Inflation in the Denver metro area accelerated at a 3.8 percent pace in the first half of the year, its biggest jump since 2001, the U.S. Bureau of Labor Statistics reported Wednesday.
That increase matched the 3.8 percent gain in the U.S. Consumer Price Index reported for the first half of the year.
On a monthly basis, U.S. consumer prices were up 0.4 percent in July over June and up 4.1 percent from July 2005, according to the national BLS report. Still, core consumer prices at the national level – excluding the volatile energy and food sectors – climbed 0.2 percent in July, the smallest gain in five months.
Coming a day after core inflation at the wholesale level fell by 0.3 percent, Wednesday’s CPI report eased fears about inflation among some economists and boosted stock markets. The report also strengthened expectations that the Federal Reserve may be done raising interest rates for now.
Rising energy costs nonetheless continue to be a concern for consumers in both the U.S. and the Denver-Boulder area. Gasoline costs shot up 24.8 percent in the first half of the year locally, the biggest increase of any item.
High fuel prices and other inflationary pressures “affect a working-class person like me in every way,” said Linda Foster, a Denver receptionist.
Not only do higher fuel costs hurt, but many consumers like Foster are vulnerable to inflation’s impact on mortgage rates.
Foster says she hopes that Wednesday’s favorable reports mean mortgage rates will decline, so she can switch her adjustable-rate mortgage to a fixed-rate mortgage and avoid higher payments.
John Kane, 48, an engineer who lives in Westminster, is watching inflation closely, worried that any uptick could slow an already-weak housing market and crimp plans to sell the home he has owned since 1997.
Five other homes in his neighborhood are up for sale and not moving.
“The housing market is in limbo,” he said.
Shelter costs rose 2.2 percent in the metro area, driven largely by a sharp jump in lodging rates. Rent costs fell 0.7 percent in the first half, and a BLS measure of homeownership costs rose only 0.3 percent.
“I had expected we would see more inflation in housing,” said Mike Mauer, chief economist with the Legislative Council. “That doesn’t appear to be what is driving it.”
Besides fuel costs, the more notable increases in the Denver- Boulder report included:
Nondurable goods, absent food and beverages, rose 12 percent.
Apparel costs jumped 14.1 percent.
Medical-care costs rose at a 6.6 percent pace.
The jump in apparel costs was particularly perplexing, given that clothing costs rose only 0.9 percent in the U.S. during the first half of the year, said Rudy Andras, an economist with RBC Dain Rauscher.
Subtracting energy and food costs, the Denver-Boulder core inflation rate was 3.2 percent, compared with a 1.5 percent rate for the U.S. in the first half.
Inflation in Denver ran hotter than the national average for much of the 1990s through 2001. It has lagged for the past three years, even registering deflation in the first half of 2004, when the CPI dropped 0.7 percent.
Aside from energy costs, Mauer said, the first-half CPI could represent a readjustment given the state’s unusually low inflation numbers between 2003 and 2005.
The local inflation rate is likely to land somewhere between 3.5 percent and 4 percent for the year, predicted Andras.
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
