Energy prices cause Utah living costs to rise

Energy prices pulled the cost of living higher in Utah and across the country in March, reigniting worries about inflation and economic stability going forward.

The cost of living rose 0.7 percent along the Wasatch Front, according to a report released Wednesday by Wells Fargo. Transportation costs rose 4.3 percent last month, the report stated, and were the sole culprit for Utah's overall price increase. Except for a 0.6 percent decline in grocery prices, all other categories reported stable prices in March.

Not so nationally, according to a similar report Wednesday from the U.S. Labor Department.

The department reported that U.S. consumer prices jumped 0.6 percent in March, the biggest inflation surge in five months. Energy, clothing and airline fares all rose sharply.

"We know we have a cost problem, but the markets and financial analysts are struggling with the question as to whether it has or will become an inflation problem," said Kelly K. Matthews, Wells Fargo executive vice president and economist.

Matthews defined an "inflation problem" as a spiraling situation in which higher costs translate into higher wages, and higher wages lead to higher costs, and so on.

Inflation worries sent stocks lower, as the Dow Jones industrial average fell 115.05 to 10,012.36.

The government's new report showed that even outside of food and energy — two categories known for their price volatility — there were significant price pressures last month. The so-called core rate of inflation rose by a worrisome 0.4 percent in March, the largest jump in 2 1/2 years and double what economists had expected. It reflected higher prices for clothing, hotel rooms, airline tickets and medical care.

"Today, the national CPI (consumer price index) number was a little bit worrisome," Matthews said. The increase in core inflation "was a little bit high, . . . suggesting that maybe some of those prices are being passed on (to consumers) a little bit."

The higher inflation pressures are coming at a time when a number of reports in recent weeks have shown economic weakness, from a disappointing employment rise in March to lower-than-expected retail sales.

Underscoring that inflation pressures are mounting, the Federal Reserve said Wednesday in its latest survey of business conditions in the Fed's 12 regions that "price pressures have intensified in a number of districts and most report that high or rising energy prices are a concern across sectors." The Fed has been raising interest rates at a gradual pace of small quarter-point moves since June of last year.