Declines in U.S. annual inflation rates had been on a 12-month streak since hitting 9.1% last June, stepping down to 3.0% in the same month this year before inching up to 3.2% in July according to a Labor Department report released on Thursday.
But most economists remain optimistic that overall price trends for consumer goods and services, coupled with other economic indicators, are showing positive signs of improvement for the U.S. economy.
And Utah’s economic performance continues to be a standout even as it finds itself among a group of states that have seen inflation rates running well above the national average for over a year.
The Labor Department’s Consumer Price Index Summary noted the biggest driver of the inflation uptick in July came from rising costs of shelter, which were 7.7% higher than the same time last year. Buying groceries and eating out also got a bit more expensive last month, with prices rising 4.9% and 3.6%, respectively, over July 2022.
Mountain West states, which include Utah, continued to see regional inflation running above the national average with the annual inflation rate coming in at 3.5% for July, according to the new report. Among the drivers of that elevated rate are gas prices in the state that have, like overall inflation, been mostly running above national averages.
According to the latest AAA data, a gallon of regular was selling for an average of $4.10 across the state on Wednesday, compared to the U.S. national average of $3.83 per gallon. The average price of gas in Utah has shot up almost 24 cents in the last month.
The core inflation index, a metric closely watched by the Federal Reserve and one that strips out volatile food and energy prices, came in at an annual rate of 4.7% in July, down from June’s 4.8%.
Sung Won Sohn, chief economist at SS Economics and professor of economics and finance at Loyola Marymount University, said the July price data provides further evidence that price pressures are easing and could help push the Federal Reserve to back off a series of interest rate hikes, going back over a year, that have aimed to quell excessive inflation.
“It is not quite ‘mission accomplished’ yet, but significant progress on the inflation front has been made,” Sohn told CNBC. “On balance, the inflation picture has improved significantly. The Federal Reserve will stop raising the interest rate soon.”
The Fed has levied 11 rate hikes going back to March 2022 including a .25% bump to its benchmark rate following the monetary body’s most recent meeting in late July.
Following a decision at its June meeting to take a pause on a streak of rate hikes, the Fed’s Open Markets Committee voted unanimously to support the increase which brought its intra-bank overnight lending rate into the range of 5.25% to 5.5%, the highest it’s been since 2001.
The rate hikes aim to raise the cost of debt for businesses and consumers, which should, theoretically, reduce the amount of spending and overall economic activity, a shift in dynamics that typically brings inflation rates down.
When asked by reporters, following the July meeting, if the Fed is likely to assess another rate hike at its next meeting in September, Federal Reserve Chairman Jerome Powell said no decision has yet been made and he and the Fed’s board members would be guided by incoming data.
“I will also say, between now and the September meeting, we get two more job reports, two more CPI reports, I think we have an (employment compensation index) report coming later this week ... lots of data on economic activity, all of that information is going to inform our decision as we go into that meeting,” Powell said. “I would say it is certainly possible that we would raise funds again at the September meeting if the data warrants it. And I would also say it’s possible that we would choose to hold steady at that meeting.”
Even as Utah continued its own streak of inflation running well north of the national average, a local economist says the state is firing on all cylinders when it comes to economic vitality with the biggest challenges coming from its own level of high performance.
“The Utah economy continues to be hot,” said Phil Dean, public finance senior research fellow at the University of Utah’s Kem C. Gardner Policy Institute. “There are a lot of fundamental strengths in the Utah economy that are showing up in multiple data points.”
Dean noted Utah continues to see near nation-leading low unemployment, job growth that’s been very strong and seen recent acceleration and the benefits of a highly diversified economy that helps insulate the overall state economy from sector-specific slowdowns. But, Dean said that a robust jobs sector comes with a downside.
“Right now the story is the biggest constriction to econ growth is filling available jobs,” Dean said. “We could be growing even faster if we had the labor to fill positions.”
Dean said Utah housing costs are another point of concern amid an overall economic picture for the state that is predominantly positive.
Utah is among the most expensive states in the nation to own a home, according to a new report by the real estate website Agent Advice, which analyzed the typical price of homes throughout the country from March 2021 to March 2023 — years that will go down in history for their erratic impacts on the housing market.
Utah was named the sixth most expensive state to buy a home, with a typical home price of $506,072 as of this past March, according to Agent Advice’s analysis. The site used price and percentage increases in that three-year range for its rankings. Utah trailed behind Hawaii, California, Washington, Massachusetts and Colorado in the home price rankings.
Elevated housing prices, Dean said, can create both near- and long-term impacts as both current and potential residents get priced out of the chance to become homeowners.
“It’s a continuation of the story from the last several years,” Dean said. “Very high housing costs are good for existing homeowners but it creates difficulties for our rising generation and for those looking to come into the state ... unless they have high paying jobs.
“We’re continuing down this path and it’s a risk. We’re pricing our kids, grandkids and future workers out of the market.”