Research Briefing | Aug 13, 2021

US South and Midwest regional inflation runs hotter than rest

South and Midwest regional inflation runs hotter than rest - iPad

Headline CPI inflation rose 5.4% y/y in July 2021, but regional inflation is uneven, with prices up 5.9% y/y in the Midwest and 5.8% y/y in the South on the high end and 5.2% y/y in the West and 4.3% y/y in the Northeast on the low end. Supply-side constraints are raising prices, and stronger base effects, lesser economic slack, and tighter labor markets underpin comparatively higher inflation readings in the South and Midwest. Our recovery trackers confirm the South and Midwest led the recovery in H1 2021.

What you will learn:

  • Regional inflation disparities narrows modestly excluding food and energy, but core CPI inflation is hotter in the South (+4.8% y/y) and Midwest (+4.6% y/y) than the West (+3.9% y/y) and Northeast (3.5% y/y) – this despite core inflation historically running coolest in the South and Midwest.
  • Goods inflation was strongest in the Midwest (+9.6% y/y) and South (+9.5% y/y) in July, outpacing the 9.2% national increase. These regions account for about 60% of the rise in national goods prices since the crisis began, but they represent only half of national consumer outlays. 
  • We look for gradually unwinding supply-side constraints and moderating demand growth to temper regional price pressures in coming quarters. But substantial constraints in pandemic-stricken supply chains and labor markets risk keeping regional inflation higher for longer than we expect.

Back to Resource Hub

Related Services

Post

Why an ageing population doesn’t mean soaring inflation

What’s the future for inflation? Joachim Nagel, the new president of Germany's central bank, believes the rapidly ageing global population will play a key role – ramping up pressure on prices in the medium term. While we agree slowing labour supply will stifle output growth, in his recent discussion Nagel failed to fully consider the demand side of the argument.

Find Out More

Post

Surging global food prices could drive eurozone core inflation higher

Along with energy prices, global food prices have emerged as a key driver of the eurozone's current inflationary surge. Like other advanced economies, eurozone countries tend to be less exposed to global food price fluctuations. But if persistent and combined with strong demand, high food prices could result in a higher pass-through to core inflation.

Find Out More