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How Does Denver's Consumer Price Index Stack Up?

Monthly economic deep-dive : The consumer price index


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WHAT IS IT? 

The CPI (Consumer Price Index) measures changes in consumer prices. There are different series, but the most common is the CPI-U, an index for all items and all urban consumers. The index is weighted to reflect typical household expenditures with housing, transportation and food combined, counting for 73 percent of the index. 

WHY DOES IT MATTER?

It’s one measure of inflation and commonly used to compare against annual increases in wages, rents, taxes, etc. Economists often say things like “real wages are decreasing for teachers,” even though they got a wage increase. This means teacher wage increases did not keep up with inflation or the cost of living. 

LOOKING AT DENVER

The Bureau of Labor Statistics (BLS) measures the CPI or consumer inflation in different metropolitan areas around the nation. Looking back 20 years, we see four distinct periods by comparing the Denver CPI to the overall U.S. CPI. Most recently, since 2013, Denver’s inflation rate has been greater than the national rate by more than 1 percent per annum (see the solid “Difference” line). But that is the exception. During the economic boom of the 1990s, Denver’s rate was slightly less than 1 percent higher than the national rate. From the end of the housing boom in about 2006 and through the mortgage crises, Denver and the U.S. broadly had about the same rate of inflation. After the dot com bust, the Colorado economy was hit with high-tech manufactures closures, downsizing and offshoring. During these lean economic years, Denver’s inflation rate was lower than the national rate.   

The bottom line: Comparing the two rates is a good way to look at the Denver economy relative to the nation – higher inflation generally means a hotter economy.

The BLS plans changes in measuring Denver’s CPI in 2018. In the past the Denver CPI was based on surveys in the Denver-Boulder-Greeley area. Staring next year, it will be based on the Denver-Aurora-Lakewood area. Also, instead measuring twice a year it will be measured six times annually along with other major US metropolitan areas. 

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Tom Binnings

Tom Binnings is a senior partner at Summit Economics in Colorado Springs. He has more than 30 years of experience in project management, economic and market research, real estate development, business analytics and strategic planning. He can be reached at (719) 471-0000 or tbinnings@comcast.net.

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