From Deseret News archives:
Is economic storm ahead?
Wells Fargo Bank's monthly Wasatch Front Cost of Living report found that prices rose 1.0 percent in August, led by a hefty 5.8 percent jump in transportation costs.
On the national front, the Consumer Price Index rose 0.5 percent, the U.S. Bureau of Labor Statistics reported Thursday, again led by a jump in energy prices which had shot up by the largest amount in more than two years even before Katrina hit at the end of the month. The hurricane caused a further price spike due to widespread shutdowns of oil and natural gas facilities in the Gulf Coast region.
Excluding volatile energy and food costs, however, the "core" rate of inflation nationally rose a modest 0.1 percent.
"Overall, inflation appears to be pretty well contained," said Sterling Jenson, regional managing director for Wells Capital Management. "The question is, what will be the full impact of Katrina?"
While they do not believe that storm-related disruptions will be enough to push the country into a recession, analysts caution that this forecast could be proven wrong if energy prices keep soaring, triggering significant cutbacks in spending by consumers in other areas.
Phil Hopkins, managing director of U.S. regional services for Global Insight, estimates that the seasonally adjusted unemployment rate in the area of New Orleans, Metairie and Kenner was 4.9 percent in July. He said that based on his calculations, the jobless rate there could easily climb to 25 percent.
And analysts predicted that the overall inflation figure will be even higher in September, reflecting the fact that gasoline prices climbed even higher to more than $3 per gallon in September as the impacts of the Gulf Coast shutdowns were felt in supply shortages.
"Gasoline prices have gone through the roof," said Labor Department analyst Patrick Jackman, who said gasoline was about 30 percent higher in the first two weeks of September as compared to the first two weeks of August.
But Jenson noted that gasoline prices have begun to ease and should continue downward as the summer driving season ends and demand lessens.
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