Mixed signals about U.S. inflation concerns continue to emanate from federal policymakers, but Utahns are decidedly united when it comes to how they’re feeling about rising costs amid the ongoing economic recovery.
They’re just plain worried.
A new, statewide Deseret News/Hinckley Institute of Politics poll found 85% of Utahns said they were very or somewhat concerned about inflation. And among that group, 25% said higher prices would be “temporary” versus 60% who believe inflation will be a “lasting” concern.
The findings are from a survey conducted by independent pollster Scott Rasmussen of 1,000 registered Utah voters from June 18 to June 26. The poll has a margin of error of plus or minus 3.1 percentage points.
A series of increasingly dreary inflation reports over the last few months are likely helping fuel the fire for consumers who are continuing to pay more for goods and services in most categories.
Last month, the U.S. Bureau of Labor Statistics released data for May, a month that saw the biggest 12-month consumer price increase in 13 years. May’s 5.0% hike was the biggest one-year increase since a 5.4% jump in August 2008. The news follows April’s one-year price increase rate of 4.2% that also exceeded the top rates going back over a decade.
Economists generally believe that a nominal rate of inflation, around 2%, is a good thing for the overall economy and key decisionmakers, like the board of the Federal Reserve, continue to predict current price increases will be “transitory.” While increases in lending rates can curb inflationary pressures, Fed Chairman Jerome Powell has said the central bank will not raise interest rates preemptively and “will wait for evidence of actual inflation or other imbalances.” But, minutes from a mid-June board meeting reflect some divergent opinions among members of the Fed’s governing body, according to a recent report by the New York Times.
So, are the inflationary concerns of Utahns’ justified?
Phil Dean, former Utah state budget director and current public finance research fellow with the University of Utah’s Kem C. Gardner Policy Institute, said he wasn’t surprised by the poll results and noted widespread media coverage of inflation issues was likely playing a role in the collective outlook. But he cautioned that the current rates being reported by federal agencies need to be understood in context.
“These year-over-year numbers are comparisons to the worst months, early in the pandemic,” Dean said. “The further we get out from the very worst of the pandemic’s economic impacts, the more relevant the comparisons are going to be.”
Dean also noted that consumer perceptions about inflation can themselves become a factor that applies further downward pressure on the economy.
“The poll highlights one of my biggest concerns and that relates to people’s expectations about inflation,” Dean said. “Those expectations can become guiding forces of economic activity. Consumers see not only what is going on today with inflation but sometimes start projecting that into the future.
“That’s where I get worried, when people expect future inflation and change their behaviors significantly.”
Wells Fargo Senior Economist Mark Vitner also reviewed Deseret News polling data and said Utahns’ concerns likely reflect how they’re being impacted by the rate at which prices in some categories have escalated.
“It’s not really that surprising to me that we see this elevated level of concern,” Vitner said. “The increase in inflation has been more abrupt and larger than what policymakers have been letting on.”
Vitner said he does not expect inflation to get anywhere near the double-digit rates that staggered the U.S. economy in the late ’70s but believes some of the factors that have driven up prices on consumer goods — like supply chain bottlenecks, labor shortages and surging demand — are likely to continue in the short term. He sees inflation running higher than it has over the past few decades (just over 2% since 2000) and lasting at least a few years.
The Bureau of Labor Statistics’ May report detailed the largest U.S. consumer price increases for energy products, including gasoline prices that are up over 50% from last year. The used vehicle market also continues to be hot, with the average cost of a previously-owned set of wheels 30% ahead of the same time in 2020. Overall food prices were up 2.2% but food purchased outside the home saw a 4% jump while groceries rose 0.7%.
Both economists pointed to housing costs as a prime driver of consumer concerns over inflation and particularly so since housing and housing-related spending typically amounts to around 40% of a household budget.
Utah’s red-hot housing market was examined in a recent, deep-dive Deseret News story, highlighting record-smashing sales volumes in 2020 along with unprecedented price jumps.
In Salt Lake County, the median single-family home price climbed to $468,000 in the first quarter of 2021, up $68,000 or 17% from a year earlier when the median price was $400,000. In Utah County, that price is up to $450,000, up an even bigger 20% from the first quarter of 2020. In Davis County, that price is $430,000, up 21%. In Tooele County, it’s up to $360,000, up 18%. And in Weber County, it’s up to $340,000, up 23%.
In the Salt Lake metro area, the median cost of rent went from $1,384 a month in March of 2020, when the pandemic first hit home here, to $1,451 a month one year later, a 4.8% increase, according to a new report by Stessa.com.
Almost every year over the past decade, Utah’s rental prices have shot up to the tune of 5% to 7% a year along the Wasatch Front, a startling reality that means the average Salt Lake County apartment that cost $793 in 2008 now costs about $1,145.