Jan 18 (Reuters) – Asian American/Pacific Islander (AAPI) and lower-income households have seen higher inflation in recent months as a rise in food and shelter costs and a fall in gas prices disrupt the pattern of inflation inflation inequality have changed, an analysis by the New York Federal Reserve showed on Wednesday.
The results, a reversal of trends between early 2021 and the summer of 2022 tracked by the regional Fed Bank, showed that Hispanic, black and middle-income households were most exposed to rising inflation during this period due to their spending on transportation used cars and fuel were particularly affected.
Used car costs have soared due to a lack of supply during the coronavirus pandemic, while the price of gasoline started to rise after Russia’s invasion of Ukraine in February 2022 and has been one of the main drivers of an inflationary push that has forced the Fed to raise interest rates raised quickly to quell price pressures that were racing to 40-year highs.
Gasoline prices in the United States peaked in June last year but have since fallen more than 30%, while other components of inflation, notably food and housing costs, continued to weigh on households.
“As prices in other categories have started to rise faster, the pattern of inflation inequality is changing with groups that have larger spending shares on those components…and are experiencing higher inflation,” New York Fed economists wrote in a blog post.
Asian American/Pacific Islander households are being hit the hardest by rising housing inflation, the New York Fed said.
To illustrate the changing patterns, the researchers showed that in June 2021, when transportation costs were skyrocketing, the inflation rate for Hispanic households was more than 1.5 percentage points above the national average.
In December 2022, the inflation differential for Hispanic households narrowed to about 0.27 percentage point. Inflation for black households fell to the national average last month after topping it by more than 1.0 percentage point in February last year, while AAPI households, whose inflation rate has been below the national average for the past two years, are now up are the national average.
Likewise, the data showed that middle-income households experienced the highest inflation in 2021. But in December 2022, the bottom 40% by income had the highest year-over-year inflation rate, while inflation for middle-income households was now below the national average.
The same rate of inflation weighs more heavily on lower-income households than on higher-income households, in part because of less spare capacity for less expensive goods and greater liquidity constraints.
According to other findings, rural households experienced “significantly higher” inflation than urban households over the past two years, with the US South being hardest hit and the US Northeast experiencing lower inflation, again reflecting different transport and housing shares by region Although that gap has narrowed in recent months, New York Fed researchers said.
Reporting by Lindsay Dunsmuir; Edited by Paul Simao
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