The cost of living along the Wasatch Front jumped 0.8 percent in April, tying the largest increase in nearly 18 months.
According to the April Wasatch Front Cost of Living report released Friday by Wells Fargo Bank, transportation and utilities costs did the bulk of the work pulling the index up. Transportation costs increased 2.7 percent in April, while utilities prices climbed 1.8 percent. Smaller increases were in the costs of groceries, clothing, education, communication and housing.
The U.S. Labor Department said national seasonally adjusted consumer prices rose by a modest 0.2 percent in April. Core prices — which exclude the more volatile food and energy sectors — went up 0.3 percent.
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Kelly Matthews, Wells Fargo executive vice president and economist, said some upward pressure on prices isn't necessarily a bad thing.
"We've been needing to arrive at a situation where businesses had some pricing power as a precursor to their being able to hire people," Matthews said. "To the degree it is reflective of pricing power, I'd say it's a good trade-off."
That trade-off likely will include Federal Reserve action to raise short-term interest rates, possibly as soon as June.
"Put a fork in the 1 percent funds rate. It's done," said Joel Naroff, president of Naroff Economic Advisors. "The steady, upward creep in inflation continues and will have to be addressed fairly soon by the Fed."
Sterling Jenson, senior managing director for Wells Capital Management in Salt Lake City, said the Fed could increase rates a full percentage point to 2 percent by the end of the year.
Mortgage rates are also likely to climb toward year's end, Jenson said. Since early March, mortgage interest rates have gone up a full percentage point. By the end of the year, Jenson predicted the interest rate on a 30-year mortgage could be 7 percent. Which, according to Matthews, "will certainly affect refinancing." But it also could affect new home projects and purchases, Jenson said.
"We've seen a lot of people who've compared rent prices to mortgage prices, and it's been cheaper to pull out a mortgage," Jenson said. "We may see that pendulum swing, to where renting becomes cheaper than a new home mortgage. It may price some of those early homebuyers out of the market, especially if home prices don't adjust downward, which they usually don't."
The stock market, however, has adjusted downward several times in the last month.
"The question is, what's not to like?" Jenson said, running off a list of economic measures, all pointing toward strength: the strength of the Gross Domestic Product, factory orders, supply management surveys, personal income, industrial production, money supply, corporate earnings, job growth.
The Fed reported Friday that industrial production jumped by 0.8 percent in April, the biggest increase since November, up from a 0.1 percent dip in March. The U.S. Commerce Department said businesses boosted their inventories by 0.7 percent in March, a sign that companies feel more confident in the recovery's staying power. Business sales rose by 2.9 percent in March.
Still, the stock market stumbled again Friday.
"It just seems like the stock market right now is in this mood that it's going down for any reason at all," Jenson said. "If it seems like it's too hot it goes down. If it seems like it's too cold they want to take the stock market down. At first, it was the jobless recovery. . . . Now, the fear is in interest rates and inflation."
Jenson attributed the market's timidity to fears over the conflict in Iraq, terrorism risks and the presidential election cycle. As these issues are resolved, Jenson said he expects the market will strengthen. He maintained his prediction of 12 percent to 15 percent growth on Wall Street by year's end.
Contributing: The Associated Press
E-mail: jnii@desnews.com