INFLATION COULD BE HERE FOR THE LONG HAUL: So how should we prepare?

• Position: INDUSTRIAL

Although Utah managed to bounce back relatively well from the recession shock of 2021, it is still breaking records with inflation highs and supply chain problems--creating more robust, new pain points in our local economy.

On January 12th, rents skyrocketed to a 39-year high after a year that saw a 17 percent increase. Mountain West states have experienced the highest inflation in the country, with an annual rate of 9.0 percent.

According to the 2022 Economic Report To the Governor, Utah economists forecast moderation in inflation with a hopeful resolve of supply chain challenges, lowering these numbers within the first half of 2022.

"If that doesn't happen, then I don't think that assumption of moderating inflation still holds. I think we're going to see increasing interest rates, which will somewhat dampen the economy," says Phil Dean, Public Finance Senior Research Fellow at the Kern C. Gardner Policy Institute. "With that being said, from any historical standpoint, interest rates are very, very low, even with recent increases."

In March, The Federal Reserve approved its first interest rate increase in more than three years, hoping to incrementally hedge spiraling inflation without limiting economic growth. The Fed expressed concern that the current high inflation rate near 8 percent might cause businesses and workers to increase their expectations of future inflation, thus raising prices and wages in a self-fulfilling prophecy. As a result, the Fed hinted at six more federal funds rate increases this year, one at each meeting.

The Bureau of Labor Statistics (BLS) reported that the US consumer price inflation index rose 7.5 percent over the past year before the seasonal adjustment--the steepest climb in prices since 1982. The BLS also noted that the food index rose over 6 percent over the past 12 months, and the energy index increased by 29.3 percent. In March, Utah fuel pumps matched record high prices for gasoline only seen in the throes of the 2008 recession.

With these increases, supply chain problems and continued geopolitical instability worldwide have further aggravated these issues for local Utah businesses and consumers.

The Commodity Squeeze

Chelsea Kasch, Owner and Principal Designer of Chelsea K. Designs, says prices went through the roof and continue to do so every month by about 40 percent across the board for materials in the building. "Aluminum is one of the things that is killing us right now," she says. "Your faucets...