From Deseret News archives:

Utah inflation not bad

Increase in national figures has some economists concerned

Published: Wednesday, April 19, 2006 10:16 p.m. MDT
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While inflation remained well-behaved along the Wasatch Front last month, a spike in national numbers kerfuffled analysts and economists Wednesday.

Wells Fargo Bank reported in its monthly Wasatch Front Cost of Living Index that inflation crept up 0.1 percent on a non-seasonally adjusted basis in March, led by a 0.3 percent bump in transportation costs and 0.2 percent increases in the costs of clothing and groceries.

Meanwhile, the U.S. Labor Department released more alarming data in the form of its Consumer Price Index, which rose 0.4 percent (on a seasonally-adjusted basis) in March — the biggest amount the nation has seen in a year, and eclipsing February's modest 0.1 percent gain.

The federal inflation meter, like the local one, was pulled higher by gasoline prices, which the Labor Department said jumped 3.5 percent.

Core inflation, which excludes the more volatile food and energy categories, posted a 0.3 percent rise in March.

Analysts' reactions to the report were mixed.

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"Any way you cut it, inflation was not well contained in March," said Joel Naroff, chief economist for Naroff Economic Advisors, a private consulting firm. "This was not a good report, especially if you are a member" of the Federal Reserve committee that meets eight times a year to set interest rates. The next meeting is May 10.

However, Kelly K. Matthews, executive vice president and economist for Wells Fargo, said that while the jump in core inflation was "the highest monthly number in literally five years in terms of the change in the monthly core basis," a broader analysis lent some perspective to the situation.

"Even though it was 0.3 (percent higher) for the month," Matthews said, "on a year-to-year basis it remained 2.1 percent core inflation, which was pretty much consistent with where the core rate of inflation on a year-to-year basis has continued. So there wasn't really any big jump on a year-to-year basis, and the 2.1 percent is still pretty much on the upper end of what's called the 'acceptable range,' from the Fed's point of view."

Others worried that the core inflation data could be a worrisome signal that higher energy prices are starting to spill over into more widespread inflation pressures.

"Today's report provides a signal, albeit noisy, that the long-awaited pass-through of higher costs to a wide range of consumer prices has arrived," said Kenneth Beauchemin, an economist at Global Insight, a forecasting firm.

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