economy
Surging gas prices are hitting lower-income households harder, New York Fed study shows
Lower-income consumers are compensating for higher gas prices by buying less.
TL;DR
- Lower-income households (earning less than $40,000) are buying less gas and increasing spending by a smaller margin compared to higher-income households.
- Higher-income households (earning over $125,000) have only slightly reduced real gas consumption and increased spending significantly.
- The K-shaped economy, a byproduct of the post-Covid period, is characterized by lower-income individuals experiencing less growth than their wealthier counterparts.
- Inflation has contributed to disparities, with consumer prices rising about 28% since March 2020 while average hourly earnings have grown only 30%.
- Energy prices have climbed 56% in the post-pandemic economy, with gasoline prices rising sharply.
- The current energy price shock has exacerbated the K-shaped pattern in gasoline consumption.
- Lower-income households may be carpooling or using public transit to reduce gas consumption.
- The observed consumption trends are similar to the 2022 energy spike but quantitatively larger.
- The study surveyed 2,000 respondents and found an overall 15% increase in gasoline spending in March.