DENVER — Prices for everything from clothing to housing to gas kept rising last month at the fastest pace in nearly four decades.
The consumer price index released by the Bureau of Labor statistics on Friday showed that prices are up 6.8% from this time last year and roughly .8% more since October.
It’s the steepest increase in inflation since 1982. Along with increasing wages, a labor shortage, supply chain issues and production slowdowns, an increase in the money supply is also pushing prices upward.
Higher consumer demand is also contributing.
“Because the pandemic is kind of under control, we are going out and buying more, so there are higher prices because of the holiday season shopping as well,” said Kishore Kulkarni, a distinguished professor of economics at Metropolitan State University of Denver.
During a news conferences Friday, the Biden Administration attempted to temper reactions to the data, saying this consumer price index is a snapshot of the past and that energy prices, for example, have started to go down. Gas prices have dropped an average of nine cents from the previous month.
The administration also touted some progress in easing the shipping bottlenecks and pointed to strong job, wage and economic growth as signs that things are moving in the right direction.
The White House and Federal Reserve are also predicting that inflation will come down next year. Kulkari doesn’t think it’s fair to blame the Biden Administration for all of the inflation since there are so many factors contributing to the price increases.
“It is not that simple at all. I don’t think presidents and the policymakers are completely responsible for any economic problem,” he said. “Inflation is a circular process and if it starts in some sectors it doesn’t take very long to go into other sectors.”
Nevertheless, inflation is affecting everything from gas to housing to clothing. Cotton in particular is seeing a large price increase. In October, cotton hit a 10-year high in prices to $1.16 per pound.
Rent is also increasing; it has gone up by about 14% on average compared to last year.
“The average rent price in the Denver metro area is about $1,650, which is very steep and that’s a reflection of increase demand for housing and not being able to build enough housing to keep up with that demand,” said Drew Hamrick, from the Colorado Apartment Association.
Hamrick blames population growth for the increasing rent prices and says construction is simply not keeping up with demand. He estimates that the state could use another 50,000 housing units but said only 30,000 are currently being built.
He believes the solution is for local governments to loosen up some of their regulations to allow for the construction of more apartment buildings.
As for renters, Hamrick says to expect to see rent go up by that 14% this year; however, if it goes up more than that, you can try to talk to your apartment manager to see whether anything can be done.
“It’s much less expensive for a housing provider to keep existing customers than to lose one and try to attract a new one, and so usually, if you’re a resident, you have some level of leverage of keeping the status quo in place,” Hamrick said.
If the rent increase is significantly more than the 14%, it might not be a bad idea to look around for another unit. The length of your lease can also affect prices.
“One way to lower rent rates is to lock in a longer lease term,” Hamrick said. “In inflationary times, if you know you’re going to be staying put in the same location, it usually makes more sense to lock in a longer lease contract.”
As for homeowners, Kulkari expects to see interest rates begin to go up to cut down on some of the inflation the country is experiencing.
In the meantime, he says it might not be a bad idea to consider what you are planning on buying over the next year and whether you were thinking about refinancing your house.
“To beat the inflation, you can take advantage of very low interest rates, borrow some more, buy things which you are absolutely going to buy in the next year or so today rather than next year, and go into the contracts with lower prices that are available right now because it probably will go up,” Kulkari said.