SerpApi.Org
(The Center Square) - Phoenix’s inflation rate is lower than the national average, according to a new report.
Common Sense Institute Arizona released a report showing Phoenix’s year-over-year inflation rate in June was 2.8%, compared to the national average of 3.5%.
The biggest difference between America’s and Phoenix’s inflation rate is the shelter category, CSI senior economist Zach Milne told The Center Square on Tuesday.
Phoenix’s shelter category contributed only 0.5% to its overall inflation rate compared to 1.16% at the national level, the report shows.
Arizona experienced a surge in housing prices during the COVID-19 pandemic, which drove prices up, Milne said, adding that over the last few years prices have “leveled off,” contributing to a lack of inflation in the shelter category.
In January 2020, the average home in Phoenix cost $274,595, according to Zillow. By July 2022, the average home price had skyrocketed up to $462,194. This represents a 68% increase in prices. Almost four years later, the average home price in Phoenix costs $410,222.
Milne called Arizona’s housing prices “still relatively unaffordable.”
Jim Rounds, an Arizona economist and CEO of Rounds Consulting Group, said the fast increase in inflation Arizonans experienced during COVID could “only last so long” before eventually coming down.
He told The Center Square on Tuesday that prices are “still going up.”
“Unless prices come down [and] inflation is below zero, then we’re still paying higher prices,” he explained.
Rounds said prices have increased in Arizona at a higher rate than the national average since 2022, when the state saw double-digit inflation rates.
When things start to level out, Rounds said it “gives the impression that things are getting cheaper in places like Greater Phoenix,” when in reality “the prices aren’t coming down.”
According to Milne, if the energy category is not factored into inflation, Phoenix’s inflation rate is lower. The report shows when Phoenix’s inflation rate is determined without factoring in energy, it is 2%.
The energy category, which include electricity, propane, oil and other prices, have increased since the Iran conflict started in February, Milne said.
The Iran conflict over the last couple of months has caused inflation rates to go up and down nationwide, including in Arizona, he added.
“There’s a lot of other factors outside of domestic [and] economic policy that are affecting Consumer Price Index growth right now,” Milne said.
He called the CPI an “imperfect measure” because a “large change in one specific category” can increase the “overall index higher and make it look like ‘inflation’ is higher than it really is.”
According to the Bureau of Labor Statistics, the CPI measures “the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.”
Milne said Phoenix’s CPI score could be around 2% if the energy category settled down.
Regarding the Arizona economy, Milne said looking at the CPI does not provide enough information about the current state of the economy.
Rounds said Arizona’s economy is strong, citing the state's addition of high-value jobs and its per capita personal income growing at a faster rate than in other states.
