But even with soaring energy expenses, a rather modest increase in the cost of living along the Wasatch Front during September has not convinced Wells Fargo economist and executive vice president Kelly Matthews that hard-core inflation is imminent. .
At least not yet. If energy costs don't retreat some after winter's peak demand for natural gas, there could be more reason for concern, Matthews said. That's why he and Sterling Jenson, a regional managing director for Wells Capital Management, expect the Federal Reserve Board to increase interest rates several times in coming months to control inflation.
"We're not in the big leagues of inflation at all, nowhere near what we used to think of as bad inflation," Matthews said Friday.
The Wasatch Front's overall cost of living rose 0.8 percent in September, the eighth consecutive monthly increase. From a half-year perspective, the cost of living between April and September was 2.6 percent higher than for the same six-month period in 2004. Nationally, it was 1.2 percent in September and 3.5 percent over the six-month stretch.
Utah's numbers are "not too impressive," Matthews said, saying it's not like prices are "zooming upward."
His optimistic outlook was driven by price figures that indicated big jumps in the cost of crude oil and natural gas had not spread into cost-of-living categories outside of transportation and housing.
With crude oil selling for $60 to $65 per barrel this fall, compared to $42 to $54 a barrel a year earlier, transportation costs over the past six months rose 9.9 percent along the Wasatch Front. Housing costs went up 1.3 percent, largely because the going rate for natural gas is now twice as much as it was a year ago.
But those increases are not reflected in Wasatch Front residents paying markedly higher prices for food, clothing, health care, recreation, education or communication.
Still, there are signs that rising energy costs are impacting Utahns.
Winder Farms increased the delivery fee for its 26,000 customers to $1.95 - the highest ever after going 119 years through several recessions and the Great Depression with no fees for bringing milk to homes.
"Our customers can cut down on their own fuel bills by ordering from us," noted vice president Mike Winder.
Mike Lami, owner of Rocky Mountain Pizza Co. in Salt Lake County, said gas prices have cut deeply into his profit margin. But he has not raised prices for fear of losing business.
"We charge a $2 delivery fee while most other places just put the delivery cost in the price of the pizza, so it's not as obvious," he said. "I would love to charge a $3 delivery fee, but I don't think our customers would stand it."
Taxi companies also are talking about seeking approval for a rate increase, said Jim Curtis of Ute Cab & Rent-A-Car.
If escalating energy expenses do not abate next spring and appear to be pushing up prices in other economic sectors, inflation could become troublesome, Matthews and Jenson said.
But they feel retiring Federal Reserve chairman Alan Greenspan wants to be perceived as an "inflation fighter" and is likely to push the board to use higher interest rates to check rising prices.
Matthews said he expected short-term interest rates to rise from 3.75 percent now to 4.5 percent by the end of March, 2006. He projected that 10-year Treasury notes, a key barometer for mortgage rates, will climb over the next year from 4.5 percent to nearly 6 percent.
Jenson said he does not foresee rampant inflation similar to the late 1970s and early '80s, citing continued job growth (2.2 million new positions), the best tax situation for businesses in 30-40 years, consumer confidence that is slipping but still relatively high, and corporate earnings reports that show many companies are "flush with cash."
mikeg@sltrib.com
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