Inflation Expected To Hit Sacramento Harder Than Other Cities

OLD SACRAMENTO (CBS13) – For restaurants and retailers, the cost of doing business is crippling. We're getting answers on why inflation will hit Sacramento harder than other cities and whether a recession is on the horizon.

Inflation set a new record in June after consumer prices rose 9.1 percent. Many Americans are wondering how much further can families stretch the dollar.

As for restaurants and retailers, the staggering reality shows the cost of doing business is crippling. Businesses in Old Sacramento experienced a quiet bustle Wednesday. Renning Jones visited her hometown after leaving California years ago.

Just like the local residents, her mouth dropped at the cost of living.

"Even just living on the other side of the country, I'm seeing $2 or $3 more for gas per gallon. Going to the grocery store is a huge shell shock," said Jennings.

At Danny's Mini Donuts, business trickled in just before noon.

It was a welcome sight after owner Danny Johnson survived pandemic restrictions amid a fragile supply chain and being understaffed.

Like everyone, he is also feeling the squeeze.

"I've had to increase my prices at least once," he said.

Violet Arizmendez, the owner of Lace Salon, is seeing a shift in spending with some clients.

"It's kind of the last thing on the to-do list when you're thinking of rent, food, taking care of your kids, whatnot," Arizmendez

Sometimes, it might mean the appointment book constantly changes.

"People moving around, people canceling, new clients booking and not showing," she said.

Dr. Sanjay Varshney, a finance professor at Sacramento State told CBS13 that a recession is very likely.

Each time the Federal Reserve raises the interest rate, it increases the cost of borrowing in hopes of discouraging people to spend.

As for inflation, Sacramento might be hit harder than other U.S. cities based on a sobering reality.

"In Sacramento, we don't have the very high wages that you see, for example, in the Bay Area," Dr. Varshney said. "So, we feel the pressure a little bit more – especially, the poorer households."

Businesses in Old Sacramento say they are delicately passing rising costs to customers as they do not want to keep them away.

Perhaps there could be a bright spot, say some economists. They believe the economy will improve but consumers may not feel it for a while. Prices for goods, gas, and natural resources have come down recently.