U.S. inflation could affect 2022 Senate midterms in Georgia, Arizona

Matthew Rice doesn’t have to look hard for signs of inflation in Savannah, Ga.

A gallon of gas cost $2.79 a few months ago, he said. Now it runs him more than $4.

“And, of course, when the price of gas goes up, the price of products goes up,” the 45-year-old added. “So yeah. It’s played a role in our household.”

Rice, a longtime Atlanta Braves fan and graduate of Armst­­rong State University, is one of the tens of thousands of Americans who say rising prices are straining their household budgets and shaping how they think about this year’s elections.

Gradual-but-steady jumps in the costs of groceries, housing and gas have forced consumers like Rice, who manages reservations for an RV park on nearby Tybee Island, to change how they spend money.

While his work has been busy as more Americans take long-delayed vacations following pandemic-era shutdowns, Rice said inflation has made him choosier when he, his mother and 10-year-old daughter shop for groceries every other Friday.

“We have, at times, made substitutions based off what’s available because of the supply chain,” he said. “And at times, due to the price, we maybe try other brands of products that we normally would not have tried before.”

Few areas of the country have seen inflation as bad as the South, where prices have risen across the 16-state region by an average of 8.4% from a year ago. That compares with year-over-year inflation of 8% in the Midwest, 8.1% in the West and 6.6% in the Northeast, according to the Bureau of Labor Statistics.

Inflation is particularly bad in Tampa, Miami and Atlanta where consumer prices have jumped by an average of 9.6%, 9.8% and a whopping 10.6%, respectively, over the last year.

But prices aren’t the only thing heating up in the South, as Georgia again finds itself in the middle of a fierce election cycle. Inflation has vaulted to the top of the minds of both voters and candidates across the state.

At the federal level, several Republicans hope to unseat Democratic Sen. Raphael Warnock, who defeated Republican Kelly Loeffler in a special election in 2020. Loeffler was appointed in 2019 by Republican Gov. Brian Kemp to finish the term of former Sen. Johnny Isakson, who resigned for health reasons.

Warnock is Georgia’s first Black senator, and his win gave Democrats a razor-thin majority in the Senate.

Meanwhile, the state’s gubernatorial race pits Kemp against fellow Republican and former Sen. David Perdue, who’s been endorsed by former President Donald Trump.

In an already-bitter primary competition, Perdue hopes to tap into Georgia Republicans’ frustrations with Kemp after the governor refused to overturn the 2020 election results that favored then-candidate Joe Biden. Trump falsely claimed widespread fraud led to Biden’s win, and asked the state’s top elections official to “find” enough votes for him to overturn his loss.

The GOP winner is all but certain to face another tough challenger in the November general election from Democratic candidate Stacey Abrams, who narrowly lost the 2018 governor’s race to Kemp.

But as different as Georgia’s candidates and elections are, voters are unified by their shared fatigue over rising sticker prices for gasoline, groceries and housing.

For the past several months, Labor Department data has shown that year-over-year price jumps have been hitting levels not seen since the Ronald Reagan administration. In its most recent update last month, the department said its benchmark consumer inflation index rose 7.9% over the last 12 months, the hottest reading since January 1982.

The Labor Department’s March 2022 consumer price report is due out on Tuesday at 8:30 a.m. ET.

Those familiar with the White House’s thinking say the administration expects to see hot headline March CPI figure given that the prior print failed to fully capture a dramatic uptick in petroleum prices caused by Russia’s invasion of Ukraine that began in late February.

Core inflation, which excludes volatile energy prices, could be more modest by comparison in the March report.

The Federal Reserve, the U.S. central bank tasked with keeping prices stable, considers inflation around 2% a healthy byproduct of economic growth. But too much can signal overheating and a disconnect between the economy’s broadest forces of supply and demand.

For consumers, unruly inflation can erode what economists call purchasing power, or the total quantity of goods and services they can buy at their current income.

But as fast as prices rise in Savannah, Rice said some grocery purchases aren’t up for debate.

“We try not to make too many adjustments because my daughter — she likes certain brands,” he laughed, saying they can’t substitute cheaper brands for Kraft Macaroni & Cheese or Quaker Oats’ Peach & Cream flavored instant oatmeal among his daughter’s favorites. “Kids usually have a certain taste.”

Factory shutdowns during the pandemic left automakers like Ford and General Motors behind on production. The surge in demand, combined with a shortage in computer chips, further reduced vehicle inventory and sent prices soaring on cars and electronics.

Labor shortages — due in part to people calling out sick with Covid or quarantining because of an exposure — led to freight backlogs at the ports of Los Angeles and Long Beach, Calif., and higher shipping costs that were passed on to consumers.

Russia’s invasion of Ukraine has sent oil prices spiking, and soaring real estate values have driven up the cost of housing.

Caroline Fohlin, an economics professor at Emory University in Atlanta, said Arizona and Georgia are both seeing steep home price jumps as people leave the country’s largest cities for cheaper locales. The pandemic opened up the prospects of working from home — from anywhere — for city dwellers who could buy expansive homes with yards for the cost of a one-bedroom in New York or San Francisco.

Apartment List shows that Atlanta rents climbed by about 18% over 2021, with the average per-month cost for a one-bedroom apartment at $1,831.

“They’re moving in droves to places like Savannah, Charleston – you know, the coastal South,” Fohlin said. “Take a look at the real estate market in, say, Sullivan’s Island, South Carolina” where “shacks” are selling for millions,

“That’s great news for the old timers who are able to sell their previously $50,000 shacks for $3 million,” she said.

Roger Ferguson, former vice chair of the Federal Reserve, attributed most of the rise in consumer prices in Georgia and Arizona to the rise in housing costs.

“There might be some differences in terms of your labor force, compensation composition,” Ferguson, a CNBC contributor, said last month. “But my hypothesis is that it’s primarily around housing.”

In New York City, where renters comprise about 67% of all households, the average rent for a one-bedroom apartment fell from about $1,920 per month in February 2020 to $1,510 by January 2021 as residents fled congested cities, according to online listing site Apartment List.

Rents have more than rebounded since then as bosses increasingly insist on workers returning to their offices. The monthly cost of a one-bedroom in New York City is now around $2,068.

Nearly one in five Americans, 17%, said in March that inflation is the most important problem facing the U.S., according to polling site Gallup. That figure represents a 7 percentage-point climb from the 10% of Americans who in February said inflation was the country’s chief headache.

As inflation has climbed, Biden’s polling has fallen: Just 36% of those surveyed by Gallup say they approve of his handling of the economy in a recent poll, down from 54% in February 2021.

Republicans hoping to win back control of Congress have seized on rising prices as evidence of economic mismanagement and frivolous spending by Democrats, who control the White House and both houses of Congress. They have focused on the $1.9 trillion American Rescue Plan, the Democratic coronavirus relief law passed in March 2021, as vaccines were starting to boost demand in the U.S.

One such Republican is former pro football player Herschel Walker, who’s running against Warnock in Georgia’s Senate race.