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Inflation, as measured by the Consumer Price Index for all Urban Consumers (CPI-U), rose 8.3 percent nationwide in the 12 months ending August ’22. That’s a minor improvement over July when the U.S. inflation rate came in at 8.5 percent.

In Houston, prices rose 9.5 percent, still elevated, but an improvement over the 10.2 percent recorded in June. Houston’s inflation rate has tracked above the U.S. rate since March ’22.

Inflation is a supply vs. demand phenomenon, with prices rising as the demand for goods and services outpaces the available supply. Several factors are contributing to the current bout of high inflation. 

The three economic stimulus packages passed by Congress during the pandemic helped households to pay down debt and increase their savings. Consumers are now spending those savings and increasing their credit card purchases, which has boosted demand. 

Many businesses reduced or shutdown operations during the early stages of the pandemic. When the economy reopened, they found themselves unprepared to meet the surge in demand. 

The supply situation has been exacerbated by shipping delays, supply chain issues, and labor shortages. The war in Ukraine and China’s policy of locking down entire cities at the first sign of a COVID outbreak have added to supply chain woes.

That Houston’s inflation has tracked above the U.S. in recent months suggests demand is stronger here than elsewhere, that supply chain issues and labor shortages may be somewhat worse, or a combination of both.

While inflation may have peaked earlier in the year, it remains stubbornly high. August’s reading suggests the U.S. Federal Reserve will likely hike interest rates another 75 basis points when it meets next week. That would be the fifth rate hike this year.

Prepared by Greater Houston Partnership Research

Patrick Jankowski, CERP
Chief Economist and Senior Vice President, Research
713-844-3616
pjankowski@houston.org

Clara Richardson
Research Associate
crichardson@houston.org