Falling gas prices flatten inflation

Credit is tight and nest eggs are taking a beating in the stock market, but the latest inflation gauge shows a bright side that consumers may not have noticed: a break at the grocery store and the gas pump.

The Wells Fargo Consumer Price Index released Thursday shows the Wasatch Front's cost of living dropped 0.4 percent last month. That includes about a 2 percent drop in both the price of groceries and transportation, largely because of falling gas prices.

Nationally, prices remained flat. A 4.1 percent jump in the cost of clothes was balanced by a 3.5 percent drop in utilities costs and a 0.4 percent housing-cost decline. When energy and food products are stripped out, "core" prices inched up by just 0.1 percent in September, an improvement from the 0.2 percent advance in August.

Still, the bright spot is really just for last month. And it might not be felt all that much, considering people's paychecks are shrinking.

Nationally, weekly wages dropped for the 12th straight month in September, by 2.5 percent, according to the Labor Department. The number of people collecting jobless benefits rose to 3.7 million, the highest since late June 2003, when the labor market struggled after the 2001 recession.

The September cost of living dip really is a longitudinal blip. Since February, local inflation actually rose 3.9 percent, led by a 7.9 percent increase in grocery costs, an 8.2 percent hike in utilities costs and a 9.1 percent transportation-cost increase. Nothing the index measures, in fact, from health care to recreation, costs the same or less than it did in February, according to the Wells Fargo report.

National inflation is slightly less pronounced, at 3.3 percent since February. Utilities accounted for the biggest cost increase at 12.7 percent.

The numbers are not seasonally adjusted.

The higher inflation seen for most of this year, however, does mean that Social Security paychecks will be fatter next year. Social Security benefits will go up 5.8 percent next year, the largest increase in more than a quarter century.

Oil prices closed at less than $70 a barrel Thursday, less than half of the record high $147.27 a barrel in mid-July. That suggests gas prices will continue to fall, said Kelly Matthews, economist and executive vice president for Wells Fargo. However, he said, the lower prices are a double-edged sword, because they could be an economic gauge that shows weakening is going to continue.

As for the stock market, investors' fear now rules, said Sterling Jenson, regional managing director of Wells Capital Management. The market is down 39.4 percent in the past year. Even with $750 billion in government intervention, credit markets still are not thawing.

"Is it working yet?" Matthews said of the government rescue. "Well, it's not working fast."

Yet Jenson predicts the housing market will reach stability by June, and the national recession will last for the next year. While the stock market remains volatile, the strong-stomached person who picks up some of today's bargains "is going to be quite happy" in a year or so, he said.

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E-mail: jtcook@desnews.com