February 24, 2014

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Zions Bank Consumer Index Decreased Slightly

Zions Bank Consumer Price Index

February 24, 2014

Salt Lake City — The Zions Bank Wasatch Front Consumer Price Index (CPI) decreased 0.1 percent from December to January on a non-seasonally-adjusted basis. Over the last twelve months, prices have increased in Utah by 1.8 percent. The national Consumer Price Index, released by the Bureau of Labor Statistics, increased 0.4 percent from December to January on a non-seasonally-adjusted basis and has increased 1.6 percent over the past 12 months.

Consumers paid more for food from grocery stores this month, with food at home prices increasing 0.7 percent month-over-month. For the third straight month, produce prices have moved significantly higher due in part to challenging weather conditions, including cold and frost in some of the winter fruit and vegetable growing states. Overall beef prices also jumped about 3 percent last month in the state. This reflects national trends, as choice-grade beef prices are up over 15 percent year-over-year in national commodity markets. According to agricultural commodity research firm Allendale, Inc., beef supplies are already tight and U.S. beef production will hit a 20-year low in 2014 largely due to a three-year drought in key beef production states including Texas, Oklahoma, Kansas, and Nebraska. Because of these factors, the U.S. Department of Agriculture predicts overall beef prices will increase 3 to 4 percent this year and continue to hover around all-time highs.

Offsetting the increase in food at home prices, food away prices — which include full-service meals, fast food and alcoholic beverages — declined 1.0 percent. Specifically, Utahns paid less for full-service meals and certain alcoholic beverages while fast-food prices were unchanged. Full-service restaurants often see lower demand in the winter months as consumers are less apt to venture out or travel, especially if they are going to encounter snow, ice, or freezing temperatures. This can prompt restaurants to lower prices in the winter months to try to increase demand and subsequently increase prices in the spring months as consumers become more active.

Although overall transportation costs fell again in January largely due to a decrease in the price of used and new vehicles, Utahns finally saw gasoline prices rise again after they had declined for four straight months. Utahns paid an average of $3.11 per gallon of gasoline in January, up from $3.06 in the month prior. Still, the average price of gasoline in Utah to end the month of January was about 5 percent lower than the national average price per gallon and about 6 percent lower than the average price per gallon of gasoline in Utah during the same period last year. Current reports show gasoline prices in Utah have inched higher in February, and, according to AAA, Utahns are currently paying about $3.18 per gallon of gasoline, an increase from $3.09 just one week ago. Looking forward, the seasonal increase in gasoline prices that generally occurs in the springtime will likely be more moderate this year. This will be unlike the previous three years, when consumers have seen sharp spikes in gasoline prices during the spring months due to geopolitical production concerns and domestic supply interruptions. Because of with fewer substantial supply interruptions, the U.S. Energy Information Administration estimates that the average price for a gallon of gasoline will be $3.44 in 2014, down from $3.51 in 2013 and $3.63 in 2012.

In other categories, clothing prices, up 0.4 percent, rose again in January due to an increase in prices for men’s and women’s apparel and jewelry. Recreation prices increased 0.4 percent in January as costs for pets and pet products increased. Medical care costs, up 0.2 percent, increased as higher prices for prescription drugs and elderly care offset a decrease in prices for eye care products. Utahns paid 0.6 percent less for education and communication services in January due to a decrease in cellphone plan prices. Other goods and services also decreased 0.6 percent as prices for personal care products decreased in January. Transportation and utility prices, down 0.2 percent and 0.1 percent respectively, also decreased. Housing prices were unchanged in January.

“For the first time in several months, gasoline prices inched higher,” said Scott Anderson, Zions Bank president and CEO. “But that alone is not cause for concern, as gasoline prices generally increase in the spring months. What is important is that we do not see a sharp and abrupt spike in prices, and thankfully early reports indicate that this year’s expected increase will be slow and steady.”

Analysis and data collection for the Zions Bank CPI and the Zions Bank Consumer Attitude Index are provided by the Cicero Group. The Cicero Group is a premier market research firm based in Salt Lake City. The Zions Bank Utah Consumer Attitude Index will be released February 25, 2014.

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