Consumer prices up 7.5% in the Midwest over the past year; faster than nation

Sticker shock in Michigan and the rest of the Midwest continued at a slightly faster pace than the rest of the nation.

The consumer price index jumped by 7.5% in December from a year ago in the Midwest, including Michigan. That was the highest spike for all regions of the country. 

By contrast, the CPI soared 7% in December for the country from a year ago — reaching a nearly 40-year high. It was the largest 12-month spike since June 1982. 

The South was up 7.4%; the West was up 7.1%, and the Northeast up 5.9%.

No one, of course, needs to see these official numbers if they've hit a drive-thru at a fast food restaurant on Van Dyke or Woodward, shopped for groceries in Detroit or filled their tank with gas in Michigan in the past year. Our personal cash-flow has seen its fair share of clogs for months. 

It might be good to know, though, that you're not imagining things. It really is costing more to eat and drive. A lot more in many cases.

Metro Detroit sees 10% hike in food

Groceries in the Midwest were up 7.4% in the past year, far more than some parts of the country, including the Northeast, where grocery and food prices were up 4.9%, according to Paul LaPorte, economist with the U.S. Bureau of Labor Statistics in the Office of Economic Analysis & Information in Chicago.

Metro Detroit even saw double-digit sticker shock where grocery prices, as measured by the CPI, were up 10%. 

The grocery category includes cereal, meat, milk, fish, poultry, fruit, vegetables and other food at home. 

Another spot for hefty price hikes: food away from home or or the cost of dining out,  including takeout.

In the Midwest, the food away from home category was up 7.7% — up significantly from the West, which was up 5.5%, and the South, which was up 5.4%. 

"The food categories are where we are feeling a bigger pinch in our wallets," LaPorte said. 

More:Food prices soar as inflation sees biggest, fastest increase in decades

More:More than unemployment concerns, Americans are worried about rising prices

Wage hikes drive up prices on the shelf

What's likely to be driving food prices up, though, continues to be higher wages in many areas, as well as higher costs for transportation and gas. 

The labor shortage during the pandemic has many companies paying sign-up bonuses, including at restaurants, and raising hourly wages — costs that are being passed along to consumers. 

Kurt Rankin, economist for the PNC Financial Services Group, said states throughout the Midwest region are seeing wage growth that is consistently outpacing the national average.

"Stronger wage growth is a prime contributor to inflation," Rankin said, "as increased demand through higher incomes chases a limited supply of goods and services."

Many people aren't returning to the workforce, driving some employers to need to raise wages and offer bonuses to attract a limited supply of workers.

"On this score, Michigan is one of the worst-off states in the region in terms of inflationary fuel. Michigan’s labor force is still 3.4% smaller than it was in February 2020," Rankin said.

Rankin said he would expect that Michigan and the Midwest as a whole will continue to see inflation that is above the national average. 

PNC forecasts that the national consumer price index will remain elevated in the first quarter of 2022, coming in at 7% year over year for January and 6.7% year over year for February. Yet PNC expects that pace to slow to an average of 3% for the fourth quarter of 2022. 

Higher gas prices contribute to price hikes for groceries and other goods

Supermarkets and other stores are likely passing along higher costs involved with transportation and supply chain disruptions, too. 

Energy prices in the Midwest jumped 30.6%, largely the result of an increase in the price of gasoline.

Gas prices are up nearly 50% from a year ago in the Midwest, LaPorte said, which is about in line with other regions in the country. 

We're paying nearly a buck more a gallon for gas at the pump than a year ago.

In metro Detroit, the average price for a gallon of gas was $3.22 on Wednesday, up from an average of $2.30 a gallon a year ago, according to GasBuddy.com.

We're not likely to see much relief at the pump in 2022, and we could even see steeper price hikes ahead, according to some forecasts.

GasBuddy predicts that we could see a national average of $4 per gallon this spring, as the U.S. economy continues to recover from the pandemic.

GasBuddy expects the yearly national average gas price to hit $3.41 a gallon in 2022, up from $3.02 for 2021.  

"After a hot start to the summer, prices should begin to decline, falling back to potentially just under $3 per gallon by the holiday season," according to the GasBuddy outlook.

The average household is expected to see its gasoline spending hit $2,341 for the year, the highest since 2014.

Another big mover in the Midwest: the cost of natural gas.

The Midwest saw an uptick of 33.7% for natural gas prices in the past year through December — significantly more than the 19.3% gain in the South and the 21% gain in the Northeast. 

How upset you are about price hikes, though, could depend a great deal on your own financial situation.

Right now, the consumers who are being hit the hardest continue to be those making close to the minimum wage who do not have much in savings to cushion the blow of higher expenses. 

Many families benefited from one stimulus payment in 2021 and six advance monthly payments from July through December for the child tax credit. The extra cash eased some of the pain of higher prices. But no similar payments are currently in the works for 2022.  

If inflation continues to heat up, we're going to hear more grumbling from many middle income and higher income households.  

Where are signs of hope? 

Charles Ballard, professor of economics at Michigan State University, suggested that one might spot a hopeful sign if you look at the monthly changes for prices, instead of the year-over-year changes.

The big headline is the 7% CPI change year over year nationwide.

But Ballard pointed out that the month-to-month change from November to December was 0.5%, which was less than the type of shifts we saw in October (up 0.9%) and November (up 0.8%). 

It's hard to build a forecast on a month or two of data. But it's also hopeful that gas prices have been trending down in the last month, he said.

"If energy prices stabilize, that will go a long way toward moderating the overall rate of inflation," Ballard said. 

Yet he warned that inflation will continue to be part of the picture in 2022.

"Even if the overall rate of inflation moderates in the coming months, the year-over-year rate of inflation will almost certainly stay high," he said. 

When it comes to the Midwest, it is important to note that the CPI measures the direction of prices, not whether people who live in Michigan or elsewhere actually pay more for things like food, rent and transportation than they do in another part of the country. 

The Midwest region is composed of Michigan, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin. 

In general, the Midwest consumers have tended to benefit from a lower cost of living. Some businesses even may have more wiggle room to pass along their higher costs in the form of price hikes here — up to a point. 

Right now, though, many consumers in the Midwest can only hope that we don't turn into the leader for price hikes in 2022. 

ContactSusan Tompor: stompor@freepress.com. Follow her on Twitter@tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.