Customers shop in the meat section of Kroger Marketplace in Versailles, Kentucky, U.S., on Tuesday, Nov. 24, 2020. The National Retail Federation on Monday forecast that holiday sales during November and December will increase between 3.6 percent and 5.2 percent over 2019 to a total between $755.3 billion and $766.7 billion. Photographer: Scotty Perry/Bloomberg via Getty Images
SALT LAKE CITY — Inflation is up considerably over the last year, but it does not appear to be seriously dampening spirits in Utah. At least, not yet. It also depends on who you ask.
Inflation rose more than 5% over the last year, according to the Consumer Price Index. That is much higher than the approximate 2% over the last two decades.
“It’s much higher than it’s been over the past recent history, and it’s been higher than we expected it to be,” said Zion’s Bank Senior Economist Robert Spendlove. “Every month, we kind of have a forecast of where we think it’s going to be, and for the past few months it’s been coming in even above that.”
Different from the sky-high prices for toilet paper and hand sanitizer, prices are rising across the board.
“Now we’re seeing the same effect, but on a much larger scale. It’s anywhere from wood, to oil, to used cars, to items you’d find at the grocery store,” Spendlove said.
It might seem easy to blame all of this on the pandemic or the result of the 2020 election. Spendlove thinks it’s pretty simple.
“It really is tied to the pandemic,” Spendlove explained. “We’re seeing high demand because everyone’s coming back into the economy. They want to go out, they want to buy things and do things.”
Another compounding factor is the disruption of supply chains. Think about the global computer chip shortage and all the havoc that created.
“Because of a microchip shortage, it caused a shortage of new cars. So, those prices went up. Then people started buying used cars, and those prices went up. Rental car prices went up.”
While the nation has seen pushes for higher wages, Spendlove says wage inflation is also creating a problem. He says that sets an expectation of inflation moving forward, and ends up as something of a self-fulfilling prophecy.
“We’re seeing an increase in wages to keep up with the shortage of workers that we have right now. Once you see those wage increases go up, it locks in that higher inflation.”
There are currently more than 9 million open jobs in the U.S., according to the Bureau of Labor Statistics.
It would be fair to expect widespread concern as the cost to fill up the car with gas goes up, and the grocery bill hits your wallet a little harder than usual. Spendlove says that isn’t the case right now.
“Consumer confidence is at a post-pandemic high, business confidence is high, the stock market is doing well,” Spendlove pointed out. “Overall, we’re not seeing signs that it’s having a detrimental impact on the overall economy yet, but that’s something that we’re watching really closely.”
However, a recent Deseret News/Hinckley Institute of Politics poll tells a different story. In fact, that survey finds as much as 85% of Utahns are very concerned or somewhat concerned about inflation. Many of those believe the impact will be long-term.
Whether inflation is here to stay or just a short-term snag is a hot topic among economists.
“It’s the biggest debate in economics right no. It’s one of the biggest debates in our country right now,” emphasized Loveland, “Whether the inflation that we’re seeing right now is temporary or whether it’s going to turn into something more permanent. And, honestly, right now we don’t know.”
He says those who believe the inflation is a small blip are confident suppliers will eventually be able to meet demand.
On the other side, Spendlove says rising wages will keep inflation around longer than we want. He says companies will have to raise prices in order to pay workers more.
“They’re just treading water,” Loveland added. “That’s why high inflation is so dangerous. It eats away that economic benefit of higher wages. You’re just struggling and trying to swim just to catch up.”
In a week-long series, KSL NewsRadio will report on the impact supply and demand is having on inflation in Utah.