Inflation cooling off faster in the Twin Cities than U.S. as a whole

Price increases continued to moderate faster in the Twin Cities last month compared with the U.S. as a whole.

The consumer price index, an often-used measure of inflation, eased to 5.1% in January on a year-over-year basis for the Minneapolis-St. Paul region, according to data released Tuesday by the Bureau of Labor Statistics. That is down from 5.3% in November.

By comparison, the price index for the U.S. rose by 6.4% over the year. That was down from 6.5% in December and from 7.1% in November, and was the seventh-straight year-over-year slowdown.

The regional data are published every other month while the U.S. figures are released monthly. Of the dozen metro areas for which the federal government reported inflation data on Tuesday, the Twin Cities had the second smallest year-over-year increase, with the Washington, D.C., area having the lowest at 4.4%.

"We have been seeing slower inflation growth both in Minneapolis and in the Midwest region, especially compared to the South and the West," said Tyler Schipper, associate professor of economics at the University of St. Thomas.

He pointed to housing as being one big reason why, with shelter costs (which includes rent) going up more nationally and being a bigger contributor to overall U.S. inflation.

Over the past 12 months, food prices in the Twin Cities rose 12.2%, with items such as cereal and baked goods jumping 17%. Meanwhile, energy prices increased 7.6%, largely because of a bump in natural gas prices. All other items excluding those two categories rose 3.8% over the year.

Used car and truck prices was one of the few categories to show a decline, of 12.4%, over the year.

Nationally, one notable increase was the price for eggs, which jumped 8.5% in January, and has skyrocketed 70% in the past year, driven by an bird flu epidemic and more expensive feed.

Jervis and Catherine White, who run the Papa J's Kitchen and Goods business out of their Newport home, have noticed food prices going in both directions.

"We look at inflation from both ends," he said. "From a wholesale point of view, we noticed that prices have dropped tremendously."

Wholesale chicken wings dropped from $3 to $2 a pound, but retail prices at Walmart and Sam's Club are still $4 a pound, White said.

With most store prices still high, the Whites, who have three kids, avoid $8 bacon and $4 eggs. They also stopped buying costly granola bars for their kids' school snacks. Instead, it's pretzels or crackers. "It's how we manage. You have to be mindful," he said.

Ramona Wilson also hasn't seen food prices drop at the store, but has seen a decline with gas prices. "Which is great for those of us that commute to work," she said.

Wilson, a director at Knutson Construction, said the idea of inflation is sometimes relative.

"I do hear people complain about housing interest rates," she said. "And then I share with them that when we purchased in 1984, our interest rate was 13%. So the 6% to 7% they're complaining about doesn't compare."

Inflation still remains high both locally and nationally. The Federal Reserve's target is to get it back down to 2%.

Inflation began accelerating at the fastest rate in four decades last year amid supply-chain bottlenecks and higher demand for some products and services as the economy bounced back from the pandemic. The consumer price index hit recent highs of 9.1% for the U.S. and 8.7% for the Twin Cities last summer.

While U.S. prices have been moderating on a year-over-year basis, they accelerated on a monthly basis by 0.5% from December to January, higher than the 0.1% rise from November to December. More expensive gas, food and clothing helped drive up last month's figure.

So while the latest data indicates that inflation is still trending downwards, it also shows that it may be stubborn and not come down as fast as some may hope, Schipper said.

"This is going to dispel some people's notions that inflation is just going to kind of magically go away," he said. "It's going to hang out and it might require the Federal Reserve to do a little bit more."

Fed Chair Jerome Powell said last week that the process of getting inflation down has begun.

But "this process is likely to take quite a bit of time," he added. "It's not going to be, we don't think, smooth. It's probably going to be bumpy."

The Fed has aggressively raised its benchmark interest rate in the past year to its highest level in 15 years in its drive to get rampaging inflation under control.

The Associated Press contributed to this report.