Falling gas prices have taken the steam out of inflationary pressure building in recent months, giving consumers along the Wasatch Front some relief even as concerns mount over job security and shrinking nest eggs.

According to a Wells Fargo & Co. report released Wednesday, the Wasatch Front consumer price index dipped 0.1 percent in October, dragged down for a second straight month by a 6.5-percent drop in local gasoline prices and lower costs of utilities and telephone services.

The average price of a gallon of unleaded gasoline in Provo-Orem was $1.93 on Wednesday, down from $3.22 a gallon one month ago and a peak of $4.18 on July 18, according to AAA Utah. Statewide, gas prices averaged $2.04 a gallon, while the national average is $2.08.

Offsetting the drop in gasoline prices are higher prices of groceries, restaurant meals, apparel and renting in Utah, although these are expected to moderate over the next few months if economic conditions continue to deteriorate, eroding consumer spending further.

Locally, grocery prices are up 9.8 percent in Utah, compared with a 5.4 percent rise in food prices nationally.

"There's no substantial reason for food prices in Utah to be noticeably above national food prices. With general commodity prices and gas prices dropping, that should cause food prices to drop. Perhaps it takes time for grocers to re-price that inventory. I can't tell you how fast that will take place," said Kelly Matthews, executive vice president and senior economist with Wells Fargo.

Supermarkets are the beneficiaries of what restaurants are losing, as more consumers dine out less and entertain more at home, said Bret Gallacher, marketing manager with Associated Foods in Salt Lake City.

The meat department may be selling fewer steaks and more chicken, but consumers are shopping more often at grocery stores instead of going to a restaurant, he said.

"Consumers are trading down. Those who were going to nice expensive restaurants before, are now going more to franchise restaurants. And those who were going to franchise restaurants before, may now be buying steaks for a home-cooked meal. And those who were buying steak before, may now be buying more chicken, and so on," he said.

Nationally, consumer prices fell by 1 percent last month, the biggest one-month drop in more than six decades. Falling gas prices aren't the only factor pulling down consumer prices. Prices in categories such as clothing, new and used cars and airline fares also fell as recession fears take their toll on consumer spending.

The U.S.'s economic woes have quickly spread around the world, depressing growth and cutting into demand for oil and other products, a development that has resulted in sharp declines in the price of crude oil and other commodities.

While some are worried that continued price drops could raise the specter of deflation -- a prolonged bout of falling prices -- most economists believe that current conditions are not likely to set the stage for such a development, which last occurred in the U.S. during the Great Depression.

Matthews said he believes Utah is less susceptible to the threat of deflation because its government's finances are stronger, and because home values here haven't plunged as dramatically as compared with some other states.

"But will the deflationary situation and credit crunch continue to ease nationally?" he asked. "Part of what creates a deflationary cycle is debt that can't be paid back when asset prices are falling. Reducing your debt is part of the solution to deflation. But it's tricky because getting the economy going requires consumers to spend and get in debt."

Looking ahead, Matthews sees local food prices dropping as the costs of transporting food to restaurants and stores are falling in line with lower gas prices.

Apparel costs in Utah should also decline in the coming weeks as retailers slash prices to lure consumers back to the stores for the upcoming holiday season, he said. "Clothing costs are going to be severely discounted to get inventories liquidated. Retailers will be giving away clothes in the last two to three weeks before Christmas," Matthews said.

More rent increases may be on the horizon as potential home buyers continue to be sidelined by tighter lending requirements, he said. But the magnitude of rent increases may be mitigated by Utah's rising jobless rate, which could put a dent in demand for apartments and homes.

• The Associated Press contributed to this report.