Gas prices are consistently high as people line up for discounts at Costco. Usually at $5.39 per gallon.
Robert Gauthier | Los Angeles Times | beautiful pictures
Low-income people bear the brunt of the economic downturn following the initial introduction of Covid-19.
Now, with soaring gas prices and historically high inflation driving up consumer costs, that team is feeling the biggest constraint on their budgets, according to a new report on data. February from Morning Consult.
According to Kayla Bruun, economic analyst at Morning Consult, people with an annual income of $50,000 or less have had a lower profit margin between what they bring home and how much they spend.
Now, people in that income group are seeing that level of return erode, she said.
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Meanwhile, people with higher incomes can absorb the increase in costs without necessarily disrupting their spending.
“Low-income adults are really feeling this gas price; they have to cut discretionary spending.
“The top earners, those making $100,000 a year or more, were really able to up their purchases and celebrate the end of the omicron in February,” she said.
Spend in all categories
According to Morning Consult, monthly spending on gasoline increased 13% in February from the previous month.
However, it is still only the third highest spending category to see an increase. Hotels and airfares spiked more, with increases of 19% and 17% respectively.
Sectors tied to travel, personal care and leisure rebounded as the omicron variant of Covid retreated, although rising prices and seasonal factors also led to higher costs.
Earnings growth is an important factor
How high gasoline prices can be taken out of households’ budgets depends on income growth.
Median earnings are up 4.9% from a year ago, according to Morning Consult. Meanwhile, the US Bureau of Labor Statistics’ Consumer price indexmeasure of a certain price consumers pay, rose 7.9%, suggesting income growth is not keeping pace.
But workers are in a better position than they were last year, Morning Consult said. In February, 61% of adults had income from work, up from 57% the year before. At the same time, only 13% of adults rely on unemployment checks, down from 19% in the same period last year.
One temporary bright spot is the amount of tax refunds many expect to receive in the coming months. The average reported cashback was $2,845 in February, which for the average US adult would double their monthly reported earnings, according to Morning Consult.
Housing, food costs pose many challenges
A person buys groceries at Lincoln Market on March 10, 2022 in the Prospect Lefferts Garden neighborhood of Brooklyn borough in New York City.
Michael M. Santiago | beautiful pictures
Adults in households earning less than $50,000 a year are also facing challenges due to high housing costs, according to Morning Consult.
In February, they paid 10% more in rent than a year earlier.
Much of that is due to skyrocketing rents, which have pushed average renters’ monthly spending up 15% year-over-year through February. Meanwhile, homeowners with mortgages did not see a significant increase in monthly spending year over year.
Adults making less than $50,000 a year have allocated more than 15% of their total spending on groceries, compared with 12% for the top earners, according to Morning Consult.
According to Bruun, while the same price appreciation is happening across all income groups, smaller income households are feeling it due to the fact that they have less financial buffers.
“It seems like what we are seeing in the lowest income quintile can be stacked up to the higher income quintile,” says Bruun.
