Recently, we discussed the Regional Price Parities (RPPs) of selected college towns. Here, we paint a picture of regional price parities amongst the twenty-five Texas Metropolitan Statistical Areas (MSAs).
As previously stated, the Consumer Price Index (or CPI) computed by the Bureau of Labor Statistics is derived monthly for a very small subset of large metropolitan areas. The number of selected geographical areas covered is extremely limited and CPI values do not adequately apply to the metropolitan areas that are not included. However, RPPs are known to capture these geographic price level differences and give us the ability to see how Texas MSA’s fare in location price differences.
The Bureau of Economic Analysis (BEA) produces annual data for states and for metropolitan statistical areas on Regional Price Parities, which express the price level for an area as a fraction of the national price level (with the national price level normalized to 100).
In 2022, Texas had a regional price parity value of 97.5, indicating that prices in Texas were 2.5% lower than the average for the nation. Among the states, California had the highest RPP value at 112.5, indicating that prices there were 12.5% above the average for the nation. Arkansas had the lowest RPP value at 86.6, indicating that prices there were 13.4% lower than the average for the nation.[1]
The dashboard linked below shows the RPP’s in 2022 for the 25 Texas MSAs, and the change in price level (the inflation rate) from 2019 to 2022. The top map contains RPP values for 2022 that you can see by hovering over an MSA, and the bottom map contains the increase in the price level from 2019 to 2022. The bar graphs on the right show the MSAs ranked by RPP (in red) and their corresponding inflation experience over 2019-2022. All RPP values reported in the graphs and on the maps are scaled so that the Texas statewide RPP is 100, and each MSA’s prices are scaled relative to the Texas statewide number.
The MSA with the highest prices in 2022 was Dallas-Fort Worth-Arlington with an RPP of 106.16, indicating its prices were 6.16% higher than the statewide price level. Austin-Round Rock-San Marcos was second at 101.35, and Houston-Pasadena-The Woodlands third at 101.28. The fourth-largest city, San Antonio-New Braunfels, was fifth on the list at 97.53, indicating prices that were 2.47% lower than the statewide level. College Station-Bryan was eleventh on the list at 94.98, indicating prices were 5.02% lower than the statewide level. At the bottom of the ranking was Texarkana, with a RPP of 87.37, indicating prices 12.63% lower than the statewide average. Brownsville-Harlingen ranked second-to-last at 87.61, indicating prices 12.39% lower than the statewide average.
We also compare the inflation rates across the Texas MSAs. The BEA calculates a measure of inflation called the Implicit Price Deflator (IPD). This differs from the more familiar Consumer Price Index (CPI)[2]. One advantage of the IPD is that it is reported for the states and for the MSAs. We add information on the inflation rate for the period 2019-2022 to see pre-pandemic level conditions, as well as a few years after the pandemic recovery. Data from 2023 will not be available until late 2024.
Inflation rates over 2019-2022 varied across MSAs, Dallas-Fort Worth-Arlington prices increased 13.1%, while Austin-Round Rock-San Marcos prices increased 11.9%, and Houston-Pasadena-The Woodlands saw a 9.7% increase. San Antonio-New Braunfels prices rose 11.3%. College Station-Bryan saw prices rise 9.7% over this period. The lowest inflation rate was for Longview at 5.5%.
Footnotes
[1] On a technical note the RPPs are derived using a multilateral price aggregation index that combines the CPI price relatives for goods and services, the ACS PUMS price relatives for housing rents and utilities, and expenditure weights from the PCE by state series. In other words, RPP quantifies place-based price differences by using a weighted average of goods and services price levels.
[2] “The CPI measures price change from the perspective of an urban consumer and thus pertains to goods and services purchased out of pocket by urban consumers. The GDP price index and implicit price deflator measure price change from the perspective of domestic production of goods and services and thus pertain to goods and services purchased by consumers, businesses, government, and foreigners, but not importers. In addition, the formulas used to calculate these two measures differ.” Source: BLS, Monthly Labor Review