very significant braking power is being applied to the economy," Kelly said, citing factors including rising mortgage rates that should slow demand for housing and overall inflation, too.
Yet many economists, including those at the Federal Reserve, underestimated the inflation surge so far this year. Getting rid of inflation might prove even more challenging.
