After easing substantially in 2023, U.S. inflation has remained stubbornly elevated so far this year, creeping more slowly toward the Federal Reserve’s 2% goal.
But some states are already there while others will still be struggling to reach the benchmark even after the nation effectively has declared mission accomplished.
What will the next CPI report say about inflation?
The country’s 3.2% annual inflation rate – based on the Labor Department’s consumer price index (CPI) – masks notable differences among the states since pandemic-related product and labor shortages sparked a run-up in consumer prices starting in 2021. On Wednesday, Labor is expected to report that yearly inflation jumped to 3.4%, though that’s still down from a 40-year high of 9.1% in June 2022.
Florida is saddled with the nation’s highest inflation at about 4% while Pennsylvania has the lowest at about 1.8%, according to an analysis of CPI data by Moody’s Analytics that’s based on a three-month moving average. Although BLS doesn’t conduct surveys on state inflation numbers, it does publish metro area and regional data that Moody’s used to roughly estimate the state figures.
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S&P Global Market Intelligence compiles a similar ranking that looks broadly similar to Moody’s despite some differences.
Before the health crisis, “You didn’t see the big differences (among states) in inflation that you’re seeing now,” says S&P regional economist Karl Kuykendall.
What places have the lowest inflation?
For eight northeastern states, yearly price gains are already below 2.5% and for about a quarter of the U.S., they’re under 2.7%, according to the Moody’s analysis.
“A big part of the country already has worked its way back to (prices) people would be very comfortable with,” says Mark Zandi, chief economist of Moody’s Analytics.
That could move the needle in the November presidential election, Zandi says. President Biden may get a boost in swing states with yearly inflation rates below the U.S. average – such as Pennsylvania, Wisconsin and Michigan – especially if they edge close to 2% by November.
Yet Georgia, another swing state, still grapples with relatively high inflation, possibly aiding former President Trump. And while price increases have slowed in Arizona, its cumulative gain since early 2021 is among the nation’s largest.
Generally, inflation has been higher in the South and West because Americans have flocked to those regions for their favorable climates and lower costs, pushing up consumer demand and prices, especially for housing. It’s been lower in the Northeast and Midwest, with many residents leaving those areas, easing cost pressures.
Which states did people move to during the pandemic?
Those decades-long migration trends were intensified by the pandemic as people bolted from densely populated cities like New York and Chicago for smaller towns with open spaces and lower costs, such as Boise, Idaho, and Nashville, Tennessee.
Now that many companies are requiring staffers to return to the office, at least some of the time, price pressures have partly swung back, says Moody’s regional economist Adam Kamins.
Inflation in Mountain West states like Utah, Idaho and Arizona led the nation at more than 10% in June 2022, according to Moody’s. But skyrocketing housing costs, along with return-to-office mandates, have dampened migration to the area. In February, inflation in the region was among the nation’s lowest at about 2.5%.
By contrast, price increases in California, Hawaii and New York peaked at a relatively modest 7% to 8% in June 2022. People were leaving cities like San Francisco, New York and Honolulu in droves for less expensive and less hazardous areas. But as COVID has faded, many people have returned to those cities and fewer are departing, renewing cost squeezes. Inflation is about 3.6% in California and 3.5% in Hawaii, based on Moody’s estimate of the three-month average.
Mountain West residents may feel better now that inflation is softening and those in California and Hawaii may be more frustrated. Yet perceptions may be shaped more by cumulative price increases since early 2021, Kamins says. On that basis, Utah’s prices, for example, are up 19.3% — above the 18.5% U.S. average – while California’s have risen 16.7%.
Here’s a look at the five states with the highest annual inflation the past year and the five states with the lowest price gains based on the Moody’s three-month average.
The five states with the fastest inflation:
Florida
12-month inflation: 3.9%
Americans have streamed into the Sunshine State since the pandemic for its warm weather, beaches and lower costs, especially compared to the Northeast. The state gained 194,000 more residents than it lost last year, according to Moody’s and Census Bureau figures, driving up the cost of single-family homes and rent.
The state is attracting many high-income consumers, including both workers and retirees, Moody’s Kamins and Zandi say. The influx also has pushed up the cost of food, furniture and other goods and services. Groceries are among the most expensive in the country, with the average family spending nearly $300 a week, according to the Census Bureau.
Meanwhile, damaging hurricanes in recent years have caused homeowners insurance to skyrocket. The average annual premium costs $8,770, about four times the national average, according to moneygeek, a personal finance website.
Tennessee
12-month inflation: 3.8%
As home prices soared in larger metro areas, many Americans sought refuge in Tennessee for its more affordable housing, big-city amenities in Nashville, diverse economy and robust job opportunities. The trend accelerated during the pandemic, Kamins says.
Major corporations such as FedEx and AutoZone are based there and the state boasts a thriving auto assembly hub.
Last year, Tennessee added 63,000 more residents than it lost, pushing up the cost of housing and other services. Its 3.3% unemployment rate, below the nation’s 3.8%, has increased wages and the cost of services.
But while housing prices have climbed higher, they didn’t vault as sharply as they did in the Mountain West, Kamins says. And so many Americans who moved to the state’s rural areas during the pandemic have stayed and are working remotely even as the health crisis has eased.
Virginia
12-month inflation: 3.8%
The state has drawn residents, particularly to Northern Virginia, as the federal government in nearby Washington, D.C., has beefed up staffing following legislation to expand investments in infrastructure, chip manufacturing and clean energy, Zandi says.
But the area, a vibrant technology hub, has struggled to attract enough skilled workers to staff the numerous tech companies that have moved to the region, Kamins say, nudging wages and inflation higher. Unemployment is just 3%.
South Carolina
12-month inflation: 3.6%
The state, the fastest-growing in the country, boasts a robust tourism industry in Charleston, Hilton Head and Myrtle Beach and a vibrant manufacturing sector centered around BMW in the Upstate area and Boeing in Charleston.
About 82,000 more people moved to the state than left last year, the Moody’s and Census figures show, pushing housing and other prices higher.
Alabama
12-month inflation: 3.6%
The state attracted residents during the pandemic and many have stayed and are working remotely, Kamins says.
Meanwhile, its large stable of manufacturers have been expanding, S&P’s Kuykendall says, including Hyundai, Mercedes-Benz and Airbus. The unemployment rate is 3%.
Inflation has picked up off of a low cost base, Kamins says.
The five states with the slowest inflation:
Pennsylvania
12-month inflation: 1.8%
Pennsylvania is among the few states that have lost population as residents have fled to the Mountain West and South for lower costs, scenic beauty or more mild temperatures.
Since residents of the Keystone State do lots of driving, gasoline costs carry more weight in a basket of goods and services and the decline in gas prices over the past 18 months has helped lower inflation overall, Kamins says.
Maine
12-month inflation: 1.9%
Maine got a big boost during the pandemic as residents of larger New England cities such as Boston moved to the less populated area, Kamins says. But that has stalled and partly reversed as COVID has faded.
Meanwhile, he says, its population has a disproportionate share of older residents who tend to spend less, keeping prices from rising sharply.
New Hampshire
12-month inflation: 2%
Like Maine, New Hampshire attracted residents from larger cities during the pandemic but the trend has petered out.
The state also has an older population that tends to spends less. Nearly 19% of residents are 65 and older compared to 16.5% for the U.S., according to the Carsey School of Public Policy at the University of New Hampshire.
The population has grown slowly but the state has surprisingly high home prices, Kamins says, discouraging people from moving in.
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Vermont
12-month inflation: 2.1%
Vermont has the nation’s third-oldest population behind Maine and New Hampshire. It was losing population for years but gained during COVID.
The state has a vibrant tourism industry but low snowfall hurt the past ski season and a historically wet summer last year discouraged visitors as well, Moody’s says.
Meanwhile, a chip production factory, the state’s largest employer, has laid off workers because of weak global demand.
Connecticut
12-month inflation: 2.1%
The state drew New York City residents during the pandemic but many have now left for warmer, more affordable areas, Kamins says.
“Housing affordability is a problem,” he says.
Contributing: C.A. Bridges of the Daytona Beach News-Journal
