Rising expenses for housing and clothing caused inflation to roar back in metro Denver last year, ending three years of tame price increases.
The Denver-Boulder-Greeley Consumer Price Index rose 3.6 percent in 2006, outpacing the U.S. rate of 3.2 percent, according to data released Wednesday by the U.S. Bureau of Labor Statistics.
Inflation in the metro area was at its highest level since 2001 and outpaced the national average for the first time since 2002.
Core inflation, which excludes volatile food and energy spending, rose at a blistering 4.9 percent pace for the second half of the year. That compares with a 2.7 percent pace for the nation.
Shelter, a category that accounts for nearly a third of the local Consumer Price Index, posted a 5.5 percent hike in the second half of 2006 in the metro area, compared with the same period the year before.
The hike was 4 percent nationally.
“We are seeing some economic growth, so it isn’t surprising that we are seeing some more inflation,” said Michael Mauer, chief economist with the Colorado Legislative Council.
The inflation picture would have been much worse if not for a 6.5 percent decline in energy costs in the metro area for the six-month period, reflecting declines in household utility expenses.
Huge gains in apparel pricing – up 24.2 percent for the last six months of 2006 – added 0.2 percentage points to the overall metro inflation rate for the year, estimates Rudy Andras, an economist with RBC Capital Markets in Denver. He and other economists were at a loss to explain that huge jump.
“It could be a goofy shopper at the Labor Department,” he joked.
The Labor Department calculates the Consumer Price Index for an area by creating a basket of goods and services and tracking prices over time. The items in the basket can shift from time to time, creating price swings in the reports.
Linda Nickisch, a Labor Department economist in Kansas City, couldn’t confirm whether that happened in the apparel category.
Even with the rapid rise last year, apparel costs are about where they were in 1988, according to the index.
The biggest driver in the rising inflation rate was housing. Labor Department economists don’t use home prices or mortgage payments to calculate shelter costs for homeowners but, rather, what a homeowner would have to pay in rent for a similar living arrangement.
Although median home values fell in large swaths of the metro area, rents are rising as potential homebuyers wait on the sidelines.
With more than 19,000 foreclosures started in the metro area last year, many former homeowners also are becoming renters again.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
