Inflation Slows in May as Oil Prices Drop
SALT LAKE CITY, Utah; June 15, 2011 — In May 2011, on a non-seasonally adjusted basis, the Zions Bank Wasatch Front Consumer Price Index (CPI) increased 0.4 percent after rising 0.8 percent in April. The national Consumer Price Index, which is a culmination of all prices throughout the U.S., increased 0.5 percent in the month of May.
In May, the price of crude oil remained below $100 per barrel for the full duration of a week for the first time since February. Lower oil prices gave Utahns a welcomed break from the state’s surging transportation costs, which have increased 11.3 percent since January. In May, transportation costs rose 0.5 percent, the lowest single month increase in four months.
It is too soon to tell if crude oil will average below $100 per barrel in the coming months; however, the impacts of lower oil costs were evident in May’s prices. The Wasatch Front has experienced an average price increase of 0.9 percent per month over the past three months. May’s increase of 0.4 percent gives weight to the notion that Utah’s inflation is indeed oil induced. Other price categories that experienced an inflationary slowdown in May were food at home and clothing, both correlated to the price of crude oil.
Although this year’s inflation has challenged Utah’s progress toward a quick economic recovery, the price data for May points to an oil-induced inflation. Tensions in Libya are still high; however, as they ease and investor speculation resumes to its normal range, the price of crude oil will recede.
In May, the price of food at home increased 0.2 percent, its lowest single month increase since January. Attributing to this slowdown was a halt in rising produce, meat, and dairy prices. Clothing prices increased 0.3 percent in May, due to a rise in women’s and men’s apparel costs.
Despite a general inflationary slowdown last month, the price of housing increased 0.8 percent. Since January, housing has averaged a monthly price increase of 0.3 percent. Rising hotel/motel rates, which are typical during the summer months, are the primary cause of May’s higher costs in housing.
Looking to the future, there is speculation that the U.S. is heading toward a double-dip recession. The onslaught of press for this topic is due to a series of economic disruptions, including the earthquake and tsunami in Japan, Europe’s ongoing debt crisis, and rising oil costs. Many economists speculate that the recent rough patch is temporary, and due to the three factors mentioned above.
“So far this year, the Zions Bank CPI has increased 3 percent,” said Zions Bank President and CEO Scott Anderson. “Higher prices have posed a challenge for our state’s quick economic recovery. However, Utah businesses are still growing and we foresee a full economic recovery in the future. Zions will continue to track inflationary trends to help businesses weather economic hardships.”
Analysis and data collection for the Zions Bank CPI and the next Utah Consumer Attitude Index to be released June 28 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.