Inflation has hit these 3 U.S. cities the hardest. That has 'substantial political implications,' analyst says.

By Venessa Wong

Cities experiencing more significant inflation typically have undergone rapid population growth, leading to an increased demand for goods and services

Consumer prices in the U.S. were up 3.2% in February from a year earlier - but those increases were not felt equally across the country, according to a new analysis by WalletHub.

The Dallas metropolitan area saw the steepest increase in prices year over year, at 5.3%, the study by the personal-finance site found. That was about three times the rate of inflation in the Anchorage, Alaska, metropolitan area, where prices increased 1.7% - the smallest increase among the 23 metropolitan areas included in the study.

Many consumers are still under financial pressure from historically high inflation rates that began in 2021, and people regularly name inflation as a top concern in polls. While price increases have slowed significantly since reaching a four-decade high in 2022, inflation in the U.S. economy remains higher than the Federal Reserve's 2% target.

Despite the regional differences highlighted by WalletHub, most of the metropolitan areas the study tracked saw notable increases in housing costs, according to Bureau of Labor Statistics data. Nationally, shelter prices increased 5.7% in February over the last year, accounting for two-thirds of the increase over the last 12 months in the core consumer-price index, which excludes food and energy. These increases were offset by decreases in some other areas, including vehicle and energy prices.

Inflation has become a central issue in the upcoming presidential election. "Partisanship is a huge mitigating factor in perceptions of who is to blame for inflation," Patrick Murray, the director of the Monmouth University Polling Institute, told MarketWatch in an email.

Even as President Joe Biden touts the slowing rate of inflation in recent months and blames corporate greed for some of the rise in consumer prices, Republicans have continued to criticize him sharply, charging that his economic policies have driven those retail-price increases.

The Biden administration, meanwhile, announced this month that it would create what it calls a strike force, led by the Federal Trade Commission and the Justice Department, to combat "unfair and illegal pricing" by corporations.

But inflation trends alone don't determine political opinion in a given area, Murray said. While Dallas had high inflation and Anchorage had low inflation, he said, "I'd be willing to bet they have more in common in terms of political opinion around inflation than Minneapolis at 4% or Baltimore at 3%."

Still, "the consequences of inflation, such as its impact on income distribution and economic stability, remain critical issues in political discourse and policy formulation," said Cassandra Happe, a WalletHub analyst.

Cities experiencing more significant inflation typically have undergone rapid population growth, she noted, leading to increased demand for goods and services. "Understanding and addressing inflation carry substantial political implications," Happe said.

Cities with the highest rates of inflation

These metropolitan areas experienced the highest rates of inflation early this year as compared with early 2023:

1. Dallas: Up 5.3%

Rent in the Dallas area in January increased by 5.6% year over year, and the cost of eating out increased by 7.3%, according to BLS data. Grocery-store prices rose at a slower 2.2% pace, while prices declined for gasoline, drugs, household furnishings and maintenance, and used cars and trucks.

2. Miami: Up 4.9%

The main contributor to rising costs in the Miami area was shelter, which was 7.4% more expensive in February than it was a year earlier, according to the BLS.

3. Seattle: Up 4.3%

Shelter costs in the Seattle area increased in February by 5.1% year over year. Overall grocery prices rose by 1.6%, although steeper hikes were seen for cereals and bakery products, at 8.7%, and fruits and vegetables, at 5.8%. The price of used cars and trucks fell by 2.3%.

Cities with the lowest rates of inflation

These metropolitan areas experienced the lowest rates of inflation early this year as compared with early 2023:

1. Anchorage: Up 1.7%

Although the Anchorage area, like the rest of the U.S., saw high levels of inflation in 2022, prices have been more stable over the past 12 months, with the area experiencing the lowest price increases in the country. The cost of shelter was up by 2.6% in February, but grocery prices saw a minor decline of 0.1%, new- and used-car prices fell by 5.9% and prices for household furnishings and maintenance were 3.5% lower.

2. Boston: Up 2%

In the Boston area, prices of some things increased significantly in January compared with the same time a year earlier: Rent prices were up 7.3%, grocery prices were up 3.1% and full-service-restaurant prices were up 8.3% in January. Still, consumers in the area benefited from a 13.8% year-over-year decrease in energy prices (electricity prices were down by 23.8% after spiking in early 2023), as well as a 4.8% drop in medical costs and a 5.6% reduction in prices for recreation, a category that includes televisions, sports equipment and other items.

3. Phoenix: Up 2.2%

Food prices in the Phoenix area increased last month by 1% year over year, and energy prices rose 0.5%. Meanwhile, shelter prices were up by 2.7%, as the area saw a major slowdown in home sales and rents cooled after spiking in 2022.

-Venessa Wong

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03-23-24 1144ET

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