Higher food costs eat away at budgets

Sharply higher grocery prices zinged Seattle-area shoppers again last month, but the pain was offset — just a bit — as fuel prices edged lower.

The federal Bureau of Labor Statistics (BLS) reported Thursday that metro Seattle grocery prices rose 1.7 percent in July, versus a national average gain of 1.2 percent.

Groceries locally cost 7.9 percent more than in July 2007, compared with a national rise of 7.1 percent.

Overall, inflation nationally is running at the fastest pace in 17 years, according to the BLS. Consumer prices shot up by a seasonally adjusted 0.8 percent in July, double the increase economists had expected, and only slightly lower than the 1.1 percent surge in June that had been the second-highest monthly increase in the last 26 years.

The big gains left inflation increasing by 5.6 percent over the past year, the largest 12-month jump since the period ending in January 1991.

There was no equivalent figure for the Seattle metro area; the BLS only calculates an overall local inflation rate every other month.

Last month, the BLS reported that Seattle's 12-month inflation rate for June was 5.83 percent, compared with a national rate of 5.02 percent.

However, the agency did release interim local data on groceries, shelter and energy prices, and they showed area consumers continuing to battle prices that are rising much faster than the nation as a whole.

Rents in the metro area were up 0.7 percent last month and 8.2 percent over the past year; the equivalent national figures were 0.3 percent and 3.7 percent. Owners' equivalent rent — an indirect measure of home prices — rose 0.5 percent locally and 0.1 percent nationally.

Between July 2007 and July 2008, owners' equivalent rent jumped 6.7 percent in the Seattle area but just 2.6 percent nationally — clear evidence of the local housing market's continued relative strength.

Local drivers did at least get a break at the pump, as gasoline prices fell 0.4 percent in July; nationally, they rose 0.7 percent. Still, gas cost 43.7 percent more in the Seattle area than it did a year earlier, compared with the national average increase of 37.9 percent.

Nationally, core inflation (which excludes food and energy costs) rose 0.3 percent in July, slightly higher than the 0.2 percent economists had expected. For the past 12 months, core inflation rose 2.5 percent, the highest 12-month change since February.

The biggest price pressures came in the energy and food sectors, just as they have all year. But the price gains spread to other areas, too: Clothing costs jumped by the largest amount in a decade, airline fares rose sharply and the cost of hotel rooms and tobacco products also climbed.

"For the average American, these inflation numbers are very bad news. It means that their purchasing power has been cut and their wages aren't going very far," said Mark Zandi, chief economist at Moody's Economy.com.

Seattle Times business reporter

Drew DeSilver and The Associated Press contributed to this story.