Americans this past year have faced the highest—and fastest climbing— inflation rates in four decades. Rapidly rising prices are harming American families, eroding the value of their paychecks, and increasing the financial strain of buying everyday goods like groceries and gasoline. Inflation is also eroding the value of savings, making it harder for Americans to build wealth.

While prices are rising across the entire country, Americans’ recent experiences with inflation vary depending on where they live. For example, Americans in the Northeast are experiencing relatively slower price growth compared to the rest of the country, while Americans in the Mountain West face the highest overall inflation rates. Trends in the cost of housing, transportation, food, and energy also vary across the country.

Inflation Trends

Inflation reached an annual rate of 7.5 percent in January 2022. In other words, the average family paid 7.5 percent more in January 2022 for the same goods and services they purchased in January 2021, based on normal spending habits. This was the highest inflation rate since February 1982 when the United States was taking drastic economic measures to battle the Great Inflation.[1]

Inflation today, in addition to being high, has also been rapidly growing: it averaged 3.4 percent in the first half of 2021 but 6.0 percent in the second half. This rapid pace of price acceleration is in stark contrast to the 10 years prior to 2020, when annual inflation rates held relatively steady and averaged about 1.8 percent.[2]

Unfortunately, Americans are unlikely to get relief from high inflation in the near term. Shipping costs continued to accelerate in January for all modes of transportation[3]—trains, trucks, airplanes, and ships—and producer prices increased at their fastest pace in eight months.[4] The cost of labor is also persistently rising as businesses continue to face labor shortages; [5] employment in January 2022 is 2.9 million workers short of its pre-pandemic levels[6] and 5.4 million below pre-COVID projections.[7] Rising shipping and labor costs in turn drive up the price of consumer goods.

At the same time, consumer demand is elevated, fueled by roughly $2.5 trillion of excess savings that Americans have accumulated from the federal responses to COVID.[8] This elevated demand is driving up prices by putting increased pressure on shipping and production while costs are high and global commodities, such as metals and semiconductor chips, are in short supply.[9] High U.S. demand fueled by excess savings also helps explain why the United States is experiencing one of the highest post-COVID inflation rates in the world.[10]

Regional Variation

High inflation is a staple of life in the United States today, but inflation rates are not uniform across the country. Regional variation in inflation is driven by a myriad of factors: varying consumer preferences and demand levels, COVID-inspired migrations from urban to suburban areas—which drives up demand in some regions and lowers demand in others—and transportation costs determined by geography and distance from suppliers.

To visualize how rising prices are affecting Americans today, Figure 1 displays the average monthly cost of inflation by region. The added monthly cost to households is found by multiplying monthly inflation rates, each relative to January 2021, by average monthly household spending, which differs by region. The result shows how much rising prices throughout 2021 have increased household costs each month.

As inflation increases, so does the monthly cost to American families—added costs that Americans will continue to face moving forward, regardless of whether inflation reverts back to normal levels, now that price levels have permanently shifted upward.

Figure 1: Average Monthly Cost of Inflation per Household by Census Division, Relative to January 2021

^{JEC Calculations. Consumer Price Indices (CPI) are retrieved for every month of 2021 across all nine Census divisions, and the percent change in CPI each month relative to January 2021 is applied to average monthly household spending data across the four Census regions. Households in different divisions within the same region are assumed to have the same average monthly household spending. Household spending data is based on a two-year average from 2019 to 2020, meaning that this analysis likely underestimates total spending in 2021 and the monthly cost of inflation by Census division. CPI and consumer spending data are both retrieved from the Bureau of Labor Statistics.[11]}

Last year, the average inflation cost per household rose from roughly $100 in April 2021, when the annual inflation rate first started accelerating, to over $380 in January 2022 when it hit 7.5 percent. Americans in the Mountain region—Utah, Colorado, Arizona, New Mexico, Montana, Idaho, and Wyoming—are experiencing the highest inflation rates with over $500 in added household costs in January. Alternatively, those in the East South Central region—Kentucky, Tennessee, Mississippi, and Alabama—are experiencing the lowest monthly inflation costs due to relatively lower inflation rates and average spending levels. Households in the remaining regions face monthly inflation costs ranging from $350 to $400 as of January 2022.

To better get a sense of how inflation differs across the country, the following interactive map breaks down annual inflation rates in January 2022 by region. The Mountain West is experiencing the highest inflation with an annual rate of 9.0 percent, largely driven by rising home and rent prices; shelter costs in the mountain region are rising nearly twice as fast as the national average. States in the Midwest and South are facing the next highest inflation rates at around 7.9 percent, and states in the Northeast are experiencing relatively lower inflation at 6.1 percent to 6.6 percent. While the Northeast may be facing the lowest inflation relative to the rest of the country, inflation in that region is still historically high, with prices rising more than three times faster than the Federal Reserve’s 2.0 percent target.

Figure 2: Annual Inflation Rates and Monthly Household Inflation Costs by Census Division, January 2022