The Changing Disparity in Prices Across States

Andrew Foerster, senior research advisor at the Federal Reserve Bank of San Francisco, discusses his Economic Letter on the changing disparity in prices across states that he co-authored with Sabrina Considine, research associate.

The video discusses how price differences across U.S. states and regions widened during the pandemic years. States with above average price levels before the pandemic generally saw higher inflation from 2019 to 2022 than states that had below average price levels.

We investigated the price disparities by using data from the Bureau of Economic Analysis on regional price parities. The map in the video shows states’ cumulative inflation from 2019 to 2022. Orange coloring indicates price changes above the national average, blue is below the national average, and white is at the national average.

While there are noticeable differences at the state level, we can also see regional variations. New England, the Southeast, and the West largely show above-average inflation, while the Mideast, Great Lakes, Plains, Southwest, and Rocky Mountains show below-average inflation.

Next, we looked at the relationship between price levels and inflation. The chart in the video shows each state represented as a marker, with distinct shapes and colors to differentiate regions. The horizontal axis shows relative price levels while the vertical axis shows inflation from 2019 to 2022.

The Plains states are concentrated in the lower left quadrant, indicating below-average price levels in 2019 and below-average inflation from 2019 to 2022, while New England states are clustered in the upper right quadrant, indicating above-average price levels in 2019 and above-average inflation from 2019 to 2022.

Overall, the upward-sloping regression line indicates that, on average, states with relatively high pre-pandemic price levels experienced more inflation than those with lower price levels.

You can learn how inflation and price levels relate across states by watching this video, and by reading our Economic Letter.

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