Cost of Living

How are we doing?

The cost of living in the Tucson Metropolitan Statistical Area (MSA) was 2.9% below the nation in 2014, ranking Tucson third among its 11 peer western MSAs.  The cost of living varied widely across the 12 comparison MSAs, with San Diego reporting a cost of living 15.9% above the U.S., while El Paso was 9.8% below. Tucson posted a modest rate of inflation between 2009 and 2014, averaging 1.5% per year, slightly less than double the state of Arizona’s average of 0.8% during the same time period. 

Why is it important?

The cost of living is measured by the Regional Price Parities (RPPs), which compare prices and living expenses across states and MSAs on a wide variety of items, including housing, food, and healthcare.  The cost of living measure compares how expensive it is to live in one city or state versus another, allowing one to measure the monetary cost of maintaining a particular standard of living in various locations.  This is an important factor when relocating and/or during wage negotiations. For example, the same salary may go far in a city with a low cost of living, but be insufficient in an expensive city. The Implicit Regional Price Deflator measures how a region’s prices change over time, thus providing a measure of inflation.  The cost of living and the Implicit Regional Price Deflator both measure the buying power of a dollar, but from different perspectives. 

How do we compare?

Data on the cost of living can be broken down into three major categories: Goods, Rents, and Other Services.  In 2014, the overall cost of living for the Tucson MSA was 2.9% below the U.S. The cost of Goods in Tucson was 3.2% below the U.S. in 2014. The Goods category reflects typical consumer expenditures on tangible items such as: groceries, clothing, and vehicles. Tucson did much better compared to the U.S in the Rents category at 9.0% below the national average.  The Rents category includes housing costs for both owners and renters. The cost of living measure for Other Services in Tucson was slightly above the U.S.  Other Services include items such as legal, health, and recreational services. 

What are the key trends?

The Implicit Regional Price Deflator measures the rate of inflation over time.  The Tucson MSA posted a modest increase in inflation between 2009 and 2011 with rates of 0.7 %, 1.5%, and 2.6%, respectively.  During 2012, the inflation rate in Tucson dipped back below 2.0%.  Between 2009 and 2014 the inflation rate in Tucson averaged 1.5% per year, just less than double the average rate of inflation for the state of Arizona.  Arizona’s average inflation rate between 2009 and 2014 was less than 1.0% per year but wide fluctuations occurred during that time period. The average price level for Arizona fell by 0.6% in 2009. Inflation accelerated in 2011 and 2012 before slowing in 2013, only to rise again in 2014 to the 2012 level. Arizona experienced a decline in the price level in 2009 due to a sharp decrease in housing costs which fell by nearly 2.5%.  Tucson did not experience the same steep decline in housing costs during this period, as costs fell by only 0.9%. 

How is it measured?

The Bureau of Economic Analysis (BEA) calculates Regional Price Parities (RPPs) using data gathered for use in the Consumer Price Index. Major categories include housing, food, transportation, and education.  Rent data and owner equivalent costs collected from the Census Bureau’s American Community Survey are also used in the construction of the RPPs.  The expenditure weights for each category are constructed using data from the BLS Consumer Expenditure Survey and BEA Personal Consumption Expenditures.  The RPPs are indexes that allow the comparison of prices across regions. RPPs are expressed as a percentage of the overall national price level for a given year, which is equal to 100. The Implicit Regional Price Deflator uses the same data, but adjusted to track price changes over time within a region.