A surge in housing and medical costs have reignited inflation in metro Denver, ending a brief respite from price increases earlier this year, according to the latest Consumer Price Index for the Denver-Aurora-Lakewood.
Consumer inflation in September was running at a 2.7% clip year-over-year in the metro area, according to the U.S. Bureau of Labor Statistics.
That’s the same pace seen for all of 2018. But 2.7% is much higher than the 1.7% inflation rate measured nationally and the earlier increases in metro Denver. Those included a 0.4% increase in January, a 1.4% increase in March, and a 2.1% jump in July.
It is also higher than most metros in the country, with the exception of Phoenix, Los Angeles, Seattle, and Riverside, Calif.
“Right now, shelter is definitely driving the price increases out there,” said Jacqueline Michael-Midkiff, a regional economist with the BLS in Kansas City, Mo.
Shelter includes the cost of renting a residence, the cost of owning a home or condo, and related utilities. It rose 6.5% in metro Denver, compared to a 3.5% gain nationally.
Other local drivers of inflation included higher medical costs, up 4.2%, and a 4% increase in the cost of dining out.
The inflation acceleration came despite an 8.2% drop in energy costs the past year. Effectively, if prices at the pump hadn’t fallen so much, inflation would be running even hotter.
Core inflation, which excludes more volatile food and energy prices, increased at a 3.7% clip in metro Denver. Food prices were up 1.9%.
Employers in Colorado this summer forecasted pay raises averaging 3.2% next year, according to a survey from the Employers Council.
That was the highest since 2008 and should be enough to cover the increases measured in September.
But gains in real average hourly earnings aren’t living up to expectations. Nationally, they rose only 1.2% through September, said Scott Anderson, chief economist at Bank of the West, in a commentary.
Given how much housing and medical expenses can consume in a household’s budget, more people could find themselves falling behind.
“Households in need of these services are definitely going to feel the squeeze in the quarters ahead as incomes fail to keep pace,” he said.
It isn’t clear yet if and how higher tariffs on imports might be stoking inflation. Apparel prices shot up nearly 15% in metro Denver the past year in September. And China is a major producer of the clothes and footwear purchased in the U.S.
Midkiff said apparel prices tend to rise this time of year, given the rollout of fall and winter items, which are heavier and more expensive. And while noticeable, they don’t carry much weight in the overall CPI.
Inflation is a closely watched measure in Colorado. It is a key component in the formula that state and local governments use to determine spending increases under the Taxpayer Bill of Rights or TABOR.
A higher inflation rate means the state won’t have to refund as much to taxpayers as forecast, assuming revenue projections stay on target.
The Colorado Legislative Council, in its most recent forecast, called for an inflation rate of 1.8% this year and 1.9% in 2020 and 2021.
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