Investing.com — Wells Fargo analysts said in a note this week that inflation continues to rise faster than the Federal Reserve’s target, creating a challenging environment for consumers. However, the bank’s analysis shows that inflation affects different consumer groups in significantly different ways.
By examining unique consumer price indices based on the Consumer Expenditure Survey (CES), the company identifies the demographic groups most affected by inflation.
Income: As expected, Wells Fargo (NYSE:) says lower-income households are being hit the hardest by inflation, which have seen the strongest price increases over the past year and the past four years.
The main causes of this inflation are the rising costs of essentials such as housing, electricity and food. Wells Fargo states: “As lower-income consumers spend a greater share of their spending on necessities, persistently high inflation in essential necessities has weighed most heavily on them.”
Race/Ethnicity: Wells Fargo says that “Asian households have experienced the highest inflation over the past year,” although they have seen less severe cumulative increases in the cost of living across the cycle.
The bank adds that Hispanic and Latino households have experienced the lowest inflation rates recently, but have also seen inflation at the highest levels alongside black households over the past four years. “Inflation has been lowest for Hispanic and Latino households over the past year,” Wells Fargo said.
Age: The bank notes that seniors have been most affected by rising healthcare costs, which have experienced the highest inflation in the past year. “Meanwhile, Generation
“The lowest-income households have seen the biggest gains in inflation-adjusted incomes over the past four years, but the improvement in real income came in the first two years of the pandemic,” the bank wrote. “Gains have eroded recently, not only due to weaker nominal income growth, but also due to the stronger inflation that lower-income households face than households higher on the income spectrum.”
