Inflation in the Seattle area mostly held steady in August, but remained above the national rate, the federal Bureau of Labor Statistics reported Friday.
Local prices rose 0.3 percent between June and August, the bureau reported, and 2.74 percent over the previous 12 months.
That compares with a national 12-month inflation rate of 1.7 percent, also reported Friday. (Local inflation is measured every other month.)
Local inflation has been running between 2.7 and 2.9 percent all year, while it has slowed nationally.
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Rising prices for shelter and apparel in the summer months pushed Seattle-area inflation higher. Rents were up 5.7 percent compared to a year earlier, the bureau reported, and clothing prices were up 8.8 percent.
In addition, medical costs locally rose 7.5 percent over the past 12 months, and bar and restaurant tabs were up 3.7 percent. The grocery index was nearly flat, defying — for now, at least — predictions of higher food prices caused by the summer’s drought.
In what might come as a surprise to anyone who’s filled their gas tank lately, gasoline wasn’t a big contributor to local inflation in August, because pump prices were actually heading down last month.
Gasoline prices dropped 4.5 percent between June and August, though they were 3.3 percent higher than in August 2011 and have since resumed their upward climb.
Those higher gas prices are crimping consumer spending and slowing the weak U.S. economy. And they could get worse in the coming months.
The Federal Reserve this week took steps to boost economic growth. But those stimulus measures are also pushing oil prices up. If gas prices follow, consumers will have less money to spend elsewhere.
The impact of the Fed’s actions “is likely to weigh on the value of the U.S. dollar and lift commodity prices,” said Joseph Carson, U.S. economist at AllianceBernstein. “We would not be surprised if (it) fueled more inflation in coming months, squeezing the real income of U.S. workers.”
The Fed’s moves can push up oil prices in several ways. The Fed creates new money to pay for its mortgage bond purchases. That increases the amount of dollars in circulation and can lower their value. Oil is priced in dollars, so the price tends to rise when the dollar falls. That’s because it costs more for overseas investors to purchase dollars to buy oil.
Lower interest rates also push investors out of safer assets, such as bonds, and into riskier investments, such as oil, in hopes of a greater return. And if the Fed’s moves accelerate growth, that would increase demand for oil and gas and also raise their prices.
Gas prices have risen more than 50 cents per gallon in the past two months. The U.S. average was $3.87 a gallon on Friday ($4.08 in the Seattle area).
And higher gas prices are eating up a bigger share of Americans’ incomes. Spending at the pump accounts for 8.2 percent of the typical family’s household income, according to Fred Rozell of the Oil Price Information Service. That’s just below last year’s 8.3 percent.
Those represent the biggest slice of household income spent on gas since 1981. The typical household spends about $342 per month on gasoline. Before gasoline prices began rising in 2004, households spent less than $200 per month, Rozell said, under 5 percent of median income.
Average gas prices are higher now than last year. But Americans are using less by driving more fuel-efficient cars and driving less.
One silver lining is that weakness should eventually push prices back down, economists note. That’s because people cut back on oil and gas consumption when prices rise.
“Unless the economic data rapidly improve, the gains in oil … prices are unlikely to be sustained,” said Julian Jessop, an analyst Capital Economics.
Drew DeSilver: 206-464-3145
Material from The Associated Press is included in this report.