The Consumer Price Index was up 7.5% in January compared to the year prior, representing the biggest gain since 1982. Meanwhile, the Personal Consumption Expenditures Price Index, which the Federal Reserve uses to measure inflation, rose 5.2%––the biggest gain since 1983.
While all economists agree inflation is higher than ever, the effects aren’t hitting all consumers the same, according to the National Retail Federation (NRF), which recently published its Monthly Economy Review for March 2022. The impact of inflation is likely varied across demographics and what consumers are buying.
“After decades of relatively low levels, inflation is on everyone’s mind and has been making consumers and businesses miserable as prices have picked up dramatically over the past year,” NRF Chief Economist Jack Kleinhenz said in the report. “However you measure it, inflation has become a powerful force and plays a key role in the nation’s economic outlook.”
Older households tend to spend more on health and medical services, and younger households may spend more on education, communications and electronics. Big-ticket purchasers, such as those buying houses or cars, are also likely driving up inflation and may feel higher sticker prices more than other consumers.
Strong consumer demand and restricted supply, both of which have been affected by the COVID-19 pandemic, have likely had the greatest impact on inflation. Consumers expect inflation rates to remain elevated through this year, but they expect inflation to slow to 3.5% over the next three years. Consumer expectations can have a major impact on how they spend and could influence the Fed’s decision on interest rates.
“While actual price gains are expected to slow down in the coming months as they lap relatively high readings from the year before, the Fed is concerned about the risk of an unwanted jump in inflation expectations,” Kleinhenz said.