Inflation still climbing

Inflation kept on its steady march in July, pulled along by higher gasoline and other energy prices.

In Utah, Wells Fargo reported that the cost of living rose by a nonseasonally adjusted 0.6 percent in July. It was the eighth increase in as many months and comes on the back of June's 0.4 percent increase.

Utah's increase surpassed the rise in the national Consumer Price Index for July, as reported by the U.S. Labor Department on Wednesday. The CPI rose by a seasonally-adjusted 0.4 percent last month, double the increase reported in June. However, the core inflation rate, which excludes the volatile food and energy sectors, slowed in July, rising by 0.2 percent after four straight months of 0.3 percent gains.

Energy and housing cost increases led the Utah index, rising 2.2 percent and 1.2 percent, respectively. On the national side, transportation costs ruled the day, jumping 2.9 percent last month, the biggest increase in three months.

Kelly K. Matthews, executive vice president and economist at Wells Fargo, said various economic indicators this week presented a complex, sometimes contradictory picture of the economy.

On Tuesday, AAA Utah reported that the average price of a gallon of unleaded regular gasoline in the state increased 11 cents during the past month, to $2.98 per gallon. Earlier in the day, the Labor Department released its report stating core inflation at the wholesale level dropped 0.3 percent.

That data combined with the Federal Reserve's decision last week to take a breather from further interest rate increases, Wednesday's inflation information and downward movement in the bond markets to generate some buzz, Matthews said.

"Not only is this an important aspect in relation to housing mortgage rates, but if there is a big inflationary worry out there, the two things we'd traditionally look at as indicating that we've got this big problem would be if long-term interest rates were going up and the value of the dollar were coming down," Matthews said. "While the dollar has been sort of flat-ish, the fact that long-term interest rates are declining is, to me, a fairly important factor in the market's interpretation that this just isn't a big inflationary worry."

Moreover, crude oil prices haven't spiked, nor have supplies been unduly taxed by BP's recent announcement regarding its Alaska oil field. Also, the fragile cessation in hostilities between Israel and Lebanon seems to be holding, easing concerns about supply or production interruptions in the region.