Inflation eats away at the purchasing power of Coloradans.  How do consumers deal?  - Lawyer Magazine

Inflation eats away at the purchasing power of Coloradans. How do consumers deal? – Lawyer Magazine

Parker-based Randall Kettner remembers when big price hikes started showing up in 1977, the year he graduated from high school. For six years, inflation was so hot that it reshaped the way he viewed the world and the financial choices he made, just like the Great Depression that changed the behavior of his parents and grandparents.

with Consumer inflation rises to 9.1% March annual rate in metro Denver, Kettner’s previous rush with runaway prices led to him adjusting his spending and staying alert as to what might happen next. He and his wife clip coupons, research sales, and adjust their vacation plans. With market volatility reducing his retirement savings this year, Kettner, 62, plans to work longer as a software engineer.

“People younger than me have not had that perspective of watching their money dwindle and seeing the price of everything go up,” he said.

In the year that Kettner graduated, inflation was 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 does not mean comfort. Inflation remained high, between 12% and 9% annually, for another three years until the Federal Reserve broke its back by raising interest rates so high that it triggered a recession.

The deadline of four decades of massive price increases over the past year has been broken. In contrast to the slow and then hot boil that consumers faced in the 1970s, the current price hike has caught many consumers, still dealing with the pandemic, by surprise. Consumer inflation in metro Denver has risen from a tepid 2% in 2020, to a modest 3.5% in 2021, to 9.1% in early 2022.

This rate reflects the average across a basket of consumer goods. Some items have gone up more over the past year. Used car prices are up 38.8% in the Denver metro, gasoline is up 36%, and prices for durable goods — such as washing machines and refrigerators — are 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. It is not yet clear what happens to housing costs.

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

Officially, rents rose at a 6.5% annual rate in March in metro Denver, according to the Consumer Price Index. but the The University of Denver and Metro Denver Apartment Association scored 14.4% Rents increased in the first quarter. Zillow and Apartment List, an apartment search engine, estimate that increases in rents were close to 15% in April.

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

Someone trying to buy a typical home in Colorado is facing a monthly payment that is roughly half more than the previous year, due to a spike in mortgage rates and home prices. However, it is more likely that a person who already owns a home has their mortgage payments locked in. They face higher property taxes, insurance costs, and utility expenses.

Families spend more

The typical Colorado household has spent an additional $4,467 since 2020 due to inflation, Stephen Byers, chief economist at the Common Sense Institute in Greenwood Village, estimated in a research note last month. He said that although labor shortages help raise wages, wage increases cover less than two-thirds of the most recent price hikes. And not every worker gets a 5.6% average wage increase.

“It’s not sustainable, and I personally know I’m about to lose everything. In addition to working seven days a week between two jobs, I also donate plasma to try to make ends meet,” said Northglen resident Priscilla Gonzalez, who like Kettner responded to an inquiry from the Denver newspaper. Post about the impact of the price hike, “I make a decent salary of $65,000 and about $72,000 between both jobs.”

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

“Before the pandemic for fun, I used to go hiking, visit different cities, find local restaurants to eat at, attend festivals, and go to sports,” Gonzalez said. “At the moment I am just trying to survive and am currently looking for a third or higher paying part-time job. I am really worried that I will end up losing my house and now I don’t have any savings to try to get something cheaper, not because I found anything on Anyway. I have never felt afraid or anxious about my future.”

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One in five Colorados lists the rising cost of living as the biggest problem facing the state, with 17% listing the issue closely related to affordable housing, according to A survey released this week by Colorado Health.

About six in 10 respondents described the rising cost of living as a “very serious” problem, while another 27% described it as a “very serious” problem. The affordability of housing was also considered too dangerous or too dangerous by a roughly similar percentage of respondents.

“Even families with six-figure incomes rank the rising cost of living as a serious problem,” Dave Metz, the survey expert who conducted the study for the foundation, said during a webinar discussing the findings. About 83% of the high-income families surveyed in Colorado, defined as those making $100,000 or more annually, considered the rising cost of living to be either very or very dangerous. For families earning $30,000 or less per year, 95% described the rising cost of living in this way.

Martha Maldonado, a single mother living in the commercial city, has been hit during the pandemic, causing the money she made from cleaning houses to evaporate. She now earns only $1,200 a month. Since September, she’s faced two rent increases in her income-restricted community, sending her rent up 12.6% to $1,558 a month.

“All our money will be rented. There won’t be much left after that to buy food,” Maldonado said through a Spanish translator. Her daughter and son-in-law live with her two grandchildren, which qualifies the family for $400 per month in the Supplemental Nutrition Assistance Program for Food.

Her daughter-in-law’s income is also intermittent, forcing the family to turn to rent assistance to avoid eviction. As they try to find work, the high costs of petrol make it difficult for them to move around. Maldonado said she spends about $120 a week on gasoline to get to cleaning jobs. And to deal with the higher costs, too, more customers are taking longer to pay or solidify their health.

It was a really tough time with the pandemic. Even if you get a job, it doesn’t pay enough. Food, housing and gas are all rising very quickly. It is a difficult experience for us. She said. “My dream is to be able to earn a decent living wage and my family and I to live in peace, and be stable.”

While inflation hits everyone, Brumfield economist Gary Horvath said low-income families, like Maldonado, have limited resources to deal with, which could force difficult choices, such as choosing to pay for drugs or putting food on the table.

“I don’t know how people are doing their best to pay for food and transportation. Wage increases may not keep pace with inflation,” he said.

Strategies include sacrifices

Patricia Perry, a retiree from Denver, said she actually gave up cable, the internet, going out to eat and the car when she retired early at 62 six years ago. Things took a turn for the worse when her lease in the senior community she’s been in for the past eight years wasn’t renewed, pushing her into the more expensive housing market.

He said, “I only eat once a day, skip prescriptions, and have a hard time surviving, especially now that I still have to pay full market rent in a 350-square-foot HUD studio building while I’m on a waiting list to get Benefit,” Berry. She had to turn to food banks to survive.

Other strategies people mentioned in their responses include not running the oven or air conditioning as much, adding solar panels to beat high electricity costs, eating out more often, skipping vacations, combining trips to reduce gasoline consumption, and hanging on their cars for longer .

Horvath said savings rates are falling and credit card debt is rising. And while it’s a psychological trick, some people don’t fill up their fuel tanks all the way, perhaps hoping that prices will drop the next time they need to refuel.

“I don’t eat out much. I really care about sales at King Soopers and Safeway and try to shop only discount items. I get gas exclusively at Costco because it’s cheaper, and I’ll go to work when I can,” said Boulder resident Katie Padron. .

Concerns about inflation pushed consumer sentiment to a 10-year low, according to a monthly University of Michigan survey released Friday. Essentially, inflation has hurt optimism more than the pandemic. But consumers still did not expect the hyperinflation of the late 1970s and early 1980s. They hold it at 5.3% over the next year and average about 3% annually over the next five years.

Theresa Ryan, a resident of Wheat Ridge, said she’s noticed inflation in some unexpected areas, such as her expenses on the garden, which is one way to get around the rising costs of food at the grocery store.

“I am also a container gardener and love to grow tomatoes, pumpkins, peppers and some flowers every summer. Also the plants in the nurseries are more expensive than I have ever seen in my life. I have tried growing some of my plants from seed, but unfortunately, I have not been very successful, so I may not have many parks this year,” Ryan said.

Inflation-sensitive companies

As consumers withdraw, it causes companies to worry more about their long-term prospects. a Alignable’s National Small Business Survey It found that six in 10 described inflation as more financially harmful than COVID-19. Chuck Casto, a spokesperson for the company, said 71% of companies surveyed described it in Colorado.

The survey found that companies in Colorado were having much more difficulty passing on increased costs to consumers than companies nationwide.

“We can say that the small business owners in Colorado in our survey are certainly more sensitive to inflationary pressures than their peers in many other states,” Casto said. “Based on our data, Colorado-based companies are already experiencing significantly more problems than their national counterparts, charging additional costs incurred.”

Supplies are getting more expensive and harder to come by, workers are harder to find and labor costs are rising, with 73% of Colorado businesses saying they are higher than they were before the pandemic, and many small businesses in Colorado and nationwide that don’t feel they can pass on their higher costs to consumers .

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

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