INFLATION IN REGION SPIKES IN JANUARY

Prices at the pump and at the bistro are up, as are housing costs.

Consumer inflation in metro Denver rose last month at its fastest pace in 12 years, according to the latest Denver-Aurora-Lakewood Consumer Price Index from the U.S. Bureau of Labor Statistics.

The region’s annual inflation rate surged to 3.8% in January, up from a 2.6% pace last year and a 2.3% pace in 2018 and above the 2.5% pace measured nationally in January.

The last time inflation ran hotter in metro Denver was 2008, when it rose 4.1%, and 2017 came close at 3.7%. But Kate Watkins, chief economist at the Colorado Legislative Council, warned against reading too much into a single report. “The data of individual metropolitan statistical areas are quite noisy, and the Denver-Aurora-Lakewood January numbers show significant fluctuations in several components that aren’t likely to hold in future months,” she said.

So what drove the increases? Gasoline costs were up 20.6% in January year-overyear, contributing to a 5.5% gain in transportation costs. Although prices at the pump are coming down fast this year as the coronavirus reduces oil demand worldwide, a gallon of regular unleaded averaged $1.92 per gallon a year ago in metro Denver and is running $2.39 per gallon, according to the AAA Gas Prices survey.

Food costs were up 3.1%, with the cost of eating at home up 1.7% and the cost of eating out up 4.7%. The cost of alcoholic beverages fell 1.1%, while the cost of nonalcoholic beverages rose 13.8% on the year in January.

Core inflation, which excludes more volatile energy and food costs, rose at an annual pace of 3.6% in January in metro Denver.

Housing costs were up 4.1%, with rents up 3.5% and the equivalent cost of owning a home up 4.5%. Household energy costs fell 3%, driven by flat electricity prices and lower natural gas heating costs.

Although it doesn’t hold a lot of weight in the overall inflation calculation, apparel costs were up 10.3% on the year. Given that U.S. clothing retailers import heavily from China, that increase could reflect higher tariffs on imports.

Medical care costs rose 3.5%, while vehicle insurance costs were up 4.8%. Those items have contributed to inflation in the past. Inflation rates are closely watched in Colorado, given that they go into the calculation of how much state and local governments can increase spending under the Taxpayer’s Bill of Rights.

The Colorado Legislative Council, in its December forecast, called for a 2.1% gain in the consumer price index for 2020, a prediction Watkins is holding to. She said housing costs, which account for 44.5% of the weighting in the basket of goods that determine the CPI, will continue to level off this year, keeping inflation closer to 2% rather than 3% or higher.