Regional Inflation Rates

A recent article (N. Brophie, Appleton Post-Crescent) outlined some of the causes and implications of heightened inflation. The article lays out some of Wisconsin-specific effects. The discussion is somewhat constrained since BLS only reports limited region-specific CPI data, and none limited to Wisconsin, so the author makes some inferences linked to housing prices, energy and wage costs. Nonetheless, there are some interesting regional differences.

Here is a comparison of rates, with a zoom into the closest to Wisconsin (East North Central division of the Midwest region (breakdown here). First, year-on-year, second month-on-month annualized, through November.

Figure 1: CPI-all inflation, year-on-year for nation (bold black), Northeast region (orange), Midwest region (green), East North Central division of Midwest region (red), all in % (decimal format), using not seasonally adjusted data. NBER defined recession dates peak to trough shaded gray. Source: BLS, NBER and author’s calculations.

As noted earlier, year-on-year inflation rates can obscure more recent developments.

Figure 2: CPI-all inflation, month-on-month annualized for nation (bold black), Northeast region (orange), Midwest region (green), East North Central division of Midwest region (red), all in % (decimal format), using seasonally adjusted data. Seasonal adjustment using Census X12 by author, except for national CPI. NBER defined recession dates peak to trough shaded gray. Source: BLS, NBER and author’s calculations.

The November WSJ article (by Dougherty and Guilford) notes that the South and Midwest lead in inflation, attributing the differential to motor fuel and grocery prices. For Wisconsin, Brophie notes:

The cost of housing continues to increase as well. In Wisconsin, the median home price is up 7.6% from November 2020, according to the Wisconsin Realtor’s Association.

Natural gas is up about 25% over the last year, and electricity costs are 5% higher.

Here’s a map of inflation differentials, by BLS divisions.

Figure 3: November CPI inflation rates by BLS division, year-on-year, %. Source: BLS.

Is there a correlation of inflation rates with observable factors? One candidate variable noted is vaccination rates. Using end-June partial vaccination rates, one finds a negative correlation – higher inflation is associated with lower vaccination rates. A quantile regression indicates each one percentage point increase in partial vaccination rates is associated with a 0.5 percentage point decrease in y/y inflation, with a t-statistics of 6.0 (simple OLS yields a similar estimate).

Graphically:

Figure 4: Scatterplot of year-on-year November inflation versus end-June partial vaccination rate. Source: BLS, USAFacts (as of June 24).