Food prices along the Wasatch Front rose at seven times the national rate in August, and the overall cost of living in Utah also increased, while nationally, inflation declined slightly.

The cost of groceries increased 4.9 percent from July to August on the Wasatch Front, compared with only 0.7 percent nationally, according to the Wells Fargo Consumer Price Index that was released Tuesday. The overall cost of living rose 0.1 percent from July to August, while the cost of living nationally decreased 0.4 percent.

Wells Fargo economist Kelly Matthews said the high prices of gasoline and diesel fuel in Utah were major contributing factors for the significant increase in food prices along the Wasatch Front. Gas prices in Utah were the third-highest in the nation in mid-August, prompting Gov. Jon Huntsman Jr. to say the state would monitor the situation to make sure Utah consumers weren't being gouged.

"A fair amount of what was going on in those food prices was the cost of delivering them, rather than the actual production cost," Matthews said.

Over the past six months, food prices have jumped 10.2 percent locally, driven mostly by a 11.2 percent hike in Utah fuel costs over that period, Matthews said. Nationally, food prices have increased 4.3 percent over the last six months and 5.5 percent since August 2007.

The cost of utilities also saw sharp rise over the past six months, the report showed. In Utah, utilities jumped 8.2 percent during the period, while nationally utility costs jumped 16.8 percent.

Transportation costs along the Wasatch Front declined slightly, by 0.6 percent, during the month, due to falling gas prices, the report said. Nationally, transportation costs fell 2.9 percent last month.

Analysts said the August decline in the national average of consumer prices should be followed by more price moderation in coming months, if prices continue falling. This will give the Federal Reserve more room to cut interest rates if needed to combat the current severe bout of market turmoil as Wall Street undergoes its biggest restructuring since the 1930s.

"Virtually all the inflation indicators are on the wane. Labor markets are weak, and compensation gains slight," said Kenneth Beauchemin, a senior economist at Global Insight, a Lexington, Mass., consulting firm.

The central bank met on Tuesday but decided to leave interest rates unchanged, despite the dip in prices seen in the consumer inflation report. The Fed said in a statement that the risks of weak growth and higher inflation both remained "of significant concern."

The central bank had signaled back in June that further rate cuts were unlikely, given rising inflation concerns, but some investors thought that position could be changing, given the chaotic conditions in financial markets in recent days.

Lehman Brothers filed for bankruptcy protection on Monday, and Merrill Lynch was forced into selling itself to Bank of America, as a severe credit crisis triggered the biggest restructuring of Wall Street since the 1930s.

Even with the overall drop in prices because of the huge decline in energy costs, paychecks continued to be under pressure. Weekly wages of nonsupervisory workers dropped by 2.5 percent in August compared with a year ago, the 11th straight month in which wages have been down on a year-over-year basis.

The stagnant wages have become an issue in the presidential campaign, with both Republican John McCain and Democrat Barack Obama promising to change tax and other economic policies in an effort to address the squeeze on the middle class.

Democrats on the Senate Joint Economic Committee released a report Tuesday contending that families are spending twice as much on household expenses now as they did in 2000, a period when median household incomes have been stagnant.

"Over the last seven years, families' pockets have been picked at the grocery store, the gas pump and each time they make their home energy, health-care and mortgage payments," said Sen. Charles Schumer, D-N.Y.

The 0.1 percent drop in consumer prices in August was the first monthly decline since prices fell by 0.5 percent in October 2006, another time where energy prices took a big decline.

Core inflation, which excludes energy and food, was also well-behaved in August, edging up by a slight 0.2 percent, after two months when core prices had risen by 0.3 percent. Both the overall decline and the small increase in core inflation were in line with economists' expectations.

Over the past 12 months, overall inflation is up by 5.4 percent. That's a slight improvement from the 5.6 percent rise for the 12 months ending in July, which had been the largest year-over-year increase in 17 years.


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