Editor’s Note: Debuting today, The Standard’s “State of the City” dashboard analyzes the outlook for San Francisco by monitoring data on the city’s economy, health, crime, housing and other key performance indicators.

Finally! A reason for San Franciscans to appreciate the crazy amounts they spend on housing: SF ranked dead last among U.S. metro areas in consumer price inflation in June.

Why? City residents have to allocate an XL portion of their monthly budget to pay for the roof over their heads. Housing accounts for 52% of a typical SF household budget vs. 42% nationally, and the price of “shelter” has only increased 2.3% over the past year.

So even if locally, the price of produce goes up 12.2% in one year, as it did in June, those expensive fruits and vegetables are taking a smaller bite out of a typical household budget in San Francisco. 

The same is true for gas prices: Most city dwellers don’t drive as often or as far as suburban or rural residents across the country. And while the work-from-home trend might be bad news for downtown SF, it is good news for the commuters who don’t have to fill their tank as often (and for the planet, as well).

“Everybody has their own personal inflation measure,” says Matthew Insco, an economist with the Bureau of Labor Statistics, publisher of  the Consumer Price Index (CPI).

Unfortunately, just about everyone's "measure" has gone up in price.

So whether you’re watching the price of avocado toast, surfboards, rice, happy hour beers or the electric bill, you paid an average of 6.8% more in SF this June compared to last—the highest annual price increase since 1984. Even worse, price inflation hits low-income households the hardest.

The CPI measures the cost of a market basket of goods and services nationwide every month but only reports the price data on individual metro areas every other month. Data for the San Francisco metro area actually includes most of the northern Bay Area, including Alameda, Contra Costa Marin and San Mateo counties. 

Though the near-term impact of the Inflation Reduction Act on consumer prices remains unclear, one thing is certain: rising inflation fueled a second-consecutive quarter of falling GDP, which has triggered a debate about whether or not the U.S. economy is in a recession. 

How will this threat combine with increasing tech layoffs, slowing venture capital investment, a growing health crisis and an emptying downtown to impact the SF economy in the coming months?

“It’s complicated,” says UCLA Anderson Forecast Director Jerry Nickelsburg, whose June report stresses that although California will see “shallower growth,” there is likely no official economic downturn in the works. Factors like higher gas prices, supply chain bottlenecks and a continued pandemic recovery will hinder growth nationwide.

Nickelsburg points to the solid job market in San Francisco. With unemployment at 2.2% in the city (see chart below), there’s a surplus of jobs available.  A startup might lay off 200 people but a bigger tech company may hire those 200 plus another 100.

“We tend to focus on stories about how Company XYZ is losing stock value and laying off people but what we do is look at the aggregate,” says Nickelsburg, whose numbers on California’s tech employment still show growth through June.

For now, consumers in San Francisco will welcome Wednesday’s report showing July inflation slightly down from what was hopefully the June peak. And Nickelsburg is not worried. “The risk in our forecast is that inflation-fighting policy could induce a recession—but that’s not what we’re predicting.” 

Analysts in the SF Controller’s Office are assessing the countervailing effect of inflation on the city’s coffers. Rising prices will translate to higher sales tax revenue. But as things cost more, consumers buy less. And higher interest rates from the Federal Reserve could impact business investments and therefore, business taxes. The controller’s team regularly updates the city’s progress on its Performance Scorecards and will next assess the impact of inflation and other indicators as part of their fall forecast.

What is more concerning locally is the slowdown in startup funding. Though SF, the Bay Area and the state continue to take the lion’s share of venture capital nationally, Nickelsburg says concerns about overvaluation have led to some startups shutting down as they run out of cash. And July data from PitchBook show SF VC deal flow is only about half of what it was in May (see chart below).

“This will disproportionately impact San Francisco—but only if those firms are not replaced by other startups.”

And that’s the multi-billion-dollar question.