Inflation has slowed in urban Colorado since March. Did you notice? Possibly not, because by the end of 2022, the Denver area posted its highest annual inflation rate in decades, at 8%, which was the same as the nation’s, according to the latest Bureau of Labor Statistics data.
In Colorado, the economy curved a little differently. The Denver metro area — the only Colorado locale where the, apparently, under budgeted BLS tracks consumer prices — swelled to a 9.1% inflation rate in March, months before the U.S. followed in June. By November, Denver was at 6.9% while the U.S. rate slowed to 6.5% in December (the BLS also only measures the Denver-Aurora-Lakewood metro area every other month).
But it continued to be a rough year for consumers since “slowing” still meant prices were higher than a year ago. And inflation is still high. The last time the annual inflation rate was above 6% in the U.S. was 1982. Some recent price hikes seemed to hit Colorado particularly hard.
Energy bills spiked in 2022, causing the state’s Office of the Utility Consumer Advocate to call Xcel Energy’s rate increases “frightening.” Gasoline prices are up again as well. A gallon of regular gas averaged $3.25 in Colorado on Friday, or 18 cents more than a week ago, according to AAA’s gas-price tracker. Nationwide, a gallon dropped a penny from last week to $3.29 on Friday.
Then there’s the egg shortage, primarily blamed on avian flu that wiped out Colorado’s 6 million egg-laying commercial chicken population last year. Farms are rebuilding their flocks but by December, the price of a dozen eggs more than doubled in a year to $4.25 nationwide. While not solely to blame for egg inflation, the virus contributed to higher prices and shortages that continued this week. A dozen ordinary large white eggs at King Soopers cost $5.49 on Friday — if you could find them.
Eggs, gas and energy are regular purchases many consumers make each month. They’re all part of “the basket” of household goods measured by the Consumer Price Index. Any change to CPI is how inflation is calculated. And while Coloradans may face higher prices for what’s in their basket, some local economists forecast higher inflation will exist but continue slowing in 2023 because shoppers are changing their behavior.
“It’s the substitution effect so when you can’t get your hands on eggs, like what’s happened over the last couple of weeks, we just use something else,” said Brian Lewandowski, executive director of the Business Research Division at Leeds School of Business at the University of Colorado Boulder. “If you’re eating eggs for breakfast, what else can we eat instead? You have a lot of other things that you can eat for breakfast instead.”
(Martha Stewart has recommendations.)
The doubling or tripling of egg prices isn’t going to put much of a dent in inflation. Eggs make up just one-tenth of 1% of the consumer basket. For West region consumers, which includes Coloradans, they spend $81 a year on eggs, according to the consumer expenditure survey.
If that doubles or triples, that’s another $162 a year. “It’s not like a mortgage,” he said.
Natural gas costs, meanwhile, doubled and tripled last year, depending on the source. Several factors are to blame, including a drop in drilling new wells in the pandemic, the war in Ukraine limiting supply, and the U.S. becoming the world’s largest exporter. But natural gas, too, is only a small part of the basket, Lewandowski said.
“Again, it’s a relatively small overall piece of our basket of goods and services but it’s increasing at a fast rate,” he said.
Higher prices and slower inflation can coexist if items are a smaller part of the basket. It’s shelter and transportation that take the biggest chunk out of household expenses. Raising interest rates, as the Federal Reserve did seven times last year, put a chill on the housing market to curb inflation. For December, housing costs increased 7.5% from a year ago, while overall transportation costs were up 3.7% in the West region.
Of course, prices were already starting to climb in late 2021 as pandemic recovery was still underway. Stimulus checks and pandemic unemployment had run out. Employers were raising wages to address labor shortages. The cost to live in our economy was already higher as 2022 began, pointed out Gary Horvath, a Colorado economist based in Broomfield. By the end of 2021, the U.S. and Denver inflation rates were already over 7%.
“We’ve created a big problem here,” Horvath said. “We’re talking about a roughly 6.5% increase (in December) based on prices that had a significant increase a year ago. We’re getting double dipped and that’s why it seems so painful.”
He’s often been surprised at the strength of the Colorado job market and is hopeful that this season’s bountiful snowfall will boost many Colorado industries through summer. But he doesn’t think inflation will start falling until 2024. There’s still too much uncertainty with the war on Ukraine, avian flu and other factors.
“In the short term I am concerned because inflation on many food items increased during the second half of the year. While the overall rate declined, everyone has to eat,” Horvath said. “High food prices combined with high energy bills will be a problem for some families.”
➔ How much higher? Check out The Wall Street Journal’s inflation tracker to see how much prices have gone up in one year as of December for eggs (+59.9%), food from vending machines (+14.8%), smartphones (-22.2%) and parking fees and tolls (+1.5%). >> View
➔ Recession or not? The New York Times Magazine looks at the people behind the Fed and its history of adjusting interest rates and how that’s impacting the fringes of society. >> Read
Economy 2023: What readers think
What’s Working readers who responded to last week’s poll about their personal economic outlook in 2023 were split roughly into thirds for those who feel this year will be better, worse or the same as last year:
Of respondents who said they feel 2023 will be better than last year, some reasons included “hoping to get a higher paying job” or people who were retired “hoping investments do better.”
David Lubbers, who lives in Centennial, said he’s expecting worse.
“Just trying to stay the same is a challenge. Eggs, vehicle fuel, natural gas are taking a bite out of my budget,” he wrote.
In a follow-up text, he said that he relies on solar and Core, the electric cooperative, for electricity so his electricity bill was pretty low. But natural gas? He buys it from Xcel. “My December gas bill is about 89% higher this year compared to last with almost the same amount used,” he said.
Many folks who said 2023 will be the same as last year or worse shared a sentiment similar to “Elena 9360,” who wrote, “Things cost more so even if I make more money, I can’t save it. I will limit my budget. Do less and spend less.”
And that’s a data point that shows up in economic data. While incomes were up last year in Colorado, savings were down nationwide, as seen in the chart below. That’s a sign that “we’ve seen the savings rate drop to one of the lowest levels in recorded history,” Lewandowski said. “We’re seeing that the savings from the federal stimulus get spent down. … I think there’s concern about what happens when that money runs out. We’re seeing debt increase, including revolving credit, and people putting more on their credit cards so that may be how they’re solving these price increases.”
➔ Need help? If your living costs are getting too high to handle, call 2-1-1 or visit 211colorado.org to get help with electricity bills, rent, food, pets and other monthly bills. The site, managed by the United Way, links users to resources in their communities. >> 211colorado.org
Take this week’s poll:
Sun stories on the economy:
➔ Unpaid wages, injuries and mushrooms — Reporter Shannon Najmabadi dug into the demise of the celebrated Colorado Mushroom Farm in Alamosa. It provided an economic future to the region and Guatemalans who fled civil war in the 1980s. Then it stopped paying workers. >> Read
➔ Colorado’s lawmakers get started — The first of 120 days that the Colorado legislature is in session began Monday. Some stories you may have missed: Tackling sports betting inequity by Jesse Paul and Elliott Wenzler, rethinking TABOR refunds by Paul, tax credits for clean lawn equipment by Michael Booth, and Gov. Jared Polis’ big speech by our politics team. >> More
➔ What happened to the yurts? The operators of the 10 yurts and cabins that comprise Never Summer Nordic in State Forest State Park are MIA. Jason Blevins found out where they went. >> Read
Other working bits:
➔ Agilent expands in Frederick after $11 million in incentives — Life sciences firm Agilent plans to double its manufacturing capacity of DNA or RNA molecules in Frederick after receiving state and local incentives that total $11.2 million. The California company, which uses the molecules to target diseases like cancer, said it will invest $725 million to expand its plant and add more employees to its existing 700 in Colorado. If hiring goals are met, it could receive up to $1.8 million from the state. Agilent also was awarded $9,387,123 in incentives by the Town of Frederick and Weld County. >> BizWest
➔ Tax break for Western Slope spare parts supplier — Spares in Motion, which recently opened a Grand Junction facility offering spare parts for wind turbines, was added to the state’s Rural Jump Start Program. That allows the Netherlands-based firm to qualify for tax breaks and incentives, including up to $20,000 as a new business and $2,500 for each new hire. The company said it is starting with five employees in Grand Junction and plans to have 15 in three years. >> Details
➔ Prefab housing gets a boost — To address the lack of affordable housing, the Polis administration this week announced the Innovative Housing Incentive Program, which will provide grants of up to $450,000 for companies in the manufactured and affordable housing industries and loans to companies building new factories. >> Details
Did you know the Colorado Sun has a daily podcast? And that I’m on it! On Tuesdays, editor David Krause interviews me about the local economy. It’s a way I can add a little behind-the-scenes storytelling. If you want to hear more, visit coloradosun.com/podcast and follow The Sun on Spotify, Apple Podcasts or RSS to subscribe.
Miss a column? Catch up:
- What’s Working: Colorado business leaders are pessimistic about 2023. Should they be?
- What’s Working: Prepare for some new costs of being employed in 2023 in Colorado
- What’s Working: Colorado sees decline in labor force but job numbers are still better than U.S.
- What’s Working: Waiting for unemployment benefits in Colorado? It may now take up to 16 weeks
- What’s Working: Behind the new fee many Colorado workers and employers will see in 2023
- What’s Working: Thanksgiving meal inflation is higher in Colorado than U.S.
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