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If rising prices for everything from food to fuel are putting your finances in a funk, perhaps there is some solace to be salvaged just knowing that the cost of living rose slower in 2007 than the national average, according to the latest data from state labor analysts.

Writing in the July issue of Alaska Economic Trends, published by the Alaska Department of Labor and Workplace Development, economists Neal Fried and Dan Robinson noted that the Anchorage Consumer Price Index rose just 2.2 percent last year, the lowest annual rate since 2002. The figure beat the national annual rate of 2.8 percent.

Given recent news of rising food and energy prices, the lower inflation numbers were greeted with some skepticism, the economists said.

"It surprised the heck out of us," Fried said during an interview Wednesday.

One reason for the mild CPI increase has to do with housing costs, which rose just 2.7 percent in 2007 compared to 4 percent in the previous year. Housing accounts for about 40 percent of consumer spending, Fried and Robinson said.

While transportation costs climbed 1.2 percent -- far lower than the 4 percent in 2006 -- food and beverages shot up 4.6 percent, the largest increase since 1995, the economists reported. The rise in medical costs slowed, and recreation costs actually fell.

Contributing to the perception that prices are climbing dramatically is the rapidly rising costs of gasoline, diesel and heating fuels. According to the economists, natural gas prices rose 29.4 percent in 2007, and an increase in the broad energy index of 9.9 percent registered last year followed three previous years in which the increase was in the 10-percent range.

"Since 2003, energy prices have consistently increased from two to four times as much as the overall CPI and have been the most volatile category of consumer expenditures," the economists said. "Although medical costs still stand out as the component with the largest total increases since the 1982-1984 base period, during the last eight years energy costs have increased 100 percent compared to a relatively mild 40 percent for medical costs," Fried and Robinson said.

Fried explained that while medical care is a distinct cost area, energy has a more pervasive effect on the economy.

"It's ubiquitous," Fried said, in that it impacts virtually everything.

Much of the data in the Trends article focused on Anchorage, Fairbanks and Kodiak prices. In general, however, those changes are reflective of other parts of the state's economy, including the Kenai Peninsula.

With regard to fuel prices, Fried and Robinson noted that during the 1980s and 1990s, fuel prices changed very little.

"It was a long period of calm before the storm, as it turned out," they said, noting that since 1999, gas prices have jumped 120 percent and are expected to remain high for some time.

"When people see the prices at the pump increase so much and so quickly, they can perhaps be forgiven for thinking inflation has gotten out of control in general, even though the dramatic increases have been limited to a few categories of consumer expenditures," the economists said.

Fried and Robinson were careful to note that while the CPI increase was moderate when averaged over a large population, an individual's experience within the economy could have been quite different. Much depends on lifestyle and other factors.

A person who commutes long distances to work and manages a large home is going to have a more costly experience than someone who lives more modestly, spends a little more on clothes and walks to work, they said.

Don't expect the rate of inflation to remain low, the economists warned.

"Most forecasts for U.S. inflation are generally higher, due to the current trends in both energy and food costs, and in three out of four months of 2008, the national CPI has been up at least 4 percent over the year," they said.

Increases are being driven by rising energy and food prices, and Anchorage and the rest of Alaska are feeling the pinch.

Fried said Wednesday that the Alaska Permanent Fund Corp. has forecast a 2.8 percent national inflation rate for the next five years.

"It would be unusual if we did not follow the national trend," Fried said.

On the other hand, state economists normally try to avoid predicting how the CPI is likely to change despite the fact everyone wants to know.

"There is a lot of volatility," he said, making accurate predictions difficult.

Quarterly studies are conducted in 300 urban areas around the nation to measure the changing cost of living. Anchorage, Fairbanks and Kodiak are included, and it is probably no surprise to anyone that it is 23 percent more expensive to live in those cities than in the index's average city in every category -- groceries, housing, utilities, transportation, health care, and miscellaneous goods and services.

Housing, however, was a special case.

"Although housing prices rose dramatically in Alaska during the 1990s and early 2000s, they were also rising nearly everywhere else, and Alaska's increases were mild compared to coastal California and a few other parts of the country," the economists said.

The economists drew some comparisons within the state from the available data. For instance, food for a week for a family of four in Anchorage averaged $134.05 in March 2008. In Homer, that same food basket cost $171.46, in Kenai $142.02, and in Seward $174.90.

Other data reflected the climb in fuel prices, especially in rural Alaska. For instance, a gallon of gasoline in Homer in November 2007 cost s$3.35. By March 2008, that had risen to $3.82 per gallon. This week, the price was closing in on $5 per gallon.

An Oil Price Information Service survey yesterday showed Alaska gasoline prices to be the highest in the nation, with an average gallon of regular gasoline at $4.63 per gallon, a gallon of diesel at $5.26.

According to Fried and Robinson, housing costs are lower on the Kenai Peninsula and in the Matanuska-Susitna Valley than in other parts of the state. For instance, it costs an average of $754 a month to rent a two-bedroom apartment on the peninsula, but $1,081 in Juneau. Renting a single-family home costs $1,221 here, but, again, $1,746 in Juneau. It was far more expensive to buy a home in Juneau -- average, $324,000, than on the peninsula, where the average was $213,000.

On the other hand, looking at where housing was most affordable -- measured by how many wage earners it took to buy a home, the data showed that last year it took 1.3 Anchorage workers to buy a Mat-Su house, but 1.6 workers to buy an equivalent home on the peninsula.

Hal Spence can be reached at hspence@ptialaska.net.