Wells Fargo answers: Who is inflation still weighing on the most?

Investing.com — Wells Fargo analysts said in a note this week that inflation continues to rise faster than the Federal Reserve’s target, creating a challenging environment for consumers. However, the bank’s analysis suggests that inflation impacts different consumer groups in significantly different ways. 

By examining unique consumer price indices based on the Consumer Expenditure Survey (CES), the firm identifies the demographic groups most affected by inflation.

Income: As expected, Wells Fargo (NYSE:WFC) says the most affected by inflation are lower-income households, which have faced the strongest price increases over the past year and the past four years.

The main drivers of this inflation are the rising costs of essentials such as housing, electricity, and food. Wells Fargo states, “Because lower-income consumers devote a larger share of their spend to necessities, the continued elevated rate of inflation in essentials has weighed most on them.”

Race/Ethnicity: Wells Fargo says “Asian households have faced the highest rate of inflation over the past year,” although they have seen a less severe cumulative rise in living costs over the entire cycle. 

The bank adds that Hispanic & Latino households have experienced the lowest inflation rates recently but, over the past four years, have seen inflation alongside Black households at the steepest levels. “Inflation has been lowest for Hispanic & Latino households the past year,” says Wells Fargo.

Age: The bank notes that seniors have been most impacted by rising healthcare costs, facing the highest rate of inflation in the past year. “Meanwhile, Gen-X households have experienced some of the least severe inflation,” as they tend to spend relatively more on goods that have seen lower price increases, explains Wells Fargo.

“The lowest-income households have seen the largest gain in inflation-adjusted incomes over the past four years, but the improvement in real income came in the first two years of the pandemic,” writes the bank. “Gains have eroded more recently due to not only weaker growth in nominal income, but the stronger rate of inflation lower-income households are facing than those higher up the income spectrum.”