Tuesday, April 8, 2014

Inflation and the Poor

Has inflation had much of an impact on your purchasing power recently? Probably not, since it's been running at a fairly muted 1.1 percent over the past 12 months. But a fascinating new study by the Web site FiveThirtyEight shows that the impact of inflation also varies by where you stand on the socioeconomic scale.

Items that the poor spend a higher proportion of their money on have had some of the highest inflation rates in the past year. The cost of electricity is up 4.7 percent; the cost of cigarettes is up 5.8 percent. Meanwhile, things we think of as primarily the province of the affluent haven't risen nearly as much. The cost of a new vehicle is up by just 1.5 percent; the cost of airfare has actually dropped in the past year, by 0.3 percent.

Add it all up, and the poorest fifth of American households have experienced an inflation rate that is 0.2 percent higher than that experienced by the rest of us. That's not a huge difference, but it's a few bucks a month for families that can't really afford it.

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