U-T: San Diego’s Inflation Rate Third Highest In US

Speaker 1: 00:00 On a day when the Dow Jones average tumbles more than 700 points. We learned that San Diego's rate of inflation is among the highest in the nation, and economists say turmoil in the markets, and rising costs are both signs of upcoming recession. Investors are looking at a global economy that's slowing down and today a major recession indicator from the bond market. Meanwhile, San Diego consumers are looking at the price of fuel, housing, and food, and what we're seeing isn't good. Joining me is San Diego Union Tribune, business reporter Phillip Molnar, and Phillip, welcome to the program. Speaker 2: 00:35 Yeah, thank you so much for having me. Speaker 1: 00:37 So you're out with a report on the inflation rate in San Diego. How does it stack up against other major metropolitan areas? Speaker 2: 00:45 The Bureau of Labor Statistics came out with a report yesterday on how inflation rates were going in all the major metro areas based on the first six months of this year. So in that report we saw that San Diego's inflation rate was about 2.8%. Now that makes it about the third highest of around 20 metro areas that they study. That of course is sort of interesting in certain regards because we can see that the price of goods that San Diego are paying a has gone up. So if it's in your head that you're paying more than you were a year ago, it's actually correct. Speaker 1: 01:22 What's causing the increase in inflation here. Speaker 2: 01:25 So the biggest reason for a increase in inflation in San Diego is housing are one of the biggest factors. We saw that Gulf about 3.9% in the first six months. And then also rent, which is a separate index, but it includes Invia housing that was up 4% so that was one of the bigger ones. Obviously we can see a few other things that our usual culprits, gas prices up 2.8% fuel. Uh, and then also medical costs up about 2.6% so those all kind of factor in. But we actually saw, um, electricity costs going down. And a few things like apparel. Apparel was barely up at all, so it kind of balanced out, but it still gave us a rather high inflation rate. Speaker 1: 02:09 No, the top three in this list were all California cities is a typical that California's largest cities will be the first to see an increase in the inflation rate prior to the rest of the country following. Speaker 2: 02:22 Yeah. Historically speaking, it's true. California is usually the highest, you know, it doesn't always follow like we're the first, then they all kind of go. It kinda just stays that California is always going to be a little bit higher and that's because we pay more for gas and you know, our cost of living is a little bit higher out here, so it's fairly typical. Speaker 1: 02:43 Although San Diego had one of the highest inflation rates on this list, it's still a little bit lower than the inflation rate in previous years. What could that be telling us? Speaker 2: 02:54 The biggest thing is that even though housing costs are going up, it's not much as it was the last couple of years and we saw amazing rent growth in 2015 particularly where rents were up like 7.5% in a given quarter. I mean it was just massively growing coming out of the great recession. So I think that's one of the biggest things. And then also last year something that we had going on was like exploding gasoline prices and this year things are a lot more stable. So it just so happens that this year all the things are still kind of going up, just not as extreme as we had seen maybe the last three to four years. Now looking at the stock market today, we've seen it take another major tumble and the business news says investors have been spooked because the yield on the benchmark 10 year treasury note fell below two year treasuries. Speaker 2: 03:47 Can you explain that to us? I'll do my best. When investors are spooked in the stock market and they don't think they could make as much money there, they'll start moving their money into bonds. And now when we go to the the 10 year treasury, there's this longstanding belief, and I can't say whether or not it's true or not or it's going to happen, but when you've got this inverted yield curve, at least the stock market anyways, they think that's a sign of a recession. So whether or not I'm saying it's a recession or an analyst agent's recession, I think it's sort of like a self fulfilling prophecy where the stock market actually believes, you know, it might be good or investors to get their money out of the stock market into bonds, just taking money out of stocks and putting it into bonds. It's just one of those factors we look for in possibly signaling or recession. Speaker 2: 04:39 It, it's not always going to mean, it's not always a guarantee, but it's just one little piece of the puzzle. And I think that's part of the reason why I think the inflation rate is also sort of interesting to look at it. Just to bring it back around is that when the inflation rate goes higher in say San Diego or in the nation, that typically means that consumers have less buying power. If you're spending more money on housing and gas, you're not going to be able to stimulate the economy for other purchases as well. So there's a few things going on here just to bring it all together. But when you look at the yield curve, when you look at inflation going up, these are just all factors we look for in trying to predict a recession, which is never easy. What do you think the presidents on again off again, Chinese tariffs are doing to the markets? Speaker 2: 05:25 Well they are according to most analysts not doing very much help for the market. Um, international particularly are very worried about this with these tariffs can mean, and recently I was working on a story just a few days ago about the housing market and one of the things people said was keeping buyers away cause our home sales are considerably down this year in San Diego County. And the nation is a general fear of the economy going south and because of the economy going south, the one of the biggest things they're seeing on the news over and over is this Chinese trade war and how much is it going to cost for more items. So I haven't seen a lot of reports that say it's good for the economy in any regard. Maybe sort of a longterm sort of deal. But so the, the trade tariffs are having a huge effect on investors getting nervous. Just your everyday buyers of maybe their first time home, you know, it could be like a $300,000 home and they're still scared to pull the trigger because economy might be going south. Speaker 1: 06:27 Now if we do go into a recession, can you give us an idea of what it means for you and me and everyday people who don't work on Wall Street? What are the implications of a recession? Speaker 2: 06:39 Well, the toughest thing for here in San Diego is we've done a lot of reports here. I know at KPBS and here at the Union Tribune about people struggling to make it in San Diego with our higher cost of living and other things that are higher as well, you know, such as even our fees at the DMV is one in particular that we all struggle with. And then also gas prices being higher. I mean a recession is tough because people in California are already stretched really, really thin. We're seeing that income gap between the haves and the have nots grow even further apart. And you might be seeing that like all over the nation, everyone's always talking about it, this country, that country, of course, the United States. But the important thing to remember for people on the lower scale, say if you're a working class or middle-class here in California, is because your costs are so much higher here than say Kansas or something. Speaker 2: 07:32 You know, you'll be feeling the recession a little bit harder. And of course with recession, you know, in general just bad economics, you could also be, you know, if you lose your job, I dunno how you survive in California when you lose a job. That's got to be really, really tough. I mean, of course unemployment pay and all that kind of stuff, but in general, things are really tight for Californians right now, and that's why we keep seeing stories and seeing, reading the data of people moving outside of San Diego to Riverside County or moving to another state. Speaker 1: 08:06 I've been speaking with San Diego Union Tribune, business reporter Phillip Molnar. Thank you so much for your time. Thank you so much for having me. Speaker 3: 08:16 [inaudible].