Inflation is chewing up Coloradans’ spending power. How are consumers coping?

Parker resident Randal Ketner remembers when big price increases started taking hold in 1977, the year he graduated from high school. For six years, inflation was so heated it reshaped how he viewed the world and the financial choices he made, just like the Great Depression changed the behavior of his parents and grandparents.

With consumer inflation soaring to a 9.1% annual rate in March in metro Denver, Ketner’s prior run-in with runaway prices has caused him to adjust his spending and stay vigilant regarding what might come next. He and his wife are clipping coupons, scouting for sales, and adjusting their vacation plans. With market volatility cutting into his retirement savings this year, Ketner, 62, is also making plans to work longer as a software engineer.

“People younger than me haven’t had that perspective of watching their money dwindle down and seeing the price of everything going up,” he said.

The year Ketner graduated, inflation ran 8.5% in metro Denver, according to the Consumer Price Index. The following year it was 9.4% and in 1979 it peaked at 15.5%. But peak didn’t mean relief. Inflation still ran hot, between 12% and 9% a year, for three more years until the Federal Reserve broke its back by raising interest rates so high it triggered a recession.

A four-decade reprieve from big price increases was shattered over the past year. Unlike the slow and then hot boil consumers faced back in the 1970s, the current price spike caught many consumers, still dealing with the pandemic, off guard. Consumer inflation in metro Denver went from a tepid 2% in 2020, to a still modest 3.5% in 2021, to 9.1% in early 2022.

That rate reflects the average across a basket of consumer goods. Some items are up more over the past year. Used car prices are up 38.8% in metro Denver, gasoline is up 36% and durable goods — think washing machines and refrigerators — were up 16.4%, according to the U.S. Bureau of Labor Statistics.

Food and beverage costs are up 8.8% overall in metro Denver, with meat costs up 14.5% over the past year, according to the BLS. And it really isn’t clear yet what is happening with housing costs.

Critics of the way the BLS calculates consumer inflation argue that its methodology understates housing costs, which represent about a third of household spending, in the near term.

Officially, rents rose at a 6.5% annual rate in March in metro Denver, per the CPI. But the University of Denver and the Apartment Association of Metro Denver clocked a 14.4% increase in rents in the first quarter. Both Zillow and Apartment List, an apartment search engine, estimate rent increases were running closer to 15% in April.

Same with the cost of owning a home, which was up 6.9% in March and 6.8% in April in a measure the BLS uses called owner’s equivalent rent of a primary residence. The Mortgage Bankers Association, which measures the median monthly payment in a given month on a new mortgage, measured a 46.3% increase in April compared to April 2021 in Colorado.

Someone trying to buy a typical home in Colorado faces a monthly payment almost half as much higher than a year earlier, because of a big run-up in mortgage rates and home prices. And yet someone who already owns a home most likely has the mortgage payment locked in. They do face higher property taxes, insurance costs, and utility expenses.

Households spending more

The typical Colorado household has spent $4,467 more since 2020 because of inflation, Steven Byers, a senior economist with the Common Sense Institute in Greenwood Village, estimated in a research note last month. Although labor shortages are helping push up wages, pay increases are covering less than two-thirds of the most recent price spikes, he said. And not every worker is getting that average wage hike of 5.6%.

“This is not sustainable, and I know personally I’m close to losing everything. In addition to working seven days a week between two jobs, I also donate plasma to try to make ends meet. I make a decent salary at $65,000 and about $72,000 between both jobs,” said Northglenn resident Priscilla Gonzales, who like Ketner responded to a query The Denver Post put out on the impact of higher prices.

Even with that salary, she finds herself struggling to make ends meet and is worried about the future.

“Prior to the pandemic for fun I used to go hiking, visit different towns, find local restaurants to eat at, attend festivals, and go to sporting games,” Gonzales said. “Right now I’m just trying to survive and currently looking for either a third job or a higher-paying part-time job. I’m really worried I may end up losing my home and now I have no savings to try to get into something cheaper, not that I’ve found anything anyway. I’ve never been more scared or worried about my future.”

One in five Colorado residents lists the rising cost of living as the top problem facing the state, with 17% listing the closely related issue of affordable housing, according to a poll released this week by the Colorado Health Foundation.

About six in 10 of those who participated in the survey described rising living costs as an “extremely” serious problem, while another 27% called it a “very” serious problem. Housing affordability was also considered extremely or very serious by an almost similar share of respondents.

“Even households with six-figure incomes rate the rising cost of living as a serious problem,” said Dave Metz, the pollster who conducted the study for the foundation, during a webinar to discuss the results. About 83% of high-income households surveyed in Colorado, defined as those making $100,000 or more a year, viewed rising living costs as extremely or very serious. For households earning $30,000 or less a year, 95% described higher living costs that way.

Martha Maldonado, a single mom living in Commerce City, took a hit during the pandemic, which caused the money she made from cleaning homes to evaporate. She now only makes $1,200 a month. Since September she has faced two rent hikes in her income-restricted community, pushing her rent up 12.6% to $1,558 a month.

“All our money is going to rent. It doesn’t leave much afterward to buy food,” Maldonado said through a Spanish translator. Her daughter and son-in-law live with her, along with two grandchildren, which qualifies the family for $400 a month in Supplemental Nutrition Assistance Program benefits for food.

Her son-in-law’s income is also sporadic, forcing the family to turn to rental assistance to avoid eviction. And as they try to scrape by and find work, higher gasoline costs are making it harder to get around. Maldonado said she spends about $120 a week in gasoline to get to her cleaning jobs. Also coping with higher costs, more customers are taking longer to pay or stiffing her.

“It has been a really challenging time with the pandemic. Even if I were to get work, it doesn’t pay enough. Food, housing, gas are all rising so rapidly. It is a hard experience for us. It is frustrating,” she said. “My dream is to be able to have a liveable wage and for me and my family to live in peace, to have stability.”

While inflation hits everyone, Broomfield economist Gary Horvath said lower-income households, like Maldonado’s, have more limited resources to cope, which can force difficult choices, such as choosing to pay for medicine or put food on the table.

“I don’t know how people are stretching things to pay for the food and for the transportation. Wage increases may not be keeping up with inflation,” he said.

Strategies include sacrifices

Denver retiree Patricia Peri said she already gave up cable, internet, going out to eat and a car when she retired early at 62 six years ago. Things took a turn for the worse when her lease in the senior community where she had lived for the past eight years was not renewed, pushing her out into a more expensive housing market.

“I only eat one time a day, skip prescriptions, and am finding it hard to survive, especially now having to still pay full market rent in a HUD building for a 350 square foot studio while remaining on a waitlist for a subsidy,” said Peri. She has had to turn to food banks to get by.

Other strategies people mentioned in their responses include not running the furnace or air conditioning as much, adding solar panels to get ahead of rising electricity costs, eating out less often, skipping vacations, combining trips to reduce gasoline consumption, and hanging onto their vehicles longer.

Savings rates are falling and credit card debts are rising, Horvath said. And while it is more of a psychological trick, some people don’t fill up their fuel tanks all the way, perhaps in the hope that prices will be lower the next time they need to refuel.

“I am not eating out as much. I really pay attention to the sales at King Soopers and Safeway and try to only shop on sale items. I get my gas exclusively at Costco because it’s cheaper and I’m walking to work when I can,” said Katie Padron, a Boulder resident.

Fears over inflation have pushed consumer sentiment to a 10-year low, according to a monthly survey from the University of Michigan released on Friday. Inflation, essentially, has damaged optimism more than the pandemic did. But consumers still aren’t expecting the runaway inflation of the late 70s and early 80s. They peg it at 5.3% over the next year and averaging around 3% a year over the next five years.

Wheat Ridge resident Teresa Ryan said she has noticed inflation in some unexpected areas, like her expenses to garden, which is one way to get ahead of rising food costs at the grocery store.

“I am also a container gardener and like to grow tomatoes, squash, peppers and a few flowers every summer. The plants at nurseries are also more expensive than I have ever seen. I have tried to grow some of my plants from seed, but unfortunately, I am not very successful so might not have much of a garden this year,” Ryan said.

Businesses sensitive to inflation

As consumers pull back, that is causing businesses to worry more about their long-term prospects. A national survey of small businesses from Alignable found that six in 10 described inflation as more financially damaging than COVID-19. In Colorado, 71% of businesses surveyed described that as being the case, said Chuck Casto, a spokesman for the company.

The survey found that Colorado businesses were having a much harder time passing on rising costs to consumers than businesses nationally.

“We can say that Colorado-based small-business owners in our survey are definitely more sensitive to inflationary pressures than their peers in many other states,” Casto said. “Based on our data, Colorado-based businesses are, indeed, having much more trouble than their peers nationally, passing on the extra costs they’ve incurred.”

Supplies are getting more expensive and harder to procure, workers are more difficult to find and labor costs are on the rise, with 73% of Colorado businesses saying they are higher than before the pandemic, and many small businesses in Colorado and nationally don’t feel they can pass their higher costs on to consumers.

Cost and labor pressures are so intense that Casto said 3% of small-business owners surveyed in Colorado reported having had to shut down, and another 3% expected to close their doors by the end of June. More than half were concerned about their ability to stay afloat over the next six months, according to Alignable.

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