Soaring housing costs along the northern Front Range have pushed the region’s consumer inflation rate to triple the U.S. average, according to a report Friday from the U.S. Bureau of Labor Statistics.
The Denver-Boulder-Greeley Consumer Price Index jumped 3 percent in the first half of the year compared to the first six months of 2015, and is up . Nationally, consumer inflation was running at a 1 percent annual rate through the end of June. Denver now has the highest inflation rate of any urban area tracked, edging out San Francisco at 2.8 percent and Honolulu at 2.4 percent.
Shelter costs, which include rents and an equivalent measure for homeowners, surged 7.6 percent in the first half of the year. In Denver and most other U.S. city, higher housing costs represented the biggest source of inflationary pressures.
The last time the region’s shelter cost index rose so much was in the early 1980s, when inflation overall was out of control. Remove shelter costs, and consumer inflation in Denver is running a modest 0.3 percent this year.
Helping keep inflation in check was the energy index, which dropped 10.4 percent in the first half of the year, following a 21.7 percent decline in the first half of 2015 versus 2014. Gasoline and diesel costs were down 13.9 percent, while utility gas service was down 11.1 percent and electricity down 3.4 percent.
Food prices also stabilized in the first half of the year, rising 0.1 percent compared to a 1.5 percent rate measured in the first half of 2014. Groceries were down 0.6 percent, while the cost of eating out rose 1 percent. Core inflation, which subtracts out volatile energy and food costs, is running 4.5 percent in Denver.
Recreation costs were rising 3.4 percent, clothing costs 4.4 percent and medical care costs, which historically outpace other categories, a tamer 1.7 percent.
A basket of consumer goods and services that cost $100 in the 1982-84 period now costs $245.19 in the Denver-Boulder-Greeley area, the report said. The last time Denver’s inflation rate ran above 3 percent was in 2011.
A forecast from the University of Colorado Boulder Leeds School of Business in December estimated local inflation would average 1.9 percent this year, while economists at the Colorado Legislative Council, in a June update, pegged it closer to 2.4 percent.
Rent increases are starting to taper and home sales are showing signs of reaching a plateau. Still, reaching either inflation target may prove tough, given that energy prices are more likely to move higher rather than lower in the months ahead.
The Denver-Boulder-Greeley CPI is used to calculate increases in state and local government spending. Employers also use it to set pay increases.
