Utah prices stay mostly stable

0 Comments | Deseret News (Salt Lake City), Jun 18, 2009 | by Lois M. Collins Deseret News

Prices were relatively stable along the Wasatch Front during May, compared to a slight national increase, according to the Wells Fargo Consumer Price Index and data released by the U.S. Bureau of Labor Statistics on Wednesday.

That doesn't mean that Utah prices remained flat. But increases in the cost of produce, meat, utilities, education and communication and medical care were offset by a smaller tab for eating out, renting an apartment, clothing, recreation, transportation and "other goods and services."

National data indicate that the recession has at least managed to check inflation so far. And The Associated Press reported that low prices will make it easier for the Federal Reserve to keep short- term interest rates near zero when it meets next week. Bond yields ticked up earlier this month on concerns that indications of an improving economy would prompt the Fed to raise rates later this year.

On the Wasatch Front, the slightly declining cost of transportation -- down 0.7 percent -- did not reflect a drop in gas prices. Those went up. But the cost of airfare decreased significantly in May.

"The slight bit of good news is that Utah has not risen as much" in terms of gasoline prices and is now slightly below the national average, said Kelly K. Matthews, executive vice president and economist for Wells Fargo.

A summary by the bank said that the overall transportation costs have declined 11.8 percent in Utah since the inception of the report in February 2008, driven largely by the overall decline in crude oil prices that had climbed so high then. Nationally, gasoline prices (not seasonally adjusted) increased by 9.6 percent in May, but the rising prices have not been enough to stifle demand, Matthews said, adding that existing conditions might be right to level out those prices a bit.

Matthews also noted that the recent increase in mortgage interest rates from around 4.75 percent to about 5.6 percent has had a definite chilling effect on refinancing. And that higher interest rate makes it harder for the housing situation to improve, which he suggested may be one reason that the stock market is focusing once again on economic weakness.

Bonnie Newman of Wells Capital Management said the market seems to be going through a "digestion" period, which is not uncommon after a rally.

At the grocery store, shelf items cost what they had the month before, but Utah shoppers paid 6.9 percent more for fresh produce and 2.7 percent more for meat, poultry, fish and eggs. The produce cost increase was driven by a rise in citrus and green pepper prices. Seafood costs, up 9.3 percent, were primarily responsible for the rise in meat costs, but pork and beef prices rose slightly, too.

Matthews said that measured year over year, grocery price increases are twice as high in Utah as they are nationally.

But year-over-year housing prices are flat in Utah, compared to a 1.6 percent national increase.

The cost of dining out dropped 1.5 percent.

Housing (which takes into account only rentals) decreased 0.1 percent, reflecting a change in rental rates.

A seasonal increase in water rates drove the cost of utilities up 1.6 percent on the Wasatch Front.

E-mail: lois@desnews.com