High gas and food prices kept inflation elevated last month, but the minimal increase will likely have little effect on consumer spending, according to UCSB economics professor Peter Rupert, director of the UCSB Economic Forecast Project.
The annual inflation rate rose 2.2 percent in April, the fastest pace in 12 months, after increasing 1.8 percent in March, the Commerce Department reported. Excluding food and energy, prices increased 1 percent last month.
The core personal consumption expenditures price index saw minimal gains as did consumer spending, according to the Commerce Department.
“Inflation is a little higher than normal in the past two years but this rate of inflation isn’t affecting much in terms of spending,” Rupert said.
The economy is seeing a general rise in prices, whether they are related to food or wages, he said.
“We’re not at a point yet where inflation has had an effect on individuals’ behaviors,” Rupert said.
Gas prices have eased slightly, Santa Barbara’s average price of unleaded gas dropped to $4.177 a gallon Friday from $4.247 a week ago. The national average also dipped, to $3.794 from $3.894, while a barrel of crude oil is going for $100.830, according to GasBuddy.com.
Santa Barbara residents can find the cheapest gas at Educated Car Wash, 3735 State St., at $3.89 a gallon. The next cheapest is $3.97 a gallon in Carpinteria, at ARCO, 1116 Casitas Pass Road, and the 76 Station, 4401 N. Via Real.
The cheapest diesel fuel was selling at Conserv Fuel, 150 S. La Cumbre Road, at $4.37 a gallon.
Inflation and gas prices have a direct impact on the profit margin of businesses like the O Street Truck, a gourmet mobile food operation. Molly Mull, vice president of marketing for the Santa Barbara startup, said the company has chosen not to pass those bills on to the customer.
“I don’t see us changing prices,” she said. “We’re definitely not raising them because the whole point is to provide food at a great prices,” although that’s not the case at a restaurant like Olive Street Table, she added.
Although inflation shouldn’t be worrisome, the economy’s gradual recovery may be, Rupert said. For instance, new-home sales rose 7.3 percent in April to a seasonally adjusted annual rate of 323,000. But a healthy real estate market would produce a pace of about 700,000 new-home sales a month, according to the Commerce Department.
“Recovery is very gradual, we’re continuing to sputter, we just saw some not-so-great housing numbers, GDP is fairly weak yesterday and I think it’s much weaker than people think,” Rupert said. “You can expect to see unemployment stuck around 8 percent for a couple years.”
Deflation was another concern six months ago, Rupert said, but the gradual and steady rise in prices over the past six months have offset those initial concerns.