LOCALIZE IT: How to tell inflation story for your audiences

Consumer Prices (Copyright 2022 The Associated Press. All rights reserved)

EDITORS/NEWS DIRECTORS:

From voters in this year’s midterm elections to White House officials to Federal Reserve policymakers, chronically high inflation is becoming a widening source of concern and anxiety.

In the United States, consumer prices soared 8.2% over the past year. Though that was down slightly from the previous month’s figure, it was still near the highest rate in four decades.

High inflation has spread to nearly every corner of the economy. Some of the original drivers of elevated prices — supply chain snags, shortages of semiconductors, more expensive corn, oil and other commodities — have started to fade. The prices of some goods, like used cars, have even started to fall.

But inflation in the nation’s vast service sector, which includes such disparate items as apartment rents, medical care, airline tickets, auto repairs and hotel rates, is actually accelerating and complicating the Fed’s ability to tame inflation without causing a recession.

One key question: How long will Americans be able or willing to pay ever-higher prices? Average pay is rising at a brisk pace but not nearly as fast as prices are, which means consumers’ buying power is eroding. If that dynamic persists, companies might be unable to pass on the higher cost of wages and raw materials to their customers. The result would likely be lower inflation.

Yet as the Fed raises rates to try to slow borrowing and spending, cool the economy and reduce inflation, the risk that it will tip the economy into a recession rises as well.

Here are some tips for localizing your inflation coverage:

REPORTING QUESTIONS

— Higher prices for such essentials as food, gas and rent fall hardest on lower-income workers and families. How are rising grocery prices affecting demand at local food banks? Are more people falling behind on rent, leading to higher eviction rates?

— Rising apartment rents are one of the leading drivers of inflation right now. How has rent changed in your area? Are there enough rental apartments available? Nationally, there are shortages of both apartments and single-family homes.

— Many large companies have been able to raise prices more than needed to cover their higher labor and input costs. Have businesses in your area been able to do this? Are customers starting to shun their pricey products as a result?

— Are local businesses still struggling to find workers to fill open jobs? If so, are they offering higher pay? Many companies will pass on their higher labor costs to their customers in the form of higher prices, thereby contributing to high inflation.

— As the Fed continues to raise borrowing rates and the economy begins to weaken, companies will likely need fewer workers. Are businesses in your area reducing their hiring? Or even laying off workers? If so, that might be an early sign of an impending recession.

PUBLISHABLE CONTEXT

Inflation in services is typically driven by consumer demand and wage increases, which are difficult for the Fed to reverse through its main inflation-fighting tool: interest-rate hikes. Still, the central bank may feel compelled to raise its benchmark short-term rate even higher than it now plans to try to ease the punishing weight of inflation.

Inflation is eroding the gains in wages and salaries that have flowed to many of America’s workers in the past year. This has created a political threat to the Biden administration and congressional Democrats and intensified pressure on the Fed. The central bank has raised its key rate this year at the fastest pace in four decades.

Evan as gas prices have dropped from a peak of $5 a gallon in June, the cost of many services — apartment rents, medical care, restaurant meals and the like — are still rising fast. Inflation, excluding the volatile food and energy categories, actually accelerated in September, up 6.6% from a year earlier.

According to Fed Vice Chair Lael Brainard, lower-income families spend three-fourths of their income on necessities — more than double the proportion of high-income families.

RESOURCES

Here are some places to find figures to assist your reporting:

— The standard measure of inflation is the Consumer Price Index, reported by the Labor Department’s Bureau of Labor Statistics: https://www.bls.gov/cpi/

— The BLS provides pricing data on hundreds of goods and services in a searchable database: https://www.bls.gov/cpi/data.htm

— There is some regional CPI data for the four major U.S. Census regions, nine Census divisions, and 23 large metro areas, here: https://www.bls.gov/cpi/regional-resources.htm.

— The Federal Reserve follows a separate inflation gauge that places less weight on housing costs and measures health insurance costs differently. As a result, its preferred measure is often lower than the CPI. It is known as the “personal consumption expenditures price index” and is reported by the Commerce Department’s Bureau of Economic Analysis: https://www.bea.gov/data/personal-consumption-expenditures-price-index.

— There is not much regionally specific data for PCE inflation. But the Commerce Department does provide a measure of how expensive different states and some metro areas are, which can give local context to the inflation data: https://www.bea.gov/data/prices-inflation/regional-price-parities-state-and-metro-area.

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Localize It is an occasional feature produced by The Associated Press for its customers’ use. Questions can be directed to Katie Oyan at koyan@ap.org.