Inflation is down and gas is cheaper in Denver, but prices are still high for many things. Here’s why

· Dec. 31, 2023, 4:00 am
The gasoline pump hangs out the fuel port of a vehicle at a convenience station in southeast Denver on Sunday, Sept. 16, 2007.The gasoline pump hangs out the fuel port of a vehicle at a convenience station in southeast Denver on Sunday, Sept. 16, 2007.David Zalubowski/AP
Convenience station in southeast Denver on Sunday, Sept. 16, 2007.

Inflation is starting to ease.

Consumer prices in the Denver area were up 4.5 percent in November from the prior year, according to the latest data from the U.S. Bureau of Labor Statistics. That's the smallest annual increase in two years. By comparison, prices in the region rose 6.9 percent annually last November, and in Denver peaked at just over 9 percent in March 2022.

In November, prices actually fell for some things on a shorter time horizon. While most of the declines were minimal, gas prices saw a big drop. , they were down 20 percent from September to November, the BLS data show. Gas prices typically fall in the winter because people aren’t driving as much. But the drop is bigger than usual this year.

At the same time, federal regulators are signaling they may be done raising interest rates because inflation appears to be under control. The central bank started hiking rates more than a year ago in an effort to slow inflation by making it more expensive to borrow money. That brings prices down by cooling demand for goods and services.

Still, consumers might not feel like things are getting more affordable. Prices are still going up for many things – they’re just not rising as fast as they had been. Things like insurance premiums, home repairs, restaurant meals, and utilities are still far more expensive than they used to be, said Mac Clouse, a professor of finance at DU’s Daniels College of Business.

“It's difficult for consumers to accept that the victory has happened and that inflation is cured and there's no problems going on when they see all of those things … taking a much bigger chunk out of their family budget each month,” Clouse said.

In fact, people aren’t likely to see broad price declines, he said. A big factor in keeping prices up is that businesses started paying higher wages to attract and retain workers, according to Clouse.  

“It's not like if the Fed says, ‘OK, inflation is over and all of you workers that took new jobs with higher wages, let's drop those back down to the levels that they were before,’” Clouse said. “We know that's not going to happen. So we've built in higher labor costs into the business model and businesses are passing those higher labor costs onto the consumers.”

Broad-based price declines would actually be a bad sign for the economy. That would only happen if demand for everything fell off a cliff, Clouse said. That means that almost everything from fruits and vegetables to clothing and rent still costs more for Coloradans than they did a year ago. But the pinch should be slightly less painful this holiday season.

You care.

You want to know what is really going on these days, especially in Colorado. We can help you keep up.  The Lookout is a free, daily email newsletter with news and happenings from all over Colorado. Sign up here and we will see you in the morning!