Consumer inflation in the Denver metro area has reached its highest levels since 2001, when the dot-com boom drove up prices and wages throughout the economy.
Measured on an annual basis, the consumer price index for Denver-Aurora-Lakewood rose 4.5% in September, up from an annual pace of 3.5% in July and the highest figure since 4.7% increase recorded in 2001, according to an update from the US Bureau of Labor Statistics.
Energy prices in the Denver area are up 33% year-on-year, mainly due to a 54.8% increase in gasoline prices. Food prices rose 3.3%, the cost of protein sources such as meat and dairy products increasing 4.9% and the cost of restaurant meals by 4.2%.
After removing food and energy, two of the most volatile spending categories, “core” inflation has risen to 3.1% in the Denver area. Within the base rate, gains in used car prices remain high, up 24.8%, as do clothing costs, up 16.8%.
“High shipping costs, rising energy prices, a shortage of materials due to supply chain bottlenecks, high raw material prices and rising wages are all collectively driving up prices. consumer prices, “Bank of the West chief economist Scott Anderson said in a research note.
At the start of the pandemic, Denver recorded the highest rate of consumer inflation among U.S. subways, but has since receded. Its inflation rate of 4.5% is lower than the gain of 5.4% measured nationally in September.
Housing costs, which account for about a third of the weight of the consumer price index, take longer to be “cooked” in official figures and could continue to weigh on household finances long after the increases. used car and gasoline prices have calmed down.
Housing costs in Denver only increased 0.7% year-over-year according to official CPI measurements, even though Apartment List saw a 16% annual increase in apartment rents in the Denver metro 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 were not offset by the lower mortgage rates.
Home prices have risen so much nationally that 4.8 million fewer households can afford to buy a home than in 2019, even though mortgage rates are much lower than they were at the time, said Nadia Evangelou, senior economist at the National Association of Realtors said in a research note.
For the first time since 1972, consumer inflation exceeds the average rate on a 30-year mortgage, she added.
Rising natural gas prices are another item to watch, as they will increase what consumers in colder climates like Colorado will have to pay this winter to heat their homes. Xcel Energy, the state’s largest utility, expects residential customers to pay an average of 14.4% more on their residential utility bills as of this month.
In another sign of rising inflation, the Social Security Administration plans to pass on a 5.9% increase in the cost of living next year, which in turn could put pressure on wage increases that employers will need to provide.