San Diego in May had the highest inflation rate in the nation by a notable margin.
The inflation rate was 3.8% in May, said data released Wednesday by the U.S. Bureau of Labor Statistics’ Consumer Price Index. San Diego’s rate in March was also 3.8% when it had the highest inflation in the U.S., tied with New York.
In May, San Diego was the clear leader in rising prices. Other metro areas with high inflation rates were New York at 3.4%, Chicago at 3.3% and Boston at 3%. Meanwhile, Dallas had an inflation rate of 0.6% and Washington, D.C., was 1.9%.
Rising prices in the San Diego metro area, which includes all of San Diego County, are in contrast to the national inflation rate of 2.4%. The relatively low U.S. inflation rate helped ease concern among economists about tariffs hitting the economy earlier than expected. President Donald Trump celebrated the latest data on social media, arguing this meant the Federal Reserve could lower borrowing rates.
From April to May, the biggest gains were in transportation, up 1.2%, in gasoline, up 1.6%, and medical care, up 2.2%. Some sectors declined, such as alcoholic beverages, down 2.7%, apparel, down 3.3%, and recreation, down 3.4%.
Alan Gin, economist at the University of San Diego, said housing costs — up 4.9% annually — continue to be the primary issue driving local inflation.
“It filters into the other categories,” Gin said, “because businesses say that they can’t attract workers here unless they pay higher wages.”
He said when a business has to pay employees more, so they can afford rent, that means prices go up higher for customers. Gin noted the catch-all category of other goods and services (which includes everything from laundry to haircuts) was up 6.6% annually.
But don’t Honolulu, Los Angeles and New York also have high home prices? Yes, Gin said, but there are other factors that San Diego must deal with: Gasoline costs are consistently higher than the national average, and it is somewhat geographically isolated so it is more difficult for some goods to get here.
Gin isn’t alone in his assessment. David Ely, a finance professor for San Diego State University, also pointed to housing costs as something that affects San Diego’s local inflation rate. He noted it isn’t just high prices here, but it’s that they seem to be going up faster than the rest of the nation.
“Housing costs are certainly high,” Ely said, “and that makes sense given the shortage of housing we have in San Diego.”
On an annual basis, here are the areas where prices changed in San Diego County:
- Motor fuel: The price for unleaded regular was down 8.3%; unleaded midgrade was down 8.1%; and unleaded was down 7.8%.
- Food: Cereals and bakery products were down 2%; dairy, down 1.2%; fruits and vegetables, up 2.4%; and meats, poultry, fish and eggs were up 3.3%.
- Shelter, including rent and owners’ equivalent of rent, was up 5.3%.
- Transportation costs, which include automobile maintenance, vehicle parts and car insurance, were up 2.5%. Used car and truck prices were up 2.2%.
- Apparel: Down 7.6%.
- Medical care: Up 3.7%.
When volatile food and energy costs are removed from the overall inflation rate, so-called core inflation in San Diego County saw a 4.3% annual rise, up slightly from 4.1% in March.
The national inflation rate rose just 0.1% in May, less than economists anticipated, said The Wall Street Journal. It didn’t stop some economists from still saying tariffs would still raise prices. One theory is that businesses loaded up on inventories before tariffs hit, preventing them from raising prices too much for now.
Nationally, inflation was highest in the Northeast at 2.8%. It was followed by the West and Midwest, both at 2.4%, and the South at 2%.
