Inflation rates in Utah, Colorado and other western states in 2021

Inflation has hit Intermountain West harder than any other region in the country in 2021, with prices climbing 8.6% from the national average of 7% in the 12 months to December, reported the Bureau of Labor Statistics.

But it would be misleading to conclude that living in Montana, Wyoming, Utah, Colorado and other eastern states that make up the office’s Mountain-Plains division costs more than other parts of the country, said a bureau economist. Data collection for the division’s Consumer Price Index began in December 2017.

But his example of fuel prices is apt because that was an area where many people across the West felt the sting of inflation last year. In the Mountain-Plains Division, fuel prices soared 57.5%. Nationally, fuel prices have increased by 49.5% in 2021.

Percival said consumers should keep in mind that gasoline prices had fallen 26% over the previous year.

People refuel at a gas station in Salt Lake City on Friday, Jan. 14, 2022.

People refuel at a gas station in Salt Lake City on Friday, Jan. 14, 2022.
Spenser Heaps, Deseret News

A recent report from the US Energy Information Administration also explained that fuel price increases last year were primarily due to declining refining capacity in the Western and Intermountain regions. Motorists consume almost all of the gasoline produced in the two regions, so the closure of refineries in these regions “has reduced refinery gasoline production, which in turn has lowered inventories and contributed to higher prices,” the agency reported in August.

Another cost consumers frequently face is food prices, which in the Mountain West rose 6.2% in 2021, slightly higher than the 6% reported nationally.

Because energy and food prices are so volatile, economists eliminate those two expenses to determine what they call “core inflation,” which rose 7.3% in the Mountain West region. and 5.5% nationally.

Percival attributed the rise in underlying inflation to rising house prices and the cost of buying used cars or trucks.

Pandemic-induced migration from densely populated urban areas to less populated areas has driven up housing costs in the West, both for buying and renting a home. But rising housing costs have their roots in the recession more than a decade ago, reported the Deseret News, which severely contracted the homebuilding industry.

The government CPI, however, does not measure home purchase prices, which have historically been stable and difficult to track. Instead, the office asks landlords what they would rent their homes for in calculating total housing costs. This rent increased by 8% in the Mountain division and by 3.8% nationally.

The spike in used car and truck prices hit consumers across the country at roughly the same levels, rising 37% nationally and 36% in the Mountain West region. News reports attributed the increase to global supply chain issues.

“Automakers are struggling to get parts — especially computer chips imported from Asia — delaying production of new vehicles and increasing demand for a limited supply of used vehicles,” The New York Times reported.

As for the outlook for 2022 after the biggest rise in inflation in nearly four decades, many economists would expect prices to stabilize as supply chain issues are resolved and the Federal Reserve will increase interest rates. Percival also points out that consumer prices have gradually fallen over the last three months of 2021 and that wholesale prices rose only 0.2% in December after rising 1% in November.

Wholesale prices, which the government tracks through its Producer Price Index, are considered a leading indicator of future movements in consumer prices.

But some economists have warned that the country still has tough months ahead on the inflation front, according to the Associated Press and the Wall Street Journal.

“Continued supply disruptions will drive producer prices to near-term record lows, especially given the rapid spread of the omicron variant which will stoke inflationary pressures,” Kathy Bosjancic told the AP. , chief economist at Oxford Economics.

“I expect inflation in the range of 3% to 4% this year, but I wouldn’t be surprised by a recession driving inflation to 1% or major geopolitical instability driving the inflation rate above by 6%,” Harvard economist Jason Furman wrote in The Wall Street Journal.

Federal Reserve Chairman Jerome Powell told lawmakers on Tuesday that if “inflation persists at high levels for longer than expected, if we need to raise interest rates further over time, we will.” .

But don’t expect the prices used to calculate core inflation to fall immediately this year.

Omair Sharif, founder of research firm Inflation Insights, told The New York Times that while annual inflation may peak at 7%, it takes time for prices to cool. “It’s just a lot of woodcutting to get to anything approaching the good old days.”

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