How are we doing?

The cost of living in the Tucson Metropolitan Statistical Area (MSA) was 7.1% below the nation in 2021, ranking Tucson second among its peer western MSAs. The cost of living varied widely across the 12 comparison MSAs, with San Diego reporting a cost of living 15.1% above the U.S., while Albuquerque was 7.7% below. Tucson posted a modest rate of inflation between 2009 and 2021, averaging 1.2% per year. The state of Arizona posted a slightly lower rate of inflation with an average of 1.1%.

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 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 four major categories: Goods, Housing, Other Services, and Utilities. In 2021, the overall cost of living for the Tucson MSA was 7.1% below the U.S., while the cost of Goods in Tucson was only 3.3% below the U.S. 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 Housing and Utilities categories at 11.3% and 17.6% below the national average respectively. The Housing category includes housing costs for both owners and renters. The cost of living measure for Other Services in Tucson was also lower than the U.S. by 7.8%. 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 modest increases in inflation in 2009, 2011, 2017, 2019, and 2021 with rates of 3.2 %, 4.1%, 2.7%, 1.9%, and 2.8%, respectively. Between 2009 and 2021 the inflation rate in Tucson averaged 1.2% per year, just slightly higher than the average inflation rate for the state of Arizona. Inflation is expected to continue to increase in 2022.

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. All expenditure classes (goods, rents, and other services) are compared to the U.S. total for all items. The Implicit Regional Price Deflator uses the same data but is adjusted to track price changes over time within a region.