The prices of produce, gas and a host of other products and services last month jumped at the second-fastest pace recorded in 26 years, mainly because of rising energy costs, according to local and national reports released Wednesday.
However, Wells Fargo economist Kelly Matthews in Salt Lake City said a drop in oil prices over the past few days brings a glimmer of hope for the future.
Gas prices jumped 8 percent between May and June. "That's clearly the big story," Matthews said in issuing Wells Fargo's Wasatch Front consumer price index. Overall, transportation prices went up 4.3 percent locally and 3.2 percent nationally, according to the report, whose numbers are nonseasonally adjusted.
Over the past four months, transportation prices have risen 10.6 percent locally and 11.3 percent nationally, the report states.
In the latest shock wave to hit the national economy, consumer prices across the United States rose 1.1 percent in June from the month before, far faster than the expected rate of 0.7 percent and almost double the reading from May, the Labor Department said Wednesday.
The only time in the past quarter-century that monthly inflation has been that high was in September 2005, when prices jumped 1.3 percent, mostly because Hurricane Katrina shut down oil refineries and energy prices spiked.
Consumer prices are up 5 percent over the last 12 months, the fastest one-year change since 1991.
As prices rose last month, take-home pay took a hit. Adjusting for inflation, weekly wages fell 0.9 percent in June, the third straight monthly decline and the biggest drop in almost four years.
The news was the back half of a one-two punch on inflation. On Tuesday, the Labor Department reported that prices at the wholesale level were rising by the highest annual rate in 27 years.
Before Congress, Federal Reserve Chairman Ben Bernanke wrapped up two days of testimony and repeated his concerns about inflation, also noting the housing slump, financial turmoil and credit troubles.
"We will work our way through these financial storms," he said.
The Consumer Price Index, which came out Wednesday, measures not just what Americans pay for goods but for other purchases, including services like health care and haircuts.
Higher energy costs led the way, with a more than 10 percent rise in gasoline prices. More expensive vegetables, dairy and beef pushed up food costs.
Core inflation, the figure that excludes energy and food to measure other costs, rose by 0.3 percent in June, the fastest rise since January. Airline tickets grew almost 5 percent more expensive, the biggest rise since the summer of 2001.
But Matthews sees some potentially good news. The price of crude oil, though it's been above $140 per barrel, has not risen above $150 per barrel. In fact, it's retreated by about $10 in the past few days. If that trend continues, then inflation might slow in July, he said.
Gas prices also are largely to blame for an increase in the price of groceries: It costs more to truck goods to stores. Groceries locally went up 1.3 percent in June double the national increase. However, the four-month increase of 2.7 percent is closer to the national rate of 2.3 percent.
Health care along the Wasatch Front was flat for June but up 3.1 percent over the past four months, versus a half-percent national increase.
The Wells Fargo index is not seasonally adjusted. That partly accounts for the 4.7 percent decrease in clothing costs locally. In May, those costs jumped 12.4 percent. The cumulative change over the past four months is a 9.7 percent increase locally, versus a nearly 1 percent drop nationwide.
Meanwhile, the Federal Reserve reported that industrial output rose 0.5 percent in June, the fastest pace in 11 months. Yet the increase, the highest since a 0.6 percent gain in July of last year, reflected an end to an automotive production strike, rather than any widespread strength in the economy.
Bernanke on Wednesday repeated his concerns about inflation in remarks to the House Financial Services Committee. He said that the upside risks to the inflation outlook have intensified, reflecting higher prices for oil and other commodities.
Bernanke's comments underscored the bind the central bank is in, caught between a faltering economy that is struggling to overcome a prolonged housing slump and a severe credit squeeze, and the risk that inflation will move higher.
Democrats in Congress said the new inflation report emphasized the need to pass a second stimulus package. The White House, though indicating concern about the economy's weakness, has opposed it.
Certainly today's situation isn't good. But Wells Capital Management regional managing director Sterling Jenson says there's some evidence that things aren't as bad as some think.
Consumer sentiment is below 1982 levels, although the country is not in recession as it was then, Jenson said. The gross domestic product is not in negative territory. Productivity actually is up. And a few companies, including Wells Fargo, executives pointed out, show second-quarter earnings at or exceeding expectations.In all, this might be a good time for investors. "The best time to invest in the stock market is when no one else wants to be there," Jenson said. While it's uncertain if the market has hit its bottom, it's probably getting pretty close, he said.