Consumer inflation in the Denver-Aurora-Lakewood area slowed to an 8.3% annual rate in May, down from a 9.1% annual rate in March, marking the first time the headline inflation number has fallen in Colorado since November 2020, according to an update from the U.S. Bureau of Labor Statistics.
“For the first time we turned a corner and the inflation rate went down, which is a pretty big deal,” said Stephan Weiler, a professor of economics at Colorado State University.
Denver’s inflation rate, while still near a 40-year high, dropped below the U.S. inflation rate in May of 8.6%. In March, the U.S. rate was at 8.5%, lower than Denver’s 9.1% rate.
Digging into the latest numbers, Weiler said the gap is coming from energy costs. Gasoline prices in the Denver area rose 33.7% year-over-year in May compared to an increase of 48.7% nationally.
“A lot of people like to complain about the Suncor plant in Commerce City, but it is the reason we have 100,000 barrels of oil processed into the local market,” Weiler said. Having oil wells nearby in Weld County results in lower transportation costs to supply the refinery. And because the refinery is close to the people consuming the gasoline, distribution costs there are also lower.
Food prices remain a sore point, rising 10.6% for food consumed at home, compared to a 10.2% annual gain in March. The leading contributor to grocery store inflation is the category of meat, poultry, fish and eggs, which rose 17.2% in May versus 14.5% in March. Beverage costs, not including alcohol, were up 11.8% in Denver in May, with more than half of those gains coming since March.
Inflation for dining out did ease some, falling to an 8.6% pace in May, down from a 10.2% pace in March.
Denver’s “core” inflation, which strips out more volatile food and energy prices, was still above the U.S. core rate in May — 7.1% vs. 6%.
Gains in used car prices are coming down sharply, although they are still elevated. They were up 18.9% in May, compared to a 38% gain in March. Rent increases in the CPI were running at 6.5%, under half of what other measures are showing.
Inflation, supply-chain disruptions and the war in Ukraine are acting as headwinds that will significantly slow the Colorado economy in the coming months, according to the latest ColoradoCast, a short-term forecast from the Colorado Futures Center at CSU.
ColoradoCast projects the Colorado economy will grow at an annual rate of 1.8% in October, a significant drop from the annual growth rate of 5% earlier this year and a booming rate of around 10% at the end of 2021. Those big losses in equity and bond markets are expected to put a damper on consumer spending, although the forecast calls for home prices and labor markets to remain “relatively strong” over the forecast period.
“The slowdown is not unexpected,” said Phyllis Resnick, director of the Colorado Futures Center, in a release. “The Colorado economy is not immune from the stressors facing all economies. Hopefully, the underlying strength of the local economy can assist Colorado in avoiding a recession, but warning signs are beginning to emerge.”
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