Marc Rivas didn’t miss a beat when asked where he’s been feeling the pinch of rising inflation lately.
“Flowers,” said Rivas, 46, as he and his family waited outside a restaurant for a Mother’s Day brunch. “A dozen roses is now $80.”
But he then went on to add that high gas prices, private school tuition for his two boys and the regular grocery bill also took their toll. Rivas, who owns an ad agency, said many of his clients also struggle with higher costs.
“I feel it personally and on the business side,” he said.
And for good reason.
Phoenix again leads the nation in inflation rates among major cities, at 11% in 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 major cities for which the bureau publishes statistics. No other major US city has double-digit inflation.
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 highest rate in the country until February, the last time the BLS tracked valley inflation on its bimonthly schedule. The Phoenix-area annual inflation rate in February was 10.9%, showing that prices are continuing to rise even though they have moderated a bit nationally.
Nationally, the Consumer Price Index in April was pushed higher by price increases for housing, food, air fares and new vehicles, although energy prices and gasoline decreased slightly. In addition, used vehicles – another source of recent price increases – also fell, the BLS said.
Over the past 12 months, energy, including gasoline, has risen another 30.3% and food 9.4%, the largest 12-month increase since April 1981. A new concern is now that the Russian invasion of Ukraine will drive up wheat prices, as the latter country is a major wheat exporter.
Why is inflation so high in Phoenix?
In the Phoenix metro area, rising rents and house prices are a major contributor to soaring inflation, economists say. Gasoline prices are another issue, in part because Arizona raises prices with emissions additives and because some of the supplies here come from California refineries and congested ports in the Los Angeles area.
“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 has replaced all jobs lost during the pandemic by mid-2021; the nation has yet to reach that benchmark.”
Strong employment growth has pushed up labor costs. Wages, salaries and benefits jumped 5.5% in the first quarter, he said, compared to 4.8% for the country as a whole. This is on top of home prices being much hotter than nationally.
“Overall, Phoenix is growing very rapidly in most metrics, and in the current environment, that means demand is outpacing supply,” Hammond said.
Struggling with rising gas and rents
Gasoline is one of the most obvious catalysts consumers cite when talking about inflation, in part because prices are visible on nearly every commercial street corner in the valley.
“Last time I filled up it was over $50,” said Pam Oliver, a retired lab manager from Ohio who now lives in Phoenix and drives a Mazda sedan.
“I like to cycle when I can, and I cycle more because of gas prices,” she said. But otherwise, Oliver said she and her husband haven’t adjusted their behavior much because of inflation.
That’s another story for Aaron Raymond. He plans to move from Ahwatukee 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 was also struggling to meet his goal of buying a home at a time when house prices were rising.
Businesses feel it too
On the business side, Kelly Cooper, owner of BKD’s Backyard Joint in Chandler and two Melting Pot restaurants in the valley, said she’s noticed rising prices for food, fuel and labor.
“Meat and produce were definitely the biggest cost increases for us, as we saw increases of 60% on many items critical to our operation,” he said.
Cooper predicts rising liquor and electricity prices could be next.
“Small businesses looking for a break will continue to be hit in crisis after crisis,” he said.
Melissa Maggiore, owner of the Italian Daughter restaurant in Scottsdale, said food prices had risen 8% across the board, with many suppliers adding surcharges to cover gasoline and increases for wages of their own. -work.
“It left us in a very difficult position, because we have to do our best not to extend this blow too much to our guests,” she said. “It’s really a balancing act right now.”
Although many consumers and businesses are struggling, they are not yet necessarily willing to cut back on certain expenses or find substitutes.
“Part of the reason for higher than expected inflation was a record 18.6% monthly gain in airfares as travel demand surged,” said David Kelly, chief global strategist at JP Morgan Asset Management. , discussing national inflation figures.
Ben Ayers, economist at Nationwide, pointed to continued supply chain disruptions and accelerating labor spending that have driven up the costs of many types of goods and services.
When will inflation cool down?
Many economists, including Kelly and Ayers, expect inflation to moderate in the coming months.
“There’s very significant braking power being applied to the economy,” Kelly said, citing factors such as rising mortgage rates that are also expected to dampen housing demand and headline inflation.
Yet many economists, including those at the Federal Reserve, have underestimated the surge in inflation so far this year. Getting rid of inflation could prove even more difficult.
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