A steep fall in gasoline costs pushed down a measure of U.S. and Utah consumer prices last month, keeping inflation mild.
In Utah, the Zions Bank Consumer Price Index fell 0.2 percent on a non-seasonally adjusted basis, helped by sharp declines in fuel and air fare prices. Pump prices dropped by an average of 10 cents from October to November. Air fares decreased by more than 12 percent. Overall, transportation prices declined 1.3 percent.
Housing costs, which account for close to 35 percent of Utahns’ monthly expenditures, increased 0.1 percent in November. Over the past 12 months, they have risen 2.9 percent, and home prices and rents have increased.
Housing and transportation costs make up almost 55 percent of all household expenses for the average Utahn, Zions said.
Nationally, the seasonally adjusted consumer price index dropped 0.3 percent in November from October, the Labor Department said Friday. Gas prices fell 7.4 percent, the biggest drop in nearly four years. That offset a 0.2 percent rise in food prices.
In the past year, consumer prices have risen 1.8 percent, down from October’s 12-month increase of 2.2 percent.
Excluding the volatile food and gas categories, U.S. prices ticked up 0.1 percent in November. Core prices have risen 1.9 percent in the past year — below the Federal Reserve’s annual target of 2 percent.
Higher rents, airline fares and new cars pushed up core prices in the U.S. last month. The cost of clothing and used cars fell.
“In simplest terms, inflation is not a problem,” Jim Baird, chief investment strategist at Plante Moran Financial Advisors, said. Lower inflation “is a real positive that should provide modest relief for households dealing with limited income growth.”
High unemployment and slow wage growth have made businesses reluctant to raise prices. Many worry higher prices could drive away customers. That’s helped keep inflation from posting bigger gains.
Modest inflation leaves consumers with more money to spend, which can boost economic growth. Lower inflation also makes it easier for the Fed to continue with its efforts to rekindle the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.
Gas prices have fallen sharply in the past two months after spiking in the late summer. A gallon of gas cost an average of $3.29 nationwide Friday. That’s 15 cents less than a month ago and 50 cents less than in mid-October. In Utah, prices are down more than 30 cents month-over-month.
The increase in food prices was smaller than many economists expected. This summer’s drought in the Midwest, which scorched corn and soybean crops, has pushed up costs. But the increase hasn’t been dramatic so far. Food costs have risen 1.8 percent in the past 12 months.
Some items have seen big increases. The cost of milk, cheese and other dairy products have risen 0.8 percent in each of the past two months. That could reflect the higher cost of animal feed, which usually includes corn and soybeans. Cereals and baked goods rose 0.3 percent. But prices for the broad category of meat, chicken, fish and eggs fell in November, after a big gain the previous month.
Shoppers may face further increases soon. Wholesale food costs jumped 1.3 percent last month, according to a separate report Thursday, the most in nearly two years.
Beef prices jumped the most in 4½ years, and vegetable costs also rose sharply. Grocery stores may pass on some of those costs to consumers in the coming months.
With inflation in check, the Fed said Wednesday that it now plans to keep the short-term interest rate it controls at nearly zero until the unemployment rate falls to at least 6.5 percent, as long as inflation isn’t expected to top 2.5 percent in the next two years.
It was the clearest sign yet that they will keep rates super-low even after unemployment falls further and the economy picks up.