Inflation slowing down

Inflation slowed in Utah and around the country last month as energy prices moderated, and local economists said Friday they're looking forward to a strong fourth quarter.

Wells Fargo Bank reported that the Wasatch Front cost of living showed no change in August, with a 1.7 percent dip in transportation costs balanced by increases in groceries and clothing. All other categories held steady.

The U.S. Labor Department, meanwhile, reported a 0.2 percent increase in its national Consumer Price Index for August, half the increase seen in July.

"I think that a case can be made, and I think that the markets are reflecting this, that possibly the worst news on inflation is over," said Kelly K. Matthews, executive vice president and economist at Wells Fargo.

With topline inflation at 3.8 percent and core inflation — which excludes volatile food and energy prices — rising a modest 0.2 percent to 2.8 percent, Matthews said it is possible the economy is witnessing "the modest beginning of a trend which very possibly can continue on into the first part of next year."

"But," Matthews said, "for that to be a reality, of course, we have to see what's happening in terms of energy and transportation."

On Friday, crude oil traded around the $62.50 to $64 per barrel mark before settling at $63.33 — about 20 percent below the summer highs nearing $78, Matthews said.

That 20 percent drop is "strange," Matthews said, given the lack of significant change in either supply or demand for gasoline. He attributed a "huge amount" of that drop to "a perception of less worry" — helped by the relative calm of the summer storm season, the relative quiet on the geopolitical front (particularly with Iran), and a lessening of concerns about crude oil supply problems out of Alaska.

"The speculative pressures may be at a point that it might level out," Matthews said. "But this is a major development, being around the $62 (per barrel) mark, and there's good reason to believe we can stay in this area."

The easing of speculative pressures also has buoyed the stock market, according to Sterling K. Jenson, regional managing director for Wells Capital Management. The Dow Jones industrial average closed up 33.38 on Friday at 11,560.77. The all-time closing high for the Dow, reached more than six years ago, was 11,722.