The Common Sense Institute (CSI) recently released its report on Colorado’s Inflation Misery Index, and the results are painting a sobering picture of just how much inflation has impacted the state. Over the past few years, inflation has taken a significant toll on the cost of living, with Colorado’s inflation misery index reaching levels not seen since the Great Recession. The report provides an in-depth look at how the average household is now spending thousands of dollars more each year to maintain the same standard of living they had in 2019. Here’s a closer look at what the report reveals, what it means for Coloradans, and where we might be heading next.
Inflation’s Impact on the Average Household
One of the most eye-popping statistics from the report is that the average Coloradan now spends $10,451 more per year to maintain their 2019 standard of living (Common Sense Institute). This staggering figure is a combination of rising costs across all sectors, from housing and utilities to food, recreation, and gasoline. The report emphasizes that even when accounting for “normal” inflation, which typically sits around 2.19% per year, Coloradans are still seeing a dramatic increase in out-of-pocket expenses. After factoring in normal price increases, households are paying $5,060 more per year, which translates to about 6% of their annual income (Common Sense Institute).
The Inflation Misery Index isn’t just about rising prices—it’s about the gap between income growth and inflation. While wages have seen some increases, the reality is that these hikes have been largely outpaced by inflation, leading to what the report describes as a significant “loss of purchasing power.” In short, the typical Colorado household is significantly poorer than it was just a few years ago, even though they may be earning more on paper.
How Inflation Is Hitting Key Areas
The $10,451 annual increase breaks down into several key areas where inflation is hitting hardest:
- Housing and Utilities: The average household is paying $5,134 more per year just to keep a roof over their heads and the lights on (CSI – March). Colorado’s housing market has been notoriously tight for years, and while there’s been some softening in the real estate market recently, rents and home prices remain significantly higher than pre-pandemic levels. Utility costs have also surged, in part due to increased energy demands and price hikes driven by supply chain disruptions and other factors.
- Food: Coloradans are spending $5,582 more annually on groceries and dining (CSI – May). With food prices having risen dramatically across the country, Colorado hasn’t been spared. Supply chain issues, labor shortages, and increased transportation costs are all contributing to this jump. Items that were once considered staples have now become luxuries for many families, adding to the strain.
- Recreation: Even leisure activities come with a higher price tag these days. According to the report, households are paying $2,104 more annually to enjoy the same recreational activities they did just a few years ago (Source). Whether it’s going to the movies, skiing in the mountains, or enjoying a night out, entertainment is more expensive than ever.
- Gasoline: With a $515 annual increase in fuel costs, driving has become a luxury for some (Source) (Source). This is particularly impactful in a state where many residents rely on cars to commute long distances, especially in rural areas. Rising gas prices have been driven by both national and global factors, including energy policy decisions, global supply chain issues, and geopolitical instability.
A Bleak Economic Outlook?
The 21% effective income loss that the report outlines is not just a statistic—it’s the reality for many Coloradans who are feeling the pinch of inflation every day. Even with some recent cooling of inflation, the average household has lost $26,129 in purchasing power over the last few years (Source). The report underscores that this isn’t just a temporary blip. Without prolonged periods of low inflation and consistent wage growth, it’s going to be very difficult for households to recover the purchasing power they’ve lost.
It’s important to note that while some areas of spending, such as education and medical care, saw smaller increases or even decreases, the overall trend is still one of significant financial strain. Many families have been forced to make tough decisions—cutting back on non-essentials, delaying home purchases, or even dipping into savings just to keep up with rising costs.
What’s Next?
So, where do we go from here? The report from the Common Sense Institute suggests that recovering from this loss of purchasing power will take more than just a return to “normal” inflation levels. It will require sustained income growth, smart policy decisions, and perhaps a bit of luck on the global economic front. Without these, it could take years for Colorado households to regain what they’ve lost.
The road ahead is likely to be challenging, but understanding the depth of the problem is the first step. The report provides valuable insights that policymakers and community leaders can use to address the issue. For the average Coloradan, though, it means continuing to stretch every dollar a little further and hoping that relief is on the horizon.
For a full look at the report and its findings, you can visit the Common Sense Institute’s Inflation Misery Index page.
