Higher Gasoline and Transportation Prices May Slow Utah Recovery
SALT LAKE CITY, Utah; May 13, 2011 — In April 2011, on a non-seasonally adjusted basis, the Zions Bank Wasatch Front Consumer Price Index (CPI) increased 0.8 percent compared to the national CPI, which increased 0.6 percent, as reflected in the Zions Bank and U.S. Bureau of Labor Statistics Consumer Price Indices. The Wasatch Front CPI has increased 2.9 percent since a year ago, which is below the national CPI rate of 3.2 percent over the same period. The generally accepted rate of U.S. inflation among economists is 2 to 3 percent each year.
Utah has had three consecutive months of price increases. While Utah’s annual inflation rate is in line with average expectations, current inflation is not indicative of the general price increases that occur in a growing U.S. economy. Instead, rising gasoline prices are pushing Utah food prices higher.
Wasatch Front transportation costs increased by 2.4 percent in the month of April due to price increases in new vehicles, airfare, and gasoline. The costs of food at home along the Wasatch Front increased 1.9 percent in April due to increases in most food categories, but primarily in the price of meats, dairy, and produce. Price increases for food and gasoline, primarily caused by fluctuations in the price of oil, is attributable to volatility in the oil markets resulting from uncertainty caused by recent natural disasters and political uprisings in the Middle East.
Utahns are spending a larger proportion of their budgets on gasoline and food, which means they are spending less on other goods and services. Spending less money on other goods and services could lead to a possible slowdown in the state’s economic recovery.
Utahns should expect to continue to pay higher gasoline and food costs throughout much of the summer. The price of regular gasoline in the state is $3.74, a 20 percent increase from May of last year. Additionally, food at home increased almost 2 percent year to date, quadruple the percent increase during the first three months of 2011 combined.
While gasoline induced inflation is a challenge to Utah’s economic growth, recovery, such inflation is often temporary, and there is already speculation that oil prices will soon recede. Some economists project a national drop of 50 cents per gallon in the late summer months.
Until prices at the pump decrease, small businesses can take action to limit their exposure to gasoline induced inflation. In the past, small businesses have used various methods to deal with gasoline induced inflation. Many businesses re-evaluate transportation logistics, such as avoiding peak driving hours, tuning up vehicles to increase fuel efficiency, and determining the best transportation routes. Some companies increase the size of their inventories, believing that goods will be cheaper today than in the future. Businesses may also invest in capital and software solutions that decrease their reliance on transportation.
In April 2011, 757 single-family homes were sold in Salt Lake County compared to 888 in April 2010. For April 2011, the median single-family home sales price in Salt Lake County was $215,000, down 5 percent from the median price of $226,000 for the same period in 2010.
Analysis and data collection for the Zions Bank CPI and the next Utah Consumer Attitude Index to be released May 31 are provided by the Cicero Group/Dan Jones & Associates, a premier market research firm based in Salt Lake City.
Zions Bank is Utah’s oldest financial institution and is the only local bank with a statewide distribution of financial centers, Zions Bank operates locations in communities throughout Utah and Idaho. In addition to offering a wide range of traditional banking services, Zions Bank is also a leader in small business lending and has ranked as the No. 1 lender of U.S. Small Business Administration 7(a) loans in Utah for the past 17 consecutive years. Founded in 1873, Zions Bank has been serving the communities of Utah for more than 135 years. Additional information is available at www.zionsbank.com.