Inflation is hitting middle-income families particularly hard. Here’s why.
The high cost of food, gas and utilities play an outsized role in household budgets
As many economists continue to predict a recession this year, middle-income families are already taking an economic hit that is threatening their long-term financial security, according to a recent special report.
Released by Primerica, a leading provider of financial services in the United States and Canada, the report combines data from the monthly Consumer Price Index (CPI) and Primerica’s national survey of middle-income families in the U.S. to present a clear picture of the pressures these households face.
Researched and written by Amy Crews Cutts, Ph.D., CBE®, Primerica’s economic consultant, the report’s focused analysis of the CPI for just the cost of food, gas and utilities — necessities that greatly impact middle-income households’ budgets — shows prices on those items rose significantly higher than benchmark inflation in 2022.
“High inflation stings for everyone, but it’s especially painful for middle-income American families,” said Dr. Cutts. “With prices increasing at the fastest rate in a generation, the middle-market is now spending their savings to make ends meet. Even so, most middle-income households are optimistic about their future and show a remarkable resilience in the face of economic headwinds.”
Here is a look at key graphics from the report.
Throughout 2022, food and energy prices remained elevated, peaking in the second quarter at 18.2% higher than the previous year. These increases have an outsized impact on the budgets of middle-income families.
The impact of increased prices on basic food items on middle-income families was substantial in 2022, with the cost of eggs hitting households the hardest.
Despite headlines about rapidly rising wages, incomes overall fell far behind rising prices for much of 2022. Thus, families had to choose to cut some part of their budgets to make ends meet.
A large majority (82%) of respondents to Primerica’s survey either curtailed or stopped saving for the future or tapped into existing savings to make ends meet as their income fell behind the cost of living.
Primerica’s survey highlights a disconnect between what middle-income families say they will do and what they actually do. Respondents frequently overestimated their ability to save and limit spending, as well as their ability to pay all their bills.