Regional price hikes ease fears of deflation

Don't worry: Prices are going up.

There was some concern earlier in the week that the region was falling victim to deflation, which could translate into a long period of economic stagnation, no growth and continued unemployment woes.

The Bureau of Labor Statistics on Friday released its bimonthly look at prices in the Tacoma-Bremerton-Seattle area, and inflation has returned. Not severely – not beyond a level economists would call “benign” – but it has returned.

Prices in the area rose 0.7 percent between June and August, the bureau said in a release. On an annualized basis, that means prices are climbing at a rate of 0.2 percent, up from a deflationary decrease of 0.5 percent reported in June.

Over the two-month period, the price of groceries bagged a 1.1 percent increase while restaurant meals were unchanged. Alcoholic beverages posted an increase of 0.3 percent following a decrease of 0.5 percent for the same period in 2009.

The cost of shelter rose 0.7 percent after losing 2.2 percent the year before.

Clothing was nearly the only category to show a decrease in price over the two months, stitching a drop of 1.7 percent. Medical care was also down, by 0.1 percent, the bureau reported.

The price of gasoline, particularly volatile, rose 4.3 percent between June and August.

Nationwide, the cost of living, minus food and energy prices, was unchanged in August, the bureau said.

The overall consumer price index rose 0.3 percent, reflecting in part more expensive gasoline.

A limited risk of inflation and a slowing economy help explain why economists project the Federal Reserve will hold interest rates close to zero until late next year.

“These numbers won’t be a surprise to Fed policy makers,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, who accurately forecast the consumer price figures. “They need to worry about unemployment and boosting growth and not worry about inflation.”