The rising costs of fuel, energy, food and housing have put the pinch on consumers across the country. However, even as the U.S. inflation rate surpassed 7 percent in 2021, prices in Tennessee were still well below national levels.
According to new regional data released by the Bureau of Economic Analysis (BEA) and analyzed by the Tennessee State Data Center (TNSDC), housed in the Boyd Center for Business and Economic Research at the University of Tennessee, Knoxville, the state’s prices ranked as the 10th lowest in the nation in 2021. At 90.9 percent, prices in Tennessee were roughly 9 percent below the U.S. average.
“The relative affordability of Tennessee has long been seen as part of the state’s desirability,” said Tim Kuhn, TNSDC director. “This data puts a finer point on that argument and shows that in most areas, Tennessee is among the most affordable states in the country.”
Four other southeastern states — Mississippi, Alabama, Kentucky and Arkansas — were found to have the lowest overall prices. Primarily driven by the cost of housing, concentrations of higher prices were found on the west coast and in New England states.
The BEA’s annual data is broken down into four categories (goods, rent, utilities and other services), and TNSDC found that Tennessee saw below-average levels across all price sectors in 2021. The state’s consumer utility costs ranked as the fourth lowest in the nation at 76 percent of the U.S. average. Rent prices were at a similar level (76.4 percent) but ranked as the 19th lowest. The state’s prices for goods and other services were more than 5 percent below national levels, with both ranked as the seventh lowest in their respective categories.
Rent Prices in Nashville Metro Drove Midstate Prices Higher
Consumers in the 14-county Nashville metropolitan area experienced prices that were 5.3 percent higher than the state average in 2021. Midstate was the only region in Tennessee where prices exceed the state level, and rent prices accounted for nearly all the difference.
Rent prices in that 14-county area were 5 percent higher than the U.S. average in 2021. That number was down slightly from 2020 and reversed a six-year trend that saw rents increase relative to the U.S. average price. In fact, Nashville’s 15-point increase since 2014 was the fifth largest among metropolitan areas with more than 1 million people. None of Tennessee’s other metro areas saw price pressures similar to Nashville’s over that time period.
“Across the state, we don’t find much variation in the price level of goods, services and utilities, but with rents we see something different,” Kuhn said. “Nashville and surrounding areas have had strong population growth. That creates new demand, which is at least partly responsible for rent hikes there. Through 2021, rents grew in other parts of the state, but their increase was on pace with the national average.”
Adjusted Tennessee Incomes Reduced the Gap with National Levels
Tennessee incomes lagged national levels by several measures. For example, the U.S. Census Bureau reported that the state’s median household income was $59,695 in 2021, which is 14 percent below the U.S. median of nearly $70,000.
However, Tennesseans have a higher purchasing power once their incomes are adjusted for the lower cost of living in the state. Tennessee’s price-adjusted median household income rose to $65,700, which was just $4,000 below the national median in 2021.
More detailed information about the BEA data is available on the TNSDC website. TNSDC is a cooperative program funded by the State of Tennessee in partnership with UT and the U.S. Census Bureau. Its mission is to provide efficient access to census data and products, training and technical assistance to data users; to report feedback on data usability to the Census Bureau; and to respond to state and local government data needs and operational issues.
Erin Hatfield (865-974-6086, email@example.com)