Prices dipped a bit in May

Local and national consumer prices dipped slightly in May due to lower energy costs.

But a Wells Fargo economist said Wednesday the most recent data suggest that prices at the gas pump may be headed back up again.

The Wells Fargo Wasatch Front Cost of Living report inched lower by 0.02 percent in May. A 1.1 percent decline in the cost of transportation was offset by increases in groceries and clothing. All other categories showed no change, according to the Wells Fargo report.

Nationally, the U.S. Labor Department reported Wednesday that the Consumer Price Index fell 0.1 percent in May, the first decline in 10 months. May's retreat followed big gains of 0.4 percent in February, 0.6 percent in March and 0.5 percent in April. Those increases had been driven by a surge in energy costs this year as crude oil prices hit all-time highs in early April, topping $57 per barrel.

On Wednesday, crude oil prices were again on the rise.

"The price information today fits right along with my schizophrenic personality," joked Kelly K. Matthews, executive vice president and economist at Wells Fargo. "That is, while the big news on the Consumer Price Index, which reflects observations taken last month, show a significant reduction in energy prices, specifically gasoline prices at the pump, the actual events of this very day are in the opposite direction. We are now teetering on the verge of having crude oil prices re-establish the peak level that occurred in April."

Matthews called the situation "a bit perplexing" and the spike in oil prices — which economists attributed largely to disappointing news from the U.S. Department of Energy about inventories — "a bit worrisome."

Likely that will result in a reversal of May's energy price drop, Matthews said, echoing private analysts' caution that the economy remains vulnerable to further oil price hikes in the months ahead.

"We really have a tight energy market, because demand is pressing up against the capacity to produce," said Nigel Gault, chief U.S. economist for Global Insight, an economic forecasting firm. "Where we would really be in trouble is if there is a terrorist attack or some sort of natural disaster that affected oil production."

Still, Matthews maintained that Utah's economy is doing "very, very well," and a variety of reports released Wednesday depicted a national economy shaking off the effects of an oil price surge in the early spring and resuming solid growth.