Published by FOX Business | December 15, 2021
It’s unclear when consumers can expect to see inflation begin to slow, with prices for an array of goods continuously climbing higher.
The hottest inflation in nearly four decades will cost millions of Americans an additional $3,500 in expenses this year, according to a new analysis published on Wednesday.
Findings from the Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania’s Wharton School, show that most U.S. households will need to allocate at least 6% more of their budget in order to sustain last year’s spending level on goods and services. That figure is even higher for low-income Americans, who need to increase their spending by at least 7%.
The recent inflation burst is disproportionately hurting lower-income households, largely because they collectively spend more on energy – which has seen some of the wildest price swings over the past year – while wealthy Americans spend more on services, which has seen the smallest inflation increases.
That could mean, based on 2020 spending data, that the bottom 20% of income-earners saw their consumption expenditure increase by 6.8% to $2,120 per household, while the top 5% saw a 6.1% increase, or roughly $7,636 per household. Middle-income earners also saw a large increase in expenses, with an increased consumption expenditure of $4,351, or an increase of 6.8%.
“Since higher-income groups had a bigger increase in expenditures in all categories, they also saw a bigger increase in total expenditure,” the analysis said. “However, because of variation in the composition of consumption bundles, we find that higher-income households had smaller percentage increases in their total expenditure.”
The Penn Wharton analysis comes on the heels of a new government report that revealed consumer prices soared 6.8% in November from the previous year, the fastest pace since June 1982, when inflation hit 7.1%.
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