What does inflation look like in Southern California: ‘It’s a losing battle’

With U.S. inflation hitting a four-decade high, rising prices in Southern California – where the cost of shelter and food is the highest in the nation – are ruining the fabric of daily life: shops are slashing grocery budgets, businesses are back in operation and low-wage workers at gas pumps are paying their wages. .

“It’s kind of crazy,” said Beverly Matsumoto, who has tried to save money by going to more than one grocery store to take advantage of discounts and sales. Matsumoto started touring budget markets like LD and grocery outlets when she saw prices rise, but she said she still couldn’t avoid them.

“It’s a losing battle,” she said.

The Labor Department’s May inflation figure – 8.6% compared to the same month last year – came as a surprise to economists and investors, who expected some moderation in prices following the rise in the consumer price index in April. The previous 40-year high in March.

The Biden administration is under pressure to ensure that US inflation does not spiral out of control. The latest figures seem to support that expectation, with prices across the board rising, led by a sharp rise in energy and grocery costs.

In a metro area as large as Los Angeles, which has a low-wage economy, the impact of inflation – especially gas prices – falls sharply on the working class, said Leo Feller, senior economist at UCLA Anderson Forecast.

The LA metro area, which includes Los Angeles and Orange County, reached 8% annual inflation in May. San Diego saw 8.3%, while the Riverside metro area, which includes Riverside and San Bernardino counties, saw an inflation rate of 9.4%.

The country’s high inflation, up to double digits, is hitting small towns where people moved during the epidemic, as work spread far and wide. The weakest inflation in the country is at 5% in the San Francisco metro area, as technical workers, more economical pastures and business areas were largely left vacant.

Los Angeles is in the middle, Feller said.

“The portion of our population that can work from home is smaller than cities with large technical or financial centers,” he said. Hollywood, healthcare, and transportation and logistics make up a major part of the LA economy. “You can’t shoot a movie in front of your computer, or move goods from port to warehouse.”

Most Los Angeles workers qualify as low-wage workers, 53% of workers in the metro area earn less than वार्षिक 40,000 a year, according to a 2019 Brookings Institution report, and about a third earn less than $ 31,000.

Working-class families are more likely to commute to work during the epidemic, and are more likely to drive older cars with poor gas mileage than white-collar workers. Even the highest earners have the flexibility to compare stores for cash and groceries or other items, while the average Angelnos has to buy essential items such as toilet paper pistils and face rising prices week in and week out.

“If you’re consuming a lot of gas, which low-income families tend to consume, and you’re more dependent on rent, and a large portion of your salary goes to food, you’re losing more purchasing power,” Feller said. Said.

As a result, food banks have seen an unexpected surge in demand, said Michael Flood, chief executive of the Los Angeles Regional Food Bank, who said inflation has led to a new wave of demand.

“Going forward this year, we thought the demand for food aid would decrease as the economy recovers, but inflation has really changed that picture,” he said. “Demand rose sharply in March and peaked in April, May and early June. Inflation is really hitting people right now.”

Flood said the food bank was now delivering just over 8 8 million in September, directly and through its 600 partner agencies, distributing less than मिल 11 million a month.

To continue, the organization has to spend a lot of money to buy food. Pre-epidemic, 5% of food distributed by food bank was purchased; Now that percentage is about 15%, the flood said, the rest coming from donations. The food bank has also been spending a lot of money on fuel for delivery vans and fleets of large trucks.

Inflation is shaking countries around the world. Consumer demand has risen over the past year, following a sharp decline in the onset of the COVID-19 epidemic, with simultaneous supply chain disruptions and sanctions against Russia in response to the nation’s invasion of Ukraine, which has pushed food and fuel prices higher. .

Eastern European countries are seeing double-digit inflation, nations like Germany and the UK are also facing four-decade high inflation, and many of the world’s poorest countries are facing huge inflation and food crises.

The Federal Reserve is expected to raise interest rates next week in a bid to ease US consumer demand. But the ghost of more expensive capital has also sent stock prices, especially for California’s leading tech companies, downhill, and broader market triggered fears that demand could cool to the point of triggering a recession.

President Biden reiterated that inflation was his “top priority” in his speech in Port of Long Beach on Friday, the last day of the US summit in Los Angeles.

Speaking from the deck of a retired warship amidst piles of transport containers at the terminals, Biden did not try to sugarcoat the numbers and attributed the rising cost to Russia’s ongoing war in Ukraine.

“I understand Americans are worried, and they’re worried for good reason,” Biden said. “We haven’t seen anything like it [Russian President Vladimir] Putin’s taxes on both food and gas.

Emphasizing his administration’s efforts to reduce supply chain disruptions, Biden again called on the Federal Reserve to adjust interest rates and target the private sector, urging oil and gas producers to speed up domestic production and urging Congress to crack down on foreigners. Transportation groups have increased their prices by “1,000%” and made record profits, he said.

But citing record job growth, rising wages and an unemployment rate of less than 4%, Biden stressed that “the United States can solve the problem of inflation from a stronger position than any other country in the world.”

In Los Angeles, residents are already wondering how to meet the high housing costs.

“[Inflation] My shopping pattern has changed a lot, “said Thomas Morgan, 40, a machine operator in the aerospace industry.” The stick was on the menu and now it sometimes turns into sandwiches. “

Many grocery stores are either cutting back on high-end foods or visiting discount grocery chains. Fruit and vegetable costs rose more than 14%, leading to a 11.9% increase in the household food category nationally, the highest rate since 1979, and 10.9% in the LA metro.

Grocery stores say they are absorbing as much growth as possible, but at a profit margin of 2% or less there are many things they can do to reduce the price increase. Transportation, fuel and labor costs are the biggest factors driving up food prices, industry experts say.

“Price changes are coming at us so fast that we can’t process them fast enough,” said Neil Stern, chief executive of Good Food Holdings, a company operating Bristol Farms, Lazy Acres Natural Market, Metropolitan Market, New Seasons. Market and New Leaf Community Market. “Everyone is being hit by the same external factors.”

Arnold Rodriguez, owner of the Black Sugar Rib Company, a private caterer and food vendor in the weekly Smargsburg market in downtown Los Angeles, said every part of his product – including key ingredients such as mayonnaise and almond sleeves – was booming. Price.

As a result, “my profit margins have shrunk” and he had to make significant adjustments. As the price of meat rose, Rodriguez raised the price of his pulled pork nachos from $ 18 to $ 20. A pulled pork sandwich currently goes for 16, but “in the next week or two, we can start charging 18.”

In addition to the supply chain, trucking companies are also feeling the pinch. Southern California gasoline prices have risen 44% in the past year, and the increase in diesel costs has simultaneously reached 50%.

Los Angeles-based trucking firm Kratos Enterprise Logistics has stopped shipping out of California due to rising fuel prices and is operating within a 500-mile radius to remain viable.

“I typically earn $ 10,000 per week, but now it’s between $ 5,000 and ,000 9,000 because they’re offering cheaper loads to my customers because inflation is affecting their business,” said Luis Arevallo, the company’s chief executive.

Rising prices, Arevalo said, have had a domino effect on the trucking business: the cost of buying a single truck tire has doubled from $ 400 to $ 800. “If gas prices continue to rise and load revenue falls, I will either have to give up or sell a truck to survive,” he said.

To cut costs, Kratos plans to leave Amazon as one of its customers later this month. Compared to some other firms, Amazon requires logistics firms to go for higher insurance to cover the goods they ship.

“I would save about $ 5,000 a year without having to work with Amazon,” Arevallo said.

On Friday afternoon, shop and business owners at Larchmont Boulevard in Tony Windsor Square also said they were feeling the heat of inflation.

At the Larchmont Mail Store, owner Ted Kim said some customers have been mistaken for the high prices charged by FedEx and UPS this year. In recent months, both companies have increased their overnight shipping costs by about $ 5, he said.

Few people are sending expensive packages – which cost $ 50 and up to shipping – he said: “Some people don’t ship. [their items] Because that’s a lot. “

“It’s worried me,” said Kim, the store’s owner since 2004. “We have to pay the rent, the employees.”

Just below the door, in the village pizzeria, menu prices have remained stable in 2022 after an increase in 2021. Steve Cohen, who opened a restaurant in Boulevard in 1996, said he kept the line up despite rising food prices.

Take the Wisconsin mozzarella he bought – last year it cost $ 2.90 to $ 3.10 per pound, and now it goes up to about 65 3.65 per pound. The restaurant is running around पाउ 500 a week, which is a significant increase, he said.

One saving grace is that his customers still gather at the pizzeria.

“We’re busy when we’re open, but we have high-value feedback from people who aren’t regulars,” Cohen said. “I think they are influenced by everything around them.”

Bob Wisnefsky, a post-production engineer at Paramount Pictures who has been a customer at Pizzeria for a long time, sub-ordered $ 12.75 meatballs and said that inflation had given him a vague sense of anxiety.

“Everything is really out of control,” Vishnevsky said.

Times staff writers Eli Stokols, Hugo Martin and Lawrence Darmiento contributed to this report.