Putting “fun” back into low- and middle-income Americans’ budgets could be years away with most of their income barely covering the surge in costs for bare necessities, economists said.
Even with annual inflation last month cooling to the lowest level since February 2021 and wages rising faster than inflation, low- and middle-income Americans are just barely covering their essentials, which include groceries, shelter, utilities and gasoline, economists say.
That’s because when inflation slows, it only means prices aren’t rising as quickly, not that prices are declining. So, Americans continue to pay higher prices for everyday needs.
Low- and middle-income Americans were hit disproportionately harder than their higher-income peers because essentials account for a larger share of their budgets, and their discretionary spending, or spending on nonessential items like dining out, vacations and entertainment, is only just recovering, economists say.
“For a very large share of Americans, the bottom 60% are spending more on essentials than before the pandemic,” said Michael Pearce, Oxford Economics deputy chief U.S. economist. “The burden is hardest among the lowest income but also touches middle income. Spending patterns of low-income Americans will take years to recover.”
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‘No financial progress’
Middle-income Americans’ purchasing power, after being sharply eroded during the 2021-2022 inflation shock, just…
