Inflation’s Impact Varies by Consumer: NRF

Not all shoppers are feeling the pinch equally

By Alan Wolf, YSN

No doubt spiraling inflation and soaring gas prices are wreaking havoc with many business and household budgets.

But according to the world’s largest retail trade association, not all shoppers are feeling the same amount of pain. In the current issue of the National Retail Federation’s Monthly Economic Review, chief economist Jack Kleinhenz argues that “Headline inflation numbers may mask what is being faced by different consumers, since spending patterns vary widely and lead to significantly different inflation experiences.”

Older households, for example, spend more on health and medical services than younger households, which spend more on education and communications like technology or TV streaming services. In addition, some spending that drives inflation consists of infrequent big-ticket purchases like a car (up 12 percent for new vehicles or 41 percent for used vehicles in January) or a new home.

 “What a person buys can have a tremendous effect on how severely the pain of inflation is felt,” he said.

That said, Kleinhenz acknowledges that inflation plays a key role in the nation’s economic outlook and “has been making consumers and businesses miserable.” The good news is that shoppers consider the present inflation rate temporary according to the latest Survey of Consumer Expectations from the Federal Reserve Bank of New York, and expect a return to a relatively normal 3.5 percent over the next three years.

Of more concern to Kleinhenz is a wage-price spiral, in which workers demand higher wages to compensate for higher prices, which in turn could prompt the Fed to move even more aggressively on rate hikes — potentially pushing the economy into a recession.