Bay Area inflation hits two-year high as gas, grocery prices climb

Gasoline and grocery prices pushed Bay Area inflation in April to its fastest annual pace in two years, adding new pressure on residents already living in one of the nation’s most expensive regions, new federal data show.

“This is more bad news for the Bay Area, America’s high-cost leader,” said Russell Hancock, president of San Jose-based think tank Joint Venture Silicon Valley.

The inflation rate in the Bay Area was 3.8% on a yearly basis, the U.S. Bureau of Labor Statistics reported Tuesday. That matched the region’s highest annual inflation rate since April 2024.

The rate in the Bay Area was sharply higher than the region’s 2.5% annual increase reported for February. The federal agency releases the Bay Area inflation rate every other month.

Gas prices, as measured by regular unleaded grades, jumped by 20.2% in April compared with the year before. April's rise followed a 15.2% annual increase in March, the federal agency’s report showed.

Economists have linked the spike to instability in the Middle East and disruptions tied to the Strait of Hormuz.

“Gas prices have been going up a lot,” said Jay Soliz, a San Jose resident. “Gas is up $3 or $4 a gallon. That’s crazy. It’s insane.”

According to a AAA gas price survey posted Tuesday, unleaded regular gasoline prices averaged $6.21 a gallon in Oakland, $6.14 in San Jose, and $6.33 in San Francisco.

Consumers in the region already pay a premium to rent or own homes. Any increases in gasoline or food expenses can squeeze residents even more.

“Bay Area residents are under tremendous pressure, more than other places, and the disposable or discretionary income isn’t there,” Hancock said. “Then, when food costs keep going up, when you’re paying $8 at the gas pump, it changes your delicate calculation and puts you on the edge.”

Some consumers said Tuesday that spikes in gas prices and food costs have prompted them to adjust spending habits.

“I am not going out as often, and I am budgeting a lot more carefully, especially on groceries,” Ariana Casillas, a Morgan Hill resident, said in an interview with this news organization as she filled up her gas tank near a Safeway store in San Jose. “I’m really careful about how much I spend on groceries.”

Along with gas, food costs also rose at a pace greater than the overall inflation rate in the region.

Overall food prices rose 5.4%, driven primarily by the cost of food consumed at home, which jumped 6.7%. Food eaten away from home increased by 4%.

Fruit and vegetable prices rose by 6.5%.

While apparel costs rose 4.4%, categories that showed increases at less than the overall inflation rate in the Bay Area included rent costs for a primary residence, up 2.7%; cereals and bakery items, up 1.6%; dairy products, up 1.3%; and medical expenditures, up 0.6%.

Items that declined in price over the year included new and used vehicles, down 1.7%; and meat, poultry, fish, and eggs, down 0.3%.

The change in the Bay Area inflation rate in April matched the nationwide annual increase of 3.8%, the report showed. Some economists have pointed to the U.S. fight with Iran as a key factor behind rising energy costs.

“The conflict in the Middle East is still temporarily boosting measured inflation,” Brian Wesbury, chief economist with First Trust Advisors, wrote in a research note. “Price increases once again came in very high but as expected in April.”

Workers aren’t earning enough to keep up with the pace of inflation nationwide, Wesbury warned.

“The worst part of the report was that wages continue to lose ground to inflation, as ‘real’ inflation-adjusted hourly earnings declined 0.5% and are now down 0.3% in the past year,” Wesbury wrote in the research note regarding the national inflation report.

He said trends in the money supply suggest inflation is poised to retreat, easing the pinch on consumers.

“Once the Iran war is resolved, inflation may drop faster than most investors expect,” Wesbury wrote.

For now, however, consumers such as Casillas, who commutes from her home in Morgan Hill to her job in North San Jose, must continue to pay elevated prices at the pump.

“If I could drive less, I would,” Casillas said. “But I have to commute to work.”

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This story was originally published May 12, 2026 at 10:20 AM.