Bay Area inflation rate cools in August
Pace of price hikes rises 3.4%, a reasonable increase when compared to previous years
Consumer price increases in the Bay Area cooled off in August and — while still rising — slowed to a near-normal pace.
The Bay Area inflation rate rose 3.4% in August, the U.S. Bureau of Labor Statistics reported. That's similar to the 2% to 3% yearly increases seen regionally when consumer prices are rising at a typical rate.
The more sedated pace of price increases was welcome news to those watching the economy and the impact on consumers at the gas pump, in the grocery store and during recent back-toschool shopping.
“Inflation easing really matters in a place like the Bay Area. We're such a high-cost region to begin with,” said Russell Hancock, president of Joint Venture Silicon Valley, a San Jose-based think tank. “People here are slammed by housing prices, child care costs have risen dramatically and we also get squeezed on routine services.”
The nationwide inflation rate was slightly more heated than in the Bay Area, rising at a yearly pace of 3.7% in August compared with the same month in 2022, the federal agency reported.
The most recent release from the federal labor agency marked the second reporting period in a row that showed a cooling trend in the Bay Area. In June, consumer prices in the region rose 2.9% on a yearly basis. Over the most recent two months that ended in August, the Bay Area inflation rate rose a nearly invisible 0.01%, the federal agency's report showed.
“The positive news in today's report is that the Bay Area consumer price index did not increase between June and August,” said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy.
But costs for electricity provided by utility companies such as PG&E have risen significantly. Electricity costs are rising more than three times as quickly as the overall inflation rate during the past 12 months.
And while gasoline prices in August were significantly lower than a year ago, a starkly different picture has emerged more recently.
Since May, gasoline prices have risen at a pace that's several times greater than the overall Bay Area inflation rate as measured by consumer
prices during roughly the same period in recent months. Gas prices are up nationally, too, a fact President Joe Biden acknowledged in a statement Wednesday.
“Overall inflation has also fallen substantially over the last year,” Biden said, “but I know last month's increase in gas prices put a strain on family budgets.”
San Jose resident Isaac Rocha, who filled up his vehicle at Gas & Shop on McKee Road in San Jose on Wednesday, said rising gas prices have been tough on the wallet.
“Gasoline is getting a lot more expensive,” Rocha said. “That makes it harder for me. That makes it harder for everyone.”
Unleaded regular gasoline prices were down 5.4% on a yearly basis in the Bay Area, but they have risen 6.2% since May.
Saudi Arabia and Russia have slashed oil production, moves that are designed to increase crude oil prices and eventually cause gasoline prices to jump.
Jasmine Sanchez, a San Jose resident, prefers to fill up at gas stations that aren't visible from the freeway and to avoid high-cost cities.
“Pay $6 at places like San Francisco and Santa Cruz? Nope,” Sanchez said.
Brian Wesbury, chief economist with First Trust Advisors, in his analysis of the nationwide inflation report, warned that the Federal Reserve's campaign to combat inflation by shoving interest rates dramatically higher is far from over.
“Inflation came in hot in August with consumer prices up 0.6% for the month, largely driven by a 5.6% surge in energy prices,” Wesbury said in his report.
He also warned that people's paychecks are not keeping up with inflation.
“The worst part of today's report was that real average hourly earnings declined 0.5% in August, taking a large bite out of consumer spending power,” Wesbury wrote. “We continue to believe a recession is on the way.”
Still, the annual change in the Bay Area inflation rate is welcome news compared with the brutally high price trends for much of 2022.
In June 2022, Bay Area consumer prices soared by 6.8%. That milestone marked the highest rate of annual increase since October 1984, when inflation rocketed higher at a yearly pace of 7.1%
“With so many high earners in our region, service providers often ratchet up their fees because the market can bear it,” Hancock said. “In actuality, though, huge chunks of our population are on the edge and inflationary pressures can be the straw that breaks the camel's back.”
Here are the annual changes in Bay Area prices for some key consumer categories in August:
• Electricity utility services — PG&E, primarily — supplied to the home, up a whopping 12.3% in August compared with the year before.
• Natural gas piped into the home, essentially PG&E gas service, was down 16.8% in August on a yearly basis. However, despite PG&E promises that natural gas service costs would moderate after the bitterly cold winter, gas service costs have risen 5.2% since March.
• Food prices rose at a still-high pace of 4.5% in August compared with the year before.
• Food consumed at home rose 3.5%, close to a normal annual rate.
• Food eaten away from the home rose at a very heated pace of 6.4%, potentially indicating that demand for dining out could be driving restaurant costs higher.
• Meat, poultry, fish and eggs were up 0.6%, a pace that's well below the double-digit increases seen in 2021 and 2022.
• Fruit and vegetable prices rose 3%.
• Dairy product costs rose 0.2%.
• Cereal and bakery product prices hopped higher by 5.7%.
• Clothing is much more expensive. Apparel costs jumped by 4.8%.
• Medical care costs fell 0.1% on a yearly basis.
• Household furnishings and supplies were down 2.7%.