Investing.com – Wells Fargo analysts said in a note this week that inflation is rising faster than the Federal Reserve’s target, creating a challenging environment for consumers. However, the Bank’s analysis suggests that inflation affects different consumer groups in significantly different ways.
By examining unique consumer price indices based on the Consumer Expenditure Survey (CES), the firm identifies demographic groups most affected by inflation.
Income: As expected, Wells Fargo (NYSE: ) says the hardest hit by inflation are low-income households, which have faced the strongest price increases over the past year and over the past four years.
The main drivers of this inflation are rising prices of essential commodities like housing, electricity and food. Wells Fargo says, “Because low-income consumers devote the bulk of their spending to necessities, the persistently high rate of inflation in essentials has weighed heavily on them.”
Race/Ethnicity: Wells Fargo says that “Asian households have faced the highest rate of inflation over the past year,” although they have seen less severe cumulative increases in living costs throughout the cycle.
The bank added that Hispanic and Latino households have recently experienced the lowest inflation rates but, over the past four years, black households have seen inflation at the highest levels as well. Wells Fargo says, “Inflation has been the lowest for Hispanic and Latino households over the past year.
age: The bank notes that seniors have been hit hardest by rising health care costs, experiencing the highest rate of inflation over the past year. “Meanwhile, Gen-X households have experienced the least severe inflation,” because they spend relatively more on goods that have seen lower price increases, Wells Fargo explains.
“The lowest-income households have seen the largest gains in inflation-adjusted incomes over the past four years, but the improvement in real incomes has come in the first two years of the pandemic,” the bank writes. “Not only have benefits been reduced recently, due to weaker growth in modest incomes, but lower-income households are facing stronger rates of inflation than those higher up the income spectrum.”
