Wednesday, February 21, 2007
The cost of living in Anchorage rose 3.2% in 2006 as rising energy costs nudged up prices for most consumer goods and services, according to Federal labor figures released today. That inflation rate is the highest in Anchorage since 1992. The 2005 inflation rate was 3.1% . Story just published in the Anchorage Daily News.
The higher prices appear in the U.S. Bureau Labor Statistics Consumer Price Index, a traditional benchmark of changes in energy, housing, food, clothing and other common consumer costs. Anchorage's cost-of-living increase matches the average increase in major U.S. cities, according to the bureau. (Picture of Anchorage Town Square at left, courtesy of AlaskaTravel.com)
Economists use the price index to keep track of inflation, but others watch it closely as well. Some employers use it to figure wage increases based on the annual fluctuation of the index. Landlords and child-support agencies also use it to adjust rent and payments.
Energy prices around Anchorage, which account for 8% of the entire index, rose most sharply, finishing the year 14% higher, according to the bureau's figures. That mostly reflects higher gasoline and natural gas prices consumers paid last year. Natural gas prices on average rose 19%, while the price of a gallon of regular unleaded gasoline was 14% higher, the government's figures show. The higher natural gas prices also pushed up electricity prices, which rose 10% last year, according to the government report. Most of Anchorage's electric power comes from natural gas turbines, and electric companies recoup fuel costs through a surcharge that fluctuates with fuel prices.
Other prices rose more modestly. For example, food and beverage prices were up 1.5%. Clothing prices rose 3.8%. Prices for alcoholic beverages rose 1.6%, according to the bureau's survey.
Analysis: Because of the methodology, the 3.2% figure looks optimistic, and Administration and neocon Congressional spinmeisters will use it to downplay inflationary concerns and remind us of "how good we have it". However, to get a truer picture of the impact, one must use this figure in conjunction with statistics published in the recently-released Anchorage Community Assessment Project (CAP) Comprehensive Report, discussed in this post. According to the economic page of the CAP report, the average price of a single-family house in Anchorage increased 8%, from $281,729 to $304,214 in 2006 alone. Average rents on various rental units around town increased an average of 5-10% in 2005, depending on the type of rental. And the future prognosis for lower-income people is grim. The supply of developable land in the Anchorage Bowl is shrinking. Furthermore, most contractors are choosing to build higher-end humongous trophy haciendas with six bedrooms and four bathrooms, like some of the hideous monstrosities sprouting on the Hillside and in Southport, rather than more modest affordable homes in order to reap maximum profits. Real estate agents also reap higher commissions from the trophy homes. The housing shortage in Anchorage was triggered by scarcity but is being fueled by greed.
The report also understandably does not include even higher price increases levied since its release. For example, the reported 19% increase in natural gas prices in 2006 does NOT include the ADDITIONAL 30% increase levied by Enstar since that time, which first showed up in customers' bills in January 2007. And during the past two months, I've seen the price of an eight-ounce jar of Best Foods Mayonnaise at Fred Meyer increase from $1.19 to $1.55, an increase of 30%. Fortunately, such increases in foodstuffs are fairly isolated and can be mostly countered through comparative shopping at both Fred Meyer and Carr's, as well as using the Safeway Discount Card offered by Carr's. However, there is no such "escape" strategy from higher housing prices.
And the number of people cut off from our housing market will continue to grow. The CAP report states that 7.4% of Anchorage residents live below the official Federal poverty line. A third of the people interviewed in low-income neighborhoods reported spending more than 50 percent of their take-home pay on rent or housing alone. And 45,000 Anchorage residents have no health insurance (around 16% of the city's population). Asked in a phone survey what basic need they went without last year, 50% of respondents said health care and 33% said food. The problem is not going away anytime soon, even if the Knik Arm Bridge was to be built tomorrow and open up Point Mackenzie land for residential development..
And it's variances like this that Federal statistics do not take into consideration. As Mark Twain once said, there are lies, damn lies, and statistics.
Tags: politics , economics , Alaska , Anchorage , Consumer Price Index