Detroit is U.S. metro with biggest inflation problem, study finds



It’s not just you — inflation is a big problem these days, and Detroiters especially are feeling the economic pinch.

That’s according to a new study by personal finance website WalletHub, which analyzed how inflation is impacting different metropolitan areas. The study ranked the “Detroit-Warren-Dearborn” area as facing the biggest problem with inflation.

Metro Detroit is followed by Dallas-Fort Worth-Arlington, Texas; Urban Honolulu, Hawaii; San Francisco-Oakland-Hayward, California; and Seattle-Tacoma-Bellevue, Washington.

To make this determination, Wallethub used U.S. Bureau of Labor Statistics to compare 23 Metropolitan Statistical Areas across two key metrics: Consumer Price Index Change (latest month vs. two months before) and Consumer Price Index Change (latest month vs. 1 year ago).

The U.S. inflation rate hit a 40-year high due to factors involving the COVID-19 pandemic, which the Federal Reserve has tried to tame by raising interest rates in an attempt to cool the market. While inflation has cooled since then, the year-over-year inflation rate sits at 3.3% as of May 2024, which is still above the target rate of 2%.

“The Fed’s theory is that high interest rates will lower prices by dampening demand for goods and services as consumers reign in spending due to the high cost of credit,” said David Skidmore, professor at Drake University in Des Moines, Iowa, one of the study’s authors. “Businesses will respond by lowering prices to lure shoppers back. However, instead of slowing spending, consumers have, over the past couple of years, drawn down savings accumulated during the pandemic and, most recently, gone into greater credit card debt. This bullish consumer demand is, however, unsustainable and could, if interest rates remain high for too long, lead to a recession once rising debt reaches a tipping point and consumers pull back or bankruptcies rise.”

The full study is available at wallethub.com.



Source link

Leave a Comment