Consumer inflation hits a 20-year high in Denver area
Consumer inflation in metro Denver has reached its highest levels since 2001, when the dot-com boom pushed up prices and wages across the economy.
Measured on an annual basis, the Consumer Price Index for Denver-Aurora-Lakewood rose 4.5% in September, up from a 3.5% annual pace in July and the highest reading since the 4.7% increase recorded in 2001, according to an update from the U.S. Bureau of Labor Statistics.
Energy prices in the Denver area are up 33% year-over-year, driven primarily by a 54.8% increase in gasoline prices. Food prices were up 3.3%, with the cost of protein sources like meat and dairy rising 4.9% and the cost of eating out up 4.2%.
After removing food and energy, two of the more volatile spending categories, “core” inflation is running at a 3.1% pace in the Denver area. Within the core rate, gains in used car prices remain elevated, up 24.8%, and so are clothing costs, up 16.8%.
“High shipping costs, rising energy prices, a shortage of materials stemming from supply chain bottlenecks, elevated commodity prices and rising wages are all collectively pushing consumer prices higher,” said Scott Anderson, chief economist with Bank of the West in a research note.
Early in the pandemic, Denver reported the highest consumer inflation rate among U.S. metros, but has since fallen back. Its 4.5% inflation rate is below the 5.4% gain measured nationally in September.
Shelter costs, which account for about a third of the weight in the consumer price index, take longer to get “baked” into the official numbers and could continue to pressure household finances long after gains in used car and gasoline prices have have calmed down.
Shelter costs in Denver are only up 0.7% year-over-year according to the official CPI measures, even though Apartment List clocked a 16% annual increase in apartment rents in metro Denver in September. The S&P CoreLogic Case-Shiller home price index for Denver recorded a record 21.3% annual increase in home prices in July, and unlike last year, the gains weren’t offset by lower mortgage rates.
Home prices have risen so much nationally that 4.8 million fewer households can afford to buy a residence than was the case in 2019, even though mortgage rates are much lower than they were back then, said Nadia Evangelou, a senior economist with the National Association of Realtors said in a research note.
For the first time since 1972, consumer inflation is surpassing the average rate on a 30-year mortgage, she added.
Rising natural gas prices are another item to watch, given that they will drive up what consumers in colder climates such as Colorado have to pay this winter to heat their homes. Xcel Energy, the state’s largest utility, expects residential customers could pay on average 14.4% more on their residential utility bills starting this month.
In another sign of how hot inflation is running, the Social Security Administration plans to pass on a 5.9% cost of living increase next year, which in turn could put pressure on the wage hikes that employers will have to provide.
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