Valley inflation continues to lead US at 11%, economists point to housing
PHOENIX – Inflation nationally slowed in April but remains in double figures in metro Phoenix, according to the Bureau of Labor Statistics and two local economists say it’s no mystery why.
The rate of inflation in the Valley was 11% in April while the U.S. rate dropped to 8.3% from the four-decade high of 8.5% in March.
“Home prices are going up more rapidly here,” economic consultant Elliott Pollack of Scottsdale-based Elliott D. Pollack and Company told KTAR News 92.3 FM.
Statistics released Wednesday showed Maricopa County housing increased 14% over the past year, compared to the national average of 6.5%.
“I think higher interest rates will slow that a little but the underlying demographics for housing probably have never been stronger so any slowdown is likely to be transitory,” Pollack said,
Economist Jim Rounds of Tempe-based Rounds Consulting Group says dramatic increases in housing prices are outstripping wage increases.
“Everybody is going to have less purchasing power in general,” he said.
The Federal Reserve has boosted interest rates twice this year and more hikes are expected. Pollack says that’s an “unfortunate necessity” to slow inflation but could send the country into recession early next year.
Rounds said, “The potential light at the end of the tunnel is that the Fed is finally taking action and raising rates, which should slow inflation, but they have to be careful because if they do it too rapidly they could throw us into a recession.”
Jobs could be lost, he said, adding, “Incomes go down and that’s probably as bad or worse than dealing with inflation issues. We’re walking a very fine line right now.”
Rounds doesn’t foresee a recession until late next year or early 2024.