Data collected before the economic fallout of Russia’s invasion of Ukraine began rippling across the globe finds U.S. inflation shot up to 7.9% in February, the highest in four decades and mostly driven by big cost increases for basic necessities.
February inflation was even higher for consumers in the Mountain West states, which include Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming where the 12-month increase in prices hit a nation-leading 9.7%.
The new data reflects an increase over the 7.5% average national inflation reported for January and the 9.0% for Mountain West states that month.
Thursday’s Consumer Price Index report from the U.S. Department of Labor found increased prices in nearly every category, and costs for gas, food and shelter were “the largest contributors to the seasonally adjusted all items increase.”
Over the past 12 months, grocery prices are up 8.6%, gas is up 38% and housing costs rose 4.7% according to the new report.
All six major grocery store food group indexes increased in February. The index for fruits and vegetables had the largest increase, rising 2.3%, its largest monthly increase since March 2010. The index for fresh fruits increased 3.7% over the month, and the index for fresh vegetables rose 1.3 %. The index for dairy and related products rose 1.9%, its largest monthly increase since April 2011. And the index for nonalcoholic beverages increased 1.6% in February.
U.S. gasoline prices have been escalating since Russia launched its first military strikes on Ukraine on Feb. 24, and on Thursday, Utah’s average gas price jumped 11 cents, hitting $4.30 a gallon and blowing by the previous all-time high of $4.22 set in 2008.
How is inflation impacting Utahns?
Last month, a Deseret News/Hinckley Institute of Politics poll found that inflation was the No. 1 economic concern for Utahns with 50% of respondents rating it as the most pressing fiscal challenge. Housing costs were the next biggest economic woe with 27% giving it top billing.
And when it comes to identifying their spending pain points amid widespread price increases, Utahns ranked food and shelter nearly neck and neck as the most problematic.
With 34% of poll participants calling out groceries as their top spending concern amid rising inflation, housing costs earned a first ranking from 32% of respondents, and gasoline prices were a distant third with 12%. Health care costs also ranked among the top four, with 11% of those polled citing it as their No. 1 concern.
Phil Dean, former state budget director and public finance senior fellow for the University of Utah’s Kem C. Gardner Policy Institute, reviewed the February polling data and said Utah consumers are facing wide-ranging price hikes, and particularly so on the things that make up life’s basic needs. And those in the state’s lower earning tiers feel the cost increases the most.
“The poll results don’t surprise me,” Dean said. “It just reinforces that inflation is the big issue on people’s minds right now.
“Housing costs, gas prices, groceries. These are the things we’re paying for every day, and they are the increases that hit lower income Utahns the hardest.”
That’s been the case for Ogden resident Jessica Williams, who said she has been astounded by how fast grocery prices have increased in recent months.
“It seems like every trip I make to the store, the things on my list have gone up,” Williams said. “Even if I just bought them in, like, the last couple of weeks.”
Williams said she and her family are economizing by looking for things on sale and searching for online promo codes or using coupons.
“Honestly, I’ve never really used coupons to grocery shop before, but I’m looking for deals and searching for online codes now,” Williams said.
National implications
For most Americans, inflation is running far ahead of the pay raises that many have received in the past year, making it harder for them to afford necessities like food, gas and rent.
As a consequence, inflation has become the top political threat to President Joe Biden and congressional Democrats as the midterm elections draw closer. Small-business people say in surveys that it’s their primary economic concern, too.
Seeking to stem the inflation surge, the Federal Reserve is set to raise interest rates several times this year, beginning with a quarter-point hike next week. The Fed faces a delicate challenge, though: If it tightens credit too aggressively this year, it risks undercutting the economy and possibly triggering a recession.
Lydia Boussour, an economist at Oxford Economics, estimates that if oil remains at $120 a barrel for the rest of this year — which it topped Tuesday before slipping — it would cost U.S. households $1,500, on average. It would also weaken economic growth by about 0.8 percentage point this year, she said. Many economists have cut their growth estimates for 2022 by roughly a half-point to about 2.5%.
A group of Utah business leaders and economists met earlier this week to discuss how ongoing Russian military aggression toward Ukraine, and its related global economic impacts, could impact Utah residents and businesses. Their consensus opinion is that while Utah’s diverse and high performing economy is better situated than most to weather the fallout from the conflict, further increases on the prices of goods and services is a likely scenario.
Contributing: Associated Press