Consumer Prices Rose 4.5 Percent in 2005

By Andrew Galvin, The Orange County Register, Calif.

Jan. 19–Consumer prices rose 4.5 percent in the Los Angeles-Riverside-Orange County area in 2005, the most since 1990 and well above the national inflation rate of 3.4 percent, the federal government reported Wednesday.

Energy costs rose 10.2 percent in the 12 months through December, including a 22.6 percent increase in utility natural gas service, to lead the local consumer price index higher, the Bureau of Labor Statistics said. That capped a year in which the average monthly increase in local energy costs was 13.9 percent.

The higher annual inflation rate for Los Angeles-Riverside-Orange County came despite a decrease in consumer prices of 0.8 percent in December, following a similar decrease of 0.6 percent in November. Local gasoline prices dropped 11 percent in December, contributing to the monthly drop in the CPI, the BLS said.

Of course, local motorists know that gasoline prices have since climbed again, rising an average of 21 cents a gallon in California in the two weeks ended Monday, according to the U.S. Energy Information Agency.

“The major components of inflation for us are energy costs and housing costs and medical costs, and I don’t see any major break in any of these,” said Esmael Adibi, director of Chapman University’s A. Gary Anderson Center for Economic Research. “I wouldn’t be surprised to see still 3.5 percent to 4 percent CPI for us for this year.”

Christopher Thornberg, a senior economist with the UCLA Anderson Forecast, has a different view, expecting energy and housing costs to cool this year. He’s sticking with UCLA’s 3.3 percent forecast for 2006 Orange County inflation, first published in November.

Susan Johnson, owner of Susan’s Healthy Gourmet, an Irvine company that prepares and delivers meals to customers’ homes, said she was forced to reinstate a $10 per week delivery charge in October to cover rising costs for gasoline.

“They went through the roof and we just didn’t feel like we had another choice,” she said.

Her company’s gasoline costs averaged about $4,000 a month last year, up from less than $3,000 a month in early 2004, she said. It also has been hit with higher bills for natural gas used in the kitchen.

However, Johnson was able to avoid raising prices for most menu items last year as food prices rose just 3.1 percent locally in the 12 months through December.

Local housing prices, which include rents, rose 6.1 percent in the period, while medical care increased 6.0 percent.

The 4.5 percent annual average increase in the local CPI topped the 3.3 percent increase for 2004 and was the highest since Los Angeles-Riverside-Orange County prices rose 5.9 percent in 1990.

Nationally, consumer prices rose by 3.4 percent in 2005 with 40 percent of the increase blamed on the biggest jump in energy costs since 1990. Energy was up 17.1 percent this past year, reflecting gasoline prices that for a time soared above $3 a gallon and crude oil prices that topped $70 per barrel. Housing costs were up 4 percent nationally in the 12 months through December, while medical care was up 4.3 percent, the government said.

Overall inflation actually declined by 0.1 percent in December, an unexpectedly good performance, following an even bigger 0.6 percent drop in November.

That represented the first consecutive monthly declines in two years, but both months were heavily influenced by declines in gasoline and other fuels that are expected to be reversed in January.

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