Inflation down again as economy finally showing signs of chilling

A shopper looks at produce at Reams Food Store in Sandy on Sept. 23, 2022. (Jeffrey D. Allred, Deseret News)

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SALT LAKE CITY – U.S. inflation fell for six straight months in December and the overall rate is coming in at 6.5% over the same period last year and down from 7.1% in November, according to a new federal report.

The Labor Department released its Final December Consumer Price Index on Thursday, noting that the 12-month rate of inflation was the slowest since October 2021 and that the average price of goods and services fell .1% from November to December, the first monthly decline since October 2021. .May 2020.

A sharp drop in oil prices contributed to the decline even as food and accommodation prices rose from December. The national average gas price in December fell 9.4% from November while food prices rose .3% and the cost of lodging rose .8%. At the same time last year, food prices rose 10.4% and housing prices were 7.5% higher than December 2021.

Utah is among the Mountain West states that experienced the nation’s highest rate of death in 2022 and that gap continued in December with a 7.4% increase in the region, the highest in the nation.

Will the Fed stop raising prices and lower inflation?

The Federal Reserve has been cracking down on inflation all year, triggering the strongest rate hike in decades in an effort to cool the overheated economy.

The increase in prices requires an increase in the cost of credit for businesses and consumers which should, in theory, reduce the amount of money spent and all economic activities, a dynamic change that leads to a decrease in prices.

But consumer spending has remained strong and the U.S. labor market continues to tighten, with unfilled jobs increasingly outstripping the number of workers available to fill them.

The Fed is expected to raise its overnight lending rate again after its next meeting on Feb. 1. But if inflation continues to fall, the central bank may end its rate hike later, some economists say, or simply implement it. One more hike in March is a break.

According to the Associated Press, futures rates show that investors expect the Fed to cut rates by the end of the year, although minutes of its December meeting showed that none of the 19 policymakers foresee any rate cuts this year.

“If inflation is coming down, the Fed can be very comforted that it will bring the economy to a better place,” Daleep Singh, global economist at PGIM Fixed Income and a former Fed official, told the AP. Singh expects the Fed to raise its interest rate by a quarter at its next two meetings and hold off on its interest rate below 5%.

What’s in store for Utah’s economy in 2023?

A report from the Utah Economic Council released Thursday predicted that Utah’s economy could go one of three ways in the coming year — continuing GDP growth of 2% to 4%, seeing growth slow to 0% to 2% or less. The GDP of the state may decrease by about 1%.

So, why did the financial institution, a partnership of the University of Utah David Eccles School of Business and the Governor’s Office of Planning and Budget, present the budget for the coming year?

Current economic conditions have been shaken by extraordinary economic and employment events and, therefore, have never been considered economic indicators. The global health crisis, supply chain disruptions, changing consumer dynamics and government subsidies such as stimulus checks and large amounts of business capital have disrupted past models when it comes to predicting what’s to come.

“The post-pandemic economy has changed many economic relationships,” the report says. “These changes in the economy make accurate predictions difficult because it is not known when old patterns will return, or whether new arrangements will pave the way for the economy.”

The main result from the report, which was presented to Utah Gov. Spencer Cox at the economic conference on Thursday, it was a simple message that affects budget decision makers at every level – be prepared for anything.

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Art Raymond

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