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Report: Valley Prices Up in April: Consumer Costs Rise at Almost Double the National Rate

Posted on: Thursday, 18 May 2006, 12:04 CDT

By Joe Estrella, The Idaho Statesman, Boise

May 18--Treasure Valley consumer prices shot up at almost twice the national rate in April, thanks to a 50-cent-a-gallon spike in gasoline costs.

According to the Wells Fargo Boise Area Cost of Living Report released Wednesday, consumer costs were up 1.1 percent in April, compared with the national rate of 0.6 percent in the Labor Department's closely watched Consumer Price Index.

However, the CPI also showed a larger-than-expected 0.3 percent rise in the U.S. core inflation rate, which excludes food and energy costs. That raised concerns that higher oil prices are rippling throughout the economy, which could cause the Federal Reserve Bank to launch another round of interest rate increases.

The Wells Fargo survey found that transportation costs in the Boise area -- which are heavily influenced by gasoline costs --were up 5.7 percent in April and 9.9 percent during the last six months. Both were higher than the national figures of 3.8 percent and 5.5 percent.

AAA Idaho reported Wednesday that regular unleaded gasoline was averaging $2.89 a gallon in the Valley. The U.S. average is $2.93.

Boise State University economics professor Don Holley said inflation in the Valley would be lower if gasoline costs were excluded. But if pump costs continue to rise, consumers will begin scaling back on spending because more of their disposable income will go for gasoline, he added.

Housing prices in the area gained 0.9 percent, compared with a nationwide increase of 0.2 percent, because of higher rental rates. Utah-based Wells Fargo economist Kelly Matthews said that with mortgage rates approaching 7 percent percent, many consumers can no longer afford new homes and are being forced into the rental market.

Nationwide, the Labor Department said the 0.6 percent boost in U.S. prices was propelled by rising costs for a wide range of goods and services including gasoline, clothing and medical care.

Matthews called the 0.3 percent jump in core inflation "scary," because it signals that business have begun to pass their higher energy costs to consumers. A broader bout of inflation throughout the economy could lead to higher interest rates.

Wall Street responded with a dramatic sell-off. The Dow sank 214.28 points, or 1.88 percent, to 11,205.61, a one-month low.

Matthews said the only good news Wednesday was a weekly government report showing larger-than-expected increases in crude-oil and gasoline inventories. He said the best-case scenario is that energy costs won't go much higher, which would hold inflation in check, which would prevent the higher interest rates that "could cause everything to stall."

"Right now, we're teetering," Matthews said.

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Copyright (c) 2006, The Idaho Statesman, Boise

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Source: The Idaho Statesman, Boise

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