RALEIGH - When I was hired by N.C. State University 30 years ago, the yearly inflation rate was running at almost 8 percent. Then, over the next three years, the inflation rate averaged almost 12 percent. These were the years of the "misery index," stagflation (inflation with little economic growth) and mortgage interest rates approaching 20 percent.

Today, there's a feeling we might be back to those "bad old days," particularly for inflation. After all, seemingly every day gas prices set a record. And shoppers are experiencing sticker shock in the supermarket with prices for many staples, like eggs, cheese and bread, rising at double-digit rates.

Let me shine a little good news on an otherwise gloomy economy. Outside of food and fuel, we don't have runaway inflation.

The just-released consumer inflation report for the past 12 months (June 2007 to June 2008) shows the total inflation rate standing at 5 percent. This is certainly higher than the 2 percent to 3 percent annual rate we were used to earlier this decade, but it's still a far cry from the 12 percent of the late 1970s and early '80s.

Moreover, if food and energy prices are stripped out of the inflation index -- leaving the so-called "core" rate -- then a 2.4 percent inflation rate has been posted for the past year. This is only marginally higher than the 2.2 percent average annual core rate for the past decade.

But these numbers create skepticism. If gas prices are up 33 percent over the past year, and if the prices of meats, dairy products and bread have all risen at double-digit rates, how can the overall inflation rate be a still relatively tame 5 percent? Does the federal government, which compiles the inflation statistics, not know what we're spending on the home front?

Actually, I'd say the government probably knows what we're spending better than we do ourselves. The reason is that statisticians look at the entire inflation picture.

We're constantly reminded of gas prices as we drive down the road, and most of us buy gas at least once a week. Similarly, we make food purchases on a frequent basis. So it's natural that consumers' perceptions of inflation will be strongly influenced by the prices of frequently bought items, especially if those items are rising rapidly in price.

Yet food and gas prices are only part of the equation. The inflation rate is measured by calculating a weighted average of the prices of hundreds of products and services, where the weights are the relative importance of each item in the average consumer's budget.

And while food and fuel prices have certainly risen sharply, these two categories account for under 20 percent of all annual consumer spending. Among the 80 percent of other spending, prices of many items have dropped over the last year, including clothing, new and used vehicles and computers. Still other items, like the cost or rent of housing, furniture, recreation and personal care, have had modest price gains.

So rather than an economy-wide inflation problem, we primarily have a problem of fast-rising prices for energy -- particularly gasoline -- and food. But even here there are some reasons for optimism. As my colleague Michael Wohlgenant recently wrote on this page, the major factor pushing up oil (and, by extension, gas) prices is world demand (usage) of oil rising faster than world supply. The majority of this demand growth is coming from developing countries such as China and India.

However, consumers aren't taking higher gas prices sitting down. They are responding -- significantly so -- by reducing miles driven and gallons used. Eventually this reduced usage, especially if it is copied by drivers around the world, will increase oil inventories and push prices down. Indeed, several energy forecasters see oil and gas prices trending lower in the years ahead.

There's similar cautious optimism about the prices of farm commodities that are behind higher food prices. Expanded production and consumer thriftiness should bring a modest pullback in commodity prices and tamer food price inflation.

This is not to say that the current inflation situation isn't hurting consumers' finances. It is. The average consumer's income is now rising less than the inflation rate, so households are falling behind. This is why consumers are cutting back, shopping for bargains and seeking any additional income they can find.

But I don't see the country in an out-of-control inflationary spiral. Inflation has been much worse in the past, and there are good reasons to expect it to moderate in the near future. Call me a Pollyanna, but I do see a silver lining.

(Michael L. Walden is a William Neal Reynolds distinguished professor at N.C. State University and author of the upcoming book "North Carolina in the Connected Age.")