Escalating Fuel Prices, Inflation, and Sustained Confidence
SALT LAKE CITY, Utah; April 13, 2012 — In March 2012, on a non-seasonally adjusted basis, the Zions Bank Wasatch Front Consumer Price Index (CPI) increased 1.1 percent.
The U.S. CPI, which is an aggregation of all prices throughout the nation, increased at a rate of 0.8 percent on a non-seasonally adjusted basis. Year-over-year, the Zions Bank CPI has gauged local inflation to be 2.7 percent, which is in line with the U.S. CPI of 2.7 percent.
Almost 80 percent of March’s spike in inflation was driven by a single data point: price at the pump. Crude oil, which accounts for 76 percent of the price of gasoline, has risen approximately 9 percent since December 2011. These increases have been the result of higher tensions with Iran, growing demand from China, and oil investors speculating the worst. In March of last year, the Wasatch Front experienced a similar jump in inflation, again driven largely by gasoline prices.
Twelve months ago, the surge in fuel prices closed wallets, decelerated investments, and challenged the state’s recovery. Today, the economy’s fundamentals have since strengthened in key areas, such as employment, consumer spending, and confidence. The latest consumer confidence data (local and national) reveal that higher prices at the pump have not changed consumer behavior. Historically, higher fuel costs equate to drops in confidence. However, with the flow of positive economic data, it is difficult to speculate the degree to which higher gasoline prices will adversely affect the local economy.
In March, the cost of transportation along the Wasatch Front increased 5.2 percent, the largest single month increase ever recorded by the Zions Bank CPI. Gasoline prices, the primary contributor to the increase, rose 16 percent. Despite the significant increase in fuel costs, Utah remains the third cheapest state for gasoline in the nation. According to AAA’s Daily Fuel Gauge, the average price of regular gasoline in the state is $3.72 — 90 cents less than Hawaii.
The cost of utilities jumped 1.1 percent last month due to increases in the price of propane and gas. Year-over-year, utilities have increased roughly 6.4 percent along the Wasatch Front. March’s increase is primarily attributable to seasonal adjustments in price, which occurs every spring.
All other categories tracked by the Zions Bank CPI (e.g., food, clothing, housing, etc.) revealed a healthy rate of inflation. It is important to remember that March’s inflation is the result of higher gasoline costs and is not indicative of general price increases. As a result, the current rate of inflation is seen as short-term and will likely subdue in the long-run, having little impact on future economic growth.
“There are two economic events playing out along the Wasatch Front right now,” said Zions Bank President and CEO Scott Anderson. “We are seeing escalating fuel prices compete with an improving labor market, where both have historically led confidence in polar directions. The latest Zions Bank Consumer Attitude Index revealed that the labor market’s improvements outweigh the negative impact of rising gasoline costs. However, Zions Bank will continue to track the situation closely, bringing consumers and businesses the most up-to-date information each month.”
Analysis and data collection for the Zions Bank CPI and the Utah Consumer Attitude Index, to be released April 24, 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 18 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.